UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 1, 2004
Science Dynamics Corporation
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(Exact name of registrant as specified in its charter)
Delaware 000-10690 22-2011859
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
7150 N. Park Drive, Suite 500
Pennsauken, NJ 08109
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (856) 910-1166
Copies to:
Gregory Sichenzia, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Phone: (212) 930-9700
Fax: (212) 930-9725
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On September 1, 2004, M3 Acquisition Corp., a New Jersey corporation
and a majority owned subsidiary of Science Dynamics Corporation (the
"Company"), entered into an Asset Purchase Agreement (the "Agreement")
with Modern Mass Media Group, Inc., a New Jersey corporation. Pursuant to
the Agreement, M3 Acquisition Corp. sold substantially all of its tangible
and intangible assets that were used in its audio and visual systems
integration business, including: (a) all related intellectual property; (b)
all fixed assets; (c) all customer lists; and (d) the goodwill associated
therewith; all free and clear of any security interests, mortgages and other
encumbrances. The assets sold under the Agreement were valued by the Company
at $812,452, which includes $250,498 of goodwill. In consideration for the
assets sold under the Agreement, Modern Mass Media Group, Inc. assumed
liabilities of M3 Acquisition Corp. amounting to $1,116,749, although M3
Acquisition Corp. did not receive releases from its creditors.
Paul Burgess, Chief Operating Officer of the Company, incorporated
Modern Mass Media Group and is an executive officer of Modern Mass Media
Group. Mr. Burgess has agreed to remain an officer of Modern Mass Media
Group to facilitate the transition in ownership of the assets sold under the
Agreement. Mr. Burgess also has the right to purchase shares of common stock
of Modern Mass Media Group in an amount and at a price to be determined at
such time that Mr. Burgess decides to purchase such shares. The Company's
management believes that the terms of the Agreement are at least as favorable
to the Company as could have been obtained from an unrelated third party.
In connection with the asset sale, on October 21, 2004, Laurus Master
Fund, Ltd. consented to the asset sale according to the terms of the
Agreement. Laurus Master Fund, Ltd. also consented to the filing of a UCC-3
to release its security interest in the assets of M3 Acquisition Corp., where
applicable, to effect the asset sale.
Item 2.01 Completion of Acquisition or Disposition of Assets.
See Item 1.01 above.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Science Dynamics Corp. and Subsidiaries Unaudited combined Pro Forma
Balance Sheet as of June 30, 2004, unaudited combined Pro Forma
Statement of Operations for the Six months ended June 30, 2004;
Unaudited combined Pro Forma statement of Operations for the year
ended December 31, 2003.
(c) Exhibits.
Exhibit
Number Description
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2.1 Asset Purchase Agreement effective September 1, 2004 between
Modern Mass Media Group, Inc. and M3 Acquisition Corp., a
subsidiary of Science Dynamics Corporation.
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.
Science Dynamics Corporation
Date: October 22, 2004
/s/ Alan C. Bashforth
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Alan Bashforth
President and Chief
Executive Officer
UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma combined balance sheet of Science Dynamics
Corp.as of June 30, 2004 gives effect to the Pro Forma events described below
as if such events occurred at June 30, 2004. The unaudited pro forma
consolidated statements of operations for the six months ended June 30, 2004
and the year ended December 31, 2003 give effect to the pro forma events as
if such events occurred on January 1, 2003. The unaudited pro forma
consolidated financial statements are based upon the historical financial
statements of Science Dynamics Corp. and MMM for each period presented. In
the opinion of Science Dynamics and Modern Mass Media management, all
adjustments and/or disclosures necessary for a fair presentation of the pro
forma data have been made in accordance with Article 11 of SEC Regulation S-
X.
The pro forma event is Science Dynamics sale of $812,452 in assets, which
includes $250,498 of goodwill and the assumption of M3 liabilities amounting
to $1,116,749 of its majority owned subsidiary M3 Acquisition Corp.
SCIENCE DYNAMICS
INDEX TO UNAUDITED FINANCIAL STATEMENTS
Pages
-----
Unaudited Pro Forma Combined Statement of Operations for
the year ended December 31, 2003 1
Unaudited Pro Forma Combined Balance Sheet as of June 30, 2004 2
Unaudited Pro Forma Combined Statement of Operations for
the period ended June 30,2004 3
Notes to Unaudited Pro Forma Combined Financial Statements 4
Science Dynamics Corporation & Subsidiaries
Unaudited Pro Forma Consolidated Condensed Statement of Operations
Year ended December 31, 2003
Science Modern Mass Science
Dynamics Media Pro Forma Dynamics
Historical Historical(1) Adjustments Pro Forma
---------- ---------- ----------- ---------
Net Sales $ 4,108,510 $ 2,617,676 $ 1,490,834
---------- ---------- ---------- ----------
Operating costs and expenses:
Cost of sales 1,940,959 1,516,974 423,985
Research and development 382,764 - 382,764
Selling, general
and administrative 2,952,218 1,521,396 1,430,822
---------- ---------- ---------- ----------
5,275,941 3,038,370 2,237,571
---------- ---------- ---------- ----------
Operating income (loss) (1,167,431) (420,694) (746,737)
Other income (expenses):
NJ NOL 217,021 - 217,021
Sale of Intangible Asset 1,350,000 1,350,000
Write Down of Assets (105,603) (105,603)
Other Income - - -
Interest expense (199,713) (768) (198,945)
Finance Expense (125,942) - (125,942)
---------- ---------- ---------- ----------
Net Loss before cumulative effect
of accounting change (31,668) (421,462) 389,794
Cumulative effect of
accounting Change (250,499) (2) 250,499 -
---------- ---------- ---------- ----------
Net Income (Loss) $ (282,167) $ (421,462) $ 250,499 $ 389,794
Net Income (Loss) per
common share
Basic (0.01) 0.01
Diluted (0.01) 0.01
Weighted average shares
outstanding
Basic 41,418,655 41,418,655
Diluted 41,418,655 69,495,535
The accompanying notes are integral part of this unaudited Pro Forma Statement of Operation
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Science Dynamics Corporation & Subsidiaries
Unaudited Pro Forma Consolidated Statement of Balance Sheet
June 30, 2004
Science Modern Mass Science
Dynamics Media Pro Forma Dynamics
Historical Historical(1) Adjustments Pro Forma
---------- ---------- ----------- ---------
Current assets:
Cash and cash equivalents $ 78,483 $ (8,838) $ 69,645
Accounts receivable - trade 531,553 (262,237) 269,316
Inventories 133,345 (72,047) 61,298
Other current assets 2,842 (30) 2,812
---------- ---------- ---------- ---------
Total current assets 746,223 (343,152) 403,071
---------- ---------- ---------- ---------
Property and equipment, net 140,063 (47,193) 92,870
Deferred Asset 21,955 - 21,955
Other assets 2,812 2,812
Goodwill - -
---------- ---------- ---------- ----------
Total assets $ 911,053 (390,345) $ 520,708
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term payable $ 261,860 $ (80,000) $ 181,860
Current portion of
convertible note - - -
Customer deposits 191,290 (61,290) 130,000
Deferred Income 44,377 (44,377) -
Revolving Credit Line 227,998 227,998
SBA Loan 50,000 50,000
Loan payable stockholders 163,192 - 163,192
Accounts payable 1,328,520 (472,646) 855,874
Accrued expenses 550,908 (63,660) 487,248
Convertible Debenture 1,198,360 - 1,198,360
---------- ---------- ---------- ---------
Total current liabilities 4,016,505 (721,973) 3,294,532
---------- ---------- ---------- ---------
Long term liabilities:
Long term Debt 332,963 (240,000) 92,963
Non current portion of bank note - - -
---------- ---------- ---------- ---------
Total liabilities $ 4,349,468 $ (961,973) $3,387,495
Shareholders' equity -
Common stock - .01 par value,
200,000,000 shares authorized,
43,844,455 issued
43,718,655 outstanding
in 2004 . 458,505 458,505
Preferred stock, .01 par value,
no shares issued and
outstanding - - -
Additional paid-in capital 15,944,517 - 15,944,517
(Deficit) (19,443,604) 571,627 (18,871,976)
---------- ---------- ---------- ---------
(3,040,582) 571,627 (2,468,955)
Common stock held in treasury,
at cost (397,833) - (397,833)
---------- ---------- ---------- ---------
Total shareholders' equity (3,438,415) 571,627 (2,866,788)
---------- ---------- ---------- ---------
Total liabilities and
shareholders' equity $ 911,053 $ (390,345) $ 520,708
========== ========== ========== =========
The accompanying notes are integral part of this unaudited Pro Forma Balance Sheet
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Science Dynamics Corporation & Subsidiaries
Unadudited Pro Forma Combined Statement of Operations
June 30, 2004
Science Modern Mass Science
Dynamics Media Pro Forma Dynamics
Historical Historical(1) Adjustments Pro Forma
---------- ---------- ----------- ---------
Net Sales $ 2,581,451 $(1,442,245) $1,139,206
Total Cost of Sales 984,697 (795,177) 189,520
---------- ---------- ---------- ---------
Gross Profit 1,596,754 (647,068) 949,686
---------- ---------- ---------- ---------
Operating costs and expenses:
Research and development 153,423 - 153,423
Selling, general and
Administrative 1,450,687 (823,279) 627,408
---------- ---------- ---------- ---------
Total Operation Expenses 1,604,110 (823,279) 780,831
Write-off of Goodwill 250,498 (2) (250,498) -
---------- ---------- ---------- ---------
Total Operating income (loss) (257,854) 176,212 250,498 168,855
Other income (expenses):
Sale of Intangable Asset 60,000 60,000
Write Down of Assets -
Other Income (4,809) (4,809) -
Interest expense (75,407) - (75,407)
Finance Expense (44,891) - (44,891)
---------- ---------- ---------- ---------
(55,489) 4,809 (60,298)
Net Income (Loss) $ (313,343) $ 181,021 $ 250,498 $ 118,176
========== ========== ========== =========
Net (Loss) per common
share Basic (0.01) 0.00
Net (Loss) per common
share Diluted (0.00) 0.00
Weighted average shares
outstanding Basic 45,612,134 45,612,134
Weighted average shares
outstanding Diluted 45,612,134 66,679,089
The accompanying notes are integral part of this unaudited Pro Forma Balance Sheet
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Notes to Science Dynamics Unaudited Pro Forma
Consolidated Financial Information
1. Elimination of the historical information from Modern Mass Media
2. In accordance with SFAS 142, Goodwill and Other Intangible Assets,
Science Dynamics tests goodwill and other intangible assets for
impairment during the fourth quarter of each year and on an interim
date should factors or indicators become apparent that would require an
interim test. For pro forma purposes no impairment adjustments would be
necessary.
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