SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 23, 1996
PRODUCTIVITY TECHNOLOGIES CORP.
(Formerly named Production Systems Acquisition Corporation)
(Exact name of Registrant as specified in its charter)
Delaware 0-21894
(State or other jurisdiction of incorporation) (Commission File No.)
520 Madison Avenue 10022
New York, New York (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 843-1480
Item 2. Acquisition or Disposition of Assets.
On May 23, 1996, the Registrant consummated its acquisition of
Atlas Technologies, Inc. ("Atlas"), a Michigan corporation, pursuant to the
Merger Agreement dated December 18, 1995, among the Registrant, Ronald M. Prime
and Michael D. Austin, doing business as AMS Holding Company ("AMS"), a Michigan
partnership, and Atlas. The acquisition was effected by the merger of PSAC
Merger Corporation, a wholly owned subsidiary of the Registrant formed for the
purpose, into Atlas, with Atlas being the surviving company and becoming a
wholly owned subsidiary of the Registrant.
The total merger consideration paid by the Registrant to the
shareholders of Atlas was $7,120,000. Such merger consideration, and the fees
and expenses of the transaction, was paid from the liquid assets of the
Registrant and the proceeds of a special interest-bearing account established
with certain proceeds of the initial public offering of securities of the
Registrant consummated July 5, 1994. The shareholders of Atlas to whom the
merger consideration was paid were AMS, of whom Messrs. Prime and Austin,
principal executive officers of Atlas, are the partners, and the Atlas
Technologies, Inc. Employee Stock Ownership Trust.
Atlas designs and manufactures automation equipment for the
sheet metal forming industry. At the conclusion of the merger, the Board of
Directors of Atlas was increased to five members, consisting of Messrs. Prime,
Austin, Samuel N. Seidman, director and President of the Registrant, and Joseph
K. Linman and John S. Strance, directors and Vice Presidents of the Registrant.
For further information regarding the transaction and Atlas,
please refer to Item 5 of the Registrant's Report of Form 8-K dated December 18,
1995, which is incorporated by reference as an exhibit to this Report.
Item 5. Other Events.
On May 21, 1996, the stockholders of the Registrant approved
an amendment to the Registrant's Certificate of Incorporation to (a) change the
name of the Registrant to Productivity Technologies Corp. and (b) classify the
Board of Directors of the Registrant into three classes. Such amendment was
filed and became effective on May 28, 1996. Pursuant to the classification of
the Board of Directors, the stockholders elected Jesse A. Levine and Alan I.
Goldman as Class I Directors to serve for terms expiring at the annual meeting
of stockholders to be held during the 1997 fiscal year, Ray J. Friant, Jr. and
John S. Strance as Class II Directors to serve for terms expiring at the annual
meeting of stockholders to be held during the 1998 fiscal year, and Samuel N.
Seidman, Joseph K. Linman and Alan H. Foster as Class III Directors to serve for
terms expiring at the annual meeting of stockholders to be held during the 1999
fiscal year.
1
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Atlas Technologies, Inc.
Balance sheet as of March 31, 1996 (unaudited)
Statements of Income for nine months ended March 31, 1996 (unaudited) and March
31, 1995 (unaudited)
Statement of Stockholders' Equity for period ended March 31, 1996 (unaudited)
Statements of Cash Flows for nine months ended March 31, 1996 (unaudited) and
March 31, 1995 (unaudited)
Selected Information
(b) Pro Forma Financial Information.
Production Systems Acquisition Corporation and Atlas Technologies, Inc.
UnauditedPro Forma Consolidated Statement of Operations for nine months ended
March 31, 1996
Unaudited Pro Forma Consolidated Statement of Operations for year ended
June 30, 1995
Notes to Unaudited Pro Forma Consolidated Statements of Operations
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1996
Notes to Unaudited Pro Forma Consolidated Balance Sheet
(c) Exhibits
2.1 Registrant's Report on Form 8-K dated December 18,
1995 (Item 5).
4.1 Certificate of Amendment to Registrant's Certificate
of Incorporation filed May 28, 1996.
2
Item 8. Change in Fiscal Year.
On May 17, 1996, the Board of Directors of the Registrant
approved a change in the Registrant's fiscal year. The new fiscal year end will
be June 30. A Report on Form 10-K will be filed covering the transition period
from April 1, 1996 to June 30, 1996.
SIGNATURE
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.
PRODUCTIVITY TECHNOLOGIES CORP.
(Formerly named Production Systems
Acquisition Corporation)
/s/ Samuel N. Seidman
Name: Samuel N. Seidman
Title: President
Date: June 6, 1996
3
ATLAS TECHNOLOGIES, INC
BALANCE SHEETS
March 31, 1996
-------------------
ASSETS (Unaudited)
Current assets:
Cash $ 155,316
Contract receivables 5,776,993
Notes receivable 516,192
Officer note receivable 15,600
Costs and estimated earnings
in excess of billings
on uncompleted contracts 6,327,745
Inventories 991,988
Prepaid expenses 28,310
Deferred taxes - current 269,000
-------------------
14,081,144
-------------------
Property, plant, and equipment:
Land 77,200
Buildings and improvements 1,945,123
Machinery and equipment 4,973,586
Transportation equipment 99,117
Accumulated depreciation (4,501,160)
-------------------
2,593,866
-------------------
Other assets:
Deferred taxes - noncurrent 187,000
Noncompetition agreement, net of accumulated
amortization 232,333
Officer notes receivable, net of current portion 123,362
Other assets 40,000
-------------------
582,695
-------------------
$17,257,705
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable $2,531,168
Line of credit 4,990,852
Accrued expenses and other 1,606,934
Accrued taxes 99,851
Billings in excess of costs and estimated
earnings on uncompleted contracts 905,435
Stock redemption payable 700,000
Current portion of long-term debt 1,808,846
-------------------
12,643,086
-------------------
Long-term debt, net of current portion 1,063,806
-------------------
Commitments
-
Stockholders' equity:
Common stock ($1 par value, authorized 50,000 shares,
25,683 issued and outstanding) 25,683
Paid in capital 73,465
Retained earnings 3,451,665
-------------------
3,550,813
-------------------
$17,257,705
===================
See selected information.
F-1
ATLAS TECHNOLOGIES, INC
STATEMENTS OF INCOME
Nine months ended March 31,
1996 1995
(Unaudited) (Unaudited)
Net sales
$25,841,050 $21,027,428
------------------ ------------------
Cost of sales 17,862,970 15,374,582
Selling, general, and administrative
expenses 4,935,291 3,800,913
Management bonuses 1,602,530 -
------------------ ------------------
24,400,791 19,175,495
------------------ ------------------
1,440,259 1,851,933
------------------ ------------------
Other income (expense):
Interest income 32,036 2,232
Interest expense (410,910) (462,352)
Gain on disposal of assets 35,474 308,565
Miscellaneous 20,273 68,812
------------------ ------------------
(323,127) (82,743)
------------------ ------------------
Net income before income taxes 1,117,132 1,769,190
Income taxes 379,200 370,630
------------------ ------------------
Net income $737,932 $1,398,560
================== ==================
Net income per share of common stock $28.73 $45.36
================== ==================
Weighted average common shares 25,683 30,830
================== ==================
See selected information.
F-2
ATLAS TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Total
Number of Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------- --------- -------------- ----------- -----------
Balance at June 30, 1995 ........................................... 25,683 25,683 73,465 3,413,733 3,512,881
Stock redemption ................................................... -- -- -- (700,000) (700,000)
Net income for the period .......................................... -- -- -- 737,932 737,932
------- --------- -------------- ----------- -----------
Balance at March 31, 1996 (Unaudited) .............................. 25,683 $ 25,683 $ 73,465 $ 3,451,665 $ 3,550,813
======= ========= ============== =========== ===========
See selected information.
F-3
ATLAS TECHNOLOGIES, INC
STATEMENTS OF CASH FLOWS
Nine months ended March 31,
1996 1995
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $737,932 $1,398,560
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 293,715 264,587
Gain on sale of property & equipment - (28,565)
Increase in contract receivables, inventories, prepaids and other (1,822,274) (2,136,456)
Increase in accounts payable, accrued
expenses, and other 424,599 418,009
Costs and estimated earnings in excess of billings
on uncompleted contracts; and billings in excess of
costs and estimated earnings on uncompleted contracts (1,036,333) (1,311,040)
-------------------- ----------------------
Net cash used in operating activities (1,402,361) (1,394,905)
-------------------- ----------------------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment - 132,142
Expenditures for property, plant, and equipment (357,612) (348,680)
Issuance of notes receivable (47,793) (88,326)
-------------------- ----------------------
Net cash used in investing activities (405,405) (304,864)
-------------------- ----------------------
Cash flow from financing activities:
Proceeds from issuance of long-term debt - 110,000
Net borrowing on line of credit 2,381,914 2,278,970
Purchase of common stock - (196,000)
Payment of debt (436,085) (569,188)
-------------------- ----------------------
Net cash provided by financing activities 1,945,829 1,623,782
-------------------- ----------------------
Net increase (decrease) in cash 138,063 (75,987)
Cash, Beginning of period 17,253 93,084
-------------------- ----------------------
Cash, End of period $155,316 $17,097
==================== ======================
See selected information.
F-4
ATLAS TECHNOLOGIES, INC.
SELECTED INFORMATION - Substantially all Disclosures
Required by Generally Accepted Accounting Principles Are Not Included
MARCH 31, 1996
1. General
On December 18, 1995, the majority stockholders of Atlas Technologies,
Inc. (Atlas) entered into a definitive Merger agreement with Production Systems
Acquisition Corporation (PSAC). PSAC is a Specified Purpose Acquisition
Company(R) (SPAC(R)) formed to acquire or merge with an operating business in
the production systems industry. Under the merger agreement, a newly formed
wholly owned subsidiary of PSAC will be merged with and into Atlas , so that
Atlas will become a wholly owned subsidiary of PSAC. Each share of the
outstanding stock of Atlas at the date of the merger will be entitled to receive
its prorata portion of the $7,000,000 merger consideration to be paid by PSAC.
The accompanying financial statements are unaudited. However, in the
opinion of management, all adjustments necessary for a fair statement of
financial position and results for the stated periods have been included. A
commitment to the former stockholders has been recorded in the period ended
March 31, 1996. This commitment is discussed in Note 5. The remaining
adjustments are of a normal recurring nature. Selected information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted. It
is suggested that these condensed financial statements be read in conjunction
with the audited financial statements and notes thereto as of and for the year
ended June 30, 1995. Results for interim periods are not necessarily indicative
of the results to be expected for an entire fiscal year.
2. Officer note receivable
At the effective date of the merger, this note will become due and will be paid
to the corporation in full.
3. Inventories
Inventories at June 30, 1995, and March 31, 1996, are stated at lower
of cost (first-in, first-out) or market and include primarily raw materials and
parts.
4. Line of credit and long-term debt
At the effective date of the merger, certain items included in current
portion of long-term debt that are secured by company stock will be paid in full
or refinanced with new debt at the Company's lending institution.
5. Commitments and Stock Redemption
As discussed in Note 1, terms of the merger require the stockholders of
Atlas to receive from PSAC $7,000,000 in consideration for their shares of the
outstanding stock of Atlas prior to the date of the merger, with additional
consideration to be paid in the amount of $10,000 per week for each week the
closing date is beyond March 1, 1996. The agreement also requires an equity
adjustment of the merged subsidiary (Atlas). Upon approval of the merger, a
contingent liability of $700,000 has been defined and will be paid to a former
stockholder as part of the stockholder's redemption agreement. Other payments
and contributions will be made to current executives of the company and the
Employee Stock Ownership Plan. The effect of these payments is to reduce the net
income of the company reported in these financial statements for the period
ended December 31, 1995. In the event the equity of Atlas at the effective date
is below $3,196,064, the merger consideration of $7,000,000 will be reduced.
F-5
ATLAS TECHNOLOGIES, INC.
SELECTED INFORMATION - Substantially all Disclosures
Required by Generally Accepted Accounting Principles Are Not Included
MARCH 31, 1996
5. Commitments and Stock Redemption - (continued)
PSAC has also agreed to retain the two majority stockholders, Ronald M.
Prime and Michael D. Austin, under employment agreements pursuant to which they
will serve as Chief Executive Officer and President of Atlas, respectively.
These agreements will be identical except that the term of Mr. Prime's agreement
will terminate on December 31, 1998, and that of Mr. Austin will terminate on
December 31, 2001. Each agreement requires the executive to devote substantially
all of his business time and attention to the affairs of Atlas. The agreements
require a bonus payment to be made to the shareholders in the amount of $100,000
each upon signing of the agreement. Annual compensation (salary) will be
$190,000, subject to cost of living increases after December 31, 1996. The
agreements also require additional annual bonuses to the executives if certain
operating results are achieved.
6. Subsequent event
On May 23, 1996, PSAC acquired all the shares of Atlas under the merger
agreement discussed in Note 1 above.
F-6
PRODUCTION SYSTEMS ACQUISITION CORPORATION ("PSAC")
AND ATLAS TECHNOLOGIES, INC. ("ATLAS")
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated balance sheet as of March 31, 1996
and the unaudited pro forma consolidated statements of operations for the year
ended June 30, 1995 and nine months ended March 31, 1996 include the accounts of
PSAC and Atlas for the respective periods. The unaudited pro forma financial
statements have been prepared to illustrate the estimated effects of the merger
of PSAC and Atlas ("Merger"). The Merger is accounted for as an acquisition of
the common stock by PSAC under the purchase method of accounting. The pro forma
financial statements were derived by adjusting the historical financial
statements of PSAC and Atlas for certain transactions pursuant to the Merger
described in the notes to the unaudited pro forma consolidated financial
statements.
The unaudited pro forma consolidated balance sheet was prepared as if
the Merger had occurred on March 31, 1996. The unaudited pro forma consolidated
statements of operations for the year ended June 30, 1995 and nine months ended
March 31, 1996 were prepared as if the Merger had occurred on July 1, 1994. The
pro forma financial data does not purport to be indicative of the results which
actually could have been obtained had such transactions been completed as of the
assumed dates or which may be obtained in the future. The pro forma statements
of operations conform to Atlas' fiscal year since the operations of the combined
companies will primarily be those of Atlas. This presentation, considered a more
accurate reflection of results, would not be materially different if PSAC's
fiscal year end of March 31 were the basis of presentation.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Pro forma Pro forma
PSAC Atlas adjustments consolidated(1)
----------------------------------
Debit Credit
(in thousands, except per share and share amounts)
Nine months ended March 31, 1996
Net sales.................................... $ -- $ 25,841 $ -- $ -- $ 25,841
Operating expenses:
Cost of sales............................. -- 17,863 -- -- 17,863
Selling, general and 149(2) --
administrative expenses............. 210 4,935 144(3) 279(5) 5,159
Management bonuses........................... -- 1,602 813(4) 1,602(5) 813
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)...................... (210) 1,441 1,106 1,881 2,006
Other income (expense):
Interest income........................... 372 32 329(6) -- 75
Interest expense.......................... -- (411) -- -- (411)
Gain on disposal of assets................ -- 35 -- -- 35
Miscellaneous income...................... -- 20 -- -- 20
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income tax
provision................................. 162 1,117 1,435 1,881 1,725
Income tax provision......................... 96 379 252(7) -- 727
- -----------------------------------------------------------------------------------------------------------------------------------
Net income................................... $ 66 $ 738 $ 1,687 1,881 $ 998
- -----------------------------------------------------------------------------------------------------------------------------------
Per share of common stock:
Income.................................... $ 0.03 $ 0.47
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of
shares of common stock.................... 2,125,000 2,125,000
- -----------------------------------------------------------------------------------------------------------------------------------
F-7
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Pro forma Pro forma
PSAC Atlas adjustments consolidated(1)
---------------------------
Debit Credit
(in thousands, except per share and share amounts)
Year ended June 30, 1995
Net sales.................................... $ -- $ 29,078 $ -- $ -- $ 29,078
Operating expenses:
Cost of sales............................. -- 21,034 -- -- 21,034
Selling, general and administrative 198(2)
expenses............................... 277 5,119 192(3) -- 5,786
Management bonuses........................... -- -- 566(4) -- 566
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)...................... (277) 2,925 956 -- 1,692
Other income (expense):
Interest income........................... 474 33 407(6) -- 100
Interest expense.......................... -- (645) -- -- (645)
Gain on disposal of assets................ -- 308 -- -- 308
Miscellaneous income...................... -- 64 -- -- 64
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income tax
provision................................. 197 2,685 1,363 -- 1,519
Income tax provision......................... 67 465 125(7) -- 657
- ----------------------------------------------------------------------------------------------------------------------------------
Net income................................... $ 130 $ 2,220 $1,488 -- $ 862
- ---------------------------------------------------------------------------------------------------------------------------------
Per share of common stock:
Income.................................... $ 0.06 $ 0.41
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted average number of
shares of common stock.................... 2,125,000 2,125,000
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) The unaudited pro forma consolidated statements of operations are
presented assuming that no PSAC stockholders will request conversion of
their shares. No such requests were made.
(2) The purchase price, which includes cash paid for the Atlas shares
($7,120,000), and certain transaction expenses (approximately
$400,000), will exceed the book value of Atlas' stockholders equity by
approximately $4,567,000 against which a $598,000 deferred tax
liability will be provided. This excess is allocated $1,496,000 to
property, plant and equipment (based on a recent appraisal) and
$3,071,000 to goodwill. Additional depreciation on property, plant and
equipment based on a 20-year life, and amortization of goodwill based
on a 25-year life aggregating $198,000 has been charged to operations
for the year ended June 30, 1995 and $149,000 for the nine months ended
March 31, 1996.
(3) Represents annual salaries to officers and directors of PSAC ($252,000)
net of annual savings of $60,000 on PSAC occupancy expense. Such
payments would have been incurred had the transaction been consummated
on July 1, 1994.
(4) Represents pro forma amounts payable to Atlas senior management under
new employment agreements after the Merger (based on Atlas operating
income, as adjusted) in the amounts of $813,000 and $566,000 for the
nine months ended March 31, 1996 and year ended June 30, 1995,
respectively. Such payments would have been incurred had the
transaction been consummated on July 1, 1994.
F-8
(5) Represents elimination of management bonuses ($1,602,000) and
professional fees ($279,000) incurred by Atlas aggregating $1,881,000.
These amounts would not have been incurred in the normal course of
business had it not been stated that the Merger Agreement contemplates
that the net worth of Atlas equal $3,196,084 at the date of
consummation of the Merger.
(6) Represents the elimination of interest income on the portion of
PSAC's investment in a U.S. government security deposited in the Trust
Fund, which will be liquidated upon consummation of the Merger.
(7) Represents consolidated income tax provision at an effective rate of
40% on taxable income after adding back non-deductible amortization of
goodwill of $92,000 and $123,000 for the nine months ended March 31,
1996 and year ended June 30, 1995, respectively.
</FN>
F-9
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(in thousands)
Pro forma Pro forma
PSAC Atlas adjustments consolidated (1)
---- ----- -----------------
------------------------------------
Debit Credit
Assets
Current assets:
Cash and cash equivalents.................. $ 4 $ 155 $9,071(2) $ 337(3) $2,168
395(7) 7,120(4)
Short term investments and accrued
interest thereon........................... 80 -- -- -- 80
U.S. Government security deposited in
Trust Fund and accrued interest
thereon.................................... 9,071 -- -- 9,071(2) --
Contracts and notes receivable............. -- 6,309 -- 272(7) 6,037
Costs and estimated earnings in excess
of billings on uncompleted contracts....... -- 6,328 -- -- 6,328
Inventories -- 992 -- -- 992
Prepaid expenses........................... 13 28 -- -- 41
Deferred acquisition costs................. 213 -- -- 213(3) --
Deferred taxes............................. -- 269 -- -- 269
- ----------------------------------------------------------------------------------------------------------------------------------
Total current assets................ 9,381 14,081 9,466 17,013 15,915
- ----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net.. -- 2,594 400(3) -- 4,090
1,096(4) --
Goodwill..................................... -- -- 3,071(4) -- 3,071
Deferred taxes............................... -- 187 -- -- 187
Other assets................................. 34 396 -- 123(7) 307
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets........................ $9,415 $17,258 $14,033 $17,136 $23,570
==================================================================================================================================
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable, accrued expenses
and income taxes payable................... $245 $4,238 150(3) -- $4,333
Line of credit............................. -- 4,991 -- 2,148(6) 7,139
Billings in excess of costs and
estimated earnings on uncompleted
contracts.................................. -- 905 -- -- 905
Stock redemption payable................... -- 700 700(6) -- --
Current maturities of long-term debt....... -- 1,809 1,448(6) -- 361
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities........... 245 12,643 2,298 2,148 12,738
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term debt, net of current portion -- 1,064 -- -- 1,064
Deferred income taxes............... -- -- -- 598(4) 598
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities................... 245 13,707 2,298 2,746 14,400
==================================================================================================================================
Common stock subject to possible
conversion................................... 1,813 -- 1,813(5) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common Stock............................... 2 26 26(4) -- 2
Additional paid-in capital................. 7,352 73 73(4) 1,813(5) 9,165
Retained earnings.......................... 3 3,452 3,452(4) -- 3
- -----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity.......... 7,357 3,551 3,551 1,813 9,170
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and 41 58
stockholders' equity................ $9, 5 $17,2 $7,662 $4,55 $23,570
==================================================================================================================================
F-10
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) The unaudited pro forma consolidated balance sheet is presented
assuming that no PSAC stockholders request conversion of their shares.
No such requests were made.
(2) Represents the release of restricted cash from the Trust Fund as a
result of the Merger.
(3) Represents PSAC's estimated expenses ($400,000) to be incurred in
connection with the Merger: brokers' fee ($180,000) and other
professional fees ($220,000), allocated to plant, property and
equipment.
(4) Represents the payment for the Atlas shares ($7,120,000), elimination
of Atlas' capital accounts, allocation of the excess of the purchase
price over Atlas' stockholders' equity at December 31, 1995 to
property, plant and equipment based on a recent appraisal of fixed
assets ($1,096,000) and goodwill ($3,071,000) and accounting for the
deferred tax liabilities ($598,000) at an assumed 40% tax rate on the
temporary differences arising from the excess purchase price allocated
to property, plant and equipment. The carrying value of the remaining
assets and liabilities of Atlas approximate fair value.
(5) Represents the reclassification of common stock subject to possible
conversion since the unaudited pro forma consolidated balance sheet
contemplates that no PSAC stockholders will request conversion of their
shares.
(6) Represents payment of debts due to a former stockholder of Atlas upon
consummation of the Merger ($1,448,000) and stock redemption due to
such former stockholder ($700,000).
(7) Receipt of notes receivable ($395,000) repaid at closing.
F-11