-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AgcB2ZMGYUkjNlPM9VLo/LFP6Gzxotyfl1sgnW/Y3JsKKHzHKxMYNZAplVCtYfro ppYxvndEdX0ejcwHTge7bw== 0000795445-96-000010.txt : 19961009 0000795445-96-000010.hdr.sgml : 19961009 ACCESSION NUMBER: 0000795445-96-000010 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961008 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961008 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARC CAPITAL CENTRAL INDEX KEY: 0000795445 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 330256103 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20097 FILM NUMBER: 96640450 BUSINESS ADDRESS: STREET 1: 2067 COMMERCE DR CITY: MEDFORD STATE: OR ZIP: 97504 BUSINESS PHONE: 5417767700 MAIL ADDRESS: STREET 1: 2067 COMMERCE DR CITY: MEDFORD STATE: OR ZIP: 97504 FORMER COMPANY: FORMER CONFORMED NAME: APPLIED LASER SYSTEMS /CA DATE OF NAME CHANGE: 19930825 8-K/A 1 October 7, 1996 Securities and Exchange Commission Judiciary Plaza 450 5th Street NW Washington, DC 20549 RE: ARC Capital Enclosed in accordance with Rule 13a-11 of the Securities Exchange Act of 1934 is ARC Capital's report on Form 8-K-A dated October 7, 1996. Very truly yours, Alan R. Steel Vice President, Finance & CFO ARS/smk FORM 8-K-A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) July 24, 1996 ARC CAPITAL (Exact name of registrant as specified in its charter) California (State or other jurisdiction of incorporation) 0-20097 33-0256103 (Commission File Number) (I.R.S. Employer Identification No.) 2067 Commerce Drive Medford, Oregon 97504 (Address of principal executive offices) (Zip Code) 541-776-7700 (Registrant's telephone number, including area code) N.A. (Former name or former address, if changed since last report) The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K, filed July 25, 1996, as set forth in the pages attached hereto: Item 7. Financial Statements and Exhibits. (a) Financial statements of business acquired. Report of Independent Accountants Balance Sheets at December 31, 1995 and 1994 Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 Statement of Changes in Shareholders' Equity for the Years Ended December 31, 1995, 1994 and 1993 Notes to Financial Statements as of December 31, 1995, 1994 and 1993 (b) Unaudited pro forma financial information. Balance Sheet at June 30, 1996 Statement of Operations for the Year Ended December 31, 1995 Statement of Operations for the Six Months Ended June 30, 1996 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ARC Capital Date: October 7, 1996 By: /s/ Alan R. Steel ----------------- Vice President of Finance and Chief Financial Officer ARC Capital Form 8-K-A Item 7(a) Financial Statements of Business Acquired Ventek, Inc. Financial Statements December 31, 1995, 1994 and 1993 Ventek, Inc. Financial Statements Contents Report of Independent Accountants.............................................1 Balance Sheets at December 31, 1995 and 1994..................................2 Statements of Operations for the years ended December 31, 1995, 1994 and 1993.....................................3 Statements of Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993........................................................4 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993.....................................5 Notes to Financial Statements.................................................6 Report of Independent Accountants To the Board of Directors and Shareholders of ARC Capital In our opinion, the accompanying balance sheets and the related statements of operations, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Ventek, Inc. at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As described in Note 8, on July 24, 1996, ARC Capital acquired the business and certain assets of Ventek, Inc., subject to certain liabilities. PRICE WATERHOUSE LLP Portland, Oregon September 27, 1996 Ventek, Inc. Balance Sheets
ASSETS December 31, December 31, 1995 1994 --------------------- Current Assets: Cash and cash equivalents (Note 1) $ 1,454,181 $ 135,566 Accounts receivable, net (Note 1) 466,942 185,368 Inventories (Notes 1 and 2) 270,220 -- Prepaid expenses and other assets 12,590 603 Receivables from shareholders (Note 7) -- 30,150 ------------- ------------- Total current assets 2,203,933 351,687 Equipment, net (Notes 1 and 3) 21,721 32,087 ------------- ------------- $ 2,225,654 $ 383,774 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 87,143 $ 12,292 Accrued SEP contribution (Note 4) 90,000 84,900 Accrued payroll 47,796 21,928 Customer deposits (Note 1) 223,382 -- Accrued commissions 64,404 -- ------------- ------------- Total current liabilities 512,725 119,120 ------------- ------------- Commitments and contingencies (Note 5) Shareholders' equity: Capital stock - $20 par value, one vote per share: 100,000 shares authorized, 300 shares issued and outstanding at December 31, 1995 and 1994 6,000 6,000 Retained earnings 1,706,929 258,654 ------------- ------------- Total shareholders' equity 1,712,929 264,654 ------------- ------------- $ 2,225,654 $ 383,774 ============= ============= See Accompanying Notes to Audited Financial Statements.
Ventek, Inc. Statements of Operations
Year Ended December 31, 1995 1994 1993 ---------------------------------- Net sales (Notes 1 and 6) $ 4,584,884 $ 1,379,504 $ 654,095 Cost of sales 1,021,446 619,108 322,914 ------------- -------------- ------------ Gross profit 3,563,438 760,396 331,181 ------------- -------------- ------------ Operating expenses: Selling and marketing 385,797 199,286 81,278 Research and development (Note 1) 320,104 265,697 113,968 General and administrative 246,419 133,371 49,816 ------------- -------------- ------------ 952,320 598,354 245,062 ------------- -------------- ------------ Income from operations 2,611,118 162,042 86,119 Interest income 28,073 3,793 83 ------------- -------------- ------------ Net income $ 2,639,191 $ 165,835 $ 86,202 ============= ============== ============ See Accompanying Notes to Audited Financial Statements.
Ventek, Inc. Statements of Shareholders' Equity
Capital Stock Retained Shares Amount Earnings Balance, December 31, 1992 400 $ 8,000 $ 52,597 Net income -- -- 86,202 Distributions to shareholders -- -- (16,280) ----------- ----------- ------------ Balance, December 31, 1993 400 8,000 122,519 Net income -- -- 165,835 Distributions to shareholders -- -- (29,700) Repurchase of shares (100) (2,000) -- ----------- ----------- ------------ Balance, December 31, 1994 300 6,000 258,654 Net income -- -- 2,639,191 Distributions to shareholders -- -- (1,190,916) ----------- ----------- ------------ Balance, December 31, 1995 300 $ 6,000 $ 1,706,929 =========== =========== ============ See Accompanying Notes to Audited Financial Statements.
Ventek, Inc. Statements of Cash Flows
Year Ended December 31, 1995 1994 1993 --------------------------------- Cash flows from operating activities: Net income $ 2,639,191 $ 165,835 $ 86,202 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 15,276 3,998 2,383 Changes in assets and liabilities: Accounts receivable (281,574) (179,564) 7,821 Inventories (270,220) 9,171 2,176 Prepaid expenses and other assets (11,987) 2,113 (1,486) Receivables from shareholders 30,150 (30,150) -- Current liabilities 393,605 83,305 (2,416) ------------ ------------ ------------ Net cash provided by operating activities 2,514,441 54,708 94,680 ------------ ------------ ------------ Cash (used in) investing activities: Purchases of equipment (4,910) (27,036) (7,383) ------------ ------------ ------------ Net cash (used in) investing activities (4,910) (27,036) (7,383) ------------ ------------ ------------ Cash (used in) financing activities: Distributions to shareholders (1,190,916) (29,700) (16,280) Repurchase of shares -- -- (2,000) ------------ ------------ ------------- Net cash (used in) financing activities (1,190,916) (29,700) (18,280) ------------ ------------ ------------ Net increase (decrease) in cash 1,318,615 (2,028) 69,017 Cash and cash equivalents - beginning of the period 135,566 137,594 68,577 ------------ ------------ ------------ Cash and cash equivalents - end of the period $ 1,454,181 $ 135,566 $ 137,594 ============ ============ ============ See Accompanying Notes to Audited Financial Statements.
8 Ventek, Inc. NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Operations: Ventek, Inc. ("Ventek" or the "Company") designs, manufactures, markets and services computer aided vision sorting and defect detection equipment for use in the processing of wood veneer. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentrations of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of money market instruments and trade receivables. The Company invests its excess cash in money market instruments and certificates of deposit with high credit quality financial institutions. Concentrations of credit risk with respect to trade receivables exist because the Company relies heavily on a relatively small number of customers in a single industry. The Company performs ongoing credit evaluations of its customers and requires a significant deposit upon acceptance of a customer's order. The Company does not require any other collateral. The Company has not experienced any credit losses to date. Cash Equivalents: For financial reporting purposes, cash equivalents consist primarily of money market instruments that have original maturities of three months or less. Inventories: Manufacturing inventories are stated at the lower of cost or net realizable value, with cost determined principally by use of the first-in, first-out method. Equipment: Equipment is stated at cost. Depreciation and amortization are computed by the straight-line method over the estimated useful lives of the assets (five years), or the term of the lease in the case of leasehold improvements. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to expense as incurred; significant renewals and betterments are capitalized. Revenue Recognition: The Company recognizes revenue upon the shipment of products. Customer deposits represent monies received in advance of shipment of products. Research and Development Costs: Research and development costs are expensed as incurred. A substantial portion of the research and development expenses is related to developing new products and to improving existing products or processes. Income Taxes: Ventek has elected to be taxed under the provisions of Sub-Chapter "S" of the Internal Revenue Code. Under the provisions of Sub-Chapter "S," the Company is not liable for payment of federal and state corporate income taxes. The shareholders are liable for payment of federal and state income taxes based on their respective share of the Company's taxable income. Fair Value of Financial Assets and Liabilities: Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments, requires disclosure of the fair value of certain financial assets and liabilities. The Company estimates the fair value of its monetary assets and liabilities based upon the existing interest rates related to such assets and liabilities compared to current market rates of interest for similar nature and degree of risk. The Company estimates that the carrying value of all its monetary assets and liabilities approximate fair value as of December 31, 1995 and 1994. NOTE 2 - INVENTORIES Inventories consist of the following:
December 31, 1995 1994 Raw Materials $ 142,555 $ -- Work-in-process 127,665 -- ------------- ------------- $ 270,220 $ -- ============= =============
NOTE 3 - EQUIPMENT Equipment consists of the following:
December 31, 1995 1994 Office and production equipment $ 29,730 $ 24,820 Leasehold improvements 13,020 13,020 ------------- ------------- 42,750 37,840 Less accumulated depreciation (21,029) (5,753) ------------- ------------- $ 21,721 $ 32,087 ============= =============
Depreciation expense aggregated $15,276, $3,998, and $2,383 for the years ended December 31, 1995, 1994, and 1993, respectively. NOTE 4 - RETIREMENT PLAN The Company has established a Simplified Employee Pension (SEP) Plan pursuant to the Internal Revenue Code. The contributions are discretionary and aggregated $90,000, $84,900 and $24,300 for the years ended December 31, 1995, 1994, and 1993, respectively. The contributions are accrued during the year in which they are earned and have been fully funded in the subsequent year. NOTE 5 - COMMITMENTS AND CONTINGENCIES The Company leases the current location of its administrative offices and manufacturing site. The lease is noncancelable and expires on May 31, 1997. The following is a schedule by years of future minimum rental payments required by the above lease as of December 31, 1995:
Year ending December 31, 1996 $ 39,000 1997 16,250 -------------- Total minimum payments required 55,250 Less: sublease rentals (18,417) -------------- $ 36,833 ==============
The following schedule shows the composition of total rent expense for all operating leases:
Year ended December 31, 1995 1994 1993 -------------------------------------------- Minimum rentals $ 33,250 $ 10,300 $ 3,600 Less: Sublease rentals (10,400) (800) -- -------------- -------------- ------------ Net rent expense $ 22,850 $ 9,500 $ 3,600 ============= ============= ============
NOTE 6 - GEOGRAPHIC INFORMATION Sales to geographic areas are as follows:
Year ended December 31, 1995 1994 1993 --------------------------------------------- United States $ 4,249,884 $ 1,293,504 $ 654,095 Export 335,000 86,000 -- ------------- ------------- ------------ $ 4,584,884 $ 1,379,504 $ 654,095 ============= ============= ============
In 1995, Ventek sold equipment to one unaffiliated customer totaling approximately 26% of sales. In 1994, Ventek sold equipment to two different unaffiliated customers totaling approximately 33% and 13% of sales. In 1993, Ventek sold equipment to two different unaffiliated customers totaling 13% and 12% of sales. NOTE 7 - RELATED PARTY TRANSACTIONS As of December 31, 1994, various shareholders of the Company owed Ventek $30,150 for temporary loans made to such shareholders. The loans bore interest between five and eight percent and were repaid in full during 1995. Interest from these loans to shareholders approximated $1,000 in 1995 and is included in interest income in the accompanying Statement of Operations. NOTE 8 - SUBSEQUENT EVENT On July 24, 1996, ARC Capital acquired the business and certain assets of Ventek, subject to certain liabilities. The accompanying financial statements do not reflect any effects of the acquisition of the Company by ARC Capital. ARC Capital Form 8-K-A Item 7(b) Unaudited Pro Forma Financial Information ARC Capital INTRODUCTORY INFORMATION On July 24, 1996, ARC Capital ("ARC") acquired certain assets and the business of Ventek, Inc. ("Ventek") subject to certain liabilities. Ventek manufactures, markets, and services computer-aided vision defect detection systems used in the wood veneer industry. The purchase price was approximately $5.1 million in notes: (i) a 6.75% $1,000,000 note due in three years; (ii) a 6.75% $2,250,000 note due in three years convertible into ARC's Class A Common Stock at $2.25 per share; and (iii) a note and stock appreciation rights agreement payable by issuance of up to 1,800,000 shares of Class A Common Stock or, at ARC's option, in cash in three years. ARC also issued a warrant to purchase 1,000,000 shares of Class A Common Stock which vests over a four year period subject to Ventek meeting specified sales and earnings goals. The acquisition was accounted for under the purchase method of accounting. The $5.1 million purchase price was allocated based on the fair values of the identifiable assets of Ventek as follows: $0.2 million represents the acquired net assets of Ventek and the remaining $4.9 million represents goodwill and other intangibles to be amortized over 15 years. On March 1, 1996, ARC acquired all of the outstanding capital stock of Pulsarr Holding B.V. ("Pulsarr"). Pulsarr designs, manufactures and markets computer-aided vision sorting and defect removal equipment primarily for use in the food processing industry. The acquisition of Pulsarr was reported to the Securities and Exchange Commission on the Company's Form 8-K and Form 8-K-A dated March 6, 1996, and May 13, 1996, respectively. The purchase price was approximately $7.8 million in cash and notes payable. The acquisition was accounted for under the purchase method of accounting. The $7.8 million purchase price was allocated based on the fair values of the identifiable assets of Pulsarr as follows: $1.3 million represents the net assets of Pulsarr, $6.1 million represents in-process research and development technology intangibles which were charged against operations in the quarter ending March 31, 1996, and the remainder of $0.4 million represents goodwill to be amortized over 15 years. The $6.1 million charge for in-process research and development technologies has been eliminated from the accompanying pro forma statements of operations. The unaudited pro forma statements of operations for the twelve months ended December 31, 1995, and the unaudited pro forma statements of operations for the six months ended June 30, 1996, were prepared as if the acquisitions had taken place at the beginnings of the periods presented. The unaudited pro forma balance sheet as of June 30, 1996, was prepared as if the acquisitions had taken place on June 30, 1996. The unaudited pro forma financial information is intended to provide information about the continuing impact of the acquisitions by showing how they might have affected historical financial statements if they had been consummated at an earlier date. This information is not necessarily indicative of future operations or the actual results that would have occurred had the acquisitions been consummated at the beginning of the earliest period presented. This information should be read in conjunction with the accompanying notes to the unaudited pro forma financial information. ARC Capital Unaudited Pro Forma Balance Sheet June 30, 1996 (In thousands)
Historical Pro Forma ARC Ventek Adjustments Results ASSETS Current assets: Cash and cash equivalents $ 1,166 $ 582 $ -- $ 1,748 Accounts receivable 3,139 -- -- 3,139 Inventories 8,933 361 -- 9,294 Prepaid expenses and other assets 1,143 -- -- 1,143 --------- ------- ----------- --------- Total current assets 14,381 943 -- 15,324 --------- ------- ----------- --------- Property, plant and equipment, net 6,890 14 -- 6,904 Goodwill, intangibles and other assets, net 3,137 -- 4,820(A) 7,957 --------- ------- ----------- --------- $ 24,408 $ 957 $ 4,820 $ 30,185 ========= ======= =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,474 $ 124 $ -- $ 3,598 Accrued liabilities 1,425 -- 100(A) 1,525 Customer deposits 3,393 582 -- 3,975 Short-term borrowings 816 -- -- 816 Accrued payroll 524 -- -- 524 Warranty reserve 474 -- -- 474 Current portion of long-term liabilities 2,248 -- -- 2,248 --------- ------- ----------- --------- Total current liabilities 12,354 706 100 13,160 --------- ------- ----------- --------- Long-term liabilities, less current portion 9,899 -- 4,779(A) 14,678 --------- ------- ----------- --------- Shareholders' equity: Common stock 25,083 6 (6)(B) 25,083 Common stock warrants 2,211 -- 192(A) 2,403 Additonal paid in capital 2,797 -- -- 2,797 (Accumulated deficit) retained earnings (27,980) 245 (245)(B) (27,980) Accumulated translation adjustment 44 -- -- 44 --------- ------- ----------- --------- Total shareholders' equity 2,155 251 (59) 2,347 --------- ------- ----------- --------- $ 24,408 $ 957 $ 4,820 $ 30,185 ========= ======= =========== ========= See Accompanying Notes to Unaudited Pro Forma Financial Statements.
ARC Capital Unaudited Pro Forma Statement of Operations For the Year Ended December 31, 1995 (In thousands, except per share amounts)
Historical Pro Forma -------------------------------- --------------------- ARC Pulsarr Ventek Adjustments Results Net sales $ 19,394 $ 11,443 $ 4,585 $ -- $ 35,422 Cost of sales 11,194 6,605 1,022 -- 18,821 -------- -------- -------- --------- --------- Gross margin 8,200 4,838 3,563 -- 13,038 Operating expenses: Selling and marketing 3,255 65 386 -- 4,297 Research and development 1,987 2,134 320 -- 4,441 General and administrative 1,933 1,354 246 -- 3,533 Goodwill/intangible amortization 371 -- -- 348(D) 719 -------- -------- -------- --------- --------- 7,546 4,144 952 348 12,990 -------- -------- -------- --------- --------- Income (loss) from continuing operations before other income and expense 654 694 2,611 (348) 3,611 Other income and expense: Gain on rescission of stock compensation, net 732 -- -- -- 732 Investment and other income 212 16 28 -- 256 Interest expense (483) (38) -- (791)(G) (1,312) -------- -------- -------- --------- --------- Income (loss) from continuing operations before income taxes 1,115 672 2,639 (1,139) 3,287 Provision for income taxes -- (235) -- 147(I) (88) -------- -------- -------- --------- --------- Income from continuing operations 1,115 437 2,639 (992) 3,199 Loss from discontinued operations (173) -- -- -- (173) -------- -------- -------- --------- --------- Net income $ 942 $ 437 $ 2,639 $ (992) $ 3,026 ======== ======== ======== ========= ========= Net income per share: Continuing operations $ 0.12 $ 0.25 Discontinued operations (0.02) (0.01) -------- -------- $ 0.10 $ 0.24 ======== ======== Weighted average shares outstanding 9,451 3,200(J) 12,651 ======== ======== ======== See Accompanying Notes to Unaudited Pro Forma Financial Statements.
ARC Capital Unaudited Pro Forma Statement of Operations For the Six Months Ended June 30, 1996 (In thousands, except per share amounts)
Historical (C) Pro Forma ARC Pulsarr Ventek Adjustments Results Net sales $ 10,032 $ 1,257 $ 3,750 $ -- $ 15,039 Cost of sales 5,955 572 792 -- 7,319 -------- -------- -------- --------- --------- Gross margin 4,077 685 2,958 -- 7,720 Operating expenses: Selling and marketing 1,691 155 330 -- 2,176 Research and development 1,943 100 113 -- 2,156 General and administrative 2,064 218 142 -- 2,424 Goodwill/intangible amortization 194 -- -- 166 (E) 360 Charge for acquired in-process technology 6,088 -- -- (6,088)(F) -- Charge for royalty expense 647 -- -- -- 647 -------- -------- -------- --------- --------- 12,627 473 585 (5,922) 7,763 -------- -------- -------- --------- --------- (Loss) income before other income and expense (8,550) 212 2,373 5,922 (43) Other income and expense: Investment and other income 104 -- 32 -- 136 Interest expense (424) -- -- (275) (H) (699) -------- -------- -------- --------- --------- (Loss) income before income taxes (8,870) 212 2,405 5,647 (606) Provision for income taxes -- (74) -- 31 (I) (43) -------- -------- -------- --------- --------- Net (loss) income $ (8,870) $ 138 $ 2,405 $ 5,678 $ (649) ======== ======== ======== ========= ======== Net (loss) income per share $ (0.85) $ (0.05) ======== ======== Weighted average shares outstanding 10,388 2,269(J) 12,657 ======== ========= ======== See Accompanying Notes to Unaudited Pro Forma Financial Statements.
ARC Capital Notes to Unaudited Pro Forma Financial Information (A) The pro forma balance sheet adjustments represent the consideration paid and the preliminary allocation of the purchase price based on the fair values of the assets acquired and liabilities assumed of Ventek as of June 30, 1996, with the remainder allocated to goodwill and other intangibles. (B) The pro forma balance sheet adjustments represent the elimination of common stock and retained earnings of Ventek. (C) The amounts on the Unaudited Pro Forma Statement of Operations for the six months ended June 30, 1996, in the "Historical" ARC column, include the consolidated results of ARC's operations for the period from January 1 through June 30, 1996, which includes Pulsarr's results from its acquisition date of March 1, 1996. The amounts in the "Historical" Pulsarr column represent the results of Pulsarr's operations for the period from January 1 through February 29, 1996. The amounts in the "Historical" Ventek column represent the results of Ventek's operations for the period from January 1 through June 30, 1996. (D) The pro forma adjustment to "Goodwill/intangible amortization" for the year ended December 31, 1995, represents the amortization of $406,000 and $4,820,000 of goodwill/intangibles resulting from the preliminary allocation of the purchase price of Pulsarr and Ventek, respectively. Goodwill/intangibles will be amortized over 15 years. The goodwill/intangible amortization associated with the Ventek acquisition is deductible for tax purposes whereas the goodwill amortization associated with the Pulsarr acquisition is not tax deductible. (E) The pro forma adjustment to "Goodwill/intangible amortization" for the six months ended June 30, 1996, represents the amortization resulting from the preliminary allocation of the purchase price of Pulsarr and Ventek, as described in (D) above. As ARC's "Historical" results include Pulsarr from its acquisition date of March 1, 1996, the adjustment relating to Pulsarr is for the two months ended February 29, 1996. (F) The charge for acquired in-process technology has been eliminated from the Pro Forma Statement of Operations for the Six Months Ended June 30, 1996, as required by the Security and Exchange Commission's requirement to eliminate nonrecurring acquisition related expenses. (G) The pro forma adjustment to "Interest expense" for the year ended December 31, 1995, represents the interest expense associated with the acquisitions of Pulsarr and Ventek. (H) The pro forma adjustment to "Interest Expense" for the six months ended June 30, 1996, represents the interest expense associated with the acquisitions of Pulsarr and Ventek. As ARC's "Historical" results include Pulsarr from its acquisition date of March 1, 1996, the adjustment relating to Pulsarr is for the two months ended February 29, 1996. (I) The pro forma adjustment to "Provision for income taxes" represents the tax benefits associated with the Pulsarr acquisition interest expense included in (G) and (H) above. Ventek was a Subchapter S Corporation prior to its acquisition. No pro forma adjustments have been made for taxes on Ventek's income as such income will be offset by ARC's current period losses or net operating loss carryforwards. (J) The pro forma adjustments to "Weighted average shares outstanding" are comprised of the following transactions, to fully reflect the number of shares as outstanding for the entire periods presented:
Six Months Year Ended Ended December 31, June 30, 1996 1995 Sale of 1,400,000 shares of ARC Class A Common Stock on March 1, 1996, the proceeds of which were used to partially fund the acquisition of Pulsarr 469,000 1,400,000 Shares of ARC Class A Common Stock underlying the note and stock appreciation rights issued to the former owners of Ventek. 1,800,000 1,800,000 --------------- -------------- 2,269,000 3,200,000
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