<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 8-K/A
------------------------------------
Amendment No. 2 to
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
November 16, 1999 1-14559
- ------------------------------------------------ ----------------------
Date of Report (Date of earliest event reported) Commission File Number
MUSE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 85-0437001
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1601 Randolph SE
Albuquerque, New Mexico 87106
-------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(505) 843-6873
-------------------------------------------------------------
(Registrant's telephone number, including area code)
================================================================================
<PAGE>
Item 2. Acquisition or Disposition of Assets.
This Amendment No. 2 to the Form 8-K filed on November 24, 1999 is
being submitted to provide the financial statements required in connection with
the acquisition by Muse Technologies, Inc. (the "Company") of UK-based Virtual
Presence Limited ("Virtual Presence") and amends and restates in its entirety
the financial statements contained in Amendment No. 1 as a result of the
inclusion of additional information.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) HISTORICAL FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED (Virtual
Presence, Ltd., a company incorporated under the laws of England).
Page
----
Auditors Report from Pridie Brewster, Chartered Accountants 8
For year ended March 31, 1999
Statement of Profit and Loss for Years ended March 31, 1999 9
and 1998 with convenience translation
Balance Sheet as of March 31, 1999 and March 31, 1998 10
With convenience translation
Cash Flow Statement for the Years Ended March 31, 1999 11
With convenience translation
Notes to the Financial Statements for the Years Ended March 31, 13
1999 and 1998
(b) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED (Virtual
Presence, Ltd.)
Unaudited Balance Sheet as of September 30, 1999 14
Unaudited Statement of Operations for the six months ended 15
September 30, 1999 and 1998
Unaudited Cashflow Statement for the six months ended
September 30, 1999 and 1998 19
Notes to unaudited Financial Statements as of September 30, 1999 20
(c) PRO FORMA FINANCIAL INFORMATION
Introduction
Pro forma Consolidated Balance Sheet as of September 30, 1999 22
Pro forma Combined Statement of Operations for the 23
Year Ended September 30, 1999
Notes to Pro Forma Financial Statements as of September 30, 1999 24
Signature 25
2
<PAGE>
VIRTUAL PRESENCE LIMITED
REPORT AND ACCOUNTS
31ST MARCH 1999
PRIDIE BREWSTER
CHARTERED ACCOUNTANTS
CAROLYN HOUSE
29-31, GREVILLE STREET
LONDON EC1N 8RB
ENGLAND
3
<PAGE>
VIRTUAL PRESENCE LIMITED
DIRECTORS: J.E. Hough
D.E. Hendon
R.J. Stone
J.D. Gregory
R.H. Allardice (Appointed 13th July 1998)
M.J. Walker (Appointed 19th July 1999)
N.A. Eldred (Appointed 13th July 1998)
J. Cumberland (Appointed 8th June 1999)
SECRETARY: T.M.S. Jenkins
REGISTERED OFFICE Canvas House
AND PRINCIPAL PLACE Jubilee Yard
OF BUSINESS: Queen Elizabeth Street
London SE1
England.
AUDITORS: Pridie Brewster
Chartered Accountants
Carolyn House
29-31, Greville Street
London EC1N 8RB
England.
COMPANY NUMBER: 2632764
4
<PAGE>
VIRTUAL PRESENCE LIMITED
DIRECTORS' REPORT
The directors present their report and audited accounts for the year ended 31st
March 1999.
ACTIVITIES
The principal activity of the company during the year was the retailing of
computer software and hardware.
ACQUISITION
On 1st April 1998 the company acquired 76% of the issued share capital of Sim
Team SARL.
RESULTS
The results for the year are set out on page 3.
DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that year. In preparing
those financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
DIRECTORS
The directors who served during the year, and their interests in the ordinary
shares of the company, were as follows:-
31.3.99 31.3.98
Ordinary pounds 1 Ordinary pounds 1
------------------- -------------------
J.D. Gregory -- --
D.E. Hendon -- --
J.E. Hough 95,000 95,000
R.J. Stone -- --
R.H. Allardice -- --
N.A. Eldred -- --
AUDITORS
The auditors, Pridie Brewster, Chartered Accountants, have signified their
willingness to continue in office and a motion for their re-appointment will be
put before the annual general meeting.
BY ORDER OF THE BOARD
N.A. ELDRED
SECRETARY
5
<PAGE>
VIRTUAL PRESENCE LIMITED
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS
We have audited the accompanying balance sheet of Virtual Presence Limited as of
31st March 1999 and the related profit an loss account and statement of cash
flows for the year ended 31st March 1999, and the comparative figures for the
year ended 31st March 1998. 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 audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Virtual
Presence Limited at 31st March 1999 and the results of its operation and its
cash flows for the year ended 31st March 1999, and the comparative figures for
the year ended 31st March 1998, in conformity with accounting principles
generally accepted in the United Kingdom.
Pridie Brewster Carolyn House
Chartered Accountants 29-31 Greville Street
Registered Auditor London EC1N 8RB
27th January 2000 England
3.
6
<PAGE>
VIRTUAL PRESENCE LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEARS ENDED 31ST MARCH 1999 AND 1998
<TABLE>
<CAPTION>
Notes 1999 1999 1998
----- ---- ---- ----
pounds $ pounds
<S> <C> <C> <C> <C>
TURNOVER 1 1,952,141 3,145,290 1,288,977
Cost of sales (1,370,325) (2,207,868) (839,919)
---------- ---------- ----------
GROSS PROFIT 581,816 937,422 449,058
Administrative expenses (540,063) (870,150) (344,171)
---------- ---------- ----------
OPERATING PROFIT 41,753 67,272 104,887
Permanent diminution in value of investment (157,246) (253,355) --
Write off of inter group debt (163,537) (263,491) --
---------- ---------- ----------
(Loss)/profit on ordinary activities before interest (279,030) (449,574) 104,887
Interest receivable -- -- 72
Interest payable and similar charges (71,565) (115,306) (22,168)
---------- ---------- ----------
(Loss)/profit on ordinary activities before tax (350,595) (564,880) 82,791
Tax on profit on ordinary activities -- -- (2,500)
---------- ---------- ----------
(DEFICIT)/RETAINED PROFIT AT END OF YEAR (350,595) (564,880) 80,291
========== ========== ==========
</TABLE>
There were no other recognised gains or losses in the year other than those
shown above.
7
<PAGE>
VIRTUAL PRESENCE LIMITED
BALANCE SHEET AS AT 31ST MARCH 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
Notes 1999 1999 1998
----- ---- ---- ----
pounds $ pounds
<S> <C> <C> <C>
CURRENT ASSETS
Stocks 5 24,006 38,678 13,202
Debtors 6 401,958 647,635 356,440
Cash at bank and in hand 8,065 12,995 15,125
---------- ---------- -------
434,029 699,308 384,767
FIXED ASSETS
Intangible assets 1,2 138,680 223,441 90,000
Tangible assets 1,3 423,276 681,982 216,049
Investments 4 41,677 67,150 157,246
---------- ---------- -------
603,633 972,573 463,295
---------- ---------- -------
Total Assets 1,037,662 1,671,881 848,062
========== ========== =======
LIABILITIES AND EQUITY
CREDITORS (amounts falling due within one
year) 7 992,922 1,599,796 419,411
CREDITORS (amounts falling due after more
than one year) 8 41,617 67,053 74,933
CAPITAL AND RESERVES
Called up share capital 9 304,727 490,976 304,727
Share premium account 6,009 9,682 6,009
Profit and loss account (307,613) (495,626) 42,982
---------- ---------- -------
Shareholder's funds 11 3,123 5,032 353,718
---------- ---------- -------
1,037,662 1,671,881 848,062
========== ========== =======
</TABLE>
The accounts were approved by the Board of Directors on 16 November 1999 and
were signed on its behalf by J.E. HOUGH (DIRECTOR)
8
<PAGE>
VIRTUAL PRESENCE LIMITED
CASHFLOW STATEMENT
FOR THE YEARS ENDED 31ST MARCH 1999 AND 1998
<TABLE>
<CAPTION>
1999 1999 1998
Reconciliation of operating profit to net pounds $ pounds
cashflow from operating activities
<S> <C> <C> <C>
Operating profit 41,753 67,272 105,040
Depreciation of tangible assets 115,631 186,305 61,579
Amortisation of intangible assets 20,920 33,706 10,015
Profit on disposal of tangible assets (10,560) (17,014) (19,390)
Decrease in stock (10,804) (17,407) 3,341
Increase in debtors (45,518) (73,339) (164,397)
Increase In creditors 568,875 916,572 129,869
-------- ---------- --------
Net cashflow from operating activities 680,297 1,096,095 126,057
======== ========== ========
Net cash inflow from operating activities 680,297 1,096,095 126,057
Returns on investments and servicing of finance
Interest received -- -- 73
Interest paid (71,565) (115,306) (22,362)
-------- ---------- --------
Net cash outflow for returns on investments and
servicing of finance (71,565) (115,306) (22,289)
Taxation 2,500 4,028 --
Capital expenditure and financial investment
Payments to acquire intangible assets (69,600) (112,140) (50,436)
Payments to acquire tangible assets (72,251) (116,411) (150,234)
Payments to acquire investments (41,677) (67,150) (136,127)
Receipts from sales of tangible assets 25,599 41,245 66,510
-------- ---------- --------
Net cashflow for capital expenditure (157,929) (254,456) (270,287)
-------- ---------- --------
Net cashflow before management of liquid resources
and financing 453,303 730,361 (166,519)
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C>
Financing
Issue of share capital -- -- 116,002
Issue of loan capital -- -- 50,436
Issue of loan stock -- -- 10,087
Bank loan repayments -- -- (25,432)
Capital element of finance leases (10,799) (17,399) (11,648)
Net cashflow from financing (10,799) (17,399) 139,445
-------- -------- --------
Increase (Decrease) in cash in the year 442,504 712,962 (27,074)
======== ======== ========
</TABLE>
10
<PAGE>
VIRTUAL PRESENCE LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEARS ENDED 31ST MARCH 1999 AND 1998
1. ACCOUNTING POLICIES
The principal accounting policies which are adopted in the preparation of
the company's accounts are as follows:-
Accounting Convention
The accompanying financial statements have been prepared in accordance
with United Kingdom generally accepted accounting principles which do not
differ in any significant aspect from United States generally accepted
accounting policies.
Turnover
Turnover consists of amounts receivable for work carried out during the
year, less credit notes on completed contracts, net of trade discounts and
value added tax. No deferrals of maintenance contracts have been made in
these accounts since it is viewed by the directors that no future material
expenditure will be incurred.
Depreciation
Depreciation has been provided at the following rates, in order to write
off the assets over their estimated useful lives:-
Land and Buildings Leasehold - 50% straight line
Plant and Machinery - 25% straight line
Fixtures and Fittings - 15% straight line
- 15% - 20% Reducing Balance
Motor Vehicles - 25% straight line
Stocks
Stock has been valued at the lower of cost and net realisable value.
Deferred Taxation
Provision is made at the current corporation tax rate for deferred
taxation, calculated by the liability method, on all timing differences,
to the extent that it is probable that the tax will become payable.
Leasing and Hire Purchase Commitments
Assets held under finance leases and hire purchase contracts are
capitalised in the balance sheet and are depreciated over their useful
lives. The interest element of the rental obligations is charged to the
profit and loss account over the year of the contract.
Foreign Currency
Foreign currency transactions were translated into sterling in the
original UK accounts at the exchange rate in operation on the date on
which the transaction occurred.
Development Expenditure
Development costs have been capitalised in accordance with SSAP 13.
Cashflow
The cashflow statement has been prepared in accordance with IAS 7.
11
<PAGE>
VIRTUAL PRESENCE LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEARS ENDED 31ST MARCH 1999 AND 1998
2. INTANGIBLE ASSETS
Development
Costs
pounds
COST
At beginning of year 100,000
Capitalised during year - additions 69,600
-------
At end of year 169,600
=======
AMORTISATION
At beginning of year 10,000
Amortisation for year 20,920
-------
At end of year 30,920
=======
NET BOOK VALUE
At 31.3.99 138,680
=======
At 31.3.98 90,000
=======
3. TANGIBLE ASSETS
Land and Other Tangible
Buildings Fixed assets Total
pounds pounds pounds
COST
At beginning of year 24,105 338,627 362,732
Transferred from group
Company 245,651 245,651
Additions 9,922 82,324 92,246
Disposals (16,022) (16,022)
---------------------------------------
At end of year 34,027 650,580 684,607
=======================================
DEPRECIATION
At beginning of year 7,202 139,481 146,683
Charge for year 7,202 108,429 115,631
Adjustment on disposal (983) (983)
---------------------------------------
At end of year 14,404 246,927 261,331
=======================================
NET BOOK VALUE
At 31.3.99 19,623 403,653 423,276
=======================================
At 31.3.98 16,903 199,146 216,049
=======================================
12
<PAGE>
VIRTUAL PRESENCE LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEARS ENDED 31ST MARCH 1999 AND 1998
3. TANGIBLE ASSETS (CONTINUED).
The net book value of fixed assets includes an amount of pounds 81,701
(1998 - pounds 71,826) in respect of assets held under hire purchase
contracts. The depreciation charge in respect of such assets amounted to
pounds 29,870 (1998 - pounds 47,796) for the year.
4. FIXED ASSETS INVESTMENT
$ Shares in
subsidiary
undertakings
pounds
COST
At beginning of year 157,246
Additions 41,677
-------
At end of year 198,923
=======
PROVISION FOR DIMINUTION IN VALUE
At beginning of year --
Charge for year 157,246
-------
At end of year 157,246
=======
NET BOOK VALUE
At 31.3.99 41,677
=======
13
<PAGE>
VIRTUAL PRESENCE LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEARS ENDED 31ST MARCH 1999 AND 1998
5. STOCKS
1999 1998
---- ----
pounds pounds
Finished goods 24,006 13,202
------ ------
6. DEBTORS
1999 1998
---- ----
pounds pounds
Trade debtors 332,910 296,445
Amount due from subsidiary undertaking 3,863 5,188
Other debtors 1,733 1,726
Prepayment and accrual income 63,452 53,081
------- -------
401,958 356,440
======= =======
7. CREDITORS (amounts falling due within one year)
1999 1998
---- ----
pounds pounds
Bank loans and overdrafts 29,383 41,879
Net obligations under finance lease
and hire purchase agrements 13,687 9,055
Trade creditors 264,717 186,799
Taxation and social security 69,565 44,901
Payments received on account 122,896 54,936
Other creditors 492,674 81,841
------- -------
992,922 419,411
======= =======
8. CREDITORS (amounts falling due after more than one year)
1999 1998
---- ----
pounds pounds
Bank loans 10,881 38,861
Net obligations under finance leases and
hire purchase consultants 30,736 26,072
Other Creditors -- 10,000
------- -------
41,617 74,933
======= =======
14
<PAGE>
VIRTUAL PRESENCE LIMITED
NOTES TO THE ACCOUNTS
FOR THE YEARS ENDED 31ST MARCH 1999 AND 1998
9. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
Authorised Allotted and fully paid
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Ordinary shares of pounds 1 each 95,000 95,000 95,000 95,000
Cumulative convertible participating
preferred ordinary shares of pounds 1 each 77,727 77,727 77,727 77,727
Preference shares of pounds 1 each 132,000 132,000 132,000 132,000
------- ------- ------- -------
304,727 304,727 304,727 304,727
======= ======= ======= =======
</TABLE>
10. EMPLOYEES
There were no employees during the year apart from directors.
1999 1998
---- ----
pounds pounds
The costs were:
Salaries 474,782 303,255
Social security costs 55,172 38,007
------- -------
529,954 341,262
======= =======
11. RECONCILIATION OF MOVEMENTS ON SHAREHOLDERS' FUNDS
1999 1998
---- ----
pounds pounds
(Loss)/Profit for the financial year (350,595) 80,291
Opening shareholders' funds 353,718 273,427
------- -------
Closing shareholders' funds 3,123 353,718
======= =======
12. DIRECTORS' EMOLUMENTS
1999 1998
---- ----
pounds pounds
Emoluments for qualifying services 141,000 117,557
======= =======
15
<PAGE>
(b) VIRTUAL PRESENCE, LTD UNUADITED FINANCIAL STATEMENTS, SEPTEMBER 30, 1999
16
<PAGE>
VIRTUAL PRESENCE, LTD.
BALANCE SHEET
As of September 30, 1999
(Unaudited)
ASSETS
CURRENT ASSETS:
GB Pounds US $
Cash and equivalents (pound)5,870 $9,662
Debtors 445,036 732,440
Stocks 31,672 52,126
Other current assets 76,322 125,611
--------- ----------
Total current assets 558,900 919,839
Intangible assets 202,921 333,967
Property, plant and equipment 444,901 732,218
Other assets 41,677 68,592
Goodwill
--------- ----------
Total assets (pound)1,248,399 $2,054,616
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable (pound)496,831 $ 817,684
Accrued liabilities 873,381 1,437,410
Capital lease - current portion 13,687 22,526
Bank loans 24,321 40,028
--------- ----------
Total current liabilities 1,408,220 2,317,648
LONG-TERM LIABILITIES:
Capital lease - less current portion 23,891 39,321
--------- ----------
Total Liabilities 1,432,111 2,356,969
STOCKHOLDERS' EQUITY:
Common stock 304,727 501,520
Additional paid-in capital 0 0
Share premium account 6,009 9,890
Stock subscription receivable 0 0
Treasury stock 0 0
Accumulated deficit (494,448) (813,763)
--------- ----------
Total stockholders' equity (183,712) (302,353)
--------- ----------
(pound)1,248,399 $2,054,616
========= ==========
See Notes to Financial Statements
17
<PAGE>
<TABLE>
<CAPTION>
VIRTUAL PRESENCE, LTD.
Statement of Operations
For the Six Months ended September 30,
(Unaudited)
GB Pounds US $ GB Pounds
1999 1999 1998
-------------------------------------
<S> <C> <C> <C>
Sales:
Total sales (pound)1,152,556 $1,844,090 (pound)737,079
Cost of Sales:
Total cost of sales 951,713 1,522,741 230,567
-------------------------------------
Gross margin 200,843 321,349 506,512
Selling, general and administrative 260,921 417,473 344,625
Research and development 25,806 41,289 23,873
Depreciation 58,677 93,883 54,484
Amortization of intangibles 18,205 29,128 12,971
-------------------------------------
Total operating expenses 363,609 581,773 435,953
-------------------------------------
Operating income (162,766) (260,424) 70,559
Other income (expense):
Interest expense (24,070) (38,512) (33,412)
Other, net 0 0 (1,600)
-------------------------------------
Total other (expenses) income (24,070) (38,512) (35,012)
-------------------------------------
Net Income (Loss) -(pound)186,836 ($298,936) (pound)35,547
=====================================
</TABLE>
See Notes to Financial Statements
18
<PAGE>
VIRTUAL PRESENCE, LTD.
CASHFLOW STATEMENT
For the Six Months Ended September 30
(Unaudited)
<TABLE>
<CAPTION>
GB Pounds US $ GB Pounds
1999 1999 1998
------------------ ---------------- ------------------
<S> <C> <C> <C>
Reconciliation of operating profit to net cash flow from
opeating activiites
Operating profit (loss) -(pound)162,765 ($267,879) -(pound)2,135
Depreciation of tangible assets 58,679 96,573 57,723
Amortisation of intangible assets 18,205 29,962 16,107
Increase in stocks (7,666) (12,617) (4,452)
Increase in debtors (119,400) (196,509) (51,278)
Increase in creditors 415,298 683,497 376,801
------------------ ---------------- ------------------
Net cashflow form operating activities 202,351 333,027 392,766
================== ================ ==================
Returns on investments and servicing of finance
Interest received
Interest paid (24,070) (39,614) (33,412)
------------------ ---------------- ------------------
Net cash outflow for returns on investments and
servicing of finance (24,070) (39,614) (33,412)
Capital expenditure and financial
investment
Payments to acquire intangible assets (82,446) (135,690) (32,450)
Payments to acquire tangible assets (80,304) (132,164) (292,251)
Payments to acquire investments 0 0 (41,677)
------------------ ---------------- ------------------
Net cashflow for capital expenditure (162,750) (267,854) (366,378)
------------------ ---------------- ------------------
Net cashflow before management of liquid
resources and financing 15,531 25,559 (7,024)
Financing
Bank loan repayments (17,725) (29,172) (23,316)
Capital element of finance leases
------------------ ---------------- ------------------
Net cashflow from financing (17,725) (29,172) (23,316)
------------------ ---------------- ------------------
Decrease in cash -(pound)2,194 ($3,613) -(pound)30,340
================== ================ ==================
</TABLE>
See Notes to Financial Statements
19
<PAGE>
(c) PRO FORMA FINANCIAL INFORMATION
Introduction
On November 16, 1999, MUSE Technologies, Inc., a Delaware corporation (the
"Registrant"), acquired all the issued and outstanding capital stock and
preference shares of Virtual Presence, Ltd., a company organized under the laws
of England, from the shareholders of Virtual Presence in exchange for $600,000
cash payable over a nine month period and 430,839 shares of the Company's common
stock, subject to certain restrictions. Of such shares, 205,522 are subject to
adjustment in the event that the price of the common stock over the twenty
trading days prior to November 15, 2000 is less than US $4.41 per share.
The accompanying unaudited pro forma consolidated balance sheet is presented to
illustrate the effect of the Transaction on the financial statements, and
assumes the Transaction was completed on October 1, 1998.
The unaudited pro forma financial statements are included for informational
purposes only and are not necessarily indicative of the future financial
position or future results of operations of the combined company, or of the
financial position or results of operations of the combined company that would
have actually occurred had the Transaction taken place as of the date or for the
periods presented. These unaudited pro forma financial statements and the
accompanying notes may not be indicative of future financial position. The
unaudited pro forma information should be read in conjunction with the
historical financial statements of Virtual Presence, Ltd., a company organized
under the laws of England, and the Registrant presented herein. In the opinion
of management, all adjustments have been made that are necessary to present
fairly the pro forma data.
MUSE Technologies, Inc.
20
<PAGE>
Notes to Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles in the
United Kingdom, which do not materially differ from generally accepted
accounting principles in the United States. These financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended September 30, 1999 and 1998
are not necessarily indicative of the results that may be expected for the full
fiscal year or any other interim reporting period.. For further information,
refer to the financial statements and footnotes contained elsewhere in this
filing.
2. SUBSEQUENT EVENTS
On November 16, 1999, MUSE Technologies completed the acquisition of
Virtual Presence, Ltd., a United Kingdom company, and its subsidiaries for
$600,000 cash and notes to sellers and the issuance of 430,839 shares of its
Common Stock.
21
<PAGE>
MUSE Technologies, Inc.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 1999
<TABLE>
<CAPTION>
(Unaudited)
MUSE VPL
September 30 September 30 Pro Forma Pro Forma
1999 1999 Adjustments Balance Sheet
----------- ----------- -----------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $12,064,734 $9,662 (402,588)(A) $11,671,808
Accounts receivable, net 667,593 732,440 1,400,033
Notes receivable - related parties 1,145,922 0 1,145,922
Inventories 0 52,126 52,126
Other current assets 117,870 125,611 243,481
-------------------------- --------------------------
Total current assets 13,996,119 919,839 (402,585) 14,513,370
Intangible assets 0 333,967 333,967
Property, plant and equipment 1,162,797 732,218 1,895,015
Notes receivable - related parties 284,955 0 284,955
Other assets 81,574 68,592 150,166
Goodwill 2,351,313 (A) 2,351,313
-------------------------- --------- -----------
Total assets $15,525,445 $2,054,617 1,948,725 $19,528,786
========================== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $23,165 $817,684 $840,849
Accrued liabilities 922,751 1,437,410 300,000 (A) 2,660,161
Capital lease - current portion 16,478 22,526 39,004
Bank loans 0 40,028 40,028
-------------------------- --------- -----------
Total current liabilities 962,394 2,317,648 300,000 3,580,042
LONG-TERM LIABILITIES:
Capital lease - less current portion 49,150 39,321 88,471
-------------------------- -----------
Total Liabilities 1,011,544 2,356,970 3,668,513
STOCKHOLDERS' EQUITY:
Common stock 154,997 501,520 (501,520)(A) 161,460
0 0 6,463 (A)
Additional paid-in capital 23,609,620 0 1,339,909 (A) 24,949,529
Share premium account 0 9,890 (9,890)(A) (0)
Stock subscription receivable (87,500) 0 (87,500)
Treasury stock (776,315) 0 (776,315)
Accumulated deficit (8,386,901) (813,763) 813,763 (A) (8,386,901)
-------------------------- --------------------------
Total stockholders' equity 14,513,901 (302,353) (513,787) 15,860,273
-------------------------- --------------------------
$15,525,445 $2,054,617 1,948,725 $19,528,786
========================== ========= ===========
</TABLE>
22
<PAGE>
MUSE Technologies, Inc.
Pro Forma Condensed Consolidated Statement of Operations
For the Year ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
MUSE VPL Pro Forma
September 30 September 30 Pro Forma Statement of
1999 1999 Adjustments Operations
----------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Sales:
Total sales $1,723,267 $3,859,506 $5,582,773
Cost of Sales:
Total cost of sales 0 1,954,166 1,954,166
---------------------------- ------------
Gross margin 1,723,267 1,905,340 3,628,607
Selling, general and administrative 4,180,717 1,947,562 6,128,279
Research and development 2,302,885 0 2,302,885
Depreciation 487,360 193,590 680,950
Amortization of goodwill 0 0 109,655(B) 109,655
---------------------------- ------------
Total operating expenses 6,970,962 2,141,152 109,655 9,221,769
---------------------------- --------- ------------
Operating income (5,247,695) (235,812) (109,655) (5,593,162)
Other income (expense):
Costs in excess of value of
repurchased stock (563,636) 0 (563,636)
Interest income 729,061 0 729,061
Interest expense (30,678) (115,081) (145,759)
Other, net 0 4,386 4,386
---------------------------- --------- ------------
Total other (expenses) income 134,747 -110,695 0 24,052
---------------------------- --------- ------------
Net Income (Loss) ($5,112,948) ($346,507) ($109,655) ($5,569,110)
============================ ========= ============
Net income per share
Basic ($0.51) ($0.53)
=========== ============
Diluted ($0.51) ($0.53)
=========== ============
Weighted average common shares
Basic 10,048,842 430,839 10,479,681
=========== ========= ============
Diluted 10,048,842 430,839 10,479,681
=========== ========= ============
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
NOTES TO THE PRO FORMA FINANCIAL STATEMENTS
1. On November 16, 1999, MUSE Technologies, Inc., a Delaware corporation
(the "Registrant"), acquired all the issued and outstanding capital
stock and preference shares of Virtual Presence, Ltd., a company
organized under the laws of England, from the shareholders of Virtual
Presence in exchange for $600,000 cash payable over a nine month period
and 430,839 shares of the Company's common stock, subject to certain
restrictions. Of such shares, 205,522 are subject to adjustment in the
event that the price of the common stock over the twenty trading days
prior to November 15, 2000 is less than US $4.41 per share.
2. Pro Forma Balance Sheet Adjustments
A. Recording the acquisition of Virtual Presence and
consolidation with MUSE Technologies, Inc.
3. Pro Forma Statement of Operations Adjustments
B. Recording of amortization expenses
24
<PAGE>
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.
Date: February 1, 2000 MUSE TECHNOLOGIES, INC.
By: /s/ Brian Clark
------------------------------
Name: Brian Clark
Title: Chief Financial Officer
25