================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 20, 1997 PROTOSOURCE CORPORATION ---------------------------------------------------- (Exact name of registrant as specified in its charter) California 33-86242 77-0190772 - ----------------------------- ----------- ------------------ (State or other jurisdiction (Commission (IRS Employer I.D. of incorporation) File Number) Number) 2300 Tulare Street, Suite 100 Fresno, California 93721 -------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code (209) 486-8638 -------------- 2580 West Shaw Fresno, California 93711 ------------------------------------------------------------ (Former name or former address, if changed since last report) ================================================================================ SECURITIES AND EXCHANGE COMMISSION FINANCIAL STATEMENTS TO FORM 8-K/A DATED JANUARY 3, 1997 PROTOSOURCE CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- Proforma Condensed Financial Statements Summary of Presentation F-2 Proforma Condensed Balance Sheet as of September 30, 1996 F-3 Proforma Condensed Statement of Operations for the nine months ended September 30, 1996 F-5 Proforma Condensed Statement of Operations for the nine months ended September 30, 1995 F-6 Notes to Proforma Condensed Financial Statements F-7 F-1 PROTOSOURCE CORPORATION PROFORMA CONDENSED FINANCIAL STATEMENTS The following unaudited proforma condensed financial statements gives effect to the divestiture of ProtoSource Corporation's (the "Company's") software development, MarketStreet and computer training center divisions (the "divisions") to the former management of the Company. The proforma condensed financial statements are based on the Company's historical financial statements and estimates and assumptions set forth below. The proforma condensed balance sheet as of September 30, 1996 gives effect to the divestiture of the divisions to the former management of the Company as if the sale took place on September 30, 1996. The proforma condensed statement of operations for the nine months ended September 30, 1996 includes the divestiture of the divisions as if the transaction was completed at the beginning of the year. The proforma condensed statement of operations for the nine months ended September 30, 1995 includes the divestiture of the divisions as if the transaction was completed at the beginning of the year. Proforma adjustments are based upon preliminary estimates, available information and certain assumptions that management deems appropriate. The unaudited proforma financial information presented herein is not necessarily indicative of the results of operations or financial position that the Company would have obtained had such events occurred at the beginning of the period, as assumed, or of the future results of the Company. The proforma financial statements should be read in conjunction with the historical financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995 and the Company's Quarterly Report on Form 10-QSB for the nine months ended September 30, 1996. F-2 PROTOSOURCE CORPORATION (Formerly SHR Corporation dba Software Solutions Company) PROFORMA CONDENSED BALANCE SHEET SEPTEMBER 30, 1996 (UNAUDITED) ASSETS ------ Proforma Proforma ProtoSource Adjustments Combined ----------- ----------- -------- Current Assets: Cash and cash equivalents $ 2,370 $1,070,000 (1) $1,072,370 250,000 (2) (250,000)(3) Accounts receivable, net of allowance for doubtful accounts of $199,848 and $-0-, as adjusted 178,256 (129,438)(3) 48,818 Inventories 50,288 (50,288)(3) -- Deposits and other current assets 46,775 (20,000)(1) 14,275 (12,500)(3) ----------- ----------- ---------- Total Current Assets 277,689 857,774 1,135,463 ----------- ----------- ---------- Property and Equipment, at cost: Land 411,176 -- 411,176 Building and improvements 1,389,590 -- 1,389,590 Equipment 738,947 (67,806)(3) 671,141 Furniture 132,750 (38,375)(3) 94,375 Vehicles 10,090 -- 10,090 ----------- ----------- ---------- 2,682,553 (106,181) 2,576,372 Less accumulated depreciation and amortization 423,789 (31,732)(3) 392,057 ----------- ----------- ---------- Net Property and Equipment 2,258,764 (74,449) 2,184,315 ----------- ----------- ---------- Other Assets: Software development costs, net of (250,000)(2) accumulated amortization of $895,868 710,215 (460,215)(3) -- Deferred tax assets 71,550 -- 71,550 Note receivable 35,000 (35,000)(3) 770,850 770,850 (3) Deposits and other assets 74,141 -- 74,141 ----------- ----------- ---------- Total Other Assets 890,906 25,635 916,541 ----------- ----------- ---------- Total Assets $ 3,427,359 $ 808,960 $4,236,319 =========== ========== ========== The accompanying notes are an integral part of these unaudited proforma condensed financial statements. F-3 PROTOSOURCE CORPORATION (Formerly SHR Corporation dba Software Solutions Company) PROFORMA CONDENSED BALANCE SHEET SEPTEMBER 30, 1996 (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Proforma Proforma ProtoSource Adjustments Combined ----------- ----------- -------- Current Liabilities: Accounts payable $ 417,194 $ (275,438)(3) $ 141,756 Accrued liabilities 294,710 (81,611)(3) 213,099 Customer deposits 44,415 -- 44,415 Notes payable 200,000 (200,000)(1) -- Current portion of long-term debt 116,008 -- 116,008 Unearned customer support revenue 25,099 (25,099)(3) -- ---------- ---------- --------- Total Current Liabilities 1,097,426 (582,148) 515,278 ---------- ---------- --------- Long-Term Debt, net of current portion above: Bank 3,130 -- 3,130 Individuals 45,907 (45,907)(3) -- Obligations under capital leases 1,801,161 -- 1,801,161 Less current portion above (116,008) -- (116,008) ---------- ---------- --------- Total Long-Term Debt 1,734,190 (45,907) 1,688,283 ---------- ---------- --------- Commitments and contingencies -- -- -- Shareholders' Equity: Preferred stock, no par value; 5,000,000 shares authorized, 900,000 shares issued and outstanding, -O- adjusted -- -- (4) -- Common stock, no par value; 10,000,000 shares authorized, 1,330,001 shares issued and outstanding, 7,730,001 as adjusted 3,464,286 1,350,000 (1) 4,814,286 Retained earnings (deficit) (2,868,543) 187,015 (3) (2,781,528) (100,000)(1) ---------- ---------- ---------- Total Shareholders' Equity 595,743 1,437,015 2,032,758 ---------- ---------- ---------- Total Liabilities and Shareholders' Equity $ 3,427,359 $ 808,960 $4,236,319 =========== ========== ========== The accompanying notes are an integral part of these unaudited proforma condensed financial statements. F-4 PROTOSOURCE CORPORATION (Formerly SHR Corporation dba Software Solutions Company) PROFORMA CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) Proforma Proforma ProtoSource Adjustments Combined ----------- ----------- -------- Net Revenues: Product sales $ 19,120 $ (19,120) (5) $ -- Hardware equipment sales 244,366 (244,366) (5) -- Professional service fees 808,949 (265,993) (5) 542,956 Other -- -- -- ---------- --------- -------- Total Revenues 1,072,435 (529,479) 542,956 ---------- --------- -------- Operating Expenses: Cost of product sales 132,339 (132,339) (5) -- Cost of hardware equipment sales 204,236 (204,236) (5) -- Cost of professional services 342,612 113,648 (5) 456,260 Sales and marketing 384,808 (384,808) (5) -- Research and development 213,126 (213,126) (5) -- General and administrative 419,624 (113,648) (5) 305,976 ---------- --------- --------- Total Operating Expenses 1,696,745 (934,509) 762,236 ---------- --------- --------- Operating Loss (624,310) 405,030 (219,280) ---------- --------- --------- Other Income (Expense): Interest income 1,140 -- 1,140 Interest expense (137,007) -- (137,007) Financing costs -- -- -- Rent income -- 108,000 (6) 108,000 Other, net 78,189 -- 78,189 ---------- --------- --------- Total Other Income (Expense) (57,678) 108,000 50,322 ---------- --------- --------- Loss Before Provision (Benefit) For Income Taxes (681,988) 513,030 (168,958) Provision (benefit) for income taxes -- -- -- ---------- --------- --------- Net Loss $ (681,988) $ 513,030 $(168,958) =========== ========= ========= Net Loss Per Share of Common Stock $ (.51) $ (.02) =========== ========= Weighted Average Number of Common Shares Outstanding 1,330,001 7,730,001 =========== ========= The accompanying notes are an integral part of these unaudited proforma condensed financial statements. F-5 PROTOSOURCE CORPORATION (Formerly SHR Corporation dba Software Solutions Company) PROFORMA CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) Proforma Proforma ProtoSource Adjustments Combined ----------- ----------- -------- Net Revenues: Product sales $ 283,029 $ (283,029)(5) $ -- Hardware equipment sales 801,316 (801,316)(5) -- Professional service fees 426,963 (404,493)(5) 22,470 Other -- -- -- ----------- ----------- ----------- Total Revenues 1,511,308 (1,488,838) 22,470 ----------- ----------- ----------- Operating Expenses: Cost of product sales 227,250 (227,250)(5) -- Cost of hardware equipment sales 632,904 (632,904)(5) -- Cost of professional services 209,493 (133,947)(5) 75,546 Sales and marketing 443,528 (443,528)(5) -- Research and development 315,684 (315,684)(5) -- General and administrative 401,424 -- 401,424 ----------- ----------- ----------- Total Operating Expenses 2,230,283 (1,753,313) 476,970 ----------- ----------- ----------- Operating Loss (718,975) 264,475 (454,500) ----------- ----------- ----------- Other Income (Expense): Interest income 48,255 -- 48,255 Interest expense (122,266) -- (122,266) Financing costs -- -- -- Rent income -- 108,000 (6) 108,000 Other, net 83,893 -- 83,893 ----------- ---------- ----------- Total Other Income (Expense) 9,882 108,000 117,882 ----------- ----------- ----------- Loss Before Provision (Benefit) For Income Taxes (709,093) 372,475 (336,618) Provision (benefit) for income taxes (170,183) -- (170,183) ----------- ----------- ----------- Net Loss $ (538,910) $ 372,475 $ (166,435) =========== =========== =========== Net Loss Per Share of Common Stock $ (.45) $ (.02) =========== =========== Weighted Average Number of Common Shares Outstanding 1,205,441 7,605,441 =========== =========== The accompanying notes are an integral part of these unaudited proforma condensed financial statements. F-6 PROTOSOURCE CORPORATION NOTES TO PROFORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation --------------------- In 1996, the Company retained the Kriegsman Group ("Kriegsman"), a financial consulting firm, to assist it with a financial restructuring of its operations. Kriegsman was to use its best efforts to provide a minimum of $1,500,000 of financing for the Company through bridge loans or equity financing. In August 1996, a bridge loan of $200,000 was obtained by the Company for which the Company issued 400,000 shares of common stock to the bridge lenders as additional consideration for the $200,000 loan. In October and November 1996 the Company sold 6,000,000 shares of its common stock at $.25 per share through an Underwriter, which included the conversion of the $200,000 bridge loan into common stock. The Company paid the Underwriter a 10% sales commission and a 3% nonaccountable expense allowance on the bridge loan and sale of common stock. The Company also entered into a two year financial consulting agreement with the Underwriter which provides for a monthly consulting fee of $5,000 for the two year period. As a part of the financing transaction, the Company granted both the Underwriter and Kriegsman warrants to purchase common stock. The Company granted 2,200,000 warrants to each which are exercisable at $.25 per share for a four year period through October 31, 2001. The Company also agreed to use its best efforts to file a Registration Statement within 90 days of the closing of the Private Placement to register the shares issued in the Private Placement and the shares underlying the warrants issued to the Underwriter and Kriegsman. In connection with the financial restructuring the Company agreed to divest the software development, MarketStreet and the computer training center divisions. The divisions were spun-off to a new Company owned by the former management of the Company on December 31, 1996. All of the assets of the three divisions and the related liabilities and facilities leases were assumed by the former management. Also included in the assets of the divested divisions will be $500,000 in cash less expenses of the divested divisions paid prior to closing. The management of the divested divisions will also assume all litigation and claims related to the divisions which includes one law suit in the amount of approximately $70,000. The Kriegsman Group will also nominate new members for the Board of Directors upon completion of the divestiture of the three divisions. The Company will receive a 25% ownership interest in the common stock of the new company formed to acquire the divested divisions and the divested divisions will lease the principal office from the Company for a period of eighteen months at the current market rate. F-7 PROTOSOURCE CORPORATION NOTES TO PROFORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 2. Proforma Net Income (Loss) Per Share of Common Stock ---------------------------------------------------- The proforma net income (loss) per share of common stock is based on the weighted average number of common shares outstanding during the period. The shares issued in the Private Placement described above are given effect to as if they were issued at the beginning of the period for each period presented in the proforma combined calculations. 3. Proforma Adjustments -------------------- Adjustments to present the proforma combined condensed financial statements are as follows: 1. Adjustment to record the sale of 6,000,000 shares of common stock at $.25 per share, which includes conversion of the $200,000 Bridge Loan into common stock, net of offering expenses of approximately $250,000. Also includes issuance of 400,000 shares of common stock as additional consideration to the bridge lenders. 2. Adjustment to record the receipt of approximately $250,000 from the sale of additional interest in the Software, net of expenses. 3. Adjustment to record the divestiture of the assets and liabilities of the divested divisions. 4. Adjustment to record cancellation of all of the outstanding Preferred Stock of the Company in accordance with the terms of the Divestiture Agreement. 5. Adjustment to remove the operations of the divested divisions for the period. 6. Adjustment to record rent income for the sublease of office space to the divested divisions of $12,000 per month. F-8 The Registrant hereby amends Item 7, Financial Statements and Exhibits of its Current Report on Form 8-K dated January 3, 1997 as follows: ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS --------------------------------- (b) Pro forma financial information. Proforma Condensed Financial Statements Summary of Presentation Unaudited Proforma Condensed Balance Sheet as of September 30, 1996 Unaudited Proforma Condensed Statement of Operations for the nine months ended September 30, 1996 Unaudited Proforma Condensed Statement of Operations for the nine months ended September 30, 1995 Notes to Proforma Condensed Financial Statements 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. PROTOSOURCE CORPORATION (Registrant) By: /s/ ANDY CHU -------------------------------- Andy Chu, President Dated: February 20, 1997 -----------------