<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 2000
REGISTRATION STATEMENT NO. 333-49824
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
MOLDFLOW CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7372 04-3406763
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
--------------------------
430 BOSTON POST ROAD
WAYLAND, MASSACHUSETTS 01778
(508) 358-5848
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
------------------------------
MARC J. L. DULUDE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MOLDFLOW CORPORATION
430 BOSTON POST ROAD
WAYLAND, MASSACHUSETTS 01778
(508) 358-5848
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
STUART M. CABLE, P.C. KEITH F. HIGGINS, ESQ.
ANDREW F. VILES, ESQ. JOEL F. FREEDMAN, ESQ.
GOODWIN, PROCTER & HOAR LLP ROPES & GRAY
EXCHANGE PLACE ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02109-2881 BOSTON, MASSACHUSETTS 02110-2624
(617) 570-1000 (617) 951-7000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
-------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
-------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
-------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
-------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 2000.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
UNDERWRITERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING OFFERS TO BUY
THESE SECURITIES IN ANY STATE IN WHICH THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
2,335,000 SHARES
[LOGO]
COMMON STOCK
------------------
This is a public offering of 2,335,000 shares of common stock of Moldflow
Corporation. We are offering 575,000 shares and the selling stockholders
identified in this prospectus under "Principal and Selling Stockholders" on page
53 are offering an additional 1,760,000 shares. We will not receive any of the
proceeds from the sale of shares by the selling stockholders.
Our common stock is quoted on the Nasdaq National Market under the symbol
"MFLO." On November 21, 2000, the last reported sale price of our common stock
on the Nasdaq National Market was $24.00 per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE THE
SECTION ENTITLED "RISK FACTORS" STARTING ON PAGE 7 TO READ ABOUT RISKS THAT YOU
SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
Public offering price................................... $ $
Underwriting discounts.................................. $ $
Proceeds, before expenses, to Moldflow.................. $ $
Proceeds, before expenses, to selling stockholders...... $ $
</TABLE>
The underwriters have an option to purchase 170,000 additional shares of
common stock from us and 180,000 additional shares of common stock from the
selling stockholders at the public offering price less the underwriting discount
to cover any over-allotments of shares.
------------------------
ADAMS, HARKNESS & HILL, INC.
ROBERT W. BAIRD & CO.
A.G. EDWARDS & SONS, INC.
Prospectus dated , 2000.
<PAGE>
[EDGAR GRAPHICS DESCRIPTIONS]
(Inside Front Cover)
Three pages of graphics follow:
- Page 1: The first page has the words "Process Wide Plastics Solutions" at
the top. The following paragraph is below next to a chart: "Our products
work together to optimize the complex process of designing and producing
injection molded plastic parts. Moldflow's software technology delivers
solutions that provide valuable information and advice at the product
design, mold design and part production phases of the process and this
information can be shared with colleagues down the hall or around the
world." The chart has four columns labeled "Initial Design," "In-Depth
Analysis," "Mold Design" and "Production." Across the rows are arrows
labeled "Insight," "Advisers" and "Xpert." The Insight arrow runs from
In-depth Analysis through Production. The Advisers arrow runs from Initial
Design through Mold Design. The Xpert arrow crosses Production only.
Lower on the page are the MPA, MPI, MPX and plasticszone.com logos with
the following respective words beside them: (i) "Moldflow Plastics
Advisers helps design engineers to create their initial product designs
knowing that these designs will be manufacturable and meet the design
requirements," (ii) "Moldflow Plastics Insight allows a specialist to
perform comprehensive product reviews to solve complex part and mold
design problems and optimize these designs," (iii) "Moldflow Plastics
Xpert removes trial-and-error approaches to pre-production mold set-up in
the injection molding machine and monitors and controls subsequent
production," and (iv) "plasticszone.com is our business and productivity
website for professionals working with injection molded plastics." At the
bottom of the page is Moldflow's logo and Moldflow's website address
www.moldflow.com and the website address for plasticszone:
www.plasticszone.com.
- Pages 2 and 3: Gatefold has the words "Global Concurrent Product
Development" at the top. A picture of planet Earth is in center with
arrows pointing in from and out to the four corners of the page. Each
corner depicts a separate step in the design and production process for
plastic parts. The upper left corner has the words "Initial Design" and a
picture of a man and a woman viewing a computer monitor depicting a three
dimensional image of cell phone outer casings as well as two computer
screens with closer views of these casings. Above this picture are the
words "The Problem" and the following paragraph: "The creation of
injection molded plastic parts is a complex, fragmented global process.
Manufacturers in many industries are facing increasing pressure to reduce
the time required to bring a plastic part from initial design to
production." The upper right corner has the words "In-Depth Analysis" and
a picture of a man working at a computer as well as two computer screens
depicting three dimensional images of cell phone outer casings. The bottom
right corner has the words "Mold Design" and a picture of a metal mold as
well as two computer screens depicting cell phone outer casings within a
mold. The bottom left corner has the words "Production" and a picture of a
large injection molding machine as well as a picture of a computer and a
computer screen displaying pages of Moldflow's MPX product. Below the
graphics are the words "The Moldflow Solution" and the following
paragraph: "Our approach, called Process Wide Plastics Solutions, provides
our customers with a software tool for each step in the process, from part
design through production monitoring. Using our products can significantly
reduce the time it takes to design plastic parts, improve their quality
and decrease the cost of production." The bottom center has an arrow
pointing down to a picture of a cell phone.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Information Regarding Forward-Looking Statements............ 13
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Price Range of Common Stock................................. 14
Capitalization.............................................. 15
Selected Financial Data..................................... 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
Business.................................................... 30
Management.................................................. 45
Certain Relationships and Related Transactions.............. 52
Principal and Selling Stockholders.......................... 53
Description of Capital Stock................................ 55
Shares Eligible for Future Sale............................. 59
Underwriting................................................ 60
Validity of Common Stock.................................... 62
Experts..................................................... 62
Where You Can Find More Information......................... 62
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------
You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in the jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our common stock.
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND OUR CONSOLIDATED FINANCIAL STATEMENTS, THE NOTES TO THOSE
STATEMENTS AND THE OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS.
MOLDFLOW CORPORATION
We believe we are the world's leading developer of software solutions that
enhance the design, analysis and manufacture of injection molded plastic parts.
We have developed a suite of software applications that address the difficulties
and variables inherent in the design and production of injection molded plastic
parts. We believe we have the widest and most advanced range of software
solutions and proprietary technology to address the problems that arise in each
phase of the process of designing and manufacturing injection molded plastic
parts. Our products enable our customers to speed their products to market,
decrease manufacturing costs and reduce costly design and manufacturing errors
with an automated and integrated process. Our products are used by more than
3,400 customers at more than 3,800 sites in over 55 countries around the world.
Representative customers include Baxter International, BMW, DuPont, Fuji Xerox,
Hewlett-Packard, Lego, Motorola, Nokia and Samsung.
The use of plastics as a manufacturing material is widespread because
plastic parts can be formed into an almost limitless number of shapes, are
relatively inexpensive to manufacture in volume and are easy to assemble.
Injection molding, the dominant method by which plastic parts are produced, is
extremely complex due to the inherent difficulties and the many variables
encountered in transforming various molten plastic materials into sophisticated
part shapes. Common consumer products that make extensive use of injection
molded plastic parts include cellular telephones, personal digital assistants,
pagers, automobiles, televisions, cameras, toys and personal computers. As
product life cycles shrink and the importance of time to market increases,
successful manufacturers in these industries must design and build products
quickly. In particular, product delays or high product defect rates for
manufacturers in rapidly changing industries can result in significant economic
and opportunity costs.
We believe a substantial portion of companies producing injection molded
plastic parts continue to employ trial-and-error at most steps of the design and
production process. We believe this condition exists today primarily because of
the limited availability of specific software tools which are capable of
addressing many of the complex and unique issues involved in designing injection
molded plastic parts and their molds. Further, the trend toward outsourcing and
supply chain management across multiple geographic time zones has exacerbated
the inefficiencies and costs occurring in the design and manufacturing of
plastic parts.
Prior to 1997, our products were designed to be used by highly specialized
engineers conducting in-depth plastics simulation. Since then, we have developed
two new product lines that can be used by design engineers and injection molding
machine operators who do not specialize in plastic part design. We believe a
large untapped market exists for these new product lines. In particular, we
believe that up to 750,000 injection molding machines are currently in use and
are being operated without integrated software solutions that can analyze and
improve the efficiency of their production.
Our strategy includes capitalizing on the universal accessibility of the
Internet to further grow our business. We have developed several Internet and
network-based offerings to expand the usefulness and reach of our products.
Earlier this year we introduced plasticszone.com, a business and productivity
website for professionals working with injection molded plastics. The
plasticszone.com site currently offers, among other things, an application
service provider, or ASP, version of one of our product lines on demand via the
Internet on a pay-per-use basis. In addition,
3
<PAGE>
we recently introduced a browser-based production monitoring system that enables
customers to view production data remotely over corporate intranets. Our
products are available on a global basis and address each stage of the plastics
product development process. We believe that this provides an environment for
continuous collaboration across all participants in a supply chain for every
plastic part made.
We operate facilities in 14 countries. We sell our products worldwide
primarily through our direct sales force in North America, Europe and Asia and,
to a lesser extent, through original equipment manufacturers and distributors.
We have distribution arrangements with Parametric Technology Corporation or PTC,
Structural Dynamics Research Corporation or SDRC, Unigraphics Solutions,
CoCreate and resellers of products of SolidWorks, a subsidiary of Dassault
Systemes, and Autodesk. Our research and development efforts involve over 70
research and development personnel located at our United States, Australia and
United Kingdom facilities. As a result, our research and development is
conducted on an around-the-clock basis.
RECENT DEVELOPMENT
On November 9, 2000, we entered into a non-binding letter of intent with
XBOX Technologies, Inc. to acquire assets relating to its FullMetrics plastics
business. We believe that the FullMetrics lines of products for plastic
injection molding applications will supplement one of our product lines by
adding scheduling functionality and expanded reporting capabilities. We expect
this proposed acquisition would expand the range of products that our sales
representatives can offer to companies manufacturing plastic parts. The proposed
purchase price consists of a $500,000 initial payment and payments of $200,000
to $350,000 per year for five years based on the achievement of revenue targets.
The letter of intent is non-binding and the proposed transaction may not occur.
------------------------
We were reincorporated in Delaware as Moldflow Corporation on January 15,
1997. From 1994 to 1997, we existed as an Australian corporation under the name
Moldflow International Pty. Ltd. From 1980 to 1994, we existed as an Australian
corporation under the name Moldflow Pty. Ltd. In April 2000, we acquired
Advanced CAE Technology, Inc., which had been conducting business as C-Mold, a
developer of software solutions for the design and analysis of injection molded
plastic parts headquartered in Ithaca, New York. Our principal executive offices
are located at 430 Boston Post Road, Wayland, Massachusetts 01778. Our telephone
number at that location is (508) 358-5848 and our Internet address is
www.moldflow.com. The information contained on our website is not part of this
prospectus.
The name Moldflow and our logo are names and trademarks that belong to us.
We have registrations for other names and marks used in this prospectus. This
prospectus also contains the trademarks and trade names of other entities that
are the property of their respective owners.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Shares offered by Moldflow................... 575,000 shares
Shares offered by the selling stockholders... 1,760,000 shares
Common stock to be outstanding after this
offering................................... 9,871,137 shares
Use of proceeds.............................. For general corporate purposes, including
working capital, capital expenditures,
potential strategic investments or
acquisitions. See "Use of Proceeds."
Nasdaq National Market symbol................ MFLO
Risk factors................................. See "Risk Factors" for discussion of factors
you should carefully consider before deciding
to invest in shares of our common stock.
</TABLE>
The number of shares of our common stock that will be outstanding after this
offering excludes 946,715 shares of common stock issuable upon exercise of stock
options outstanding at November 1, 2000 at a weighted average exercise price of
$9.72 per share.
------------------------
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. IN ADDITION, WE HAVE
ADJUSTED ALL OF THE INFORMATION IN THIS PROSPECTUS, EXCEPT AS OTHERWISE NOTED,
TO REFLECT A 2.4-TO-1 REVERSE STOCK SPLIT OF OUR COMMON STOCK EFFECTED IN
CONNECTION WITH OUR INITIAL PUBLIC OFFERING.
5
<PAGE>
SUMMARY FINANCIAL DATA
The tables below present our summary consolidated financial data which you
should read together with our consolidated financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" presented elsewhere in this prospectus. The pro forma
combined statement of operations data for the fiscal year ended June 30, 2000
reflects the combined results of Moldflow and C-Mold as if we had acquired
C-Mold on July 1, 1999. The as adjusted balance sheet data as of September 30,
2000 reflects the sale of 575,000 shares of common stock by us in this offering
at an assumed price of $24.00 per share after deducting the estimated
underwriting discount and offering expenses payable by us.
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
FISCAL YEAR ENDED ENDED -----------------------------
JUNE 30, JUNE 30, 2000
------------------------------ PRO FORMA OCTOBER 2, SEPTEMBER 30,
1998 1999 2000 COMBINED 1999 2000
-------- -------- -------- -------------- ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software licenses............................. $ 8,514 $12,238 $16,742 $19,412 $2,823 $ 5,222
Services...................................... 7,875 7,983 10,627 14,083 2,358 3,602
------- ------- ------- ------- ------ -------
Total revenue............................... 16,389 20,221 27,369 33,495 5,181 8,824
Operating expenses, excluding litigation,
nonrecurring charges and amortization......... 15,734 18,675 24,429 30,526 5,014 7,947
Litigation...................................... -- 620 785 1,536 280 --
Nonrecurring charges............................ -- -- 284 70 -- --
Amortization of goodwill and other intangible
assets........................................ 84 -- 311 1,470 -- 367
------- ------- ------- ------- ------ -------
Income (loss) from operations................... 571 926 1,560 (107) (113) 510
Net income...................................... 189 481 3,453 2,063 69 534
Net income per common share:
Basic......................................... $ 1.29 $ 0.06
Diluted....................................... $ 0.48 $ 0.06
Shares used in computing net income per common
share:
Basic......................................... 2,667 9,186
Diluted....................................... 7,190 9,698
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
2000
-----------------------
ACTUAL AS ADJUSTED
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $33,755 $46,262
Total assets................................................ 55,508 68,015
Stockholders' equity........................................ 43,007 55,514
</TABLE>
6
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND ALL OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK.
IF WE EXPERIENCE DELAYS IN INTRODUCING NEW PRODUCTS OR IF OUR EXISTING OR NEW
PRODUCTS DO NOT ACHIEVE MARKET ACCEPTANCE, WE MAY LOSE REVENUE.
Our industry is characterized by:
- rapid technological advances,
- evolving industry standards,
- changes in end-user requirements,
- intense competition,
- technically complex products,
- frequent new product introductions, and
- evolving offerings by product manufacturers.
We believe our future success will depend, in part, on our ability to
anticipate or adapt to these factors and to offer on a timely basis products
that meet customer demands. For example, the introduction of new products and
services embodying new technologies and the emergence of new industry standards
can render our existing products obsolete. The development of new or enhanced
products is a complex and uncertain process requiring the anticipation of
technological and market trends. We may experience design, manufacturing,
marketing and other difficulties that could delay or prevent our development,
introduction or marketing of new products and enhancements and result in
unexpected expenses.
Our growth and profitability also will depend upon our ability to expand the
use and market penetration of our existing product lines as well as new products
we introduce. Market acceptance of our products will depend in part on our
ability to demonstrate the cost-effectiveness, ease of use and technological
advantages of our products over competing products.
BECAUSE WE DO NOT HAVE EXTENSIVE EXPERIENCE DEVELOPING INTERNET-ENABLED
PRODUCTS, WE MAY INCUR SIGNIFICANT COSTS DEVELOPING INTERNET-ENABLED PRODUCTS
AND MAY NOT BE ABLE TO DEVELOP THESE PRODUCTS.
Our business strategy includes providing additional Internet-related
functions to our products to exploit the trend toward worldwide collaborative
product development and manufacturing and to explore new pricing and packaging
strategies made possible by the Internet. We have limited experience in
developing and marketing Internet-enabled products. We may incur significant
costs developing Internet-enabled products and may be unable to capitalize on
the rapid transformation of the Internet as a computing platform, communications
vehicle and distribution channel.
WE MAY EXPERIENCE DIFFICULTY ACHIEVING SALES TARGETS, MAKING TIMELY PRODUCT
RELEASES OR OTHERWISE OPERATING OUR BUSINESS IF WE ARE UNABLE TO ATTRACT OR
RETAIN KEY PERSONNEL.
In order to grow our business, we will have to hire additional employees in
various countries. Our future success, therefore, will depend, in part, on
attracting and retaining additional qualified management, marketing and
technical personnel. We do not know whether we will be successful in hiring or
retaining qualified personnel. Competition for personnel throughout the software
industry is intense.
7
<PAGE>
IF WE BECOME SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WE COULD
INCUR SIGNIFICANT EXPENSES AND WE COULD BE PREVENTED FROM OFFERING SPECIFIC
PRODUCTS OR SERVICES.
Our products include proprietary intellectual property. We may become
subject to claims that we infringe on the proprietary rights of others. In the
United States, a significant number of software and business method patents have
been issued over the past decade and the holders of these patents have been
actively seeking out potential infringers. If any element of our products or
services violates third-party proprietary rights, we might not be able to obtain
licenses on commercially reasonable terms to continue offering our products or
services without substantial re-engineering and any effort to undertake such
re-engineering might not be successful. In addition, any claim of infringement
could cause us to incur substantial costs defending against the claim, even if
the claim is invalid, and could distract our management from our business. Any
judgment against us could require us to pay substantial damages and could also
include an injunction or other court order that could prevent us from offering
our products and services.
WE MAY LOSE SALES TO COMPETITORS IF WE ARE UNABLE TO PROTECT IMPORTANT
INTELLECTUAL PROPERTY.
Our ability to compete effectively against other companies in our industry
will depend, in part, on our ability to protect our current and future
proprietary technology through a combination of patent, copyright, trademark,
trade secret and unfair competition laws. We may be unable to maintain the
proprietary nature of our technology. While we have attempted to safeguard and
maintain our proprietary rights, we do not know whether we have been or will be
completely successful in doing so. We face the following risks in protecting our
intellectual property, which are explained in greater detail in
"Business--Technology and Proprietary Rights" beginning on page 42.
- we cannot be certain that our pending United States and foreign patent
applications will result in issued patents or that the claims allowed are
or will be sufficiently broad to protect our technology,
- third parties may design around our patented technologies or seek to
challenge or invalidate our patented technologies,
- the contractual provisions that we rely on, in part, to protect our trade
secrets and proprietary information may be breached, we may not have
adequate remedies for any breach and our trade secrets and proprietary
information may be disclosed to the public,
- our trade secrets may also become known without breach of such agreements
or may be independently developed by competitors, and
- foreign countries, including some of those in which we do business, may
reduce or limit the protection of our intellectual property rights.
OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY
INTERNATIONAL BUSINESS RISKS.
The majority of our employees, including sales, support and research and
development personnel, are located outside of the United States. Conducting
business outside of the United States is subject to numerous risks, including:
- decreased liquidity resulting from longer accounts receivable collection
cycles typical of foreign countries,
- decreased revenue on foreign sales resulting from possible foreign
currency exchange and conversion issues,
8
<PAGE>
- lower productivity resulting from difficulties managing our sales, support
and research and development operations across many countries,
- lost revenue resulting from difficulties associated with enforcing
agreements and collecting receivables through foreign legal systems,
- lost revenue resulting from the imposition by foreign governments of trade
protection measures, and
- higher cost of sales resulting from import or export licensing
requirements.
THE ACQUISITION OF C-MOLD AND FUTURE ACQUISITIONS AND STRATEGIC RELATIONSHIPS
MAY RESULT IN LOST REVENUE CAUSED BY BUSINESS DISRUPTIONS AND MISSED
OPPORTUNITIES CAUSED BY THE DISTRACTION OF OUR MANAGEMENT.
If we are unable to effectively integrate C-Mold's products, personnel and
systems, our business and operating results will likely suffer. The integration
is requiring time and focus by our management team. Further, we cannot guarantee
that we will realize any of the benefits or strategic objectives we are seeking
to obtain by acquiring C-Mold.
Additionally, we intend to engage in other acquisitions, such as our
proposed acquisition of FullMetrics, and strategic relationships in the future.
We may not be able to identify suitable acquisition candidates, and, if we do
identify suitable candidates, we may not be able to make such acquisitions on
commercially acceptable terms or at all. If we acquire another company, we will
only receive the anticipated benefits if we successfully integrate the acquired
business into our existing business in a timely and non-disruptive manner. We
may have to devote a significant amount of time and management and financial
resources to do so. Even with this investment of management and financial
resources, an acquisition may not produce the revenues, earnings or business
synergies that we anticipated. If we fail to integrate the acquired business
effectively or if key employees of that business leave, the anticipated benefits
of the acquisition would be jeopardized. The time, capital, management and other
resources spent on an acquisition that failed to meet our expectations could
cause our business and financial condition to be materially and adversely
affected. In addition, acquisitions can involve non-recurring charges and
amortization of significant amounts of goodwill and other acquired intangible
assets that could adversely affect our results of operations.
WE HAVE MORE LIMITED FINANCIAL AND OTHER RESOURCES THAN MANY OF OUR COMPETITORS
AND POTENTIAL COMPETITORS AND WE MAY BE UNABLE TO COMPETE SUCCESSFULLY AGAINST
THEM.
We operate in a highly competitive environment and may not be able to
successfully compete. Companies in our industry and entities in similar
industries could decide to focus on the development of software solutions for
the design, analysis and manufacturing of injection molded plastic parts. Many
of these entities have substantially greater financial, research and
development, manufacturing and marketing resources than we do. Increased
competition may result in price reductions, reduced profitability and loss of
market share.
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND AS A
RESULT PERIOD-TO-PERIOD COMPARISONS OF OUR RESULTS OF OPERATIONS ARE NOT
NECESSARILY MEANINGFUL AND SHOULD NOT BE RELIED UPON AS INDICATORS OF FUTURE
PERFORMANCE.
We have experienced significant fluctuations in our results of operations on
a quarterly basis. In particular, we have historically experienced lower or
relatively unchanged revenue in our first fiscal quarter as compared with the
preceding quarter as a result of seasonal factors. We expect to
9
<PAGE>
continue to experience significant fluctuations in our future quarterly results
of operations due to a variety of factors, many of which are outside of our
control, including:
- seasonal slowdowns, in particular, in our first fiscal quarter, in many of
the markets in which we sell our products,
- the timing and magnitude of capital expenditures, including costs relating
to the expansion of our operations and infrastructure,
- introductions of new products or services or enhancements by us and our
competitors,
- changes in our and our competitors' pricing policies,
- currency fluctuations, and
- timing and integration of acquisitions.
WE MAY HAVE DIFFICULTY MANAGING THE EXPANSION OF OUR OPERATIONS, WHICH COULD
RESULT IN DAMAGE TO CUSTOMER RELATIONSHIPS OR DELAYED BILLING OR COLLECTION OF
REVENUE.
The implementation of our business strategy could result in a period of
rapid growth in the number of our employees and the scope of our operations. In
addition, in connection with the acquisition of C-Mold, we have further expanded
the number of employees and facilities. Rapid expansion could place a
significant strain on our senior management team and our operational, financial
and other resources as we attempt to expand our operations in multiple locations
around the world. We may have difficulty effectively managing the budgeting,
forecasting, global hiring and other business control issues presented by such a
rapid expansion. This could, among other things, adversely affect our
relationships with our customers and result in delays in billing and collections
of revenue from our customers and increased costs.
IF WE ARE UNABLE TO MAINTAIN AND LEVERAGE OUR STRATEGIC ALLIANCES, WE MAY BE
UNABLE TO GROW AS PLANNED.
We are, and will continue to be, dependent to some extent on distribution
arrangements and strategic partnerships with third-parties because we sell a
portion of our products through these third parties. In addition, we may sell
other products through third-party distributors in the future. These third
parties may not fulfill their agreements with us. In particular, third-party
distributors may breach or terminate their distribution agreements with us or
fail to devote sufficient time and resources to successfully commercialize, or
increase sales of, our products. As a result, our revenues from these
arrangements depend, in part, on third parties' sales of our products.
DISRUPTION OF OPERATIONS AT OUR DEVELOPMENT FACILITIES COULD INTERFERE WITH OUR
PRODUCT DEVELOPMENT AND PRODUCTION CYCLES.
A significant portion of our computer equipment, source code and personnel,
including critical resources dedicated to research and development, is presently
located at operating facilities in Australia, the United States and the United
Kingdom. The occurrence of a natural disaster or other unanticipated catastrophe
at any of these facilities could cause interruptions in our operations and
services. Extensive or multiple interruptions in our operations at any of these
facilities could severely disrupt our product development.
OUR MOLDFLOW PLASTICS XPERT (MPX) PRODUCT LINE MAY LEAD TO PRODUCT LIABILITY
CLAIMS AGAINST US.
We have designed our Moldflow Plastics Xpert (MPX) product line to be
installed directly on our customers' injection molding machines and to
automatically adjust the operation of these
10
<PAGE>
machines. As a result, it is possible that our customers may claim that our
product interfered with the proper operation of their machines and may seek
reimbursement for consequential and other damages from us. Although we expressly
disclaim any liability for consequential or other damages in connection with our
sale of the MPX product, this disclaimer may not protect us from claims for
damages from our customers and these claims may adversely affect our
relationships with our customers or our reputation generally. In addition, our
insurance coverage limits may not be adequate to protect us against any product
liability claims that arise. This insurance is expensive and may not be
available on acceptable terms, or at all.
OUR OFFICERS, DIRECTORS AND THEIR AFFILIATES HAVE AND WILL CONTINUE TO HAVE
SUBSTANTIAL INFLUENCE OVER MATTERS REQUIRING A STOCKHOLDER VOTE.
Upon the closing of this offering, funds associated with Ampersand Ventures
will own approximately 27.0% of our outstanding common stock, or 25.2% if the
underwriters' over-allotment option is exercised in full. Ampersand will,
therefore, have the ability to exert significant influence over our board of
directors and the outcome of stockholder votes. Furthermore, officers, directors
and their affiliates, including Ampersand, will beneficially own approximately
36.7% of our outstanding common stock, or 34.4% if the underwriters'
over-allotment option is exercised in full. If all of these stockholders were to
vote together as a group, they may have the ability to elect our board of
directors and control the outcome of stockholder votes.
OUR STOCK PRICE IS HIGHLY VOLATILE AND COULD EXPERIENCE SUBSTANTIAL DECLINES AND
OUR MANAGEMENT'S ATTENTION MAY BE DIVERTED FROM MORE PRODUCTIVE TASKS.
The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for our common
stock to decline, perhaps substantially, following this offering, including:
- a decrease in the demand for our common stock,
- revenues and operating results failing to meet the expectations of
securities analysts or investors in any quarter,
- downward revisions in securities analysts' estimates or changes in general
market conditions,
- technological innovations by competitors or in competing technologies,
- investor perception of our industry or our prospects, and
- general technology or economic trends.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
may be involved in securities class action litigation in the future. Such
litigation often results in substantial costs and a diversion of management's
attention and resources and could harm our business, financial condition and
results of operations.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE.
The market price of our common stock could decline as a result of sales of
shares by our existing stockholders after this offering, or the perception that
such sales will occur. These sales also might make it difficult for us to sell
equity securities in the future at a time and at a price that we deem
appropriate. After this offering, we will have 9,871,137 shares of common stock
outstanding, or 10,041,137 shares if the underwriters' over-allotment option is
exercised in full. All of the shares sold in this offering will be freely
tradeable. Of the remaining shares, 1,562 shares will be subject to 60-day
lock-up agreements, 810,492 shares will be subject to 75-day lock-up agreements
and
11
<PAGE>
3,017,510 shares will be subject to 120-day lock-up agreements. As of
November 1, 2000, options to purchase 946,715 shares of our common stock were
outstanding, options to purchase 1,598,288 shares of our common stock are
available for future grant under our stock option plan and 500,000 shares are
available for future sale under our employee stock purchase plan. The shares
issued upon the exercise of these options, which are subject to vesting, and
under our employee stock purchase plan will be eligible for sale in the public
market.
WE HAVE BROAD DISCRETION AS TO THE USE OF THE PROCEEDS FROM THIS OFFERING AND
MAY USE THE PROCEEDS IN A MANNER WITH WHICH YOU DISAGREE.
Our board of directors and management have broad discretion over the use of
the net proceeds of this offering. You may disagree with the judgment of our
board of directors and management regarding the application of the proceeds of
this offering.
PROVISIONS OF DELAWARE LAW AND OF OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER
MORE DIFFICULT.
Provisions in our certificate of incorporation and by-laws and in the
Delaware corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt which is opposed by
our management and board of directors. Public stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. We also
have a staggered board of directors which makes it difficult for stockholders to
change the composition of the board of directors in any one year. These
anti-takeover provisions could substantially impede the ability of public
stockholders to change our management and board of directors.
BECAUSE WE DO NOT INTEND TO PAY DIVIDENDS, YOU WILL BENEFIT FROM AN INVESTMENT
IN OUR COMMON STOCK ONLY IF IT APPRECIATES IN VALUE.
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain our future earnings, if any, to finance the expansion
of our business and do not expect to pay any cash dividends in the foreseeable
future. In addition, our existing credit facility does not permit us to pay cash
dividends. As a result, the success of your investment in our common stock will
depend entirely upon its future appreciation. There is no guaranty that our
common stock will appreciate in value after the offering or even maintain the
price at which you purchased your shares.
12
<PAGE>
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking statements are
principally contained in the sections on "Prospectus Summary," "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." These statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Forward-looking
statements include, but are not limited to:
- our business strategy,
- the market opportunity for our products,
- our estimates regarding our capital requirements and our need for
additional financing, and
- our plans, objectives, expectations and intentions contained in this
prospectus that are not historical facts.
In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "expect," "anticipate," "believe," "estimate,"
"project," "predict," "intend," "potential," "continue" and similar expressions
intended to identify forward-looking statements. You should read statements that
contain these words carefully because they discuss our future expectations,
contain projections of our future results of operations or of our financial
condition, or state other "forward-looking" information. We believe that it is
important to communicate our future expectations to our investors. However,
there may be events in the future that we are not able to accurately predict or
control and that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. You are cautioned
that all forward-looking statements involve risks and uncertainties, and actual
results may differ materially from those discussed as a result of various
factors, including those factors described in the "Risk Factors" section of this
prospectus. You should not place undue reliance on our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in the "Risk Factors" section and elsewhere
in this prospects could harm our business, prospectus, operating results and
financial condition.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to us from our sale of 575,000 shares of common stock in
this offering are estimated to be approximately $12.5 million, after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by us. If the underwriters exercise their over-allotment option in full,
our net proceeds will be approximately $16.4 million. We intend to use the
proceeds of this offering for general corporate purposes, including working
capital, capital expenditures and potential strategic investments or
acquisitions. We will not receive any proceeds from the sale of shares by
selling stockholders. See "Principal and Selling Stockholders."
Until used, we intend to invest these proceeds in government securities and
other short-term, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain our future earnings, if any, to finance the expansion
of our business and do not expect to pay any cash dividends in the foreseeable
future. In addition, our existing credit facility does not permit us to pay cash
dividends.
PRICE RANGE OF COMMON STOCK
Our common stock has been quoted on the Nasdaq National Market since our
initial public offering on March 28, 2000 and currently trades under the symbol
"MFLO." The following table sets forth the high and low sales prices per share
of our common stock as reported on the Nasdaq National Market for the periods
indicated.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL YEAR ENDED JUNE 30, 2000
Third Quarter (from March 28 through April 1, 2000)....... $17.25 $14.00
Fourth Quarter............................................ $18.88 $13.13
FISCAL YEAR ENDING JUNE 30, 2001
First Quarter............................................. $31.06 $14.56
Second Quarter (through November 21, 2000)................ $29.00 $19.38
</TABLE>
On November 21, 2000, the closing sale price of our common stock on the
Nasdaq National Market was $24.00 per share. The number of record holders of our
common stock as of November 1, 2000 was approximately 93. We believe that the
number of beneficial owners of our common stock at that date was substantially
greater.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2000
on an actual basis and as adjusted to reflect the sale of 575,000 shares of
common stock by us in this offering at an assumed price of $24.00 per share
after deducting the estimated underwriting discount and offering expenses
payable by us.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
2000
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, net of current portion...................... $ 840 $ 840
------- -------
Stockholders' equity:
Undesignated preferred stock, par value $0.01 per share;
5,000,000 shares authorized; no shares issued and
outstanding, actual and as adjusted..................... -- --
Common stock, par value $0.01 per share; 60,000,000 shares
authorized; 9,291,007 shares issued and outstanding,
actual; 9,866,007 shares issued and outstanding, as
adjusted................................................ 93 99
Additional paid-in capital................................ 49,502 62,003
Deferred compensation..................................... (43) (43)
Notes receivable from stockholders........................ (213) (213)
Accumulated deficit....................................... (7,726) (7,726)
Accumulated other comprehensive income.................... 1,394 1,394
------- -------
Total stockholders' equity.............................. 43,007 55,514
------- -------
Total capitalization.................................. $43,847 $56,354
======= =======
</TABLE>
The above table excludes 914,373 shares of common stock issuable upon
exercise of stock options outstanding as of September 30, 2000 at a weighted
average exercise price of $9.16 per share. The above table also assumes no
exercise of the underwriters' over-allotment option.
15
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related
notes included elsewhere in this prospectus. The statement of operations data
for the years ended June 30, 1998, 1999 and 2000 and the balance sheet data at
June 30, 1999 and 2000 are derived from our audited consolidated financial
statements appearing elsewhere in this prospectus. The statement of operations
data for the year ended June 30, 1997 and the balance sheet data at June 30,
1997 and 1998 are derived from our audited consolidated financial statements not
included in this prospectus. The statement of operations data for the year ended
June 30, 1996 and the balance sheet data at June 30, 1996 are derived from our
unaudited consolidated financial statements not included in this prospectus. The
unaudited consolidated financial statements, in the opinion of management, have
been prepared on the same basis as the audited consolidated financial statements
and reflect all adjustments necessary for a fair presentation of that data. The
interim statement of operations data for the three-month periods ended
October 2, 1999 and September 30, 2000 and the interim balance sheet data at
September 30, 2000 are derived from our unaudited consolidated interim financial
statements appearing elsewhere in this prospectus which, in the opinion of
management, have been prepared on the same basis as the audited consolidated
financial statements and reflect all adjustments necessary for a fair
presentation of that data. The data for the three-month period ended
September 30, 2000 are not necessarily indicative of results for the year ending
June 30, 2001 or any future period. The computation of basic and diluted net
income (loss) per common share has been adjusted retroactively for all periods
presented to reflect the redesignation of our common and preferred stock in
March 1998. As a result of the treatment of this redesignation, we had no common
stock outstanding prior to June 30, 1998 for purposes of computing net income
(loss) per common share. Accordingly, basic net income (loss) per common share
was zero for the years ended June 30, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, ----------------------------
---------------------------------------------------- OCTOBER 2, SEPTEMBER 30,
1996 1997 1998 1999 2000 1999 2000
-------- -------- -------- -------- -------- ----------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software licenses................ $ 6,531 $ 6,743 $ 8,514 $12,238 $16,742 $2,823 $ 5,222
Services......................... 7,472 8,080 7,875 7,983 10,627 2,358 3,602
------- ------- ------- ------- ------- ------ -------
Total revenue.................. 14,003 14,823 16,389 20,221 27,369 5,181 8,824
------- ------- ------- ------- ------- ------ -------
Costs and expenses:
Cost of software licenses
revenue........................ 261 377 397 378 785 169 341
Cost of services revenue......... 2,615 1,904 1,685 1,319 1,057 236 343
Research and development......... 3,535 3,527 3,062 3,466 4,074 835 1,587
Selling and marketing............ 6,094 6,703 7,287 9,673 13,495 2,698 4,291
General and administrative....... 2,550 3,719 3,303 3,839 5,018 1,076 1,385
Litigation....................... -- -- -- 620 785 280 --
Nonrecurring charges............. -- -- -- -- 284 -- --
Amortization of goodwill and
other intangible assets........ 2,904 2,370 84 -- 311 -- 367
------- ------- ------- ------- ------- ------ -------
Total operating expenses....... 17,959 18,600 15,818 19,295 25,809 5,294 8,314
------- ------- ------- ------- ------- ------ -------
Income (loss) from operations.... (3,956) (3,777) 571 926 1,560 (113) 510
Interest income (expense), net..... 135 (139) (238) (177) 427 (1) 371
Other income (loss), net........... (24) 17 19 (92) 1,717 (34) 35
------- ------- ------- ------- ------- ------ -------
Income (loss) before income
taxes.......................... (3,845) (3,899) 352 657 3,704 (148) 916
Provision (benefit) for income
taxes............................ 414 371 163 176 251 (217) 382
------- ------- ------- ------- ------- ------ -------
Net income (loss)................ (4,259) (4,270) 189 481 3,453 69 534
Accretion on convertible preferred
stock............................ 482 741 80 -- -- -- --
------- ------- ------- ------- ------- ------ -------
Net income (loss) available to
common stockholders............ $(4,741) $(5,011) $ 109 $ 481 $ 3,453 $ 69 $ 534
======= ======= ======= ======= ======= ====== =======
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, ----------------------------
---------------------------------------------------- OCTOBER 2, SEPTEMBER 30,
1996 1997 1998 1999 2000 1999 2000
-------- -------- -------- -------- -------- ----------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income per common share:
Basic............................ $ -- $ -- $ -- $ 1.82 $ 1.29 $ 0.20 $ 0.06
Diluted.......................... $ -- $ -- $ 0.04 $ 0.08 $ 0.48 $ 0.01 $ 0.06
Shares used in computing net income
per share:
Basic............................ -- -- -- 265 2,667 353 9,186
Diluted.......................... -- -- 5,228 6,166 7,190 6,292 9,698
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------------------------------------- AS OF SEPTEMBER 30,
1996 1997 1998 1999 2000 2000
-------- -------- -------- -------- -------- --------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities.............................. $ 1,638 $ 1,009 $ 1,700 $ 1,240 $35,711 $33,755
Working capital........................... (572) (3,260) (1,999) (2,108) 30,991 29,808
Working capital, net of deferred
revenue................................. 1,528 (501) 984 1,310 36,094 34,366
Total assets.............................. 16,432 13,940 14,336 10,247 57,323 55,508
Long-term debt, net of current portion.... -- 524 890 -- 852 840
Redeemable convertible preferred stock.... 9,582 10,322 -- -- -- --
Stockholders' equity (deficit)............ (5,340) (10,584) 34 1,270 43,778 43,007
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
Our primary business is the development, sale and support of software
applications for the design and manufacture of injection molded plastic parts.
Our products allow a product designer or engineer to simulate the manufacture of
a plastic part to determine and maintain the optimal part design and
manufacturing conditions throughout the manufacturing process.
We develop software products internally and through cooperative research
relationships with a number of public and private educational and research
organizations around the world. Prior to June 1997, our products consisted
solely of our Moldflow Plastics Insight (MPI) series for in-depth mold design.
Since then, we have introduced additional modules of our MPI product series and
have also introduced two new product lines. Our Moldflow Plastics Advisers (MPA)
series for part design and high level mold design was introduced in fiscal 1997
and our Moldflow Plastics Xpert (MPX) series for production set-up and
production monitoring was introduced in fiscal 1999. Earlier this year we
introduced plasticszone.com, a business and productivity website for
professionals working with injection molded plastics. The plasticszone.com site
currently offers four primary services, including one which provides our
customers with access to our IMPA product, an application service provider, or
ASP, version of one of our MPA series of products. In addition, we recently
introduced IMPX, a browser-based production monitoring system that enables MPX
customers to view production data remotely over corporate intranets.
We sell our products and services internationally through our direct sales
operations in 14 countries. We also sell through a network of distributors and
value-added resellers and through distribution arrangements with developers of
other design software products.
In April 2000, we completed the acquisition of Advanced CAE
Technology, Inc., which had been conducting business as C-Mold. The acquisition
was accounted for as a purchase. Accordingly, the operating results of C-Mold
have been included in our results of operations from the date of the
acquisition.
We generate revenue from two principal sources:
- license fees for our packaged software products, and
- services revenue derived from maintenance and support services related to
our software products, consulting, training and material testing.
SOFTWARE LICENSES REVENUE. Typically, our customers pay an up-front,
one-time fee for a perpetual license of our software products. The amount of the
fee depends upon the number and type of software modules purchased and the
number of the customers' employees or other users who can access the software
product simultaneously. Our MPA product is subject to the terms of a
"shrink-wrapped" or "click-wrapped" software license agreement that is
pre-packaged with the software and is also included as part of each customer's
installation process. Revenue for our IMPA product is earned on a pay-per-use
basis. For sales of our MPI and MPX products, we generally require a signed
license agreement. In addition, we receive royalty payments from original
equipment manufacturers related to the bundling of our software with their
design software programs.
We recognize software licenses revenue when evidence of a purchase
commitment exists, delivery has occurred upon shipment of the product to the
customer, no significant installation
18
<PAGE>
obligations remain, the license fee is fixed and determinable, and
collectibility is probable. Installation of the software by Moldflow is not
essential to its functionality, and typically is completed by our customers.
SERVICES REVENUE. We also derive revenue from maintenance and support
contracts, which require us to provide technical support services to customers
and unspecified product upgrades and enhancements on a when-and-if-available
basis. Maintenance and support contract revenue is invoiced in advance and is
recognized ratably over the term of the corresponding maintenance agreement,
which typically is twelve months.
Maintenance and support contracts are often entered into at the same time as
the sale of our software licenses, and we consider these multiple elements of a
single arrangement. Payment for this arrangement is typically received up-front,
and the total fee is then allocated ratably to these elements based upon vendor
specific objective evidence of fair value for each, which is determined based on
prices charged to our customers when these elements are sold separately. The
revenue allocated to each of these elements is then recognized as described
above.
We also provide consulting services, training of customers' employees, and
material testing services. Revenue is recognized as the services are performed.
COST OF SOFTWARE LICENSES REVENUE. Cost of software licenses revenue
consists primarily of the costs associated with compact discs and related
packaging material, duplication and shipping costs, hardware components for our
MPX products and the salaries of our distribution personnel. In some cases, we
pay royalties to third parties for usage-based licenses of their products that
are embedded in our software programs. Product royalties are expensed when the
related obligation arises, which is generally upon the sale of our products, and
are included in cost of software licenses revenue.
COST OF SERVICES REVENUE. Cost of services revenue consists primarily of
salary, fringe benefit and facility related costs of our maintenance and
support, consulting and training activities and of our material testing
laboratory in Australia, and is expensed when incurred. Additionally, from time
to time, we engage outside consultants to meet peaks in customer demand for our
consulting services.
RESEARCH AND DEVELOPMENT. We maintain a development staff to enhance our
existing products and to develop new ones. Product development expenditures,
which include salaries, benefits and travel and facilities costs, are generally
charged to operations as incurred. Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," requires the capitalization of certain software development
costs subsequent to the establishment of technological feasibility. We typically
establish technological feasibility upon the completion of a working model.
Accordingly, due to the minimal level of software development costs incurred
subsequent to the establishment of technological feasibility, costs eligible for
capitalization have not been significant to date.
SELLING AND MARKETING. We sell our products primarily through our direct
sales force and indirect distribution channels. Selling and marketing expenses
consist primarily of personnel costs, commissions to employees, sales office
facilities, travel and promotional events such as trade shows, advertising,
print and web-based collateral materials, and public relations programs.
GENERAL AND ADMINISTRATIVE. General and administrative expenses include our
personnel, routine legal, audit and other costs of our executive management,
finance, human resources and administrative support activities.
LITIGATION. Our litigation expenses consisted of legal costs incurred to
pursue our claims against C-Mold regarding theft of our trade secrets and to
defend against related counterclaims.
19
<PAGE>
Upon the closing of our acquisition of C-Mold, all related claims were
dismissed. As a result, we anticipate no further significant litigation costs to
be incurred in connection with this action.
NONRECURRING CHARGES. In connection with our acquisition of C-Mold, we
incurred nonrecurring charges to immediately expense purchased in-process
research and development costs and lease termination costs.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS. These costs represent
the amortization of intangible assets recorded in connection with our
acquisition of C-Mold, including goodwill, developed technology, assembled
workforce and protective covenants.
INTEREST INCOME (EXPENSE), NET. Interest income (expense), net includes our
cost of borrowings, including interest cost incurred on our working capital
lines of credit and stockholder loans, offset in part by interest income earned
on invested cash balances.
OTHER INCOME (LOSS), NET. Other income (loss), net includes realized and
unrealized gains and losses arising from translation of foreign currency
denominated asset and liability balances, recognized gains and losses on our
foreign currency hedging instruments, and other non-operating income and expense
items.
PROVISION FOR INCOME TAXES. Our provision for income taxes includes
federal, state and foreign taxes on our income in the countries in which we do
business. Our income taxes during prior periods, in particular 1999 and 2000,
have been significantly reduced by the use of our net operating loss
carryforwards. We do not expect our current net operating loss carryforwards to
significantly impact our results in future periods, and as a result, we expect
our effective income tax rate to increase from that experienced in 1999 and
2000.
Our fiscal year end is June 30. References to 1998, 1999 or 2000 mean the
fiscal year ended June 30, unless otherwise indicated. During the fiscal year,
we follow a schedule in which each interim quarterly period ends on the Saturday
of the thirteenth full week of the reporting period.
20
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth statement of operations data for the periods
indicated as a percentage of total revenue:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
JUNE 30, ----------------------------
------------------------------ OCTOBER 2, SEPTEMBER 30,
1998 1999 2000 1999 2000
-------- -------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Revenue:
Software licenses........................... 51.9% 60.5% 61.2% 54.5% 59.2%
Services.................................... 48.1 39.5 38.8 45.5 40.8
----- ----- ----- ----- -----
Total revenue............................. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Costs and expenses:
Cost of software licenses revenue........... 2.4% 1.9% 2.9% 3.3% 3.9%
Cost of services revenue.................... 10.3 6.5 3.9 4.6 3.9
Research and development.................... 18.7 17.1 14.9 16.1 18.0
Selling and marketing....................... 44.4 47.8 49.3 52.1 48.6
General and administrative.................. 20.2 19.0 18.3 20.8 15.7
Litigation.................................. -- 3.1 2.9 5.4 --
Nonrecurring charges........................ -- -- 1.0 -- --
Amortization of goodwill and other
intangible assets......................... 0.5 -- 1.1 -- 4.2
----- ----- ----- ----- -----
Total operating expenses.................. 96.5 95.4 94.3 102.3 94.3
----- ----- ----- ----- -----
Income (loss) from operations................. 3.5 4.6 5.7 (2.3) 5.7
Interest income (expense), net................ (1.5) (0.9) 1.6 -- 4.2
Other income (loss), net...................... 0.1 (0.5) 6.2 (0.7) 0.5
----- ----- ----- ----- -----
Income (loss) before income taxes........... 2.1 3.2 13.5 (3.0) 10.4
Provision (benefit) for income taxes.......... 1.0 0.9 0.9 (4.2) 4.3
----- ----- ----- ----- -----
Net income.................................... 1.1% 2.3% 12.6% 1.2% 6.1%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
OCTOBER 2, 1999
Revenue
SOFTWARE LICENSES REVENUE. Software licenses revenue increased by 85%, or
$2.4 million, to $5.2 million for the three months ended September 30, 2000 from
$2.8 million for the three months ended October 2, 1999. The increase in
software licenses revenue was primarily attributable to an increase in our
direct sales force and increased sales, particularly in Japan and North America.
To a lesser extent, the increase was attributable to our acquisition of C-Mold.
Revenue from software licenses accounted for 59% of total revenue during the
three-month period ended September 30, 2000 compared to 55% during the
three-month period ended October 2, 1999.
SERVICES REVENUE. Services revenue increased by 53%, or $1.2 million, to
$3.6 million for the three months ended September 30, 2000 from $2.4 million for
the three-month period ended October 2, 1999. This increase was due primarily to
an increase in the amount of revenue derived from maintenance and support
contracts resulting from the growth in our software licenses revenue and our
installed-user base in fiscal year 2000, in part resulting from our acquisition
of C-Mold. No customer accounted for more than 10% of the total revenue during
the three-month periods ended September 30, 2000 and October 2, 1999.
21
<PAGE>
The following table sets forth our revenue by geographic region for the
three months ended October 2, 1999 and September 30, 2000:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
OCTOBER 2, SEPTEMBER 30,
1999 2000
---------- -------------
(IN THOUSANDS, EXCEPT
PERCENTAGE DATA)
<S> <C> <C>
Revenue
USA............................................... $1,506 $2,831
Europe............................................ 2,216 3,396
Asia/Australia.................................... 1,459 2,597
------ ------
Total revenue................................... $5,181 $8,824
====== ======
% of Total revenue
USA............................................... 29.1% 32.1%
Europe............................................ 42.8 38.5
Asia/Australia.................................... 28.1 29.4
------ ------
Total........................................... 100.0% 100.0%
====== ======
</TABLE>
Costs and expenses
COST OF SOFTWARE LICENSES REVENUE. The cost of software licenses revenue
increased 102%, or $172,000, to $341,000 for the three months ended
September 30, 2000 from $169,000 for the three months ended October 2, 1999.
This increase was primarily attributable to increased personnel costs and
distribution costs associated with new product rollouts as well as an increased
percentage of our revenue attributable to our MPX products which have a higher
cost than our other products.
COST OF SERVICES REVENUE. The cost of services revenue increased 45%, or
$107,000, from $236,000 for the three months ended October 2, 1999 to $343,000
for the three months ended September 30, 2000. This increase resulted from
increased personnel costs, primarily related to our acquisition of C-Mold.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 90%,
or $752,000, to $1.6 million for the three months ended September 30, 2000 from
$835,000 for the three months ended October 2, 1999. This increase was
attributable to increased personnel costs, primarily related to the addition of
research and development personnel in connection with our acquisition of C-Mold.
SELLING AND MARKETING. Selling and marketing expenses increased 59%, or
$1.6 million, to $4.3 million for the three months ended September 30, 2000 from
$2.7 million for the three months ended October 2, 1999. This increase was due
principally to the increase in the direct sales force, an increase in sales
commissions and an increase in spending for promotional activities.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
29%, or $309,000, to $1.4 million for the three months ended September 30, 2000
from $1.1 million for the three months ended October 2, 1999. This resulted from
additional personnel costs and an increase in professional fees.
LITIGATION. The litigation expenses incurred for the three months ended
October 2, 1999 amounted to $280,000 and consisted of legal costs to pursue our
claims against C-Mold regarding theft of our trade secrets and to defend against
counterclaims. The litigation was suspended during the third quarter of fiscal
2000, and upon the closing of our acquisition of C-Mold, all related claims
22
<PAGE>
were dismissed. There were no litigation expenses incurred in the three months
ended September 30, 2000.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS. These costs represent
the amortization of intangible assets recorded in connection with our
acquisition of C-Mold. Amortization for the three months ended September 30,
2000 was $367,000. There was no amortization incurred in the three months ended
October 2, 1999.
Other income and expenses
INTEREST INCOME (EXPENSE), NET. Interest income (expense), net increased to
income of $371,000 in the three months ended September 30, 2000 from an expense
of $1,000 for the three months ended October 2, 1999. The change was primarily
the result of interest earned on the investment of the unused portion of the
proceeds from our initial public offering of common stock in March 2000.
OTHER INCOME (LOSS), NET. Other income (loss), net increased to income of
$35,000 in the three months ended September 30, 2000 from a loss of $34,000 for
the three months ended October 2, 1999. The change was based primarily on
foreign currency movements that resulted in realized and unrealized exchange
gains and losses on intercompany account balances and the recognized gains and
losses on our foreign exchange hedging instruments.
PROVISION FOR INCOME TAXES. The provision for income taxes increased to
$382,000 in the three months ended September 30, 2000. For the three months
ended October 2, 1999 the income tax provision was impacted by the receipt of a
tax rebate in Germany of $201,000.
COMPARISON OF FISCAL YEARS 2000, 1999 AND 1998
Revenue
SOFTWARE LICENSES REVENUE. Software licenses revenue increased from the
prior year by 44% in 1999 from $8.5 million to $12.2 million and by 37% in 2000
from $12.2 million to $16.7 million. Several factors have contributed to these
increases. We introduced new products, including our MPX product and new modules
for our MPI product line, and released new version updates to existing products,
including our MPA product, which was first introduced in fiscal 1997. We
increased our direct sales coverage, adding new sales offices in Italy and
Sweden, and increased the number of our sales representatives from 20 at
June 30, 1998 to 25 at June 30, 1999 and 38 at June 30, 2000. As a result, we
have increased the proportion of total licenses revenue sold directly to
end-user customers from 67% in 1998 to 76% in 2000.
SERVICES REVENUE. Services revenue has a lower gross profit margin than
licenses revenue and accounted for approximately 39% of our total revenue in
1999 and 2000. Revenue from services increased 1% in 1999 and 33% in 2000. These
increases were primarily in the sale of maintenance contracts, which was the
result of growth in our customer base arising from software license sales. To a
lesser extent, the acquisition of C-Mold provided additional services revenue
during the fourth quarter of 2000.
23
<PAGE>
The following table sets forth our revenue by geographic region for each of
1998, 1999 and 2000:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
------------------------------
1998 1999 2000
-------- -------- --------
(IN THOUSANDS, EXCEPT
PERCENTAGE DATA)
<S> <C> <C> <C>
Revenue
USA....................................................... $ 5,521 $ 6,974 $ 7,804
Europe.................................................... 5,856 8,235 10,399
Asia/Australia............................................ 5,012 5,012 9,166
------- ------- -------
Total revenue........................................... $16,389 $20,221 $27,369
======= ======= =======
% of Total revenue
USA....................................................... 33.7% 34.5% 28.5%
Europe.................................................... 35.7 40.7 38.0
Asia/Australia............................................ 30.6 24.8 33.5
------- ------- -------
Total................................................... 100.0% 100.0% 100.0%
======= ======= =======
</TABLE>
The improvement in economic conditions during 2000 in Asia, particularly in
Japan and Korea, was the primary factor driving the growth of sales in that
region.
Costs and Expenses
COST OF SOFTWARE LICENSES REVENUE. Our cost of software licenses revenue
was relatively unchanged during 1998 and 1999, at $397,000 and $378,000,
respectively, but increased by 108% in 2000 to $785,000 due to the increase in
MPX sales, which have a lower gross margin than our other products, and an
increase in personnel costs.
COST OF SERVICES REVENUE. Our cost of services revenue has decreased during
the last three years from $1.7 million in 1998 to $1.3 million in 1999 and
$1.1 million in 2000, as we have been implementing our strategy of redirecting
field technical personnel from largely passive roles of customer hotline and
maintenance services to active roles in pre-sales activities and customer
retention programs. Consequently, these costs are being redirected to selling
and marketing.
RESEARCH AND DEVELOPMENT. Our research and development expenses increased
from the prior year by 13% in 1999 from $3.1 million to $3.5 million and by 18%
in 2000 from $3.5 million to $4.1 million. These increases were driven primarily
by headcount additions. Though our research organization is geographically
dispersed, with facilities in Australia, the United Kingdom and the United
States, the majority of our expenses have historically been incurred in
Australia. This has resulted in lower overall cost incurred for our research and
development organization than would be the case if our development activities
were primarily located in the United States. With the acquisition of C-Mold in
April 2000, we now have significant development activities in the United States.
SELLING AND MARKETING. Our selling and marketing expenses increased from
the prior year by 33% in 1999 from $7.3 million to $9.7 million and by 40% in
2000 from $9.7 million to $13.5 million. This increase was due principally to
the continued redirection of field technical personnel to pre-sales support
roles and to an increase in the number of direct sales force personnel and, to a
lesser extent, an increase in promotional activities in connection with the
rollout of new products.
24
<PAGE>
GENERAL AND ADMINISTRATIVE. Our general and administrative expenses
increased from the prior year by 16% in 1999 from $3.3 million to $3.8 million
and by 31% in 2000 from $3.8 million to $5.0 million. This increase is the
result of additional hiring of corporate staff, increased costs for professional
services incurred as a result of becoming a publicly-held company and increased
management compensation expenses related to operating performance.
LITIGATION. The litigation expenses incurred amounted to $785,000 in 2000
and $620,000 in 1999 and consisted of legal costs to pursue our claims against
C-Mold regarding theft of our trade secrets and to defend against counterclaims.
The litigation was suspended during the third quarter of fiscal 2000, and upon
the closing of our acquisition of C-Mold, all related claims were dismissed.
NONRECURRING CHARGES. Our acquisition of C-Mold was accounted for as a
purchase and, accordingly, the operating results of C-Mold have been included in
our results of operations from the date of acquisition. In connection with the
acquisition, we incurred nonrecurring charges of $284,000 to immediately expense
purchased in-process research and development and for lease termination costs.
In the opinion of management, the purchased in-process research and development
had not yet reached technological feasibility and had no alternative future use.
Consequently, our nonrecurring charges included $214,000 to write off such
in-process research and development costs during the fourth quarter of 2000.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS. These costs represent
the amortization of intangible assets acquired, including goodwill, developed
technology, assembled workforce and protective covenants. These charges in 2000
resulted from our acquisition of C-Mold and in 1998 from the acquisition of a
third-party distributor of our products.
Other Income and Expenses
INTEREST INCOME (EXPENSE), NET. Our interest income (expense), net improved
in 1999 to an expense of $177,000 in 1999 from an expense of $238,000 in 1998
and in 2000 from an expense of $177,000 in 1999 to income of $427,000 in 2000
due primarily to a reduction in the amount of interest expense incurred as a
result of a reduction in the level of bank and stockholder debt outstanding and
an increase in interest income on the available cash balance from the investment
of the unused portion of the proceeds of our initial public offering of common
stock in March 2000.
OTHER INCOME (LOSS), NET. Other income (loss), net includes foreign
currency transaction gains and losses, miscellaneous income and expense, and
realized gains and losses on the sale or disposal of assets. During 2000, we
realized a gain of $1.7 million on the sale of a portion of our minority
investment in a software company in connection with that company's initial
public offering in India.
PROVISION FOR INCOME TAXES. Our effective income tax rate was 46% for 1998,
27% for 1999 and 7% for 2000. The lower tax rates in 1999 and 2000 were
primarily the result of the use of net operating loss carryforwards, or NOLs. It
is management's opinion that our remaining NOLs will not be sufficient to
maintain the effective tax rate for 2000 in future periods.
25
<PAGE>
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth the unaudited quarterly consolidated
statement of operations data for each of the nine quarters in the period ended
September 30, 2000. In the opinion of management, the unaudited financial
results include all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of our results of operations
for those periods and have been prepared on the same basis as the audited
consolidated financial statements. The quarterly data should be read in
conjunction with our audited consolidated financial statements and the
accompanying notes appearing elsewhere in this prospectus. The results of
operations for any quarter are not necessarily indicative of the results of
operations for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------------
OCT. 3, JAN. 2, APR. 3, JUN. 30 OCT. 2, JAN. 1, APR. 1, JUN. 30, SEPT. 30,
1998 1999 1999 1999 1999 2000 2000 2000 2000
-------- -------- -------- -------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software licenses........... $2,350 $2,925 $3,555 $3,408 $2,823 $3,828 $4,594 $5,497 $5,222
Services.................... 1,838 2,131 1,845 2,169 2,358 2,495 2,489 3,285 3,602
------ ------ ------ ------ ------ ------ ------ ------ ------
Total revenue............. 4,188 5,056 5,400 5,577 5,181 6,323 7,083 8,782 8,824
------ ------ ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Cost of software licenses
revenue................... 77 91 116 94 169 153 163 300 341
Cost of services revenue.... 290 315 363 351 236 255 233 333 343
Research and development.... 895 859 1,031 681 835 874 939 1,426 1,587
Selling and marketing....... 2,086 2,529 2,526 2,532 2,698 3,113 3,363 4,321 4,291
General and
administrative............ 794 941 1,065 1,039 1,076 1,201 1,244 1,497 1,385
Litigation.................. -- -- 150 470 280 250 255 -- --
Nonrecurring charges........ -- -- -- -- -- -- -- 284 --
Amortization of goodwill and
other intangible assets... -- -- -- -- -- -- -- 311 367
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses................ 4,142 4,735 5,251 5,167 5,294 5,846 6,197 8,472 8,314
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations.................. 46 321 149 410 (113) 477 886 310 510
Interest income (expense),
net......................... (41) (44) 8 (100) (1) (38) (16) 482 371
Other income (loss), net...... 50 (72) (19) (51) (34) (30) 1,703 78 35
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income
taxes..................... 55 205 138 259 (148) 409 2,573 870 916
Provision (benefit) for income
taxes....................... (3) 60 62 57 (217) 45 423 -- 382
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income.................. $ 58 $ 145 $ 76 $ 202 $ 69 $ 364 $2,150 $ 870 $ 534
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------------
OCT. 3, JAN. 2, APR. 3, JUN. 30, OCT. 2, JAN. 1, APR. 1, JUN. 30, SEPT. 30,
1998 1999 1999 1999 1999 2000 2000 2000 2000
-------- -------- -------- -------- -------- -------- -------- -------- ---------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software licenses........... 56.1% 57.9% 65.8% 61.1% 54.5% 60.5% 64.9% 62.6% 59.2%
Services.................... 43.9 42.1 34.2 38.9 45.5 39.5 35.1 37.4 40.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenue............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== ===== ===== =====
Costs and expenses:
Cost of software licenses
revenue................... 1.8% 1.8% 2.1% 1.7% 3.3% 2.4% 2.3% 3.4% 3.9%
Cost of services revenue.... 6.9 6.2 6.7 6.3 4.6 4.0 3.3 3.8 3.9
Research and development.... 21.4 17.0 19.1 12.2 16.1 13.8 13.3 16.2 18.0
Selling and marketing....... 49.8 50.0 46.8 45.4 52.1 49.2 47.5 49.2 48.6
General and
administrative............ 19.0 18.6 19.7 18.6 20.8 19.0 17.6 17.0 15.7
Litigation.................. -- -- 2.8 8.4 5.4 4.0 3.6 -- --
Nonrecurring charges........ -- -- -- -- -- -- -- 3.2 --
Amortization of goodwill and
other intangible assets... -- -- -- -- -- -- -- 3.5 4.2
----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses................ 98.9 93.6 97.2 92.6 102.3 92.4 87.6 96.3 94.3
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations.................. 1.1 6.4 2.8 7.4 (2.3) 7.6 12.4 3.7 5.7
Interest income (expense),
net......................... (1.0) (0.9) 0.1 (1.8) -- (0.6) (0.2) 5.5 4.2
Other income (loss), net...... 1.2 (1.4) (0.4) (1.0) (0.7) (0.5) 24.2 0.9 0.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before income
taxes....................... 1.3 4.1 2.5 4.6 (3.0) 6.5 36.4 10.1 10.4
Provision (benefit) for income
taxes....................... (0.1) 1.2 1.1 1.0 (4.2) 0.7 6.0 -- 4.3
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income.................. 1.4% 2.9% 1.4% 3.6% 1.2% 5.8% 30.4% 10.1% 6.1%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
26
<PAGE>
Our quarterly results have varied in the past and may vary significantly in
the future depending on many factors, many of which are outside of our control.
The primary factors that may affect us include the following:
- seasonal slowdowns, in particular, in our first fiscal quarter, in many of
the markets in which we sell our products,
- start-up expenses for new facilities and new personnel,
- our success in expanding our sales and marketing programs,
- currency fluctuations, and
- the timing and integration of acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have financed our operations and met our capital
expenditure requirements primarily through private sales of our capital stock,
stockholder loans, funds generated from operations and borrowings from lending
institutions. In March 2000, we completed our initial public offering of common
stock. As of September 30, 2000, our primary sources of liquidity consisted of
our total cash equivalents balance of $19.9 million, our marketable securities
balance of $13.8 million and available borrowings of $2.3 million under our
$3.3 million domestic and foreign revolving lines of credit, which are secured
by substantially all of our assets. Our marketable securities balance at
September 30, 2000 included $2.0 million related to our minority investment in a
publicly traded Indian software company which is recorded at market value at the
end of each reporting period. This value has been subject to significant
fluctuation in the past. As of September 30, 2000, there were no amounts
outstanding on our lines of credit. Borrowings under our lines of credit are
subject to a borrowing base of 80% of eligible domestic accounts receivable, 30%
of eligible foreign accounts receivable, and 90% of a standby letter of credit
issued by an Australian bank. The assets of our Australian subsidiary secure the
standby letter of credit. Interest on these lines of credit is payable monthly
at rates of prime plus 1.25% for the domestic line and prime plus 1.5% for the
foreign line. The standby letter of credit is subject to a fee of 0.5% per
annum. The credit facilities expire on December 31, 2000. We are currently
negotiating with the bank to modify and extend the terms of these arrangements.
Net cash provided by operating activities was $771,000 in 1998,
$1.2 million in 1999, $1.4 million in 2000 and $949,000 in the three months
ended September 30, 2000. The cash provided by operations in 1998, 1999, 2000
and the three months ended September 30, 2000 reflected primarily the impact of
increases in net income prior to non-cash charges.
Net cash used in investing activities was $729,000 in 1998, $854,000 in
1999, $11.9 million in 2000 and $8.1 million in the three months ended
September 30, 2000. In 1998 and 1999, cash was used for purchases of property
and equipment, primarily for computers, networking and materials laboratory test
equipment to support our global product development activities, and to enable
data communications among our worldwide development, sales, customer support and
administrative organizations. In 2000, in addition to the purchase of fixed
assets, $7.9 million, net of cash acquired, was used to purchase C-Mold and
$5.0 million was invested in marketable securities. Also in 2000, $1.8 million
was provided by the proceeds from the sale of a portion of our minority
investment in an Indian software company. In the three months ended
September 30, 2000, net cash used in investing activities reflected primarily
the investment of cash in marketable securities and the purchase of fixed
assets.
Net cash provided by financing activities was $716,000 in 1998,
$35.9 million in 2000 and $9,000 in the three months ended September 30, 2000.
Net cash of $907,000 was used in financing
27
<PAGE>
activities in 1999. In 1998, 1999 and 2000, cash was provided from borrowings on
our line of credit and used in payments on our debt obligations. In 2000,
$36.9 million was provided by the initial public offering of our common stock.
In the three months ended September 30, 2000, net cash provided by financing
activities was provided primarily by the exercise of employee stock options,
offset by payments on debt obligations.
We believe that the net proceeds of this offering, together with our current
cash, cash equivalents, marketable securities and available lines of credit will
be sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next twelve months following the date of this
prospectus. On a long-term basis or to complete acquisitions in the short term,
we may require additional external financing through credit facilities, sales of
additional equity or other financing vehicles. There can be no assurance that
such financing can be obtained on favorable terms, if at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 (FIN No. 44), "Accounting for Certain Transactions
Involving Stock Compensation--An Interpretation of APB Opinion No. 25." FIN
No. 44 addresses the application of APB Opinion No. 25 and among other issues
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to the
terms of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN No. 44
became effective July 1, 2000, but certain conclusions in FIN No. 44 cover
specific events that occurred after either December 15, 1998 or January 12,
2000. Our adoption of FIN No. 44 in the first quarter of fiscal 2001 did not
have a material impact on our financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." This statement was amended by the issuance of SAB 101B, "Second
Amendment: Revenue Recognition in Financial Statements," which delayed the
implementation date of SAB 101 until the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. SAB 101 summarizes the Commission's views in
applying generally accepted accounting principles to selected revenue
recognition issues in financial statements. We do not expect the adoption of SAB
101 to have a material impact on our financial position and results of
operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS 133, as amended by SFAS 137, is
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. During the three months ended September 30, 2000, we began to engage in
hedging activities and as such have adopted the accounting and reporting
requirements of SFAS 133.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We develop our products in research centers in Australia, the United Kingdom
and the United States. We sell our products globally through our direct sales
force and indirect distributor channels. As a result, our financial results are
affected by factors such as changes in foreign currency exchange rates and weak
economic conditions in foreign markets. In the future, we expect to increase our
28
<PAGE>
international operations in our existing markets and in geographic locations
where we do not have any operations now.
We collect amounts representing a substantial portion of our revenue and pay
amounts representing a substantial portion of our operating expenses in foreign
currencies. As a result, changes in currency exchange rates from time to time
may affect our operating results. We have begun to engage in hedging
transactions designed to reduce our exposure to changes in currency exchange
rates. We cannot assure you, however, that any efforts we make to hedge our
exposure to currency exchange rate changes will be successful.
EUROPEAN UNION CURRENCY CONVERSION
On January 1, 1999, eleven member nations of the European Economic and
Monetary Union began using a common currency, the Euro. For a three-year
transition period ending June 30, 2002, both the Euro and each of the currencies
for such member countries will remain in circulation. After June 30, 2002, the
Euro will be the sole legal tender for those countries. The adoption of the Euro
will affect many financial systems and business applications as the commerce of
those countries may be transacted both in the Euro and the existing national
currency during the transition period. Significant portions of our revenue have
been historically generated in Europe. Of the eleven countries currently using
the Euro, we have subsidiary operations in France, Germany, Ireland, Italy,
Netherlands and Spain. We have assessed the potential impact of the Euro
conversion in a number of areas, particularly on our pricing and other marketing
strategies. Although we do not currently expect that the conversion, either
during or after the transition period, will have an adverse effect on our
operations or financial condition, there can be no assurance that it will not
have some unexpected adverse impact.
IMPACT OF INFLATION
We believe that our revenue and results of operations have not been
significantly impacted by inflation during the past three fiscal years.
29
<PAGE>
BUSINESS
OVERVIEW
We believe we are the world's leading developer of software solutions that
enhance the design, analysis and manufacture of injection molded plastic parts.
Common consumer products that make extensive use of plastic parts include
cellular telephones, personal digital assistants, pagers, automobiles,
televisions, cameras, toys and personal computers. The commercial success of
each of these products often relies heavily upon reducing the time to bring new
products to market, reducing engineering and manufacturing costs, and improving
product quality and design.
Participants in all aspects of the injection molded plastic parts
manufacturing process, including part designers, mold designers, manufacturing
engineers and machine operators, use our products. Our products enable our
customers to speed their products to market, decrease manufacturing costs and
reduce costly design and manufacturing errors by:
- assisting part designers in the selection of a plastic material,
- determining the strength, rigidity and ease of manufacturing of a given
part design,
- predicting the amount a plastic part will shrink or warp during
production,
- optimizing production conditions such as machine temperatures, injection
speeds, cooling, times and the locations in a mold to inject the plastic,
- identifying and providing optimized solutions for adverse variations
during production, and
- providing features which facilitate collaboration over shared media, such
as the Internet.
Prior to 1997, we offered a single product line, Moldflow Plastics Insight
(MPI), which was designed to be used by highly specialized engineers conducting
in-depth plastics simulation. Our two newest product lines, Moldflow Plastics
Advisers (MPA) and Moldflow Plastics Xpert (MPX), can be used by participants in
all phases of the design and production process for injection molded plastic
parts. These phases include initial part design, mold design, production set-up
and production and process monitoring by design engineers and injection molding
machine operators, many of whom do not specialize in plastic part design. We
believe a large, untapped market for our new product lines exists.
Our strategy includes capitalizing on the universal accessibility of the
Internet to further grow our business. We have developed several Internet- and
network-based offerings to expand the usefulness and reach of our products.
Earlier this year we introduced plasticszone.com, a business and productivity
website for professionals working with injection molded plastics. The
plasticszone.com site currently offers five primary services, including one
which provides our customers with access to our IMPA product, the application
service provider, or ASP, version of MPA. IMPA enables customers to use our MPA
Part Adviser product on demand via the Internet on a pay-per-use basis. In
addition, we recently introduced IMPX, a browser-based production monitoring
system that enables MPX customers to view production data remotely over
corporate intranets.
Our products are used by more than 3,400 customers at more than 3,800 sites
in over 55 countries around the world. We sell our products primarily through
our direct sales force in North America, Europe and Asia and, to a lesser
extent, through original equipment manufacturers and through distributors in
defined geographic regions. Representative customers include Baxter
International, BMW, DuPont, Fuji Xerox, Hewlett-Packard, Lego, Motorola, Nokia
and Samsung. We have distribution arrangements with Parametric Technology
Corporation or PTC, Structural Dynamics Research Corporation or SDRC,
Unigraphics Solutions, CoCreate and resellers of products of SolidWorks, a
subsidiary of Dassault Systemes, and Autodesk.
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Our development efforts are focused on creating tools that improve the
entire span of product development for injection molded plastic parts to enable
our customers to enhance their competitiveness and reduce their costs. We
believe we have the widest and most advanced range of software solutions and
proprietary technology to address the problems that arise in each phase of the
process of designing and manufacturing injection molded plastic parts.
INDUSTRY BACKGROUND
INJECTION MOLDED PLASTICS INDUSTRY
From high technology to traditional manufacturing, companies in many
industries today make extensive use of plastic materials to produce component
parts for their products. The widespread use of plastics as a manufacturing
material has occurred because plastic parts can be formed into an almost
limitless number of shapes, are relatively inexpensive to manufacture in volume
and are easy to assemble. Common consumer products that make extensive use of
plastic parts include cellular telephones, personal digital assistants, pagers,
automobiles, televisions, cameras, toys and personal computers. The commercial
success of each of these products often relies heavily upon reducing the time to
bring new products to market, reducing engineering and manufacturing costs, and
improving product quality and design.
In high technology industries, the use of plastics has become increasingly
important as weight, cost and quality are standard points of competitive
differentiation. Most importantly, because plastics can be molded into extremely
complex shapes, they are uniquely suited for use in high technology products.
Products such as cell phones, personal digital assistants or PDAs, and notebook
computers have all employed increasingly complex designs characterized by
smaller parts, reduced weight, more sophisticated shapes and lower tolerances.
These complexities often lengthen the time to market for new products. As
product life cycles shrink and time to market becomes increasingly important,
successful manufacturers in these industries must design and build products
quickly and correctly the first time. In particular, production delays or high
product defect rates for manufacturers in rapidly changing industries can
represent significant economic and opportunity costs. For example, according to
IC Insights, Inc. analog cellular handset and digital cellular/PCS handset
production is forecast to grow from 275 million units in 1999 to 920 million
units in 2004.
The use of plastics also continues to increase in traditional industries
such as the automotive industry in large part due to improvements in the
injection molding process. Automobile manufacturers frequently find that plastic
parts provide the same or superior functionality at a lower cost than other
alternatives and permit a single part to replace multiple parts. Reducing the
number of parts decreases assembly costs and simplifies the overall product
development process. For instance, industry trade journals have reported that
DaimlerChrysler predicts that the 75-100 metal parts currently used on a typical
car's body structure could be replaced by 6-12 plastic parts on future cars. In
addition to cost savings and enhanced part performance, the use of plastics in
the automobile industry can yield improvements in other important design
criteria such as fuel economy due to the weight savings achieved by using
plastics instead of other heavier structural materials. For example, industry
trade journals have reported that DaimlerChrysler has recently produced a new
hardtop for its Jeep Wrangler model which uses plastics on external components
and weighs 23 pounds less than its current production hardtop.
INJECTION MOLDING PROCESS
The dominant method for producing plastic parts with complex shapes is
injection molding. We believe that in 1999 up to 750,000 injection molding
machines were in operation on a worldwide basis. Injection molding involves the
injection of molten plastic into a cavity called the mold, usually
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made of metal, where it is packed under pressure, subsequently cooled, and then
ejected, yielding a final part.
The injection molding process is extremely complex. It requires the matching
of part geometry to mold geometry, as well as accommodating varying material,
machine, and environmental operating conditions. Not only must the mold cavity
be machined precisely to produce the desired shape of the final part, it also
must account for shrinkage and warpage of the plastic material as it cools and
is ejected. Problems can arise in this process if the molten plastic enters the
mold at the wrong temperature, if the locations of the points of entry of the
plastic into the mold are mismatched to the design of the part, or if the
properties of the chosen plastic are poorly matched to the product's function.
Each of these potential problems can cause an excessive number of defective or
substandard parts to be produced or require several attempts to remachine the
mold.
The process of designing and producing injection molded plastic parts
consists of four distinct steps, the design portion of which can take from
several weeks to several months depending on the complexity and other attributes
of the part being designed:
- PART DESIGN--A design engineer, who typically does not specialize in the
design of plastic parts, lays out the initial design of the end product,
including the plastic components. These design engineers face difficult
plastic-related decisions which often fall outside of their area of
specialization, including: selecting a plastic material out of which the
plastic portion of the product will be made from among the thousands of
plastic materials currently available, estimating the strength and
rigidity of the part, designing the part with shapes and thicknesses that
can be readily produced using injection molding, and completing each of
the steps in a cost efficient manner.
- MOLD DESIGN--After the part has been designed, typically a second engineer
designs the mold into which injection molding machines can pack the
selected plastic material to create the part. Designing a mold requires
the engineer to estimate many important variables, including the amount
the plastic part will warp or shrink and the optimal locations for
injecting plastic into the mold. The cost of a mold can vary from as
little as a few thousand dollars to more than one million dollars.
- PRODUCTION SET-UP--After the mold has been designed and built, the mold is
fastened into an injection molding machine. A machine operator then
adjusts several machine settings, such as machine temperature, injection
speed and cooling time until the machine produces acceptable parts. In
many instances, once acceptable parts are made with some frequency, the
operator makes little or no effort to improve the machine's set-up to
optimize speed or minimize failure rates.
- PRODUCTION AND PROCESS MONITORING--Once commercial production begins,
machine operators monitor the injection molding machine's performance,
which will vary over time. This variation can be caused by operating
conditions which shift as a result of factors such as temperature
fluctuations and lot-to-lot variations in the plastic raw material.
Traditionally, these steps have been carried out through a trial-and-error
process which requires a significant amount of guesswork throughout. As a
result, the design and development process has been inherently inefficient. An
incorrect guess at any step of this process may produce suboptimal parts or
require that portions or all of the process be repeated, delaying production and
increasing costs.
The inefficiencies and resulting cost increases occurring in this process
are further exacerbated when companies outsource one or more of these steps.
Many companies have set up supply chains to match expertise and cost structures
to each step of this process and take advantage of available networks to
establish "design anywhere, build anywhere" collaborations with suppliers and
between
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divisions across their company. The part design, mold design and production
steps often occur in geographically separated facilities. As a result, the
iterative process of designing a plastic part is frequently hindered by having
to coordinate this process across multiple locations and time zones.
ABSENCE OF SOFTWARE SOLUTIONS FOR THE INJECTION MOLDED PLASTICS INDUSTRY
Although many industries have embraced software tools to improve their
product design and production processes, we believe that a substantial portion
of companies in the injection molded plastics industry continue to employ a
trial-and-error process at most steps of the design and development process. We
believe this condition exists today primarily because of the limited
availability of specific software tools capable of addressing many of the
complex and unique issues involved in designing injection molded plastic parts
and their molds. In addition, we believe that up to 750,000 injection molding
machines are currently in use worldwide and are being operated without
integrated software tools which can analyze and improve the efficiency of their
production.
THE MOLDFLOW SOLUTION
Using our extensive knowledge of designing and manufacturing with plastics,
we have developed a suite of software applications which enhance our customers'
ability to optimize the design and production process for injection molded
plastic parts. Our approach, which we call Process Wide Plastics Solutions,
provides our customers with a software tool for each step in this process, from
part design through production monitoring, in an integrated environment.
Together, our suite of products permit plastics manufacturers for the first time
to significantly decrease the guesswork involved in each step of the injection
molding process by replacing the traditional trial-and-error process with an
automated and integrated process.
Our products can significantly reduce the time it takes to design plastic
parts for injection molding, improve the quality of the plastic part produced
and decrease the cost of the production process by:
- assisting part designers in the selection of a plastic material based on
their design criteria,
- determining the strength and rigidity of a given part design,
- evaluating the ease of manufacturing a given part design,
- predicting the amount a part will shrink or warp during production,
- determining the optimal locations in a mold to inject the plastic
material,
- selecting optimal machine temperatures, injection speeds and cooling times
for part production,
- identifying and providing solutions for adverse variations during
production, and
- providing features which facilitate collaboration over shared media, such
as the Internet.
With direct sales offices and distribution partners worldwide, we believe
that we are uniquely positioned to deliver our evolving suite of software tools
to customers in any part of the world.
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OUR STRATEGY
We plan to extend our position as the leading provider of software solutions
that enhance the design, analysis and manufacture of injection molded plastic
parts. Key elements of our strategy are to:
CAPITALIZE ON MARKET OPPORTUNITY FOR EXPANDED PRODUCT OFFERINGS
We focus our research and development efforts on developing new products to
address unmet market needs. We developed Moldflow Plastics Advisers (MPA) to
provide plastic part and mold design solutions to design engineers who are not
highly specialized in plastics simulation. Prior to its introduction in June
1997, no software solution existed specifically for use by these design
engineers for the design of injection molded plastic parts. We have continued to
expand and enhance the functionality of our MPA product since its release,
including the introduction of Mold Adviser in 1999 and the addition of IMPA in
2000. Our MPA product line has contributed significantly to our revenue since
its introduction. We developed Moldflow Plastics Xpert (MPX), our newest product
line initially introduced in September 1998, to optimize the production set-up
and monitoring of injection molding machines. Since that time, MPX functionality
has been continuously extended, most recently with the introduction of IMPX, our
browser-based production monitoring system that allows the user to view
production data from injection molding machines remotely over corporate
intranets. No software solution currently exists with functionality comparable
to our MPX product to address this market. We believe MPX represents a
significant opportunity for growth and we intend to vigorously pursue this
largely untapped market. In addition, we will continue to develop new product
lines and expand our existing product lines as opportunities arise.
LEVERAGE THE INTERNET TO PROVIDE SOLUTIONS TO OUR CUSTOMERS
We will continue to use the Internet to allow users of our products,
including part and mold designers, machine operators, suppliers, business
customers and outsourcing plants, to share product data and coordinate product
design and development on a worldwide basis. Our recently introduced
plasticszone.com website enables our customers to access our IMPA product on
demand over the Internet. We are also partnering with other businesses, such as
GE Plastics, in distribution arrangements which allow them to promote and
distribute IMPA on their websites, further expanding the reach of our products.
Moreover, IMPX takes advantage of the Internet by allowing remote users to
actively review and monitor the injection molding process using corporate
intranets.
FOCUS ON DIRECT SELLING MODEL
We believe that a key element of our success over the last three years has
been our focus on creating a highly effective direct sales organization. Most of
our products are sold through this organization, which encompassed 40 sales
associates employed at sales offices located in 14 countries as of November 13,
2000 compared to 28 sales associates in nine countries as of March 1, 2000. Over
the last three years, we have implemented a new sales model which involves
teaming each sales associate with an engineer. Each team works together to
conduct a thorough evaluation of potential customers' design and manufacturing
processes and provide them with a detailed analysis of the cost savings our
products could produce.
EXPAND OUR GLOBAL PRESENCE
We will continue to build on our existing global presence in sales, support
and research and development, which we believe provides us with a competitive
advantage. In part as a result of our acquisition of C-Mold, over the past six
months we have added new direct sales and support offices in Japan, the
Netherlands, China, Spain, Singapore and Taiwan. We also have direct sales and
support offices in the United States, Australia, the United Kingdom, France,
Germany, Italy, Sweden
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and Korea. In addition, we extend our geographic coverage by selling our
products through over 100 distributors worldwide. Our research and development
team has grown over the past six months from approximately 50 to over 70
research and development personnel who are located at our United States,
Australia and United Kingdom facilities. Our personnel share software code among
these facilities and are able to electronically update colleagues in most cases
every two hours and, at a minimum, at the end of each team's working day. As a
result, our research and development continues on an around-the-clock basis. We
believe that this geographically dispersed, team-oriented approach to product
development and delivery helps us to bring new products to market faster.
SELECTIVELY ENGAGE IN ACQUISITIONS AND STRATEGIC RELATIONSHIPS
We intend to selectively engage in acquisitions and enter into strategic
relationships to accelerate the implementation of elements of our strategy. We
may pursue acquisitions, partnerships or licensing arrangements to obtain
technology to improve or broaden our product offerings if we determine that to
do so would be more cost effective or timely than developing our own.
OUR PRODUCTS
We offer software solutions for all phases of designing and manufacturing
injection molded plastic parts. We have categorized our product offerings into
three distinct families, the Moldflow Plastics Advisers (MPA) series for part
design and high-level mold design which is available on a perpetual license
basis and portions of which are available on an ASP model, the Moldflow Plastics
Insight (MPI) series for more in-depth mold design and the Moldflow Plastics
Xpert (MPX) series for production set-up and production monitoring. In addition,
we have recently introduced plasticszone.com, which we believe to be the world's
first e-business site designed for predictive engineering for injection molded
plastics. Our products employ complex and proprietary mathematical concepts. For
example, our MPA and MPI products employ our patented Dual Domain technology,
which permits users to conduct complex plastic flow simulations using solid
model data generated by their design modeling software. As a result, users can
eliminate the otherwise necessary, time consuming and error prone step of
creating a unique mathematical representation to be used solely for simulating
plastics flows. Our products run on the most widely used computing platforms and
operating systems, including various versions of Windows and UNIX.
MOLDFLOW PLASTICS ADVISERS
Our MPA series provides part and mold designers with applications that
permit them to quickly check the ultimate manufacturability of their designs at
an early stage in the design process. We have designed MPA to input its results
directly into MPX to enhance the efficiency of machine set-up. The MPA series
consists of three products:
PART ADVISER is a user-friendly application which enables product
designers without expertise in designing plastic parts to address key
manufacturing concerns in the preliminary design stage. Part Adviser offers
practical advice for the broad range of problems it identifies without the
need to consult with engineers who specialize in plastic part design. For
the first time, part designers are able to receive rapid feedback on the
extent to which a number of factors, including modifications such as part
geometry, material selection or plastic fill locations affect the
manufacturability of a plastic part. In addition, Part Adviser permits the
designer to create reports which can be instantly shared with fellow team
members across the Internet.
MOLD ADVISER extends the capabilities of Part Adviser to permit the mold
designer to layout and analyze an optimal mold. This product eliminates the
need to design and build molds through trial-and-error, enabling a mold
designer to create molds quickly and efficiently.
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IMPA is a fully functional, ASP version of our Part Adviser product. We
introduced IMPA to provide access to our Part Adviser product on a
pay-per-use basis. Customers download IMPA onto their desktop, laptop or
home computers and are then able to perform plastic flow analyses. For each
specific part geometry, IMPA creates a unique digital fingerprint that is
exchanged at plasticszone.com for an authorization key that allows unlimited
analyses to then be performed. This patent-pending ASP model allows the
customer to pay a use fee for each separate geometric configuration, while
protecting the privacy of a part's design and eliminating bandwidth
constraints by avoiding transmission of large proprietary data files over a
public network.
The following is an example of how one of our customers has used MPA:
POLAROID CORPORATION, a producer of instant and digital imaging products,
recently used our MPA product in the design of its new digital microscope camera
product. Among the many challenges faced by Polaroid in designing their product
was the modification of an existing mold used to produce the camera's shutter.
- Polaroid estimated that the use of our MPA product reduced their overall
product development time by 50% and enabled them to take the digital
microscope camera product from concept to market in only nine months.
- Polaroid design engineers were able to verify that the existing mold could
be modified to reflect the design of the new shutter and produce parts of
acceptable quality.
MOLDFLOW PLASTICS INSIGHT
The MPI series contains our broadest set of predictive capabilities for
injection molding for use by highly specialized design engineers. The MPI series
assists design engineers in determining the optimal combination of part
geometry, material choice, mold design and processing parameters to produce
quality finished products. MPI allows the optimization of the variables which
remain in the mold designer's control to adjust. For instance, a mold designer
often receives a part design and is not permitted to make changes to the design,
but rather must create a mold design and a set of operating conditions best
suited for the part as designed. MPI may also be used in connection with a
completed mold which was poorly designed and is producing defective parts at an
unacceptable rate. In these cases, MPI can be used to find the best possible
operating conditions for the mold-part combination to minimize the defects. The
results generated by our MPI products can be input directly into our MPX product
to reduce machine set-up time.
All applications in the MPI series use an integrated environment which
permits users to easily import all of the most commonly used types of
computer-generated models, select and compare material grades, prepare models
for analysis, sequence a series of analysis jobs, undertake advanced analysis
post-processing and use Internet-based capabilities to enhance collaboration
with team members. In these applications, we believe that we offer the broadest
integration with existing computer-aided design products in the plastics
software industry.
MPI/FLOW predicts the flow and subsequent packing of plastics at the
start of the injection molding cycle to enable users to optimize locations
for plastic filling and processing conditions, assess possible part defects
and automatically determine the dimensions for a balanced feed system for
the plastic material.
MPI/COOL is used to design cooling circuits and a mold block around a
part to optimize mold design by adjusting the size and locations of the
cooling circuits. Because many warpage problems result from improper cooling
design, using MPI/COOL for mold designs enhances ultimate product quality.
MPI/COOL also enables all the benefits of mold cooling analysis to be
applied to gas injection molded parts.
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MPI/WARP AND MPI/SHRINK predict and identify the cause and amount of
warpage and shrinkage in plastic parts. The mathematical tools incorporated
in these products permit the user to analyze warpage for the more than 4,700
plastics materials in our database.
MPI/FUSION allows users to work directly from three-dimensional solid
models to perform detailed calculations. Based upon the same patented
technology at the core of the MPA series of products, MPI/FUSION permits
more rapid investigation into the characteristics of the plastic parts and
molds being analyzed.
MPI/FLOW3D uses a fully three-dimensional meshing and solving technology
to analyze thick plastic parts. The majority of the MPI modules are focused
on the broadest class of plastic parts, those that are termed thin wall.
There are plastic parts, however, that are very thick or have widely varying
thicknesses throughout. Until the development of MPI/FLOW3D, creators of
these types of products had no commercially viable product alternative to
investigate the filling process to produce better parts and molds.
MPI/STRESS predicts the structural integrity of plastic components under
stress to quickly predict whether initial concept designs meet desired
structural requirements and whether the part will permanently deform if put
under load. The stress analysis calculates the amount of force which will
cause buckling and predicts the final buckled shape.
MPI/FIBER utilizes sophisticated visualization tools to provide insight
into the part's properties by allowing the user to see how fiber alignment
varies throughout the part's layers. The fiber analysis also predicts the
effects of fiber orientation. The effects of plastic flow on fiber
orientation have a significant impact on the mechanical and structural
properties of fiber filled plastic injection molded parts. Plastics are
often filled with various forms and quantities of fibers to tailor the
material's operating characteristics, such as strength or resistance to
bending.
MPI/OPTIM automatically determines the optimum processing conditions to
be set for a specific part on an injection molding machine to produce a part
of acceptable quality. These results may be used as input for MPX to ensure
molding machine setup is as quick and efficient as possible. The results may
also be used in isolation, as an input to assist the operator in finding the
best settings for a specific machine to produce the desired parts.
MPI/GAS provides predictive capabilities for the gas injection molding
process. The gas injection molding process is very similar to the injection
molding process described earlier but the machine produces an injection of
air, timed within the filling phase to follow the injection of plastic, to
produce wider, but hollow, channels within the part. These channels add
structural rigidity to the end product that is often desirable for large
parts such as television casings and lawn furniture.
MPI/TSETS provides tools to simulate the major thermoset molding
processes. Thermoset materials are a type of plastic which are used for
products which must withstand higher temperatures without alteration in
their material properties. Because other plastics may deform when exposed to
high temperatures, thermoset materials are used for a variety of plastic
parts such as chip holders in integrated circuits, distributor caps and
other automotive engine components and electrical outlets.
CM2K, formerly a C-Mold product, provides an easy-to-use environment
which enables the simulation of a wide variety of complex molding processes,
including the encapsulation of semiconductors. We are currently developing a
series of products that will integrate CM2K with our MPI series of products.
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The following is an example of how one of our customers has used MPI:
HEWLETT-PACKARD COMPANY used our MPI product in the design of a model in its
HP Deskjet line of inkjet computer printers. Approximately 60% to 80% of the
mechanical parts used in these printers are injection molded plastic parts.
After using our MPI product, Hewlett-Packard determined that the cavity through
which plastic was fed into the mold for one of its parts was wider than
necessary and resulted in the mold taking longer to fill with plastic.
- Hewlett-Packard was able to modify the mold by narrowing the cavity,
resulting in a reduction in the amount of time required to produce each
part by approximately 15 seconds, or 30%.
- Hewlett-Packard estimated that this time savings would reduce their annual
production costs by $1.1 million.
MOLDFLOW PLASTICS XPERT
Our MPX product attaches to injection molding machines to monitor and
control the plastic manufacturing process. MPX addresses common shop floor
issues such as machine set-up, process optimization and production part quality
monitoring. MPX interacts directly with the molding machine's built-in
controller to provide optimized process correction. With MPX, engineers and
die-setters can consistently and systematically set up molds, identify a robust
molding window and monitor production. MPX can be used with substantially all
injection molding machines and provides operators with a single, intuitive user
interface, reducing the need for machine-specific operator training. In
addition, MPX gives real-time feedback, providing a mechanism for rapid manual
or automatic process adjustments. We designed MPX to reduce mold set-up times
and to optimize the efficiency of the part production cycle. Our MPX product
consists of four integrated modules:
SETUP XPERT enables systematic mold set-up from starting points
generated by MPA, MPI or operator inputs, independent of operator and
location. Setup Xpert optimizes the molding cycle and maximizes the usage of
machine capabilities without requiring the operator to have in-depth
knowledge of the individual machine. Setup Xpert quickly sets up and
optimizes each machine, while ensuring that each operator uses the same
set-up procedures.
OPTIMIZATION XPERT establishes a defined range of operating conditions
within which acceptable quality parts will be produced. Optimization Xpert
can reduce to a few minutes an optimization task that previously took
several hours or was not performed. The identification of a defined range of
operating conditions is one of the key steps in being able to determine what
operating conditions can be used by the machine to prevent scrap and machine
downtime.
PRODUCTION XPERT graphically monitors variables specific to the
injection molding process and automatically evaluates the quality of the
production process. In addition, Production Xpert spots problems and either
provides suggestions on how to correct the process or makes the necessary
changes.
IMPX is a production monitoring system which allows users to view
production data from injection molding machines remotely over corporate
intranets using a standard browser. IMPX enables our customers to monitor
individual injection molding machines for data such as the cause and length
of machine down-time and production quality.
The following is an example of how one of our customers has used MPX:
MONTBLANC-SIMPLO GMBH designs and sells the Montblanc brand of premium pens.
Montblanc-Simplo employs injection molding to manufacture the outer casings of
many styles of pens. Their machine operators were experiencing difficulty
identifying the precise machine operating conditions.
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- Montblanc has been able to reduce the scrap rate of pen casings by 50%
without significantly altering the time required to manufacture each
casing.
- Montblanc estimated that it has been able to reduce its production set-up
times and reset-up times by approximately 60% with an equivalent reduction
in wasted material.
On November 9, 2000, we entered into a non-binding letter of intent to
acquire assets from XBOX Technologies, Inc. relating to its FullMetrics
business. We expect that the FullMetrics lines of products for plastic injection
molding applications will supplement our MPX product by adding scheduling
functionality and expanded reporting capabilities.
PLASTICSZONE.COM
In May 2000 we introduced plasticszone.com, a business and productivity
website for professionals working with injection molded plastics.
Plasticszone.com currently consists of five zones:
SIMULATION ZONE offers access to our IMPA product, the ASP version of our
MPA Part Adviser product, which enables users to conduct plastics flow analysis
on a pay-per-use basis.
MATERIALS ZONE provides a materials calculator that allows users to
determine optimal polymers for parts and enables users to order testing services
on new materials from us.
CONSULTING ZONE provides access to our consulting services for
troubleshooting, performance of more challenging plastic flow analyses and other
types of plastic injection molding projects.
EVENTS ZONE offers a listing of upcoming seminars and training courses
related to plastic injection molding processes and the software solutions that
can help designers and engineers become more productive.
KNOWLEDGE ZONE provides online evaluation tools, interactive answers to
commonly asked questions about part manufacturability and comparisons among many
plastic materials.
OUR CUSTOMERS
Our products are used at more than 3,800 user sites in more than 3,400
companies, which are located in over 55 countries spanning the globe.
Representative customers in various industries include:
<TABLE>
<S> <C>
AUTOMOTIVE MATERIAL SUPPLIERS
----------- ------------------
BMW AG Bayer AG
DENSO Corporation The Dow Chemical Company
Ford Motor Company Eastman Chemical Company
Hyundai Business Group E. I. duPont de Nemours and Company
Solvay SA M. A. Hanna Company
Valeo SA MEDICAL
Volkswagen AG -------
TOYS Bausch and Lomb
---- Baxter International, Inc.
Hasbro, Inc. Becton Dickinson and Company
The Lego Group OTHER/MULTIPLE INDUSTRIES
Mattel, Inc. -------------------------
ELECTRONICS Fisher & Paykel Industries Limited
----------- Honeywell International, Inc.
The Framatome Group LG Group
Fuji Xerox Co., Ltd. Minnesota Mining and Manufacturing (3M)
Hewlett-Packard Company Montblanc-Simplo GmbH
Motorola, Inc. Polaroid Corporation
Nokia Corporation Samsung Group
Siemens AG
Tyco International Inc.
</TABLE>
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SALES AND MARKETING
We distribute our products and services primarily through a direct sales
organization. As of November 13, 2000, our direct sales organization consisted
of 40 sales associates, who operated out of offices located in Australia, China,
France, Germany, Italy, Japan, Korea, the Netherlands, Singapore, Spain, Sweden,
Taiwan, the United Kingdom and the United States. Our direct sales model
involves pairing a sales associate and an engineer to form a single sales team.
These teams work together to conduct a thorough evaluation of potential
customers' design and manufacturing processes and provide the potential
customers with a detailed analysis of the cost savings our products could
produce in a selected aspect of their business. Based upon the success of this
sales model to date in increasing sales as well as the awareness among our
potential customers of our products, we intend to continue building our direct
sales organization worldwide.
To supplement the efforts of our direct sales organization, we also sell our
products through marketing and distribution arrangements with several design
software vendors as an integrated application on their solid modeling design
systems. For example, Parametric Technology Corporation, or PTC, incorporates
our MPA product in a module of its Pro/ENGINEER product, which they call
Pro/PLASTIC ADVISOR, Structural Dynamics Research Corporation, or SDRC, sells
our MPA product as well as many modules contained within our MPI family of
products, and Unigraphics Solutions, Inc. sells our MPA product. Several
distributors of SolidWorks Corporation, a subsidiary of Dassault Systemes S.A.,
distribute our MPA product and Autodesk, Inc. has designated us a MAI partner,
which gives us access to Autodesk's distribution channel to sell our MPA
product. We have retained over 100 distributors to provide worldwide sales
coverage to complement our direct sales organization. We are also partnering
with other businesses in distribution arrangements which allow them to promote
and distribute IMPA on their websites, further expanding the reach of our
products. For example, GE Plastics will sell IMPA on their gepolymerland.com and
geplastics.com websites.
CUSTOMER SUPPORT AND OTHER SERVICES
CUSTOMER SUPPORT AND TRAINING
We provide customer training on our products and technical support to our
customers, which they may access 24 hours a day. Our customers may access
customer support either through our telephone hotline or our website. In
addition, our product development staff is available to solve more complex
problems that our customer support personnel are unable to solve quickly.
CONSULTING SERVICES
In addition to traditional customer support services, we also provide
consulting services to customers who lack employees with the expertise necessary
to take advantage of the full capability of our products. We employ design
engineers who use our products on behalf of our customers to optimize their part
design and production processes. We view providing consulting services as
complementary to our core business of selling sophisticated software solutions.
Accordingly, we provide consulting services typically in cases where we believe
that providing these services will help build relationships with future
customers for our software products.
MATERIAL TESTING SERVICES
Our material testing group provides testing services to our customers who
are seeking accurate, reliable material data on new or existing grades of
polymers, measured under a wide range of practical molding conditions. We have
established a database containing information on more than 7,300 plastics
materials. We conduct this testing at our facilities located near Melbourne,
Australia, and in Ithaca, New York, which are equipped with state-of-the-art
equipment, including a number of
40
<PAGE>
injection molding machines in Melbourne. The research and testing conducted at
these facilities provides essential data for our full line of software
applications.
PRODUCT DEVELOPMENT
Our product development strategy focuses on ongoing development and
innovation of new technologies to increase our customers' productivity and
provide solutions that our customers can integrate into their existing computing
platforms. We plan to extend our leadership position in plastics simulation
technology by continuing to make significant investments in research and
development and to maintain our market share by rapidly creating and delivering
new product releases to our customers. We intend to take advantage of current
and future technology trends, such as the Internet, to ensure our customers are
always able to gain incremental competitive advantage in their respective
industries.
Our product development activities take place in facilities located in the
United States, Australia and the United Kingdom. We linked the information
systems of each of these facilities to provide a continuous development
environment, enabling software development to be undertaken 24 hours per day.
We also fund or participate in a wide assortment of external research and
development projects, often being conducted by the world's leading experts in
their fields. For instance, we currently have ongoing projects in France with
CEMEF, a highly regarded center for plastic material research. In many cases,
under these projects we gain access to fundamental research with comprehensive
experimentation results. Often the centers agree to restricted publishing rights
in order to pursue topics of mutual interest. A partial list of our
collaborative partners includes ENSAM (France) for shrinkage, Cranfield
University (United Kingdom) for analysis of fiber filled parts, University of
Bradford (United Kingdom) for fiber orientation measurement and process control,
Technical University of Eindhoven (Netherlands) for numerical methods,
University of Sydney (Australia) for fluid mechanics and Nanyang Technological
University of Singapore for optimization. We believe that these relationships
provide a significant benefit to our product development efforts.
As of November 13, 2000, our product development staff had 74 employees,
most of whom hold advanced degrees and have industry experience in engineering,
mathematics, computer science or related disciplines. We seek to recruit highly
skilled employees, and our ability to attract and retain such employees will be
a principal factor in our success in maintaining our leading technological
position. We believe that such investments in research and development are
required in order for us to remain competitive and we believe our cadre of
software developers and our worldwide development capabilities represent a
significant competitive advantage.
COMPETITION
The markets into which our products are sold are highly competitive. We
compete with many companies engaged in selling software solutions to companies
involved in product development and manufacturing. We also face competition from
materials vendors, injection molding machine manufacturers and small vendors,
such as independent engineering consultants. In addition, new competitors may
arise as we introduce new products into the marketplace.
The entrance of new competitors would be likely to intensify competition in
all or a portion of the markets in which we compete. Some of our current and
possible future competitors have greater financial, technical, marketing and
other resources than we do, and some have well established relationships with
our current and potential customers. Competitors may form alliances and rapidly
acquire significant market share. Moreover, competition may increase as a result
of software industry consolidation.
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<PAGE>
We believe that the principal competitive factors affecting our market
include:
- speed of innovation,
- ease of use,
- flexibility,
- quality,
- ease of integration into or communication with computer-aided design
systems,
- compatibility across computer platforms,
- range of supported computer platforms,
- performance,
- price and cost of ownership,
- customer service and support,
- company reputation and financial viability, and
- effectiveness of sales and marketing efforts.
We believe that we compete effectively on these factors.
TECHNOLOGY AND PROPRIETARY RIGHTS
Our proprietary technology primarily applies general mathematical models
describing the behavior of plastics as fluids under conditions of heat and
pressure to the real world environment of polymers and injection molding
machines. We believe that our broad range of proven numerical methods represents
considerable intellectual property and that these trade secrets are difficult to
reproduce. We currently own all of the core technology used in our products and
license only assorted peripheral software that facilitates the operation of our
products' core functions.
We engage in a regular review of our proprietary technology to determine the
optimal method of protecting such technology. We currently own two issued United
States patents and corresponding international patents. We have other U.S. and
international patent applications pending. We view these patents as one
important way of protecting our key intellectual property that may not be
protected by the use of other methods. We may not obtain any of the patents for
which we have applied and may not be able to enforce any patents we currently
hold or obtain in the future.
Our U.S. patent issued with respect to our Dual Domain technology will
expire on September 17, 2017. Our success depends to a significant degree upon
our ability to develop proprietary products and technologies. We intend to
continue to file patent applications as we develop new products and
technologies.
Patent positions of companies like ours are generally uncertain and involve
complex legal and factual questions. Furthermore, even if patents are licensed
or issued to us, others may design around the patented technologies. In
addition, we could incur substantial costs in litigation if we are required to
initiate patent litigation to enforce our patent rights, and the outcome of any
patent litigation is uncertain. Our patent positions may be impaired by the
following:
- our pending patent applications may not result in issued patents,
- the claims of patents which are issued may not provide meaningful
protection,
- we may not develop additional proprietary technologies that are
patentable,
- patents licensed or issued to us may not provide a basis for commercially
viable products or may not provide us with competitive advantages and may
be challenged by third parties, or
- patents of others may have an adverse effect on our ability to do
business.
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<PAGE>
We rely on a combination of trade secret, copyright and trademark laws,
license agreements, nondisclosure and other contractual provisions and technical
measures to protect the unpatented proprietary technology contained in our
products. We distribute our software under software license agreements that
typically grant customers nonexclusive, nontransferable licenses to use our
products. These agreements usually restrict use of the licensed software to our
customer's internal operations on designated computers at specified sites unless
the customer obtains a site license for the customer's use of the software, and
are subject to terms and conditions prohibiting unauthorized reproduction or
transfer of the software.
For certain software such as the MPA series, we rely primarily on
"shrink-wrapped" or "click-wrapped" licenses that are not signed by licensees
and therefore may be unenforceable under the laws of certain jurisdictions.
We also seek to protect the source code of our software through trade secret
and copyright law. We have obtained or applied for United States federal
trademark mark protection on various trademarks and logos. We have also applied
for or obtained trademark registrations of these key marks in a number of
foreign jurisdictions and are in the process of seeking trademark registrations
in other foreign countries.
We require our employees and consultants to sign a confidentiality and
non-competition agreement. Under these agreements, our employees agree not to
disclose trade secrets or confidential information and agree not to engage in or
be connected with any business that is competitive with our business while
employed by us, and in some cases for specified periods thereafter. Within these
agreements, employees also agree that any products or technology they create
during the term of their employment are our property.
Despite these precautions, misappropriation of our technology may occur.
Further, patent, trademark, copyright and trade secret protection may not be
available for our products in every country.
The software development industry is characterized by rapid technological
change. Therefore, we believe that factors such as the technological and
creative skills of our personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are more
important to establishing and maintaining a technology leadership position than
the various legal protections of our technology which may be available.
We seek to monitor the public records in order to become aware of any
potentially conflicting proprietary rights. To date, we have not received any
notification that any of our products infringe on the proprietary rights of
third parties. We can not assure you, however, that third parties will not claim
such infringement by us or our licensors with respect to current or future
products. We expect that software product developers will increasingly be
subject to such claims as the number of products and competitors in our market
segment grows and the product functionality in different market segments
overlaps. In addition, patents on software and business methods are becoming
more common and we expect that more patents will issue in our technical field.
Any such claims, with or without merit, could be time-consuming, result in
costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements. Moreover, such royalty or licensing agreements,
if required, may not be on terms acceptable to us.
We integrate third-party software into our products. This software may not
continue to be available on commercially reasonable terms. If we cannot maintain
licenses to this third-party software, distribution of our products could be
delayed until equivalent software could be developed or licensed and integrated
into our products. This could cause delays in our product sales and development
efforts.
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<PAGE>
EMPLOYEES
As of November 13, 2000, we had 249 employees, 54 of whom resided in
Australia, 93 of whom resided in the United States, 21 of whom resided in the
United Kingdom and 81 of whom resided in other countries. None of our employees
is subject to any collective bargaining agreement. We believe that our
relationship with our employees is good.
FACILITIES
We operate out of three primary facilities. Due to our growth and the recent
expansion of our staff in connection with the C-Mold acquisition, we recently
signed a five-year lease for a 22,694 square foot office space located in
Wayland, Massachusetts that expires in August 2005. On September 18, 2000, we
completed our move into the Wayland facility. Personnel located at this facility
include our senior management team, some of our North American sales force and
related support resources, some product marketing and development personnel and
some finance and administration personnel.
We own an 18,100 square foot office building set on approximately 15 acres
in the Kilsyth suburb of Melbourne, Australia. Personnel located at our
Melbourne facility include members of our software development and research
team, our materials testing personnel and a portion of our Asia Pacific sales
force and administrative staff. We lease a 13,000 square foot office and
laboratory building in Ithaca, New York, pursuant to a one-year lease that
expires in April 2001 and is renewable for three additional years. Personnel
located at our Ithaca facility include members of our software development and
research team, some of our materials testing personnel, and administrative
personnel.
We also maintain a leased office containing a portion of our sales,
administrative and software development personnel in the United Kingdom as well
as direct sales offices in China, France, Germany, Italy, Korea, Japan, the
Netherlands, Spain, Singapore, Sweden and Taiwan. We had aggregate lease
payments of $837,000 in our 2000 fiscal year.
LEGAL PROCEEDINGS
From time to time we may be involved in disputes and litigation matters that
arise in the ordinary course of business. We are not currently a party to any
such claims or proceedings which, if decided adversely to us, would either
individually or in the aggregate have a material adverse effect on our business,
financial condition or results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their positions and ages as of
November 1, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- --------
<S> <C> <C>
Marc J. L. Dulude...................... 40 President, Chief Executive Officer and Director
Suzanne E. Rogers...................... 43 Vice President of Finance and Administration, Chief
Financial Officer, Treasurer and Secretary
A. Roland Thomas....................... 41 Vice President of Research and Development and
Director
Richard M. Underwood................... 46 Vice President of Sales
Kenneth R. Welch....................... 43 Vice President of Marketing
Charles D. Yie(1)...................... 42 Chairman of the Board of Directors
Julian H. Beale(1)(2).................. 66 Director
Roger Brooks(2)........................ 55 Director
Richard A. Charpie, Ph.D............... 48 Director
Robert P. Schechter(1)(2).............. 52 Director
</TABLE>
------------------------
(1) Member of the compensation committee
(2) Member of the audit committee
MARC J. L. DULUDE has served as our President and Chief Executive Officer
and as a director of Moldflow since May 1996. Prior to joining Moldflow,
Mr. Dulude served in various positions with and most recently as the Senior Vice
President of Marketing of Parametric Technology Corporation, a computer-aided
design software company, from 1991 to May 1996, and in various positions with
the Bell-Northern Research division of Northern Telecom, a telecommunications
company, from 1987 to 1991. Mr. Dulude holds Bachelor and Master of Mechanical
Engineering degrees from Carleton University in Canada.
SUZANNE E. ROGERS has served as our Vice President of Finance and
Administration, Chief Financial Officer, Treasurer and Secretary since
September 1996. Before joining Moldflow, Ms. Rogers served as the Vice President
of Finance and Chief Financial Officer from November 1994 to September 1996 and
as the Controller from May 1993 to November 1994 of Scitex America Corp., a
subsidiary of Scitex Corporation Ltd., a graphic arts systems manufacturer.
Ms. Rogers is a certified public accountant.
A. ROLAND THOMAS has served as a director of Moldflow or its predecessors
since November 1989, our Vice President of Research and Development since
January 1997 and has served in various other positions with Moldflow since 1982.
Mr. Thomas holds a Bachelor of Mechanical Engineering degree from the Royal
Melbourne Institute of Technology.
RICHARD M. UNDERWOOD has served as our Vice President of Sales since
October 1997. Prior to joining Moldflow, Mr. Underwood served in various
positions with and most recently as the Vice President of Sales Operations of
Parametric Technology Corporation from 1990 to October 1997.
KENNETH R. WELCH has served as our Vice President of Marketing since
November 1996. Prior to joining Moldflow, Mr. Welch served as the Director of
AutoCAD Product Marketing for Autodesk, Inc., a computer-aided design software
company, from September 1995 to November 1996 and Vice President of Sales and
Marketing of Visual Kinematics, an original equipment manufacturer of software
tools, from June 1994 to September 1995. Mr. Welch holds Bachelor and Master of
Science degrees in Civil Engineering from the University of California at Davis.
CHARLES D. YIE has served as the Chairman of our board of directors since
August 1996 and as a director since December 1995. He joined Ampersand's
predecessor in 1985 and serves as a General
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Partner of all of Ampersand's active partnerships. Mr. Yie has served as a
director of more than twelve public and private companies and currently serves
as a director of Intelligent Controls, Inc., an electronics and software
manufacturer serving the energy industry, and various privately-held companies.
Mr. Yie holds a B.S. in Electrical Engineering and an M.S. in Management from
the Massachusetts Institute of Technology.
JULIAN H. BEALE has served as a director of Moldflow or its predecessors
since September 1996. Mr. Beale is a private investor and a principal of JTC
Investment Management Pty. Ltd. Mr. Beale served as a member of Australia's
federal Parliament from 1984 to 1996.
ROGER BROOKS has served as a director of Moldflow since October 1998.
Mr. Brooks has served as the President and Chief Executive Officer and a
director of Intelligent Controls, Inc., an electronics and software manufacturer
serving the energy industry, since May 1998. Previously, Mr. Brooks served as
President and Chief Executive Officer and a director of Dynisco Inc., an
instrumentation and equipment company serving the plastics industry, from 1984
through 1996.
RICHARD A. CHARPIE, PH.D. has served as a director of Moldflow or its
predecessors since December 1995. Dr. Charpie joined Ampersand Ventures'
predecessor in 1980 and led its activities beginning in 1983. The Managing
General Partner of all of Ampersand's active partnerships, he founded the firm
in 1988 and structured its spinoff from PaineWebber. Dr. Charpie has served as a
director of more than thirty-five public and private companies and currently
serves as a director of TriPath Imaging, Inc., a medical products company, V. I.
Technologies, Inc., a developer of blood products and systems, and various
privately-held companies. Dr. Charpie holds an M.S. degree in Physics and a
Ph.D. in Applied Economics and Finance from the Massachusetts Institute of
Technology.
ROBERT P. SCHECHTER has served as a director of Moldflow since
January 2000. Mr. Schechter has served as President and Chief Executive Officer
of Natural MicroSystems, a telecommunications enabling technology company, since
April 1995 and its chairman since March 1996. Prior to joining Natural
MicroSystems, Mr. Schechter served in various positions with and most recently
as the Senior Vice President of the International Business Group of Lotus
Development Corporation, a software company, from 1987 to March 1994.
Mr. Schechter also serves as a director of Infinium Software, Inc., an
application software company.
BOARD COMPOSITION
Our board of directors is divided into three classes, each of whose members
serve for a staggered three-year term. Our board of directors consists of
Messrs. Schechter, Thomas and Yie as Class I directors, whose term of office
continues until the 2000 annual meeting of stockholders, Messrs. Beale and
Dulude as Class II directors, whose term of office continues until the 2001
annual meeting of stockholders, and Messrs. Brooks and Charpie as Class III
directors, whose term of office continues until the 2002 annual meeting of
stockholders. At each annual meeting of stockholders, a class of directors will
be elected for a three-year term.
BOARD COMMITTEES
AUDIT COMMITTEE. The members of the audit committee are responsible for
recommending to the board of directors the engagement of our outside auditors
and reviewing our accounting controls and the results and scope of audits and
other services provided by our auditors. All of the members of the audit
committee are independent directors.
COMPENSATION COMMITTEE. The members of the compensation committee, a
majority of whom are independent directors, are responsible for reviewing and
recommending to the board of directors the amount and type of consideration to
be paid to senior management, administering our
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<PAGE>
stock option plans and establishing and reviewing general policies relating to
compensation and benefits of employees.
DIRECTOR COMPENSATION
Directors who are employees receive no additional compensation for their
services as directors. Non-employee directors receive a $2,000 quarterly fee for
their service as directors and $250 for each meeting of a committee of the board
of directors they attend. Non-employee directors are also eligible to
participate in the 2000 Stock Option and Incentive Plan. The 2000 Stock Option
and Incentive Plan contains a formula under which each non-employee director
receives an option to acquire 10,000 shares of common stock upon initial
election to the board. Non-employee directors also receive an option to acquire
an additional 10,000 shares of common stock following the 2002 annual meeting of
stockholders and at every second annual meeting of stockholders thereafter.
Mr. Schechter received an option to acquire 10,000 shares upon his election on
January 20, 2000 and Messrs. Beale, Brooks, Charpie and Yie each received an
option to acquire 10,000 shares of common stock concurrently with the
effectiveness of our initial public offering on March 27, 2000.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or awarded during
the fiscal years 1999 and 2000 to our Chief Executive Officer and the four other
most highly compensated executive officers, each of whose aggregate compensation
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- -------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION GRANTED COMPENSATION
---- -------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marc J. L. Dulude .......... 2000 $215,000 $128,000 -- -- $26,933(1)
President and Chief 1999 215,000 35,000 -- 131,250 26,563(1)
Executive Officer
Suzanne E. Rogers .......... 2000 133,000 83,000 -- 2,083 10,400(2)
Vice President of Finance 1999 133,000 20,000 -- 35,417 10,400(2)
and Administration, Chief
Financial Officer and
Treasurer
Richard M. Underwood ....... 2000 120,000 -- $113,000(3) 13,334 11,170(2)
Vice President of Sales 1999 120,000 -- 97,000(3) 22,917 17,321(2)
A. Roland Thomas ........... 2000 93,696 62,000 -- -- 20,105(4)
Vice President of Research 1999 96,880 19,407 -- 25,000 22,150(4)
and Development
Kenneth R. Welch ........... 2000 133,000 69,000 -- -- 10,400(2)
Vice President of 1999 133,000 17,500 -- 33,333 10,400(2)
Marketing
</TABLE>
--------------------------
(1) Includes $12,000 as a car allowance in each of fiscal 2000 and 1999, $10,175
in fiscal 2000 and $10,500 in fiscal 1999 in contributions to Mr. Dulude's
401(k) account, and $4,758 in fiscal 2000 and $4,063 in fiscal 1999
representing life insurance and disability insurance purchased for
Mr. Dulude's benefit.
(2) Represents contributions by us to the executive officers' 401(k) accounts.
(3) Represents sales commissions.
(4) Includes $7,445 in fiscal 2000 and $9,057 in fiscal 1999 in contributions to
Mr. Thomas' retirement plan account and $12,660 in fiscal 2000 and $13,093
in fiscal 1999 as a car allowance.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
during fiscal 2000 to the executive officers listed in the Summary Compensation
Table. The exercise price per share of each option was equal to the fair market
value of the common stock as of the grant date as determined by the board of
directors. No options were granted during fiscal 2000 to Messrs. Dulude, Thomas
or Welch.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SHARE) DATE 5% 10%
---- ---------- ---------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Suzanne E. Rogers........ 2,083 0.64% $13.01 2/10/2008 $12,908 $30,946
Richard M. Underwood..... 4,167 1.28% 8.40 10/18/2007 16,712 40,029
4,167 1.28% 10.40 1/20/2008 21,489 51,466
5,000 1.54% 15.94 4/25/2008 38,048 91,133
</TABLE>
------------------------
(1) The options set forth above become exercisable as to 25% of the total on the
first anniversary of the grant date and the remaining options vest in equal
quarterly installments through the fourth anniversary of the date of the
grant. All options are subject to the employee's employment and terminate
eight years after the grant date. In addition, these options also vest in
full upon any change of control of Moldflow as defined in the options. All
options were granted at fair market value as determined by our compensation
committee on the date of the grant.
(2) Based on an aggregate of 324,738 options granted to employees in fiscal
2000.
(3) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full 8-year term of the options. The 5% and 10% assumed rates
of appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent our estimate or projection of future common
stock prices. The gains shown are net of the option exercise price, but do
not include deductions for taxes or other expenses associated with the
exercise of the option or the sale of the underlying shares, or reflect
non-transferability, vesting or termination provisions. The actual gains, if
any, on the exercised of stock options will depend on the future performance
of the common stock.
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<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the number and value
of unexercised options to purchase common stock held as of June 30, 2000 by the
executive officers listed in the Summary Compensation Table. None of the
executive officers listed in the Summary Compensation Table exercised any stock
options in fiscal 2000.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END(1) AT FISCAL YEAR-END(1)(2)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Marc J. L. Dulude......................... 35,938 95,313 $404,633 $1,020,554
Suzanne E. Rogers......................... 10,808 26,692 139,178 288,272
Richard M. Underwood...................... 6,250 30,000 72,240 240,878
A. Roland Thomas.......................... 33,834 35,659 500,275 458,661
Kenneth R. Welch.......................... 9,895 23,438 120,056 263,539
</TABLE>
------------------------
(1) The options set forth above become exercisable as to 25% of the total on the
first anniversary of the grant date and vest quarterly thereafter. All
options are subject to the employee's continued employment and terminate
eight years after the grant date. These options also vest in full upon any
change in control of Moldflow, as defined in the options. All options were
granted at fair market value as determined by our compensation committee on
the date of grant.
(2) Based upon the last reported sale price on the Nasdaq National Market on
June 30, 2000 ($16.1875 per share) less the option exercise price.
2000 STOCK OPTION AND INCENTIVE PLAN
The 2000 Stock Option and Incentive Plan was adopted by our board of
directors in January 2000 and was approved by our stockholders in
February 2000. The 2000 Stock Option and Incentive Plan allows for the issuance
of up to 2,000,000 shares of common stock plus an additional amount equal to 20%
of any net increase in the total number of shares of common stock outstanding
after our initial public offering. As of November 1, 2000, options to purchase
401,712 shares of our common stock were outstanding under the 2000 Stock Option
and Incentive Plan. The 2000 Stock Option and Incentive Plan is administered by
our compensation committee.
Under the 2000 Stock Option and Incentive Plan, our compensation committee
may:
- grant incentive stock options,
- grant non-qualified stock options,
- grant stock appreciation rights,
- issue or sell common stock with vesting or other restrictions, or without
restrictions,
- grant rights to receive common stock in the future with or without
vesting,
- grant common stock upon the attainment of specified performance goals, and
- grant dividend rights in respect of common stock.
These grants and issuances may be made to officers, employees, directors,
consultants, advisors and other key persons of Moldflow.
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<PAGE>
Our compensation committee has the right, in its discretion, to select the
individuals eligible to receive awards, determine the terms and conditions of
the awards granted, accelerate the vesting schedule of any award and generally
administer and interpret the plan.
The exercise price of options granted under the 2000 Stock Option and
Incentive Plan is determined by our compensation committee. Under present law,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986 may not
be granted at an exercise price less than the fair market value of the common
stock on the date of grant, or less than 110% of the fair market value in the
case of incentive stock options granted to optionees holding more than 10% of
the voting power.
Non-qualified stock options may be granted at prices which are less than the
fair market value of the underlying shares on the date granted. Options are
typically subject to vesting schedules, terminate eight years from the date of
grant and may be exercised for specified periods after the termination of the
optionee's employment or other service relationship with us. Upon the exercise
of options, the option exercise price must be paid in full either in cash or by
certified or bank check or other instrument acceptable to the committee or by
delivery of shares of common stock that have been owned by the optionee free of
restrictions for at least six months.
The 2000 Stock Option and Incentive Plan and all awards issued under the
plan will terminate upon a merger, reorganization or consolidation, the sale of
all or substantially all of our assets or all of our outstanding capital stock
or a liquidation or other similar transaction, unless Moldflow and the other
parties to such transactions have agreed otherwise.
EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan was adopted by our board of directors in
January 2000 and was approved by our stockholders in February 2000. Up to
500,000 shares of our common stock may be issued under the Employee Stock
Purchase Plan. The Employee Stock Purchase Plan is administered by our
compensation committee.
Offerings under the Employee Stock Purchase Plan commence on each January 1
and July 1 and have a duration of six months. Generally, all employees who are
customarily employed for more than 20 hours per week as of the first day of the
applicable offering period are eligible to participate in the Employee Stock
Purchase Plan. Any employee who owns or is deemed to own shares of stock
representing in excess of 5% of the combined voting power of all classes of our
stock may not participate in the Employee Stock Purchase Plan.
During each offering, an employee may purchase shares under the Employee
Stock Purchase Plan by authorizing payroll deductions of up to 10% of his cash
compensation during the offering period. Unless the employee has previously
withdrawn from the offering, his accumulated payroll deductions will be used to
purchase shares of our common stock on the last business day of the period at a
price equal to 85% of the fair market value of our common stock on the first or
last day of the offering period, whichever is lower. Under applicable tax rules,
an employee may purchase no more than $25,000 worth of our common stock in any
calendar year under the Employee Stock Purchase Plan. We have not issued any
shares to date under the Employee Stock Purchase Plan.
1997 EQUITY INCENTIVE PLAN
The 1997 Equity Incentive Plan was initially approved by our board of
directors in August 1997 and was approved by our stockholders in October 1997.
The 1997 Equity Incentive Plan provides for the issuance of 1,537,158 shares of
our common stock. As of November 1, 2000, options to purchase 545,003 shares of
our common stock were outstanding under the 1997 Equity Incentive Plan. Options
granted under the 1997 Equity Incentive Plan generally vest over four years and
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terminate on the eighth anniversary of the date of grant. Upon the completion of
our initial public offering in March 2000, we stopped making additional grants
under the 1997 Equity Incentive Plan.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of Messrs. Dulude,
Thomas, Underwood and Welch and Ms. Rogers. Each agreement is for a period of
one year, and will be automatically extended for one additional year on the
anniversary date unless either party has given notice that it does not wish to
extend the agreement. Each agreement provides for the payment of base salary and
incentive compensation and for the provision of certain fringe benefits to the
executive. The agreements require our executive officers to refrain from
competing with Moldflow and from soliciting our employees for a period of twelve
months following termination for any reason. Each agreement also provides for
certain payments and benefits for an executive officer should his or her
employment with us be terminated because of death or disability, by the
executive for good reason or by us without cause, as further defined in the
agreements. In general, in the case of a termination by the executive officer
for good reason, or by us without cause, the executive officer will receive up
to one year of salary, an extension of benefits for one year and an acceleration
of vesting for stock options and restricted stock which otherwise would vest
during the next twelve months. Upon a change of control, as defined in the
agreements, the executive officer is eligible for payment of a minimum of six
months and up to one year of salary, an extension of benefits for one year and
an acceleration of vesting for all outstanding stock options and restricted
stock. Mr. Dulude's agreement also includes certain provisions requiring
Moldflow to increase the payments to him following a change in control in the
event that amounts paid to him would subject him to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986.
RESTRICTED STOCK AGREEMENTS
In July 1998, Messrs. Dulude, Underwood and Welch and Ms. Rogers purchased
from Moldflow a total of 551,287 shares of common stock at a price of $0.36 per
share. Each of these executive officers paid for the shares by delivering to
Moldflow a promissory note, which bears interest at a rate of 5.77% per year.
Principal and interest on the notes become payable in full on June 30, 2003, but
may be prepaid at any time. Each of these executive officers also entered into a
stock restriction agreement with Moldflow. Pursuant to these agreements,
Moldflow has the right, but not the obligation, to repurchase a portion of these
shares at the initial purchase price per share upon the termination for any
reason of the employment of the respective executive officer. The repurchase
rights with respect to these shares lapse on varying schedules through
October 2002 so long as the executive officer who purchased the shares remains
an employee of Moldflow. The repurchase right with respect to a portion of these
shares will also lapse if Moldflow terminates the employment of the executive
officer without cause as defined in his or her employment agreement or if
employment terminates due to his or her death or disability. The repurchase
right will lapse in its entirety in the event Moldflow experiences a change in
control as defined in the executive officers' employment agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Beale, Schechter and Yie are the members of our compensation
committee. None of the members of our compensation committee is an executive
officer of Moldflow or has received any compensation from Moldflow within the
last three years other than in his capacity as a director.
In January 1997, we entered into loan agreements with a group of our
stockholders consisting of JTC Investment Management Pty. Ltd., funds associated
with Ampersand Ventures, Thomas Investments Australia Pty. Ltd, Floatflow
Pty. Ltd. and Helmet Investments Australia Pty. Ltd. pursuant to which these
stockholders provided us with a credit line of approximately $1.1 million. In
July 1998, we converted the outstanding principal balance of $890,000 under this
credit line into 698,609 shares of our series C-3 convertible preferred stock
and paid these stockholders $107,000 of accrued interest. Mr. Yie is affiliated
with the funds associated with Ampersand Ventures, and Mr. Beale is affiliated
with JTC Investment Management Pty. Ltd.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1997 REORGANIZATION
In June 1997, our predecessor, Moldflow International Pty. Ltd., an
Australian corporation, entered into a reorganization agreement with Moldflow
and its stockholders. In the reorganization, the stockholders of Moldflow
International became stockholders of Moldflow, and Moldflow International became
a wholly-owned subsidiary of Moldflow. Stockholders of Moldflow International
were issued shares of either Moldflow's common stock, series A convertible
preferred stock or series B convertible preferred stock. In March 1998, these
shares of common stock, series A convertible preferred and series B convertible
preferred were redesignated as series C-1, C-2 and C-3 convertible preferred
stock. Upon completion of our initial public offering in March 2000, all shares
of our outstanding preferred stock were converted into shares of common stock.
LOANS FROM STOCKHOLDERS
In January 1997, we entered into loan agreements with a group of our
stockholders consisting of JTC Investment Management Pty. Ltd., funds associated
with Ampersand Ventures, Thomas Investments Australia Pty. Ltd. and Helmet
Investments Australia Pty. Ltd. pursuant to which these stockholders provided us
with a credit line of approximately $1.1 million. In July 1998, we converted the
outstanding principal balance of $890,000 under this credit line into 698,609
shares of our series C-3 convertible preferred stock and paid these stockholders
$107,000 of accrued interest. Dr. Charpie and Mr. Yie, directors of Moldflow,
are affiliated with the funds associated with Ampersand Ventures, Mr. Beale,
also a director of Moldflow, is affiliated with JTC Investment Management
Pty. Ltd., and Mr. Thomas, our Vice President of Research and Development and a
director of Moldflow, is the beneficial owner of Thomas Investments Australia
Pty. Ltd.
LOAN TO EXECUTIVE OFFICER AND DIRECTOR
In July 1999, Mr. Thomas borrowed approximately $129,000 from our
subsidiary, Moldflow International, pursuant to a promissory note. This
promissory note was not interest bearing and was repaid in full on July 1, 2000.
The amounts due under this promissory note were completely offset by amounts due
to Mr. Thomas on July 1, 2000 pursuant to the terms of a deferred compensation
arrangement between Moldflow and Mr. Thomas.
In connection with the expatriate assignment of Mr. Thomas from Australia to
the United States, Moldflow loaned him $87,000 in September 1996. The loan was
repaid in full in January 1999.
OTHER ARRANGEMENTS WITH EXECUTIVE OFFICERS
Other agreements with our executive officers are described under
"Management--Employment Agreements" and "Management--Restricted Stock
Agreements."
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of November 1, 2000 and on an as adjusted basis
to reflect the sale of the common stock offered hereby by:
- all persons known by us to own beneficially 5% or more of the common
stock,
- each of our directors,
- the executive officers listed in the summary compensation table,
- each stockholder selling shares in this offering, and
- all of our directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned
by the stockholder. The address of Ampersand Ventures is 55 William Street,
Suite 240, Wellesley, Massachusetts 02481, the address of JTC Investment
Management Pty. Ltd. is 20th Floor, 459 Collins Street, Melbourne, Victoria
3000, Australia, the address of Mazama Capital Management, Inc. is One
SW Columbia, Suite 1860, Portland, Oregon 97258, the address of FMR Corp. is 82
Devonshire Street, Boston, Massachusetts 02109, the address of TCW Asset
Management Company is 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017 and the address of Deborah Bordonaro is c/o Floatflow
Pty. Ltd., 13 Townsend Street, Ivanhoe, Victoria 3079, Australia. The address of
all other listed stockholders is c/o Moldflow Corporation, 430 Boston Post Road,
Wayland, Massachusetts 01778.
The number of shares beneficially owned by each stockholder is determined
under rules issued by the Securities and Exchange Commission and includes voting
or investment power with respect to securities. Under these rules, beneficial
ownership includes any shares as to which the individual or entity has sole or
shared voting power or investment power and includes any shares as to which the
individual or entity has the right to acquire beneficial ownership within
60 days after November 1, 2000 through the exercise of any warrant, stock option
or other right. The inclusion in this prospectus of such shares, however, does
not constitute an admission that the named stockholder is a direct or indirect
beneficial owner of such shares.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)
-------------------- SHARES TO --------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT BE SOLD SHARES PERCENT
------------------------ --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Ampersand Ventures(2)...................................... 4,039,060 43.4% 1,375,000 2,664,060 27.0%
Richard A. Charpie(3)...................................... 4,039,060 43.4 -- 2,664,060 27.0
Charles D. Yie(4).......................................... 4,039,060 43.4 -- 2,664,060 27.0
JTC Investment Management Pty. Ltd.(5)..................... 548,450 5.9 195,000 353,450 3.6
Julian H. Beale(6)......................................... 548,450 5.9 -- 353,450 3.6
Mazama Capital Management, Inc.(7)......................... 521,950 5.6 -- 521,950 5.3
FMR Corp.(7)............................................... 513,600 5.5 -- 513,600 5.2
TCW Asset Management Company(7)............................ 508,500 5.5 -- 508,500 5.2
Marc J. L. Dulude(8)....................................... 449,247 4.8 50,000 399,247 4.0
A. Roland Thomas(9)........................................ 200,513 2.1 25,000 175,513 1.8
Peter Kennedy (10)......................................... 171,144 1.8 25,000 146,144 1.5
Deborah Bordonaro(11)...................................... 129,290 1.4 60,000 69,290 *
Richard M. Underwood(12)................................... 68,958 * 10,000 58,958 *
Suzanne E. Rogers(13)...................................... 65,457 * 10,000 55,457 *
Kenneth R. Welch(14)....................................... 62,424 * 10,000 52,424 *
Roger Brooks(15)........................................... 3,124 * -- 3,124 *
Robert P. Schechter........................................ -- * -- -- *
All executive officers and directors, as a group (10
persons)(16)............................................. 5,437,233 57.7 1,675,000 3,762,233 37.6
</TABLE>
------------------------------
* Represents less than 1% of the outstanding shares of common stock.
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(1) All percentages assume the underwriters do not elect to exercise the
over-allotment option to purchase an additional 170,000 shares of common
stock from us and an additional 180,000 shares of common stock from the
selling stockholders. Based on 9,296,137 shares outstanding on November 1,
2000.
(2) Consists of 1,482,131 shares held by Ampersand Specialty Materials and
Chemicals II Limited Partnership, 2,516,019 shares held by Ampersand
Specialty Materials and Chemicals III Limited Partnership and 40,910 shares
held by Ampersand Specialty Materials and Chemicals III Companion Fund
Limited Partnership. Ampersand Specialty Materials and Chemicals II Limited
Partnership, Ampersand Specialty Materials and Chemicals III Limited
Partnership and Ampersand Specialty Materials and Chemicals III Companion
Fund Limited Partnership are referred to collectively herein as Ampersand
Ventures. ASMC-II MCLP LLP is the general partner of ASMC-II Management
Company Limited Partnership, which is the general partner of Ampersand
Specialty Materials and Chemicals II Limited Partnership, which exercises
sole voting and investment power with respect to all of the shares held of
record by Ampersand Specialty Materials and Chemicals II Limited
Partnership. ASMC-III MCLP LLP is the general partner of ASMC-III Management
Company Limited Partnership, which is the general partner of Ampersand
Specialty Materials and Chemicals III Limited Partnership and Ampersand
Specialty Materials and Chemicals III Companion Fund Limited Partnership,
which exercises sole voting and investment power with respect to all of the
shares held of record by Ampersand Specialty Materials and Chemicals III
Limited Partnership and Ampersand Specialty Materials and Chemicals III
Companion Fund Limited Partnership. Dr. Charpie, a director of Moldflow, is
the Managing General Partner of both ASMC-II MCLP LLP and ASMC-III MCLP LLP
and Mr. Yie, a director of Moldflow, is a General Partner of both ASMC-II
MCLP LLP and ASMC-III MCLP LLP. Dr. Charpie and Mr. Yie disclaim any
beneficial ownership of the shares held by Ampersand Ventures, except to the
extent of their respective pecuniary interests therein. Ampersand Ventures
has granted an option to the underwriters to purchase 135,000 shares of
common stock to cover over-allotments. If the underwriters exercise this
option in full, Ampersand Ventures would beneficially own 2,529,060 shares
of our common stock, representing 25.2% of our outstanding common stock
after the offering.
(3) Consists solely of the shares described in note (2) above, of which
Dr. Charpie may be considered the beneficial owner. Dr. Charpie disclaims
beneficial ownership of such shares, except to the extent of his pecuniary
interest therein.
(4) Consists solely of the shares described in note (2) above, of which Mr. Yie
may be considered the beneficial owner. Mr. Yie disclaims beneficial
ownership of such shares, except to the extent of his pecuniary interest
therein.
(5) Mr. Beale, a director of Moldflow, may be considered the beneficial owner of
these shares based on his voting and investment power with respect to the
parent company of JTC Investment Management Pty. Ltd. JTC Investment
Management Pty. Ltd. has granted an option to the underwriters to purchase
15,000 shares of common stock to cover over-allotments. If the underwriters
exercise this option in full, JTC Investment Management Pty. Ltd. would
beneficially own 338,450 shares of our common stock, or 3.4% of our
outstanding common stock after the offering.
(6) Consists solely of the shares described in note (5) above, of which
Mr. Beale may be considered the beneficial owner. Mr. Beale disclaims
beneficial ownership of 119,529 of such shares.
(7) Based upon information contained in each stockholder's publicly available
filings on Form 13F.
(8) Includes 52,345 shares that may be acquired within 60 days of November 1,
2000. Mr. Dulude has granted an option to the underwriters to purchase
20,000 shares of common stock to cover over-allotments. If the underwriters
exercise this option in full, Mr. Dulude would beneficially own 379,247
shares of our common stock, or 3.8% of our outstanding common stock after
the offering.
(9) Includes 158,457 shares held by Thomas Investments Australia Pty. Ltd., of
which Mr. Thomas is the beneficial owner. Also includes 42,056 shares that
may be acquired within 60 days of November 1, 2000. Thomas Investments
Australia Pty. Ltd. has granted an option to the underwriters to purchase
5,000 shares of common stock to cover over-allotments. If the underwriters
exercise this option in full, Mr. Thomas would beneficially own 170,513
shares of our common stock, or 1.7% of our outstanding common stock after
the offering.
(10) Includes 158,457 shares held by Helmet Investments Australia Pty. Ltd., of
which Mr. Kennedy is the beneficial owner. Also includes 12,687 shares that
may be acquired within 60 days of November 1, 2000. Helmet Investments
Australia Pty. Ltd. has granted an option to the underwriters to purchase
5,000 shares of common stock to cover over-allotments. If the underwriters
exercise this option in full, Mr. Kennedy would beneficially own 141,144
shares of our common stock, or 1.4% of our outstanding common stock after
the offering.
(11) Consists solely of shares held by Floatflow Pty. Ltd., of which
Mrs. Bordonaro is the beneficial owner.
(12) Includes 10,156 shares that may be acquired within 60 days of November 1,
2000.
(13) Includes 15,235 shares that may be acquired within 60 days of November 1,
2000.
(14) Includes 14,062 shares that may be acquired within 60 days of November 1,
2000.
(15) Includes 1,562 shares that may be acquired within 60 days of November 1,
2000.
(16) Includes 135,416 shares that may be acquired within 60 days of November 1,
2000. Our executive officers and directors, as a group, have granted options
to the underwriters to purchase 175,000 shares of common stock to cover
over-allotments. If the underwriters exercise this option in full, our
executive officers and directors, as a group, would beneficially own
3,587,233 shares of our common stock, or 35.7% of our outstanding common
stock after the offering.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Our authorized capital stock consists of 60,000,000 shares of common stock,
of which 9,871,137 shares, or 10,041,137 shares if the underwriters'
over-allotment option is exercised in full, will be issued and outstanding
following this offering, and 5,000,000 shares of undesignated preferred stock
issuable in one or more series designated by our board of directors, of which no
shares will be issued and outstanding. In addition, at November 1, 2000, 946,715
shares of our common stock are issuable upon exercise of stock options
outstanding and 2,098,288 shares of our common stock are available for future
grant under our stock option plan and our employee stock purchase plan.
COMMON STOCK
VOTING RIGHTS. The holders of our common stock have one vote per share.
Holders of our common stock are not entitled to vote cumulatively for the
election of directors. Generally, all matters to be voted on by stockholders
must be approved by a majority, or, in the case of the election of directors, by
a plurality, of the votes cast at a meeting at which a quorum is present, voting
together as a single class, subject to any voting rights granted to holders of
any then outstanding preferred stock.
DIVIDENDS. Holders of common stock share ratably in any dividends declared
by our board of directors, subject to the preferential rights of any preferred
stock then outstanding. Dividends consisting of shares of common stock may be
paid to holders of shares of common stock.
OTHER RIGHTS. Upon liquidation, dissolution or winding up of Moldflow, all
holders of common stock are entitled to share ratably in any assets available
for distribution to holders of shares of common stock. No shares of common stock
are subject to redemption or have preemptive rights to purchase additional
shares of common stock.
PREFERRED STOCK
Our certificate of incorporation provides that shares of preferred stock may
be issued from time to time in one or more series. Our board of directors is
authorized to fix the voting rights, if any, designations, powers, preferences,
qualifications, limitations and restrictions thereof, applicable to the shares
of each series. Our board of directors may, without stockholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power and other rights of the holders of the common stock and could have
anti-takeover effects, including preferred stock or rights to acquire preferred
stock in connection with implementing a shareholder rights plan. We have no
present plans to issue any shares of preferred stock. The ability of our board
of directors to issue preferred stock without stockholder approval could have
the effect of delaying, deferring or preventing a change of control of Moldflow
or the removal of existing management.
INDEMNIFICATION MATTERS
We have entered into indemnification agreements with each of our
non-employee directors. The form of indemnification agreement provides that we
will indemnify our directors for expenses incurred because of their status as a
director to the fullest extent permitted by Delaware law, our certificate of
incorporation and our by-laws.
Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director has
breached his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation Law
or obtained an improper personal
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benefit. This provision does not alter a director's liability under the federal
securities laws and does not affect the availability of equitable remedies, such
as an injunction or rescission, for breach of fiduciary duty. Our by-laws
provide that directors and officers shall be, and in the discretion of our board
of directors, non-officer employees may be, indemnified by Moldflow to the
fullest extent authorized by Delaware law, as it now exists or may in the future
be amended, against all expenses and liabilities reasonably incurred in
connection with service for or on behalf of Moldflow. Our by-laws also provide
for the advancement of expenses to directors and, in the discretion of our board
of directors, to officers and non-officer employees. In addition, our by-laws
provide that the right of directors and officers to indemnification shall be a
contract right and shall not be exclusive of any other right now possessed or
hereafter acquired under any by-law, agreement, vote of stockholders or
otherwise. We also have directors' and officers' insurance against certain
liabilities. We believe that the indemnification agreements, together with the
limitation of liability and indemnification provisions of our certificate of
incorporation and by-laws and directors' and officers' insurance will assist us
in attracting and retaining qualified individuals to serve as directors and
officers of Moldflow.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be provided to directors, officers or persons controlling Moldflow
as described above, we have been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. At present,
there is no pending material litigation or proceeding involving any director,
officer, employee or agent of Moldflow in which indemnification will be required
or permitted.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BY-LAWS THAT MAY HAVE
ANTI-TAKEOVER EFFECTS
Certain provisions of our certificate of incorporation and by-laws described
below, as well as the ability of our board of directors to issue shares of
preferred stock and to set the voting rights, preferences and other terms
thereof, may be deemed to have an anti-takeover effect and may discourage
takeover attempts not first approved by our board of directors, including
takeovers which particular stockholders may deem to be in their best interests.
These provisions also could have the effect of discouraging open market
purchases of our common stock because they may be considered disadvantageous by
a stockholder who desires subsequent to such purchases to participate in a
business combination transaction with us or to elect a new director to our
board.
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes serving staggered
three-year terms, with approximately one-third of the board being elected each
year. Our classified board, together with certain other provisions of our
certificate of incorporation authorizing the board of directors to fill vacant
directorships or increase the size of the board, may prevent a stockholder from
removing, or delay the removal of, incumbent directors and simultaneously
gaining control of the board of directors by filling vacancies created by such
removal with its own nominees.
DIRECTOR VACANCIES AND REMOVAL
Our certificate of incorporation and by-laws provide that vacancies in our
board of directors may be filled only by the affirmative vote of a majority of
the remaining directors. Our certificate of incorporation provides that
directors may be removed from office only with cause and only by the affirmative
vote of holders of at least 75% of the shares then entitled to vote at an
election of directors.
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NO STOCKHOLDER ACTION BY WRITTEN CONSENT
Our certificate of incorporation provides that any action required or
permitted to be taken by our stockholders at an annual or special meeting of
stockholders must be effected at a duly called meeting and may not be taken or
effected by a written consent of stockholders.
SPECIAL MEETINGS OF STOCKHOLDERS
Our certificate of incorporation and by-laws provide that a special meeting
of stockholders may be called only by our board of directors. Our by-laws
provide that only those matters included in the notice of the special meeting
may be considered or acted upon at that special meeting unless otherwise
provided by law.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS
Our by-laws include advance notice and informational requirements and time
limitations on any director nomination or any new proposal which a stockholder
wishes to make at an annual meeting of stockholders. For the first annual
meeting following the completion of this offering, a stockholder's notice of a
director nomination or proposal will be timely if delivered to the Secretary of
Moldflow at our principal executive offices not later than the close of business
on the later of the 75th day prior to the scheduled date of such annual meeting
or the 10th day following the day on which public announcement of the date of
such annual meeting is made by Moldflow.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
As required by Delaware law, any amendment to our certificate of
incorporation must first be approved by a majority of our board of directors
and, if required by law, thereafter approved by a majority of the outstanding
shares entitled to vote with respect to such amendment, except that any
amendment to the provisions relating to stockholder action by written consent,
directors, limitation of liability and the amendment of our certificate of
incorporation must be approved by not less than 75% of the outstanding shares
entitled to vote with respect to such amendment.
AMENDMENT OF BY-LAWS
Our certificate of incorporation and by-laws provide that our by-laws may be
amended or repealed by our board of directors or by the stockholders. Such
action by the board of directors requires the affirmative vote of a majority of
the directors then in office. Such action by the stockholders requires the
affirmative vote of at least 75% of the shares present in person or represented
by proxy at an annual meeting of stockholders or a special meeting called for
such purpose unless our board of directors recommends that the stockholders
approve such amendment or repeal at such meeting, in which case such amendment
or repeal only requires the affirmative vote of a majority of the shares present
in person or represented by proxy at the meeting.
STATUTORY BUSINESS COMBINATION PROVISION
We are subject to Section 203 of the Delaware General Corporation Law, which
prohibits a publicly-held Delaware corporation from consummating a "business
combination," except under certain circumstances, with an "interested
stockholder" for a period of three years after the date such person became an
"interested stockholder" unless:
- before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;
- upon the closing of the transaction that resulted in the interested
stockholder becoming such, the interested stockholder owned at least 85%
of the voting stock of the corporation
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outstanding at the time the transaction commenced, excluding shares held
by directors who are also officers of the corporation and shares held by
employee stock plans; or
- following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned, 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, consolidations, asset sales involving
10% or more of a corporation's assets and other similar transactions resulting
in a financial benefit to an interested stockholder. Section 203 makes it more
difficult for an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. A Delaware corporation
may "opt out"of Section 203 with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or by-laws resulting from an amendment approved by holders of at
least a majority of the outstanding voting stock. Neither our certificate of
incorporation nor our by-laws contain any such exclusion.
TRADING ON THE NASDAQ NATIONAL MARKET SYSTEM
Our common stock is listed on the Nasdaq National Market under the symbol
MFLO.
NO PREEMPTIVE RIGHTS
No holder of any class of our stock has any preemptive right to purchase any
of our securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, there will be 9,871,137 shares of our
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. All of the shares
which are being sold in this offering will be freely transferable without
restriction or further registration under the Securities Act unless the shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act.
Of the remaining 9,296,137 shares of outstanding common stock,
3,992,758 shares are freely transferable without restriction or further
registration under the Securities Act and 5,303,379 shares are currently
"restricted securities" as defined in Rule 144, and may be sold in the future
subject to compliance with the provisions of Rule 144 under the Securities Act.
In addition, as of November 1, 2000, options to purchase 946,715 shares of our
common stock were outstanding, of which options to purchase 194,217 shares were
fully vested and immediately exercisable. All shares of our common stock
issuable upon exercise of outstanding options are freely transferable without
restriction or further registration under the Securities Act, except that
affiliates must comply with Rule 144.
In connection with this offering, our executive officers and directors, the
selling stockholders and other stockholders, who collectively will own an
aggregate of 3,829,564 shares of common stock after this offering or
3,649,564 shares if the underwriters' over-allotment option is fully exercised
and 396,682 shares of common stock issuable upon exercise of stock options
outstanding, have agreed under lock-up agreements with the underwriters that,
subject to exceptions, they will not sell or dispose of any of their shares of
common stock other than shares that may be sold by selling stockholders in
connection with this offering. Of these shares subject to lock-up agreements,
1,562 shares are subject to 60-day lock-up agreements, 810,492 shares are
subject to 75-day lock-up agreements and 3,017,510 shares are subject to 120-day
lock-up agreements. Adams, Harkness & Hill, Inc. may, in its sole discretion and
at any time without notice, release all or any portion of the shares subject to
such restrictions.
In general, under Rule 144, as currently in effect, a person who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:
- one percent of the then outstanding shares of common stock, which is
expected to be approximately 98,711 shares upon the completion of this
offering, or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the date on which notice of such sale is filed,
subject to manner of sale provisions and notice requirements and to the
availability of current public information about us.
Affiliates may sell shares not constituting restricted securities in accordance
with the foregoing volume limitations and other restrictions, but without regard
to the one-year holding period.
In addition, a person who was not an affiliate of ours, as defined in
Rule 144, at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate of ours, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
We cannot predict the effect, if any, that market sales of shares or the
availability of shares for sale will have on the market price of our common
stock prevailing from time to time. We are unable to estimate the number of our
shares that may be sold in the public market pursuant to Rule 144 because this
will depend on the market price of our common stock, the personal circumstances
of the sellers and other factors. Nevertheless, sales of significant amounts of
our common stock in the public market could adversely affect the market price of
our common stock.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 120-day period following the date of this prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 2000
Stock Option and Incentive Plan and our Employee Stock Purchase Plan.
59
<PAGE>
UNDERWRITING
Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, each underwriter named below
has agreed to purchase from us the respective number of shares of common stock
shown opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON
UNDERWRITERS STOCK
------------ ----------------
<S> <C>
Adams, Harkness & Hill, Inc................................
Robert W. Baird & Co. Incorporated.........................
A.G. Edwards & Sons, Inc...................................
---------
Total.................................................. 2,335,000
=========
</TABLE>
The underwriting agreement provides that the underwriters' obligation to
purchase shares of common stock depends on the satisfaction of the conditions
contained in the underwriting agreement and that, if any of the shares of common
stock are purchased by the underwriters under the underwriting agreement, all of
the shares of common stock that the underwriters have agreed to purchase under
the underwriting agreement must be purchased. The conditions contained in the
underwriting agreement include the requirement that the representations and
warranties made by us and the selling stockholders to the underwriters are true,
that there is no material change in the financial markets and that we deliver to
the underwriters customary closing documents.
The underwriters have advised us that they propose to offer the shares of
common stock directly to the public at the public offering price set forth on
the cover page of this prospectus, and to dealers, who may include the
underwriters, at the public offering price less a selling concession not in
excess of $ per share. The underwriters may also allow, and dealers may
reallow, a concession not in excess of $ per share to brokers and dealers.
After the offering, the underwriters may change the offering price and other
selling terms.
The following table shows the per share and total public offering price,
underwriting discount to be paid to the underwriters and the proceeds before
expenses to us and the selling stockholders. This information is presented
assuming both no exercise and full exercise by the underwriters of their
over-allotment option.
<TABLE>
<CAPTION>
TOTAL
-------------------------
WITHOUT WITH
PER SHARE OPTION OPTION
--------- ----------- -----------
<S> <C> <C> <C>
Public offering price.................................. $ $ $
Underwriting discount..................................
Proceeds, before expenses, to Moldflow.................
Proceeds, before expenses, to the selling
stockholders.........................................
</TABLE>
The total proceeds before expenses that we expect to receive from this
offering, after deducting the underwriting discount, will be approximately
$13.0 million, assuming no exercise of the over-allotment option.
We estimate that the expenses of this offering payable by us, exclusive of
the underwriting discount, will be approximately $500,000.
We and the selling stockholders have granted to the underwriters an option
to purchase 350,000 additional shares of common stock, exercisable solely to
cover over-allotments, if any, at the public offering price less the
underwriting discount shown on the cover page of this prospectus. The
underwriters may exercise this option at any time until 30 days after the date
of the underwriting agreement. If this option is exercised, each underwriter
will be committed, so long as
60
<PAGE>
the conditions of the underwriting agreement are satisfied, to purchase a number
of additional shares of common stock proportionate to the underwriters' initial
commitment as indicated in the preceding table and we and the selling
stockholders will be obligated, under the over-allotment option, to sell the
shares of common stock to the underwriters.
We have agreed that, without the prior consent of Adams, Harkness &
Hill, Inc., we will not, directly or indirectly, offer, sell or otherwise
dispose of any shares of common stock or any securities which may be converted
into or exchanged for any such shares of common stock for a period of 120 days
from the date of this prospectus. Our executive officers and directors, the
selling stockholders and other stockholders who, following this offering, will
hold in the aggregate 3,829,564 shares, or 38.8%, of our outstanding common
stock, or 3,649,564 shares, or 36.3% of our outstanding common stock, if the
underwriters' over-allotment option is exercised in full, have agreed under
lock-up agreements that, without the prior written consent of Adams, Harkness &
Hill, Inc., they will not, directly or indirectly, offer, sell or otherwise
dispose of their shares of common stock other than 180,000 shares that may be
sold by selling stockholders in connection with the underwriters' exercise of
the over-allotment option. Of these shares subject to lock-up agreements,
1,562 shares are subject to 60-day lock-up agreements, 810,492 shares are
subject to 75-day lock-up agreements and 3,017,510 shares are subject to 120-day
lock-up agreements.
We and the selling stockholders will indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act and
liabilities arising from breaches of representations and warranties contained in
the underwriting agreement, and contribute to payments that the underwriters may
be required to make for certain liabilities.
In connection with the offering, the underwriters may purchase and sell the
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions, "passive" market making and purchases to cover
syndicate short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock.
Syndicate short positions involve the sale by the underwriters of a greater
number of shares of common stock than they are required to purchase from us in
the offering. The underwriters also may impose a penalty bid, whereby the
syndicate may reclaim selling concessions allowed to syndicate members or other
broker-dealers in respect of the common stock sold in the offering for their
account if the syndicate repurchases the shares in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the common stock, which may be higher than the price that might
otherwise prevail in the open market. These activities, if commenced, may be
discontinued at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
In general, the rules of the Securities and Exchange Commission will
prohibit the underwriters from making a market in the common stock during the
"cooling off" period immediately preceding the commencement of sales in the
offering. The Commission has, however, adopted exemptions from these rules that
permit passive market making under certain conditions. These rules permit an
underwriter to continue to make a market subject to the conditions, among
others, that its bid not exceed the highest bid by a market maker not connected
with the offering and that its net purchases on any one trading day not exceed
prescribed limits. Pursuant to these exemptions, certain underwriters, selling
group members (if any), or their respective affiliates may engage in passive
market making in the common stock during the cooling off period.
61
<PAGE>
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered hereby will be passed
upon for Moldflow by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Various
legal matters related to the sale of the common stock offered hereby will be
passed upon for the underwriters by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The audited consolidated financial statements of Moldflow as of June 30,
1999 and 2000 and for each of the years ended June 30, 1998, 1999 and 2000, and
the audited consolidated financial statements of C-Mold as of September 30, 1998
and 1999 and for each of the years ended September 30, 1998 and 1999, included
in this prospectus have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or SEC, a
registration statement on Form S-1 (including the exhibits and schedules
thereto) under the Securities Act and the rules and regulations thereunder, for
the registration of the common stock offered hereby. This prospectus is part of
the registration statement. This prospectus does not contain all the information
included in the registration statement because we have omitted certain parts of
the registration statement as permitted by the SEC rules and regulations. For
further information about us and our common stock, you should refer to the
registration statement. Statements contained in this prospectus as to any
contract, agreement or other document referred to are not necessarily complete.
Where the contract or other document is an exhibit to the registration
statement, each statement is qualified by the provisions of that exhibit.
You can inspect and copy any document we file with the SEC at the public
reference facility maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You may call the SEC at 1-800-732-0330 for
further information about the operation of the public reference rooms. Copies of
all or any portion of the registration statement can be obtained from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the registration statement is publicly available
through the SEC's site on the Internet's World Wide Web, located at
http://www.sec.gov.
We also file annual, quarterly and current reports, proxy statements and
other information with the SEC. You can also request copies of these documents,
for a copying fee, by writing to the SEC. Additionally, we furnish to our
stockholders annual reports containing audited financial statements for each
fiscal year.
62
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
MOLDFLOW CORPORATION
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet at June 30, 1999 and 2000 and
September 30, 2000 (unaudited)............................ F-3
Consolidated Statement of Income for the years ended June
30, 1998, 1999 and 2000 and the three months ended October
2, 1999 (unaudited) and September 30, 2000 (unaudited).... F-4
Consolidated Statement of Stockholders' Equity for the years
ended June 30, 1998, 1999 and 2000 and the three months
ended September 30, 2000 (unaudited)...................... F-5
Consolidated Statement of Cash Flows for the years ended
June 30, 1998, 1999 and 2000 and the three months ended
October 2, 1999 (unaudited) and September 30, 2000
(unaudited)............................................... F-7
Notes to Consolidated Financial Statements.................. F-8
ADVANCED CAE TECHNOLOGY, INC.
Report of Independent Accountants........................... F-28
Consolidated Balance Sheet at September 30, 1998 and 1999
and March 31, 2000 (unaudited)............................ F-29
Consolidated Statement of Operations for the years ended
September 30, 1998 and 1999 and the six months ended March
31, 1999 (unaudited) and 2000 (unaudited)................. F-30
Consolidated Statement of Stockholders' Equity for the years
ended September 30, 1998 and 1999 and the six months ended
March 31, 2000 (unaudited)................................ F-31
Consolidated Statement of Cash Flows for the years ended
September 30, 1998 and 1999 and the six months ended March
31, 1999 (unaudited) and 2000 (unaudited)................. F-32
Notes to Consolidated Financial Statements.................. F-33
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION FOR
MOLDFLOW CORPORATION
Basis of Presentation....................................... F-45
Unaudited Pro Forma Combined Statement of Operations for the
year ended June 30, 2000.................................. F-46
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Moldflow Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Moldflow
Corporation (the "Company") and its subsidiaries at June 30, 1999 and 2000, and
the results of their operations and their cash flows for each of the three years
in the period ended June 30, 2000, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards generally
accepted in the United States, 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.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 8, 2000
F-2
<PAGE>
MOLDFLOW CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
------------------- SEPTEMBER 30,
1999 2000 2000
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,240 $27,259 $19,909
Marketable securities..................................... -- 8,452 13,846
Accounts receivable, net of allowance for doubtful
accounts of $232, $706 and $436 at June 30, 1999 and
2000 and September 30, 2000 (unaudited), respectively... 4,444 5,972 5,695
Inventories............................................... 84 220 222
Prepaid expenses.......................................... 283 551 538
Other currents assets..................................... 539 1,175 1,220
-------- ------- -------
Total current assets.................................... 6,590 43,629 41,430
Fixed assets, net........................................... 3,110 4,864 5,270
Intangible assets, net of accumulated amortization of $0,
$105 and $228 at June 30, 1999 and 2000 and September 30,
2000 (unaudited), respectively............................ -- 1,994 1,870
Goodwill, net of accumulated amortization of $0, $206 and
$450 at June 30, 1999 and 2000 and September 30, 2000
(unaudited), respectively................................. -- 6,628 6,662
Other assets................................................ 547 208 276
-------- ------- -------
Total assets.............................................. $ 10,247 $57,323 $55,508
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 832 $ 58 $ 59
Current portion of capital lease obligations.............. 191 10 6
Accounts payable.......................................... 1,422 1,203 1,710
Accrued expenses.......................................... 2,835 6,264 5,289
Deferred revenue.......................................... 3,418 5,103 4,558
-------- ------- -------
Total current liabilities............................... 8,698 12,638 11,622
Long-term debt, net of current portion...................... -- 852 840
Capital lease obligations, net of current portion........... 11 -- --
Other long-term liabilities................................. 268 55 39
-------- ------- -------
Total liabilities......................................... 8,977 13,545 12,501
-------- ------- -------
Commitments and contingencies (Note 14)
Stockholders' equity:
Convertible preferred stock, $0.01 par value, 8,254,386,
no and no shares authorized at June 30, 1999 and 2000
and September 30, 2000 (unaudited), respectively;
8,139,579, no and no shares issued and outstanding at
June 30, 1999 and 2000 and September 30, 2000
(unaudited), respectively............................... 12,366 -- --
Preferred stock, $0.01 par value; no, 5,000,000 and
5,000,000 shares authorized at June 30, 1999 and 2000
and September 30, 2000 (unaudited), respectively; no
shares issued and outstanding at June 30, 1999 and 2000
and September 30, 2000 (unaudited)...................... -- -- --
Common stock, $0.01 par value; 8,333,333, 60,000,000 and
60,000,000 shares authorized at June 30, 1999 and 2000
and September 30, 2000 (unaudited), respectively;
553,177, 9,278,493 and 9,291,007 and shares issued and
outstanding at June 30, 1999 and 2000 and September 30,
2000 (unaudited), respectively.......................... 6 93 93
Additional paid-in capital................................ 270 49,482 49,502
Deferred stock compensation............................... (67) (47) (43)
Notes receivable from stockholders........................ (198) (210) (213)
Accumulated deficit....................................... (11,713) (8,260) (7,726)
Accumulated other comprehensive income.................... 606 2,720 1,394
-------- ------- -------
Total stockholders' equity.............................. 1,270 43,778 43,007
-------- ------- -------
Total liabilities and stockholders' equity.............. $ 10,247 $57,323 $55,508
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
MOLDFLOW CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, --------------------------
------------------------------ OCTOBER 2, SEPTEMBER 30,
1998 1999 2000 1999 2000
-------- -------- -------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Software licenses................... $ 8,514 $12,238 $ 16,742 $2,823 $ 5,222
Services............................ 7,875 7,983 10,627 2,358 3,602
------- ------- -------- ------ -------
Total Revenue..................... 16,389 20,221 27,369 5,181 8,824
------- ------- -------- ------ -------
Costs and expenses:
Cost of software licenses revenue... 397 378 785 169 341
Cost of services revenue............ 1,685 1,319 1,057 236 343
Research and development............ 3,062 3,466 4,074 835 1,587
Selling and marketing............... 7,287 9,673 13,495 2,698 4,291
General and administrative.......... 3,303 3,839 5,018 1,076 1,385
Litigation.......................... -- 620 785 280 --
Nonrecurring charges................ -- -- 284 -- --
Amortization of goodwill and other
intangible assets................. 84 -- 311 -- 367
------- ------- -------- ------ -------
Total operating expenses.......... 15,818 19,295 25,809 5,294 8,314
------- ------- -------- ------ -------
Income (loss) from operations......... 571 926 1,560 (113) 510
Interest income....................... -- 21 512 25 393
Interest expense...................... (238) (198) (85) (26) (22)
Other income (loss), net.............. 19 (92) 1,717 (34) 35
------- ------- -------- ------ -------
Income (loss) before income
taxes........................... 352 657 3,704 (148) 916
Provision (benefit) for income
taxes............................... 163 176 251 (217) 382
------- ------- -------- ------ -------
Net income........................ 189 481 3,453 69 534
Accretion on redeemable preferred
stock............................... 80 -- -- -- --
------- ------- -------- ------ -------
Net income available to common
stockholders.................... $ 109 $ 481 $ 3,453 $ 69 $ 534
======= ======= ======== ====== =======
Net income per common share:
Basic............................. $ -- $ 1.82 $ 1.29 $ 0.20 $ 0.06
Diluted........................... $ 0.04 $ 0.08 $ 0.48 $ 0.01 $ 0.06
Shares used in computing net income
per common share:
Basic............................. -- 265 2,667 353 9,186
Diluted........................... 5,228 6,166 7,190 6,292 9,698
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
MOLDFLOW CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED
--------------------- ---------------------- PAID-IN STOCK
SHARES AMOUNT SHARES PAR VALUE CAPITAL COMPENSATION
---------- -------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997.................... -- $ -- 2,020,256 $ 298 $ 776 $ --
Accretion of redeemable preferred stock to
redemption value..........................
Issuance of common stock in exchange for
redemption rights of outstanding preferred
stock..................................... 29,167 4 73
Exchange of Class A convertible preferred
stock for Series A convertible preferred
stock, which was redesigned as series C-2
convertible preferred stock............... 1,855,688 8,382
Exchange of convertible preferred stock for
Series B convertible preferred stock,
which was redesignated as series C-3
convertible preferred stock............... 666,666 1,943
Redesignation of common stock as series C-1
convertible preferred stock............... 4,918,616 1,151 (2,049,423) (302) (849)
Comprehensive income:
Net income................................
Foreign currency translation adjustment...
Comprehensive income......................
---------- -------- ---------- ----- ------- ----
Balance at June 30, 1998.................... 7,440,970 11,476 -- -- -- --
Conversion of promissory notes to
series C-3 convertible preferred stock.... 698,609 890
Issuance of common stock.................... 551,287 6 192
Exercise of stock options................... 1,890 -- 1
Deferred compensation associated with stock
options................................... 77 (77)
Amortization of deferred compensation....... 10
Comprehensive income:
Net income................................
Foreign currency translation adjustment...
Comprehensive income......................
---------- -------- ---------- ----- ------- ----
Balance at June 30, 1999.................... 8,139,579 $ 12,366 553,177 $ 6 $ 270 $(67)
<CAPTION>
NOTES ACCUMULATED
RECEIVABLE COMPREHENSIVE OTHER TOTAL
FROM INCOME ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCKHOLDERS (LOSS) DEFICIT INCOME EQUITY
------------ -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997.................... $ -- $(12,303) $ 645 $(10,584)
Accretion of redeemable preferred stock to
redemption value.......................... (80) (80)
Issuance of common stock in exchange for
redemption rights of outstanding preferred
stock..................................... 77
Exchange of Class A convertible preferred
stock for Series A convertible preferred
stock, which was redesigned as series C-2
convertible preferred stock............... 8,382
Exchange of convertible preferred stock for
Series B convertible preferred stock,
which was redesignated as series C-3
convertible preferred stock............... 1,943
Redesignation of common stock as series C-1
convertible preferred stock............... --
Comprehensive income:
Net income................................ $ 189 189 189
Foreign currency translation adjustment... 107 107 107
-------
Comprehensive income...................... $ 296
----- ======= -------- ------ --------
Balance at June 30, 1998.................... -- (12,194) 752 34
Conversion of promissory notes to
series C-3 convertible preferred stock.... 890
Issuance of common stock.................... (198) --
Exercise of stock options................... 1
Deferred compensation associated with stock
options................................... --
Amortization of deferred compensation....... 10
Comprehensive income:
Net income................................ $ 481 481 481
Foreign currency translation adjustment... (146) (146) (146)
-------
Comprehensive income...................... $ 335
----- ======= -------- ------ --------
Balance at June 30, 1999.................... $(198) $(11,713) $ 606 $ 1,270
</TABLE>
F-5
<PAGE>
MOLDFLOW CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED
--------------------- ---------------------- PAID-IN STOCK
SHARES AMOUNT SHARES PAR VALUE CAPITAL COMPENSATION
---------- -------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1999.................... 8,139,579 $ 12,366 553,177 $ 6 $ 270 $(67)
Exercise of stock options................... 45,916 -- 35
Amortization of deferred compensation....... 20
Conversion of outstanding shares of
convertible preferred stock to shares of
common stock.............................. (8,139,579) (12,366) 5,488,450 55 12,311
Proceeds from initial public offering of
common stock, net of issuance costs....... 3,000,000 30 34,673
Exercise of warrants........................ 9,294 -- --
Proceeds from issuance of common stock to
the underwriters of the Company's initial
public offering of common shares pursuant
to an option in the underwriting
agreements................................ 181,656 2 2,193
Interest on notes receivable from
stockholders..............................
Comprehensive income:
Net income................................
Unrealized gain on investment, net of
taxes...................................
Foreign currency translation adjustment...
Comprehensive income......................
---------- -------- ---------- ----- ------- ----
Balance at June 30, 2000.................... -- -- 9,278,493 93 49,482 (47)
Exercise of stock options (unaudited)....... 12,514 -- 20
Amortization of deferred compensation
(unaudited)............................... 4
Interest on notes receivable from
stockholders (unaudited)..................
Comprehensive income:
Net income (unaudited)....................
Unrealized gain on hedging instruments
(unaudited).............................
Unrealized loss on investment, net of
taxes (unaudited).......................
Foreign currency translation adjustment
(unaudited).............................
Comprehensive loss (unaudited)............
---------- -------- ---------- ----- ------- ----
Balance at September 30, 2000 (unaudited)... -- $ -- 9,291,007 $ 93 $49,502 $(43)
========== ======== ========== ===== ======= ====
<CAPTION>
NOTES ACCUMULATED
RECEIVABLE COMPREHENSIVE OTHER TOTAL
FROM INCOME ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCKHOLDERS (LOSS) DEFICIT INCOME EQUITY
------------ -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1999.................... $(198) $(11,713) $ 606 $ 1,270
Exercise of stock options................... 35
Amortization of deferred compensation....... 20
Conversion of outstanding shares of
convertible preferred stock to shares of
common stock.............................. --
Proceeds from initial public offering of
common stock, net of issuance costs....... 34,703
Exercise of warrants........................ --
Proceeds from issuance of common stock to
the underwriters of the Company's initial
public offering of common shares pursuant
to an option in the underwriting
agreements................................ 2,195
Interest on notes receivable from
stockholders.............................. (12) (12)
Comprehensive income:
Net income................................ $ 3,453 3,453 3,453
Unrealized gain on investment, net of
taxes................................... 2,281 2,281 2,281
Foreign currency translation adjustment... (167) (167) (167)
-------
Comprehensive income...................... $ 5,567
----- ======= -------- ------ --------
Balance at June 30, 2000.................... (210) (8,260) 2,720 43,778
Exercise of stock options (unaudited)....... 20
Amortization of deferred compensation
(unaudited)............................... 4
Interest on notes receivable from
stockholders (unaudited).................. (3) (3)
Comprehensive income:
Net income (unaudited).................... $ 534 534 534
Unrealized gain on hedging instruments
(unaudited)............................. 107 107 107
Unrealized loss on investment, net of
taxes (unaudited)....................... (961) (961) (961)
Foreign currency translation adjustment
(unaudited)............................. (472) (472) (472)
-------
Comprehensive loss (unaudited)............ $ (792)
----- ======= -------- ------ --------
Balance at September 30, 2000 (unaudited)... $(213) $ (7,726) $1,394 $ 43,007
===== ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
MOLDFLOW CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, -----------------------------
------------------------------ OCTOBER 2, SEPTEMBER 30,
1998 1999 2000 1999 2000
-------- -------- -------- ------------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 189 $ 481 $ 3,453 $ 69 $ 534
Adjustments to reconcile to net cash provided by
(used in) operating activities:
Gain on sale of long term investment............ -- -- (1,744) -- --
Loss on disposals of fixed assets............... -- 18 40 8 7
Depreciation and amortization................... 810 881 1,240 211 618
Provisions for doubtful accounts................ 256 29 13 2 9
Foreign exchange losses (gains)................. 51 97 (17) 27 (16)
Changes in assets and liabilities, net of
effects of acquisition:
Accounts receivable........................... (1,901) (7) (600) 249 276
Inventories, prepaid expenses, other current
assets...................................... (47) 209 (891) 16 112
Other assets.................................. (40) (209) (211) (135) (68)
Accounts payable.............................. 122 437 (212) (91) 507
Accrued expenses.............................. 889 (1,104) 332 (444) (484)
Deferred revenue.............................. 442 374 (38) (305) (546)
------- ------- -------- ------ -------
Net cash provided by (used in) operating
activities................................ 771 1,206 1,365 (393) 949
------- ------- -------- ------ -------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of fixed assets......................... (729) (863) (875) (204) (965)
Investment in marketable securities............... -- -- (4,957) -- (6,898)
Acquisition of C-Mold, net of cash acquired....... -- -- (7,860) -- (278)
Proceeds from sale of long term investment........ -- -- 1,779 -- --
Proceeds from fixed asset disposals............... -- 9 4 4 --
------- ------- -------- ------ -------
Net cash used in investing activities....... (729) (854) (11,909) (200) (8,141)
------- ------- -------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to
stockholders.................................... 460 -- -- -- --
Borrowings on bank notes payable.................. 1,495 1,412 1,450 800 5
Payments on bank notes payable.................... (1,124) (2,120) (2,276) (112) (13)
Payments on capital lease obligations............. (115) (200) (180) (39) (3)
Proceeds from issuance of common stock............ -- 1 36,933 1 20
------- ------- -------- ------ -------
Net cash provided by (used in) financing
activities................................ 716 (907) 35,927 650 9
------- ------- -------- ------ -------
Effect of exchange rate changes on cash and cash
equivalents....................................... (67) 95 636 164 (167)
------- ------- -------- ------ -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... 691 (460) 26,019 221 (7,350)
Cash and cash equivalents, beginning of year........ 1,009 1,700 1,240 1,240 27,259
------- ------- -------- ------ -------
Cash and cash equivalents, end of year.............. $ 1,700 $ 1,240 $ 27,259 $1,461 $19,909
======= ======= ======== ====== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................ $ 183 $ 225 $ 104 $ 28 $ 16
Cash paid for income taxes........................ 112 157 212 39 62
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of fixed assets under capital
leases.......................................... $ 18 $ -- $ 34 $ -- $ --
Conversion of notes payable to stockholder into
series C-3 convertible preferred stock.......... -- 890 -- -- --
Issuance of common stock in exchange for notes
receivable...................................... -- 198 -- -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS
Moldflow Corporation (the "Company") was incorporated in Delaware, USA in
January 1997. The Company was formed as the successor corporation to Moldflow
International Pty. Ltd. ("MIPL"), an Australian corporation that had been
incorporated in March 1994. On August 5, 1997, the stockholders of MIPL effected
a reorganization of that company's shares, resulting in MIPL becoming a wholly
owned subsidiary of the Company, and the stockholders of MIPL becoming
stockholders of the Company (Note 8).
The Company was formed to design, develop, manufacture and market computer
software applications for the design, engineering and manufacture of injection
molded plastic parts and, as such, revenues are derived from the plastic design
and manufacturing industry. The Company sells its products primarily to
customers in the United States, Europe, Asia and Australia.
On April 13, 2000, the Company completed an acquisition of Advanced CAE
Technology, Inc., which formerly conducted business as "C-Mold" (Note 3). The
business combination was accounted for using the purchase method of accounting.
Accordingly, these financial statements present together the financial position
and results of operations of the Company and C-Mold from the date of
acquisition.
The Company's fiscal year end is June 30. References to 1998, 1999 or 2000
mean the fiscal year ended June 30, unless otherwise indicated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in the consolidated financial statements.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements and related notes as of
September 30, 2000 and for the three month periods ended October 2, 1999 and
September 30, 2000 are unaudited. In the opinion of the Company's management,
the unaudited interim consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for these
interim periods. The results of operations for the three months ended
September 30, 2000 are not necessarily indicative of the results of operations
for the year ended June 30, 2001 or any other future period.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of international subsidiaries, whose functional
currency is the local currency, are translated at the rates in effect at the
balance sheet date and translation adjustments are recorded in stockholders'
equity as a component of accumulated other comprehensive income. Statement of
income amounts are translated at the average rate for the year. Foreign currency
transaction gains and losses are included in other income and expense.
F-8
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. The Company invests excess cash
primarily in overnight investments held at major financial institutions.
Accordingly, these investments are subject to minimal credit and market risk and
are reported at cost, which approximates fair value.
MARKETABLE SECURITIES
The Company's marketable securities at June 30, 2000 consisted of corporate
bonds with maturities in excess of three months but less than two years and
shares of a publicly traded company. These investments are classified as
available-for-sale and are reported at fair value, with unrealized gains and
losses included in accumulated other comprehensive income, net of the related
tax effect of $1.2 million. As of June 30, 2000, unrealized gains on these
marketable securities were $3.5 million.
ACCOUNTS RECEIVABLE, CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which potentially expose the Company to concentrations
of credit risk include accounts receivable and marketable securities. The
Company's customer base consists of a large number of geographically dispersed
customers. The Company maintains reserves for potential credit losses on
accounts receivable and such losses, in the aggregate, have not exceeded
management expectations. The Company invests its excess cash in financial
instruments with high credit quality in accordance with its investment policy,
as approved by the board of directors.
Revenue of $2,074,000 (13% of total revenue), $1,888,000 (9% of total
revenue) and $2,268,000 (8% of total revenue) was attributable to one customer
in fiscal 1998, 1999 and 2000, respectively. At June 30, 1999 and 2000, accounts
receivable from that customer accounted for $153,000 (3% of total accounts
receivable) and $182,000 (3% of total accounts receivable), respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At June 30, 2000, the Company's financial instruments consisted of cash and
cash equivalents, marketable securities, accounts receivable, accounts payable,
accrued expenses, deferred revenue, and long-term debt. The carrying amounts of
these instruments at June 30, 2000 approximate their fair values.
INVENTORIES
Inventories are predominantly finished goods and are stated at the lower of
cost, using the first-in, first-out method, or market.
FIXED ASSETS
Fixed assets are recorded at cost and are depreciated using the
straight-line method over their estimated useful lives. Fixed assets held under
capital leases are stated at the lower of the fair market value of the related
asset or the present value of the minimum lease payments at the inception of the
lease and are amortized using the straight-line method over the shorter of the
life
F-9
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the related asset or the term of the lease. Maintenance and repair costs are
charged to expense as incurred; improvements are capitalized. Upon retirement or
sale, the cost of the asset disposed of and the related accumulated depreciation
are removed from the accounts with any resulting gain or loss credited or
charged to other income.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of cost over the fair value of the net assets
acquired in the purchase of C-Mold (Note 3). Goodwill is amortized using the
straight-line method over seven years. The cost of other acquired intangibles is
amortized using the straight-line method over the following useful lives:
developed technology--4 years, assembled workforce--4 years and non-compete
covenants with former members of C-Mold senior management--5 years.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of," the Company records
impairment losses on long-lived assets used in operations, including goodwill
and other intangible assets, when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Through June 30, 2000, the Company had not
recognized any impairment loss on its long-lived assets.
REVENUE RECOGNITION
Revenue is derived from the licensing of computer software products and from
services consisting of maintenance and support, consulting, material testing and
training. The Company has adopted the guidelines of Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"), as amended by Statement of
Position 98-9, "Modification of SOP No. 97-2, Software Revenue Recognition, with
Respect to Certain Transactions" ("SOP 98-9"), both of which provide guidance on
applying generally accepted accounting principles in recognizing revenue on
software transactions.
The Company recognizes revenue from sales of software licenses upon product
shipment provided that evidence of the purchase commitment exists, the license
fee is fixed and determinable, collection is probable and all other revenue
recognition criteria of SOP 97-2 are met. Generally, the Company's software
products do not require significant modification or customization. Installation
of the products is generally routine, requires insignificant effort and is not
essential to the functionality of the product. The Company recognizes revenue
from maintenance and support ratably over the contract period and from training
and other related services as the services are performed.
Maintenance and support contracts are often entered into at the same time as
the sale of software licenses. In accordance with SOP 97-2, the Company
considers these multiple elements of a single arrangement. Payment for this
arrangement is typically received up-front, and the total fee is then allocated
ratably to these elements based upon vendor specific objective evidence of fair
value ("VSOE") for each, which is determined based upon the prices charged to
customers when these
F-10
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
elements are sold separately; the revenue allocated to each is then recognized
as described above for these elements.
When VSOE does not exist for all elements of an arrangement, the Company
employs the "residual method" of accounting for revenue recognition, as defined
by SOP 98-9. The residual method requires that the portion of the total
arrangement fee attributable to the undelivered elements, as indicated by VSOE,
is deferred and subsequently recognized in accordance with SOP 97-2. The
difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements,
if all other revenue recognition criteria of SOP 97-2 are met. VSOE for the
undelivered elements is determined based on the prices charged to customers when
these elements are sold separately, typically from the renewal of the annual
maintenance and support contracts.
SOFTWARE DEVELOPMENT COSTS
Costs associated with the research and development of the Company's products
are expensed as incurred. Costs associated with the development of computer
software are expensed prior to establishing technological feasibility, as
defined by SFAS No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed," and capitalized thereafter until
commercial release of the software products. Software development costs eligible
for capitalization have not been significant to date.
Costs of software applications developed or obtained for internal use that
are incurred during the applications' development stage are capitalized in
accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained For Internal Use." Costs eligible for
capitalization have not been significant to date.
ADVERTISING COSTS
The Company expenses the cost of advertising as incurred or, as appropriate,
the first time the advertising takes place. Advertising costs for the years
ended June 30, 1998, 1999 and 2000 were $207,000, $741,000 and $714,000,
respectively.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation to employees in accordance
with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees," and related interpretation. Accordingly, compensation
expense is recorded for options issued to employees in fixed amounts to the
extent that the fixed exercise prices are less than the fair market value of the
Company's common stock at the date of grant. The Company follows the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation"
(Note 10). All stock-based awards to non-employees are accounted for at their
fair value in accordance with SFAS No. 123.
NET INCOME PER COMMON SHARE
The Company computes net income per common share in accordance with SFAS
No. 128, "Earnings Per Share," ("SFAS 128") and SEC Staff Accounting Bulletin
No. 98 ("SAB 98"). Under the provisions of SFAS 128 and SAB 98, basic earnings
per common share is computed by dividing net income available to common
stockholders by the weighted-average number of common shares
F-11
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
outstanding. Diluted earnings per common share is computed by dividing net
income by the weighted-average number of common shares outstanding and, when
dilutive, all potential common equivalent shares outstanding including
restricted stock, options and warrants. The dilutive effect of options and
warrants to purchase common stock is determined under the treasury stock method
using the average fair value of common stock for the period (Note 11).
COMPREHENSIVE INCOME
As required, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income" on July 1, 1998. Under SFAS No. 130, the Company is required to display
comprehensive income and its components as part of the Company's full set of
financial statements. The measurement and presentation of net income did not
change. Comprehensive income is comprised of net income and other comprehensive
income. Other comprehensive income includes certain changes in equity that are
excluded from net income. At June 30, 2000, accumulated other comprehensive
income was comprised of cumulative foreign currency translation adjustments and
unrealized gains on marketable securities. The individual components of
comprehensive income are reflected in the statement of stockholders' equity for
the years ended June 30, 1998, 1999 and 2000.
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 ("FIN No. 44"), "Accounting for Certain Transactions
involving Stock Compensation--An interpretation of APB Opinion No. 25." FIN
No. 44 addresses the application of APB No. 25 and, among other issues,
clarifies the following: the definition of an employee for purposes of applying
APB No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to the
terms of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN No. 44 is
effective July 1, 2000, but certain conclusions in FIN No. 44 cover specific
events that occurred after either December 15, 1998 or January 12, 2000. The
Company does not expect the application of FIN No. 44 to have a material impact
on the Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101") "Revenue Recognition in Financial
Statements." This statement was amended by the issuance of SAB 101B, "Second
Amendment: Revenue Recognition in Financial Statements," which delayed the
implementation date of SAB 101 until the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. SAB 101 summarizes the SEC's views in
applying generally accepted accounting principles to selected revenue
recognition issues in financial statements. The Company is currently assessing
the impact of SAB 101 on its financial position and results of operations.
F-12
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS 133, as amended by SFAS 137, is
effective for all quarters of all years beginning after June 15, 2000. The
Company did not use derivative instruments or engage in hedging activities
through fiscal 2000.
UNAUDITED--During the three months ended September 30, 2000, the Company
began to engage in hedging activities and has adopted the accounting and
reporting requirements of SFAS 133 (Note 16).
3. ACQUISITION
On April 13, 2000, the Company acquired Advanced CAE Technology, Inc., which
formerly conducted business as C-Mold, for $11.3 million in cash. The
acquisition was accounted for using the purchase method of accounting, and the
results of C-Mold have been included in the Company's consolidated financial
statements since the date of acquisition. Accordingly, the purchase price has
been allocated to the assets acquired and liabilities assumed at their fair
values on the date of the acquisition, based on management's estimates and, with
respect to the identifiable intangible assets, an independent professional
appraisal. The excess of the purchase price over the amounts allocated to the
assets acquired and liabilities assumed was recorded as goodwill. The purchase
price was allocated as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Current assets.............................................. $ 4,685
Property and equipment...................................... 1,884
Assembled workforce......................................... 832
Developed technology........................................ 655
Non-compete covenants....................................... 611
In-process research and development......................... 214
Other long term assets...................................... 199
Current liabilities......................................... (3,780)
Non-current liabilities..................................... (881)
Goodwill.................................................... 6,834
-------
$11,253
=======
</TABLE>
In the opinion of management, the purchased in-process research and
development had not yet reached technological feasibility and had no alternative
future use. Consequently, a nonrecurring charge of $214,000 was recognized
during the fourth quarter of fiscal 2000 to expense the value of the acquired
in-process research and development. The value assigned was determined by
identifying research projects that were in-process as of the date of acquisition
for which technological feasibility had not yet been established. To determine
the fair value of the acquired in-process research and development, the Company
considered the stage of completion, the costs incurred and the costs to
complete, and the contribution of existing core technology, estimating the
resulting net future cash flows from the products under development, discounted
to their net present value.
F-13
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITION (CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
</TABLE>
The following table summarizes the unaudited pro forma results of operations
for the years ended June 30, 1999 and 2000 as if the acquisition of C-Mold had
been completed on July 1, 1998. The unaudited pro forma data gives effect to
actual operating results prior to the acquisition, including adjustments to
amortization of goodwill and other intangible assets but excluding the
nonrecurring charge for in-process research and development. These pro forma
amounts do not purport to be indicative of actual results had the acquisition
occurred on July 1, 1998 or that may be obtained in the future.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1999 2000
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
(UNAUDITED)
<S> <C> <C>
Revenue.................................................. $27,889 $33,495
Net income (loss)........................................ (1,573) 2,063
Net income (loss) per common share:
Basic.................................................. $ (1.40) $ 0.62
Diluted................................................ (1.40) 0.26
</TABLE>
UNAUDITED--During the three months ended September 30, 2000, certain
preacquisition contingencies were resolved that resulted in a $278,000 increase
in the consideration paid for C-Mold, which was recorded as additional goodwill.
As of September 30, 2000, the carrying value of goodwill was $6.7 million, net
of accumulated amortization of $450,000.
4. FIXED ASSETS
Fixed assets consist of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL JUNE 30,
LIFE -------------------
(YEARS) 1999 2000
------------ -------- --------
<S> <C> <C> <C>
Land........................................... -- $ 562 $ 990
Buildings...................................... 30 1,392 2,285
Equipment...................................... 5-7 2,149 2,557
Computer equipment............................. 3-5 1,491 1,642
Furniture and fixtures......................... 7-10 493 568
Computers and equipment under capital leases... 3-7 708 633
Other.......................................... 3-7 20 405
------- -------
6,815 9,080
Less--accumulated depreciation and
amortization................................. (3,705) (4,216)
------- -------
$ 3,110 $ 4,864
======= =======
</TABLE>
Depreciation expense, including amortization of assets under capital leases,
was $726,000, $881,000, and $929,000 for the years ended June 30, 1998, 1999 and
2000, respectively. Accumulated amortization for assets held under capital
leases was $425,000, $596,000 and $575,000 at June 30, 1998, 1999 and 2000,
respectively.
F-14
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1999 2000
-------- --------
<S> <C> <C>
Employee wages and commissions............................. $ 565 $1,218
Employee leave costs....................................... 604 465
Employee retirement costs.................................. 344 620
Professional fees.......................................... 591 713
Taxes and withholding...................................... 336 2,104
Severance costs............................................ -- 573
Lease termination charges.................................. -- 70
Other...................................................... 395 501
------ ------
$2,835 $6,264
====== ======
</TABLE>
In June 2000, the Company recorded a charge of $70,000 related to exit costs
incurred in the relocation of its corporate headquarters to Wayland,
Massachusetts. The amount is included as a nonrecurring charge in the Company's
consolidated statement of income. The exit costs specifically relate to
non-cancelable lease costs which terminate in November 2000.
UNAUDITED--During the three months ended September 30, 2000, cash paid
against this accrual was $40,000, reducing the remaining amount to $30,000.
6. NOTES PAYABLE TO STOCKHOLDERS
In January 1997, certain subsidiaries of the Company entered into loan
agreements with stockholders of the Company, which provided the Company with a
maximum borrowing amount of $1,073,000. Interest expense incurred by the Company
under these agreements in the year ended June 30, 1998 was $85,000.
On July 6, 1998, the Company converted the outstanding principal balance of
the notes of $890,000 into 698,609 shares of the Company's series C-3
convertible preferred stock. Accrued interest of $107,000 was paid in cash upon
conversion.
7. BANK NOTES PAYABLE
LINES OF CREDIT
In April 1998, the Company entered into an agreement with a bank for a
revolving credit facility totaling $3,750,000. In November 1998, the overall
facility was reduced to $3,250,000. Borrowings under the facility are secured by
certain assets of the Company and its Australian subsidiaries, and by a standby
letter of credit issued by an Australian bank. Available borrowings under the
line are computed based upon a percentage of domestic and foreign accounts
receivable and the value of the standby letter of credit in the amount of
$754,000. The line bears interest at the rate of prime plus 1.25% (10.75% at
June 30, 2000) and prime plus 1.50% (11.00% at June 30, 2000) on the domestic
and foreign lines, respectively, and was subject to a commitment fee of one half
of one percent. All outstanding principal plus accrued interest was due in
October 1999, however, on October 22, 1999, the term of the facility was
extended to December 31, 2000. All other significant provisions of the facility
remained unchanged.
At June 30, 1999 and 2000, borrowings under the facility were $767,000 and
$0, respectively. The agreement contains covenants which, among other matters,
restrict or limit the ability of the
F-15
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. BANK NOTES PAYABLE (CONTINUED)
Company to pay dividends, incur indebtedness, merge, acquire or sell assets. The
Company must also maintain certain financial ratios regarding liquidity,
profitability and net worth, among other restrictions. At June 30, 2000, the
Company was in compliance with these covenants.
In connection with the facility, the Company issued warrants to purchase up
to 20,833 shares of the Company's common stock. These warrants were immediately
exercisable at $7.20 per share and had an expiration date of April 2005. The
value ascribed to these warrants was determined by management using the
Black-Scholes pricing model with the following assumptions: risk-free interest
rate of 5.8%; expected life of 7 years; expected volatility of 100%; and no
dividend yield. The resulting value of the warrants was not significant. The
warrants were exercised on March 28, 2000 in connection with the Company's
initial public offering of common stock.
EQUIPMENT LOANS
At June 30, 1999 and 2000, the Company had $65,000 and $13,000,
respectively, outstanding under various equipment term loans. The loans bear
interest at variable rates ranging from 6% to 8% and require monthly payments of
principal and interest through 2001.
SECURED LOANS
At June 30, 2000, the Company had $897,000 outstanding under two mortgage
contracts secured by real estate in Louisville, Kentucky and Taiwan. Of this
amount, $45,000 was classified as current.
The loan agreement for the Louisville facility has an adjustable interest
rate defined at the prime rate (8.25% at June 30, 2000). At June 30, 2000, the
unpaid balance was $607,000, of which $23,000 is classified as current. The loan
is to be repaid in equal monthly payments of $6,000. Each payment will be
applied first to interest with the remainder applied to principal. Based on the
current monthly payments of $6,000 and an interest rate of 8.25%, the Company
will be required to make a final payment of approximately $490,000 in the year
2005. The agreement is secured by the real property located in Louisville. The
Company was in compliance with the related debt covenants at June 30, 2000. This
facility is currently being held for sale; if sold, this loan must be repaid.
The mortgage loan for the Taiwan facility was refinanced by C-Mold during
its fiscal 1997 and is due in 2012. At June 30, 2000, the unpaid balance on the
mortgage was $290,000, of which $22,000 is classified as current. The interest
rate on the mortgage loan is adjusted annually (8.3% at June 30, 2000). Monthly
interest and principal payments are $4,000.
F-16
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. BANK NOTES PAYABLE (CONTINUED)
Future principal payments for these mortgages as of June 30, 2000 are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
--------------------
<S> <C>
2001........................................................ $ 45
2002........................................................ 52
2003........................................................ 56
2004........................................................ 61
2005........................................................ 66
Thereafter.................................................. 617
----
897
Less: current portion....................................... 45
----
$852
====
</TABLE>
8. PREFERRED STOCK
On June 30, 1997, the Board of Directors of MIPL voted to enter into an
agreement with its stockholders and with the Company, whereby MIPL would
reacquire all of its outstanding and issued shares and issue an equal number of
common and convertible preferred shares to the Company. Simultaneously under the
arrangement, the former stockholders of MIPL would become stockholders of the
Company. Upon execution of the share exchange on August 5, 1997, the Company
effectively reorganized and MIPL became a wholly owned subsidiary of the
Company. The exchange resulted in the issuance by the Company of common stock,
series A convertible preferred stock and series B convertible preferred stock.
Prior to the exchange, the MIPL preferred stockholders' redemption rights
were removed. As consideration for the removal of these redemption rights, these
stockholders received 29,167 common shares of MIPL, which were valued at
$77,000.
On March 9, 1998, the Company redesignated the previously issued common,
series A convertible preferred and series B convertible preferred into shares of
series C-1, C-2 and C-3 convertible preferred stock, respectively. In addition,
on that date, the Company increased the number of authorized common shares from
4,166,667 to 8,333,333 and increased the number of all classes of authorized
convertible preferred shares from 5,732,032 to 8,254,386.
On July 6, 1998, the Company converted the outstanding principal balance of
$890,000 in notes payable to stockholders of the Company into 698,609 shares of
newly designated series C-3 convertible preferred stock.
On March 27, 2000, in conjunction with the Company's initial public offering
of common shares, all shares of series C-1, C-2 and C-3 convertible preferred
stock were automatically converted into common stock in accordance with the
terms of their conversion rights. Conversion was based on a formula, which
resulted in a 1-for-0.41667 exchange for the series C-1 and C-3 holders and a
1-for-1.54668 exchange for the series C-2 holders.
F-17
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. PREFERRED STOCK (CONTINUED)
Convertible preferred stock consists of the following (amounts in thousands,
except share data):
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1999 2000
-------- --------
<S> <C> <C>
Series C-1 convertible preferred stock; $0.01 par value;
4,918,616 and no shares authorized, issued and outstanding
at June 30, 1999 and 2000, respectively................... $ 1,151 $ --
Series C-2 convertible preferred stock; $0.01 par value;
1,855,688 and no shares authorized, issued and outstanding
at June 30, 1999 and 2000, respectively................... 8,382 --
Series C-3 convertible preferred stock; $0.01 par value;
1,480,082 shares authorized and 1,365,275 shares issued
and outstanding at June 30, 1999; no shares authorized,
issued or outstanding at June 30, 2000.................... 2,833 --
------- -------
$12,366 $ --
======= =======
</TABLE>
On January 20, 2000, the Board of Directors approved an amendment to the
Company's certificate of incorporation increasing the number of authorized
shares of preferred stock to 5,000,000, with a par value of $0.01 per share.
This increase became effective on March 31, 2000.
9. COMMON STOCK
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of the Company's stockholders. Common stockholders are
entitled to dividends when-and-if declared by the Board of Directors.
On July 1, 1998, the Company issued 551,287 shares of its common stock to
certain officers and senior managers of the Company for a cash purchase price of
$198,000. In connection with this issuance, the employees entered into Stock
Restriction Agreements that contain restrictions on the sale of the shares by
the employees and loan agreements evidenced by promissory notes bearing interest
at 5.77% and maturing on June 30, 2003. The shares purchased by the employees
under the Stock Restriction Agreements vest on varying schedules through fiscal
year 2003.
On January 20, 2000, the Board of Directors approved a 2.4-to-1 reverse
stock split of the Company's common stock which became effective on March 23,
2000. All share and per share information in the accompanying consolidated
financial statements and notes has been retroactively restated to reflect the
effect of this reverse stock split.
On March 31, 2000, the Company completed an initial public offering of
common stock, which resulted in the issuance of 3,000,000 shares of common
stock. Proceeds to the Company, net of the underwriting discount and costs of
the offering, were $34.7 million. Additionally, effective March 31, 2000, the
number of authorized shares of common stock of the Company was increased to
60,000,000.
On April 13, 2000, the underwriters of the Company's initial public offering
exercised their option to purchase an additional 450,000 shares of common stock,
of which 181,656 shares were issued by the Company. The proceeds to the Company,
net of the underwriting discount, were $2.2 million.
F-18
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMON STOCK (CONTINUED)
At June 30, 2000 the Company had 2,204,650 shares of its common stock
reserved for issuance under the Company's Stock Option and Incentive Plan and
Employee Stock Purchase Plan.
10. STOCK PLANS
STOCK OPTION PLAN
In August 1997, the Company adopted the 1997 Equity Incentive Plan (the
"1997 Plan") which provides for the grant of incentive stock options,
non-qualified stock options, stock awards and stock purchase rights for the
purchase of up to 931,303 shares of the Company's common stock by officers,
employees, consultants and directors of the Company. In April 1999, the number
of shares available under the 1997 Plan was increased to 1,537,158 shares. The
Board of Directors is responsible for administration of the 1997 Plan. The Board
determines the term of each option, the option exercise price, the number of
shares for which each option is granted and the rate at which each option is
exercisable. Incentive stock options may be granted to any officer or employee
at an exercise price per share of not less than the fair value per common share
on the date of the grant (not less than 110% of fair value in the case of
holders of more than 10% of the Company's voting stock) and with a term not to
exceed ten years from the date of the grant (five years for incentive stock
options granted to holders of more than 10% of the Company's voting stock).
Non-qualified stock options may be granted to any officer, employee, consultant
or director at an exercise price per share of not less than the book value per
share. The Company will not issue any more shares under the 1997 Plan.
On January 20, 2000, the Board of Directors approved the Moldflow
Corporation 2000 Stock Option and Incentive Plan (the "2000 Plan"), which
provides for the grant of incentive stock options, stock awards and stock
purchase rights for the purchase of up to 2,000,000 shares of common stock by
officers, employees, consultants and directors of the Company. As with the 1997
Plan, the 2000 Plan is administered by the Board of Directors. The Board
determines the term of each option, the option exercise price, the number of
shares for which each option is granted and the rate at which each option is
exercisable. Incentive stock options may be granted to any officer or employee
at an exercise price per share of not less than the fair value per common share
on the date of the grant (not less than 110% of fair value in the case of
holders of more than 10% of the Company's voting stock) and with a term not to
exceed ten years from the date of the grant (five years for incentive stock
options granted to holders of more than 10% of the Company's voting stock).
Non-qualified stock options may be granted to any officer, employee, consultant
or director at an exercise price per share of not less than the book value per
share.
In January 1999 an amendment was made to certain employee stock options
which resulted in a determinable measurement date. Deferred compensation of
$77,000 was recorded, in accordance with APB No. 25, and is being amortized over
the related vesting period. Related compensation expense of $10,000 and $20,000
was recorded during the years ended June 30, 1999 and 2000, respectively. During
fiscal 2000, the Company granted options to purchase 1,042 shares of its common
stock at an exercise price below the then fair market value of the Company's
stock, as determined by the Board of Directors. In addition, the Company granted
an option to purchase 521 shares of its common stock to a consultant. The
Company recorded compensation expense of $12,000 in fiscal 2000 relating to
these two option grants.
Except for the options noted above, no other compensation cost has been
recognized for employee stock-based compensation for the years ended June 30,
1998, 1999 and 2000. Had compensation cost been determined based on the fair
value at the grant dates for awards in 1998,
F-19
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK PLANS (CONTINUED)
1999 and 2000 consistent with the provisions of SFAS No. 123, the Company's net
income (loss) available to common stockholders would have been the pro forma
amounts indicated below. Because options vest over several years and additional
option grants are expected to be made in future years, the pro forma results are
not representative of the pro forma results for future years.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1998 1999 2000
-------- -------- --------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss) available to common stockholders
As reported........................................ $ 109 $ 481 $3,453
Pro forma.......................................... (58) 462 2,285
Net income (loss) per common share:
Basic--as reported................................. $ -- $1.82 $ 1.29
Pro forma basic.................................... -- 1.74 0.86
Diluted--as reported............................... 0.04 0.08 0.48
Pro forma diluted.................................. -- 0.07 0.32
</TABLE>
The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions for
grants:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------
1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Dividend yield.................................... -- -- --
Volatility........................................ 0.001% 0.001% 75.00%
Risk-free interest rate........................... 5.8% 4.6% 6.3%
Expected option life.............................. 8 yrs 8 yrs 7.3 yrs
</TABLE>
A summary of the status of the Company's stock options as of June 30, 1998,
1999 and 2000, and changes during the years then ended, is presented below:
<TABLE>
<CAPTION>
1998 1999 2000
------------------------------ ----------------------------- ------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ----------------- --------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year..................... -- $ -- 795,624 $2.45 566,105 $ 3.07
Granted.................... 1,267,277 1.15 375,938 4.44 374,738 15.07
Exercised.................. -- -- (553,177) 0.36 (45,916) 0.53
Canceled................... (471,653) 2.45 (52,280) 0.36 (31,323) 8.49
---------- --------- ----------
Outstanding at end of
year..................... 795,624 2.45 566,105 3.07 863,604 8.22
========== ========= ==========
Options exercisable at end
of year.................. 254,392 68,382 159,614
Weighted average fair value
of options granted during
the year................. $ 0.41 $ 1.37 $ 11.42
Options available for
future grant............. 135,679 417,877 1,704,650
</TABLE>
In conjunction with the redesignation of the Company's common and preferred
stock in March 1998 (Note 8), 390,842 options with an exercise price of $2.64
were exchanged for 697,910
F-20
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK PLANS (CONTINUED)
options with an exercise price of $0.36. The exercise price at the time of the
exchange was considered the fair market value of the common stock of the Company
subsequent to the redesignation. All other terms of the new options remained
consistent with the terms of the exchanged options.
The following table summarizes information about stock options outstanding
at June 30, 2000:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
WEIGHTED AVERAGE REMAINING CONTRACTUAL SHARES WEIGHTED AVERAGE
EXERCISE PRICE SHARES EXERCISE LIFE (YEARS) EXERCISABLE EXERCISE PRICE
-------------- -------- ---------------- --------------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.36-$5.00.......... 257,229 $ 0.73 5.7 97,522 $0.60
$5.01-$10.00......... 273,084 6.19 6.9 62,092 6.02
$10.01-$15.00........ 78,941 12.11 8.7 -- --
$15.01-$20.00........ 254,350 16.76 7.7 -- --
------- -------
$0.36-$20.00......... 863,604 8.22 6.9 159,614 2.71
======= =======
</TABLE>
STOCK PURCHASE PLAN
On January 20, 2000, the Board of Directors approved the Moldflow
Corporation Employee Stock Purchase Plan with an authorization of up to 500,000
shares of common stock. This plan is open to all eligible employees of the
Company. Under the plan, each employee may elect to have up to 10% of his or her
base salary withheld and applied toward the purchase of shares within each
six-month offering period. The purchase price per share is determined based on
85% of the lower of the fair market value of the stock on the first or the last
day of each offering period. At June 30, 2000, no shares had been issued under
the plan.
11. NET INCOME PER COMMON SHARE
Under the provisions of SFAS 128, the computation of basic and diluted net
income per common share has been adjusted retroactively for all periods
presented to reflect the redesignation of the Company's common and preferred
stock in March 1998 (Note 8). As a result of this treatment of the
redesignation, the Company had no common stock outstanding prior to June 30,
1998 for purposes of computing net income per common share. Accordingly, basic
net income per common share was zero for the year ended June 30, 1998.
F-21
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. NET INCOME PER COMMON SHARE (CONTINUED)
Options and warrants to purchase 432,000 and 335,000 shares of common stock
were outstanding for the years ended June 30, 1999 and 2000, respectively, but
were not included in the calculation of diluted net income per common share, as
their inclusion would be antidilutive.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1998 1999 2000
-------- -------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net income................................................ $ 189 $ 481 $3,453
Accretion on preferred stock.............................. 80 -- --
------ ------ ------
Net income available to common stockholders............... $ 109 $ 481 $3,453
====== ====== ======
Weighted average shares used in computing net income per
common share--basic..................................... -- 265 2,667
------ ------ ------
Effect of dilutive securities:
Restricted stock........................................ -- 287 158
Employee stock options and warrants..................... 34 162 310
Convertible preferred stock............................. 5,194 5,452 4,055
------ ------ ------
Dilutive potential common shares...................... 5,228 5,901 4,523
------ ------ ------
Weighted average shares used in computing net income per
common share--diluted................................... 5,228 6,166 7,190
====== ====== ======
Net income per common share--basic........................ $ -- $ 1.82 $ 1.29
Net income per common share--diluted...................... $ 0.04 $ 0.08 $ 0.48
</TABLE>
12. INCOME TAXES
The income before income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Domestic income (loss)..................................... $(57) $(3,335) $1,999
Foreign income............................................. 409 3,992 1,705
---- ------- ------
Income before income taxes............................... $352 $ 657 $3,704
==== ======= ======
</TABLE>
F-22
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal.............................................. $ 10 $ 5 $ 10
State................................................ 47 18 73
Foreign.............................................. 184 153 86
---- ---- ----
Total current...................................... 241 176 169
---- ---- ----
Deferred:
Federal.............................................. (78) -- 74
State................................................ -- -- 8
Foreign.............................................. -- -- --
---- ---- ----
Total deferred..................................... (78) -- 82
---- ---- ----
$163 $176 $251
==== ==== ====
</TABLE>
The reconciliation of the provision for income taxes computed at the U.S.
federal statutory tax rate to the actual provision is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Statutory federal rate of 34%........................ $120 $223 $ 1,259
Foreign withholding taxes............................ 36 79 (26)
State income taxes, net of federal benefit........... (51) 12 53
Permanent differences................................ 11 (94) (6)
Change in valuation allowance........................ 27 (54) (1,018)
Foreign tax rate differential........................ 35 20 15
Other................................................ (15) (10) (26)
---- ---- -------
$163 $176 $ 251
==== ==== =======
</TABLE>
F-23
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
The deferred tax assets and liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1999 2000
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $ 4,472 $ 4,794
Foreign tax credit..................................... 326 537
Accrued expenses not deductible for tax purposes....... 133 274
Revenue deferred for financial purposes................ 1,614 47
Other.................................................. 274 465
------- -------
Gross deferred tax assets............................ 6,819 6,117
Deferred tax asset valuation allowance................. (6,536) (5,297)
------- -------
Total deferred tax assets............................ 283 820
Deferred tax liabilities................................. (205) (948)
------- -------
Net deferred tax assets (liabilities)................ $ 78 $ (128)
======= =======
</TABLE>
At June 30, 2000, the Company had available federal, state and foreign net
operating loss carryforwards of approximately $9,538,000, $8,241,000 and
$3,429,000, respectively. These carryforwards expire at various times through
2020 if not utilized. Under the provisions of the U.S. Internal Revenue Code,
certain substantial changes in the Company's ownership may limit the amount of
federal net operating loss carryforwards and tax credit carryforwards which
could be utilized annually to offset federal future taxable income and taxes
payable.
Under generally accepted accounting principles, the benefit associated with
future deductible differences is recognized if it is more likely than not that
the benefit will be realized. Management believes that, based on the Company's
historical results of operations, it is more likely than not that a substantial
amount of the Company's deferred tax assets will not be realized. Accordingly,
the Company has recorded a valuation allowance of $6,536,000 and $5,297,000 at
June 30, 1999 and 2000, respectively. Management believes that the net deferred
tax asset represents management's best estimate, based upon the weight of
available evidence, of the deferred tax asset that will be realized. If such
evidence were to change, based upon near-term operating results and longer-term
projections, the amount of the valuation allowance recorded against the gross
deferred tax asset may be decreased or increased.
13. BENEFIT PLANS
401(K) SAVINGS PLAN
The Company has established a retirement savings plan under Section 401(k)
of the U.S. Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers
substantially all U.S. based employees of the Company who meet minimum age and
service requirements, and allows participants to defer a portion of their annual
compensation on a pre-tax basis. Matching contributions to the 401(k) Plan may
be made at the discretion of the Company. The Company contributed $132,000,
$175,000 and $227,000 to the 401(k) Plan in the years ended June 30, 1998, 1999
and 2000, respectively.
F-24
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. BENEFIT PLANS (CONTINUED)
SUPERANNUATION PLAN
Employees of the Company's Australian subsidiary are covered by a defined
contribution Superannuation Plan. The Superannuation Plan covers substantially
all Australian employees and, under Australian law, the Company is required to
contribute a fixed percentage of taxable compensation to this plan. The Company
contributed $157,000, $201,000 and $187,000 to the Superannuation Plan in the
years ended June 30, 1998, 1999 and 2000, respectively.
14. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases certain of its office space and certain office equipment
under noncancelable operating leases, which expire at various dates through
2009. In June 2000, the Company entered into a five-year lease for a new
corporate headquarters in Wayland, Massachusetts. The Company also leases
computers and other equipment under capital leases that expire in 2001. Future
minimum lease commitments at June 30, 2000, including the new headquarters
lease, are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING JUNE 30, LEASES LEASES
-------------------- --------- --------
<S> <C> <C>
2001...................................................... $1,274 $11
2002...................................................... 949 --
2003...................................................... 825 --
2004...................................................... 776 --
2005...................................................... 768 --
Thereafter................................................ 652 --
------ ---
$5,244 11
======
Less: portion representing interest....................... 1
---
$10
===
</TABLE>
Total rent expense under these operating leases was $515,000, $664,000 and
$837,000 for the years ended June 30, 1998, 1999 and 2000, respectively.
LITIGATION
On February 17, 1999, the Company filed suit against a former employee and
the individual's then current employer, C-Mold, seeking immediate and permanent
injunctive relief in connection with the theft and misappropriation of the
Company's proprietary trade secrets. The complaint sought permanent injunction
against the defendants, actual, consequential and punitive damages, and recovery
of all legal costs.
During fiscal years 1999 and 2000, the Company incurred legal expenses of
$620,000 and $785,000, respectively, during the prosecution of this litigation.
These expenses have been included in litigation expenses in the consolidated
statement of income.
On April 13, 2000, in connection with the Company's acquisition of C-Mold,
this litigation was dismissed with prejudice by the agreement of all parties.
F-25
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company is engaged in one reportable industry segment: the development,
marketing and support of software products for the plastic design and
manufacturing industry.
The Company licenses its products to customers throughout the world. Sales
and marketing operations outside the United States are conducted principally
through the Company's foreign sales subsidiaries in Europe and Asia.
The Company's principal software development facility is located in
Australia and additional development facilities are located in the United States
and the United Kingdom.
Geographic information regarding the Company's operations was as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
YEAR ENDED JUNE 30, ---------------------------
------------------------------ OCTOBER 2, SEPTEMBER 30,
1998 1999 2000 1999 2000
-------- -------- -------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE FROM UNAFFILIATED CUSTOMERS:
Asia/Australia
Software licenses.......................... $ 2,945 $ 3,156 $ 6,335 $ 808 $1,680
Services................................... 2,067 1,856 2,831 651 917
------- ------- ------- ------ ------
Total Asia/Australia..................... 5,012 5,012 9,166 1,459 2,597
------- ------- ------- ------ ------
USA
Software licenses.......................... 2,443 3,904 3,977 694 1,291
Services................................... 3,078 3,070 3,827 812 1,540
------- ------- ------- ------ ------
Total USA................................ 5,521 6,974 7,804 1,506 2,831
------- ------- ------- ------ ------
Europe
Software licenses.......................... 3,126 5,178 6,430 1,321 2,251
Services................................... 2,730 3,057 3,969 895 1,145
------- ------- ------- ------ ------
Total Europe............................. 5,856 8,235 10,399 2,216 3,396
------- ------- ------- ------ ------
Consolidated
Software licenses.......................... 8,514 12,238 16,742 2,823 5,222
Services................................... 7,875 7,983 10,627 2,358 3,602
------- ------- ------- ------ ------
Total consolidated....................... $16,389 $20,221 $27,369 $5,181 $8,824
======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
------------------------------ OCTOBER 2, SEPTEMBER 30,
1998 1999 2000 1999 2000
-------- -------- -------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
FIXED ASSETS, NET:
Asia/Australia............................. $ 2,325 $ 2,363 $ 2,641 $2,423 $2,580
USA........................................ 396 408 1,736 282 2,270
Europe..................................... 257 339 431 356 420
------- ------- ------- ------ ------
Total consolidated....................... $ 2,978 $ 3,110 $ 4,808 $3,061 $5,270
======= ======= ======= ====== ======
</TABLE>
16. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES--(UNAUDITED)
During the first quarter of fiscal 2001, the Company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
SFAS No. 133 requires that all derivative financial instruments are recorded on
the balance sheet at their fair value. Changes in the fair value of these
derivatives are recorded each period in current earnings or other comprehensive
F-26
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES--(UNAUDITED)
(Continued)
income, depending on whether the instrument is designated as part of a hedge
transaction and, if it is, the type of hedge transaction.
During the first quarter of fiscal 2001, the Company began to hedge a
portion of its forecasted foreign currency denominated intercompany sales over a
period of up to twelve months using currency options. These derivatives have
been designated as cash-flow hedges and, as such, the effective portion of the
change in their fair value is recorded as a component of accumulated other
comprehensive income until the underlying forecasted transaction occurs. Once
the underlying forecasted transaction is realized, the appropriate gain or loss
from the derivative is reclassified from other accumulated comprehensive income
to current earnings as a component of other income and expenses.
At the inception of the hedge transaction and on a quarterly basis, the
Company assesses whether the derivatives that are used in hedging transactions
are highly effective in offsetting the changes in cash flows of the hedged
items. The Company assesses the hedge effectiveness of its currency options
based on changes in the instruments' intrinsic value, which is the value of the
option attributable to the difference between the spot exchange rate and the
option strike exchange rate. Management expects that at the hedge's inception
and through the date of the forecasted sales, the hedge will be effective since
the critical terms of the option contracts match those of the anticipated sales.
Changes to the time value of the option, which is defined as the total fair
value of the option as determined through dealer quotes less the intrinsic
value, is deemed to be an ineffective portion of the hedge and is recorded to
current earnings as a component of other income and expenses. If the Company
determines that a cash flow hedge is no longer probable of occurring or that the
hedged instrument is no longer effective, the Company discontinues hedge
accounting for the affected portion of the forecasted transaction, and any
unrealized gain or loss on the contract is recognized in current earnings as a
component of other income and expenses.
At September 30, 2000, currency options designated as hedging instruments
with notional amounts of $4,268,000 and $2,041,000 to exchange Euros and Yen for
U.S. dollars, respectively, were outstanding. The fair value of the outstanding
options as of September 30, 2000 was $236,000, which has been included in other
current assets. Unrealized gains were $107,000 at September 30, 2000, which the
Company expects to affect earnings over the next twelve months. During the three
months ended September 30, 2000, a net loss of $83,000 related to these hedges
was recorded as a component of other income and expenses. The charge represented
recognition of the ineffective portion of the Company's outstanding options of
$116,000, net of gains of $33,000 on options that settled during the period.
17. SUBSEQUENT EVENTS--(UNAUDITED)
On November 9, 2000, the Company signed a non-binding letter of intent to
acquire certain assets from XBOX Technologies, Inc. The proposed purchase price
includes an initial payment of $500,000 with additional payments to be paid
through June 30, 2005. The amounts of the future consideration are based upon
achievement of certain annual revenue targets and, in total, would range from
$1.0 million to $1.8 million. The transaction is expected to be completed in
December 2000.
On November 10, 2000, the Company sold its facility in Louisville, Kentucky
for proceeds of $1.2 million. In connection with the sale, the Company retired
the outstanding mortgage debt on the property, which was $604,000 as of
September 30, 2000. This facility had been acquired as part of the Company's
purchase of C-Mold, and as such, the $200,000 gain on the sale of this facility
will be recorded as a reduction of the goodwill recorded in connection with the
C-Mold purchase accounting.
F-27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Advanced CAE Technology, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Advanced CAE
Technology, Inc. and its subsidiaries at September 30, 1999 and 1998, and the
results of their operations and their cash flows for the years ended September
30, 1999 and 1998, in conformity with accounting principles generally accepted
in the United States. 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 auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 11, 2000
F-28
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------- MARCH 31,
1998 1999 2000
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $2,600 $2,648 $2,389
Marketable securities..................................... 393 521 --
Accounts receivable, net of allowance for doubtful
accounts of $189, $185 and $175 at September 30, 1998
and 1999 and March 31, 2000 (unaudited), respectively... 1,360 1,056 1,340
Refundable income taxes................................... 126 61 61
Prepaids and other current assets......................... 255 285 283
Deferred taxes............................................ 71 187 54
------ ------ ------
Total current assets.................................... 4,805 4,758 4,127
Fixed assets, net........................................... 2,469 2,394 2,263
Other assets................................................ 80 384 337
------ ------ ------
Total assets............................................ $7,354 $7,536 $6,727
====== ====== ======
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt......................... $ 46 $ 48 $ 48
Accounts payable.......................................... 72 177 153
Accrued expenses.......................................... 705 773 574
Deferred revenue.......................................... 1,255 1,660 1,532
------ ------ ------
Total current liabilities............................... 2,078 2,658 2,307
Long term debt, net of current portion...................... 1,112 1,097 1,092
Other liabilities........................................... 11 11 1
------ ------ ------
Total liabilities....................................... 3,201 3,766 3,400
------ ------ ------
Minority interest........................................... 296 337 332
------ ------ ------
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $0.001 par value; 10,000,000 shares
authorized; 4,111,326, 4,113,476 and 4,347,970 shares
issued and 3,979,374, 3,946,303 and 3,971,032 shares
outstanding, at September 30, 1998 and 1999 and March
31, 2000 (unaudited), respectively...................... 4 4 4
Additional paid-in capital................................ 628 706 799
Retained earnings......................................... 3,411 2,747 2,596
Accumulated other comprehensive income.................... 11 230 (123)
Treasury stock............................................ (197) (254) (281)
------ ------ ------
Total stockholders' equity.............................. 3,857 3,433 2,995
------ ------ ------
Total liabilities, minority interest and stockholders'
equity................................................ $7,354 $7,536 $6,727
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-29
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
------------------- -------------------
1998 1999 1999 2000
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Software licenses....................................... $3,919 $3,772 $1,777 $1,529
Services................................................ 3,417 3,896 1,979 2,217
------ ------ ------ ------
Total revenue......................................... 7,336 7,668 3,756 3,746
------ ------ ------ ------
Costs and expenses:
Cost of software licenses revenue....................... 122 149 72 151
Cost of services revenue................................ 1,437 1,635 817 763
Research and development................................ 1,155 1,314 618 934
Selling and marketing................................... 2,924 3,389 1,593 1,692
General and administrative.............................. 1,127 1,416 867 481
Litigation.............................................. -- 490 70 478
------ ------ ------ ------
Total operating expenses.............................. 6,765 8,393 4,037 4,499
------ ------ ------ ------
Income (loss) from operations............................. 571 (725) (281) (753)
Interest income........................................... 99 100 48 25
Interest expense.......................................... (164) (157) (26) (26)
Other income (loss), net.................................. (7) (18) (15) 524
------ ------ ------ ------
Income (loss) before income taxes and minority
interest............................................ 499 (800) (274) (230)
Provision (benefit) for income taxes...................... 138 (209) (165) (103)
------ ------ ------ ------
Income (loss) before minority interest.................. 361 (591) (109) (127)
Minority interest in income of consolidated
subsidiaries............................................ 54 73 24 24
------ ------ ------ ------
Net income (loss)......................................... $ 307 $ (664) $ (133) $ (151)
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER COMPREHENSIVE
--------------------- PAID-IN RETAINED COMPREHENSIVE INCOME
SHARES PAR VALUE CAPITAL EARNINGS INCOME (LOSS)
--------- --------- ---------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1997............... 3,960,524 $4 $458 $3,156 $ 176
Purchase of treasury stock.................. (63,028)
Stock donation.............................. 72
Issuance of common stock under employee
stock purchase plan....................... 81,878 -- 98
Cash distribution........................... (52)
Comprehensive income (loss):
Net income................................ 307 $ 307
Unrealized loss on marketable
securities.............................. (5) (5)
Foreign currency translation adjustment... (160) (160)
-----
Total comprehensive income................ 142
--------- -- ---- ------ ----- =====
Balance at September 30, 1998............... 3,979,374 4 628 3,411 11
Purchase of treasury stock.................. (35,221)
Stock donation.............................. 75
Issuance of common stock under employee
stock purchase plan....................... 2,150 -- 3
Comprehensive income (loss):
Net loss.................................. (664) (664)
Unrealized gain on marketable
securities.............................. 129 129
Foreign currency translation adjustment... 90 90
-----
Total comprehensive loss.................. (445)
--------- -- ---- ------ ----- =====
Balance at September 30, 1999............... 3,946,303 4 706 2,747 230
Purchase of treasury stock (unaudited)...... (20,902)
Stock donation (unaudited).................. -- 62
Issuance of common stock under employee
stock purchase plan (unaudited)........... 45,631 -- 31
Comprehensive income (loss):
Net loss (unaudited)...................... (151) (151)
Recognition of previously unrealized gain
on marketable securities (unaudited).... (321) (321)
Foreign currency translation adjustment
(unaudited)............................. (32) (32)
-----
Total comprehensive income (unaudited).... $(504)
--------- -- ---- ------ ----- =====
Balance at March 31, 2000 (unaudited)....... 3,971,032 $4 $799 $2,596 $(123)
========= == ==== ====== =====
<CAPTION>
TOTAL
TREASURY STOCKHOLDERS'
STOCK EQUITY
--------- -------------
<S> <C> <C>
Balance at September 30, 1997............... $(100) $3,694
Purchase of treasury stock.................. (97) (97)
Stock donation.............................. 72
Issuance of common stock under employee
stock purchase plan....................... 98
Cash distribution........................... (52)
Comprehensive income (loss):
Net income................................ 307
Unrealized loss on marketable
securities.............................. (5)
Foreign currency translation adjustment... (160)
Total comprehensive income................
----- ------
Balance at September 30, 1998............... (197) 3,857
Purchase of treasury stock.................. (57) (57)
Stock donation.............................. 75
Issuance of common stock under employee
stock purchase plan....................... 3
Comprehensive income (loss):
Net loss.................................. (664)
Unrealized gain on marketable
securities.............................. 129
Foreign currency translation adjustment... 90
Total comprehensive loss..................
----- ------
Balance at September 30, 1999............... (254) 3,433
Purchase of treasury stock (unaudited)...... (27) (27)
Stock donation (unaudited).................. 62
Issuance of common stock under employee
stock purchase plan (unaudited)........... 31
Comprehensive income (loss):
Net loss (unaudited)...................... (151)
Recognition of previously unrealized gain
on marketable securities (unaudited).... (321)
Foreign currency translation adjustment
(unaudited)............................. (32)
Total comprehensive income (unaudited)....
----- ------
Balance at March 31, 2000 (unaudited)....... $(281) $2,995
===== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
------------------- -------------------
1998 1999 1999 2000
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 307 $ (664) $ (133) $ (151)
Adjustments to reconcile to net cash used:
Stock donation expense.................................. 72 75 75 62
Depreciation and amortization........................... 292 307 138 165
Deferred taxes.......................................... 57 (247) 24 133
Minority interest income................................ 54 72 24 24
Provision for doubtful accounts......................... (10) (6) (6) (6)
Realized (gain) loss on marketable securities........... (5) -- -- (544)
Changes in assets and liabilities:
Accounts receivable................................... (31) 306 (39) (284)
Prepaid expenses and other current assets............. (33) 35 (125) 2
Accounts payable...................................... (113) 107 7 (24)
Accrued expenses...................................... 80 183 (137) (199)
Deferred revenue...................................... 87 295 149 (128)
Other assets.......................................... 22 (178) (289) 47
------ ------ ------ ------
Net cash provided by (used in) operating
activities.......................................... 779 285 (312) (903)
------ ------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets................................. (214) (198) (90) (34)
Sale of marketable securities............................. 307 -- -- 744
------ ------ ------ ------
Net cash provided by (used in) investing
activities.......................................... 93 (198) (90) 710
------ ------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt................................ (121) (13) (2) (5)
Partnership distributions................................. (23) (23) -- --
Repurchase of common stock................................ (97) (56) (49) (27)
Proceeds from issuance of common stock.................... 98 3 -- 31
------ ------ ------ ------
Net cash used in financing activities............... (143) (89) (51) (1)
------ ------ ------ ------
Effect of exchange rate changes on cash and cash
equivalents............................................... 8 50 (50) (65)
------ ------ ------ ------
NET INCREASE (DECREASE) IN CASH............................. 737 48 (503) (259)
Cash and cash equivalents, beginning of period.............. 1,863 2,600 2,600 2,648
------ ------ ------ ------
Cash and cash equivalents, end of period.................... $2,600 $2,648 $2,097 $2,389
====== ====== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 157 $ 164 $ 48 $ 57
Cash paid for income taxes................................ 106 10 9 9
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS
Advanced CAE Technology, Inc., doing business as C-Mold (the "Company"), was
incorporated in New York, USA, in February 1986. The Company is engaged in the
development and sale of software for plastic injection molding simulation in the
polymer processing industry. The Company sells its products primarily to
customers in the United States, Europe and Asia.
The Company's fiscal year end is September 30. References to 1997, 1998 or
1999 mean the fiscal year ended September 30, unless otherwise indicated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries: AC Technology Europe B.V., Plastic Moulding
Consultants, Ltd., C-MOLD Singapore Pte. Ltd. and C-MOLD Scandinavia A.B.; its
99 percent-owned subsidiary, Advanced CAE Technology Pacific; its
84 percent-owned subsidiary, AC Technology Enterprise, Ltd.; and its
28 percent-owned subsidiary, ACT Partnership, which is consolidated because it
is controlled by the Company. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements as of March 31, 2000 and for
the six month periods ended March 31, 1999 and 2000 are unaudited. In the
opinion of the Company's management, the unaudited interim consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for these interim periods. The results of
operations for the six months ended March 31, 2000 are not necessarily
indicative of the results of operations for the year ended September 30, 2000 or
any other future period.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of international subsidiaries, whose functional
currency is the local currency, are translated at the rates in effect at the
balance sheet date and translation adjustments are recorded in stockholders'
equity. Statement of operations amounts are translated at the average rate for
the year. Foreign currency transaction gains and losses are included in other
income and expense.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. Accordingly, these items are subject
to minimal credit and market risk and are reported at cost, which approximates
fair value.
MARKETABLE SECURITIES
All of the Company's marketable securities are classified as
available-for-sale securities and are valued at market value at September 30,
1998 and 1999. Unrealized gains and losses on these
F-33
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
securities are included as components of comprehensive income and are reflected
in the consolidated statement of stockholders' equity.
ACCOUNTS RECEIVABLE, CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments that potentially expose the Company to concentrations
of credit risk include accounts receivable. The Company's customer base consists
of a large number of geographically dispersed customers. The Company maintains
reserves for potential credit losses on accounts receivable and such losses, in
the aggregate, have not exceeded management expectations.
Revenue of $1,286,000 (18% of total revenue) and $773,000 (10% of total
revenue) was attributable to one customer in fiscal 1998 and 1999, respectively.
At September 30, 1998 and 1999, accounts receivable from that customer accounted
for $353,000 (23% of total accounts receivable) and $81,000 (7% of total
accounts receivable), respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
marketable securities, accounts receivable, accounts payable, accrued expenses,
deferred revenue and debt. The carrying amounts of these instruments at
September 30, 1998 and 1999 approximate their fair values.
FIXED ASSETS
Fixed assets are recorded at cost and are depreciated using an accelerated
method over their estimated useful lives.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of," the Company records impairment losses on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Through September 30, 1999, the Company had not
recognized an impairment loss on its long-lived assets.
REVENUE RECOGNITION
Revenue is derived from the licensing of computer software products and from
services consisting of maintenance and support, consulting, material testing and
training. The Company has adopted the guidelines of Statement of Position 97-2,
"Software Revenue Recognition" ("SoP 97-2"), which provides guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions.
The Company recognizes revenue from sales of software licenses upon product
shipment and upon receipt of a signed purchase order or contract, provided that
the license fee is fixed and determinable, collection is probable and all other
revenue recognition criteria of SoP 97-2 are met. The Company's software
products do not require significant modification or customization.
F-34
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Installation of the products is generally routine, requires insignificant effort
and is not essential to the functionality of the product. The Company recognizes
revenue from maintenance and support ratably over the contract period and from
training and other related services as the services are performed.
SOFTWARE DEVELOPMENT COSTS
Costs associated with the research and development of the Company's products
are expensed as incurred. Costs associated with the development of computer
software are expensed prior to establishing technological feasibility, as
defined by SFAS No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed," and capitalized thereafter until
commercial release of the software products. Software development costs eligible
for capitalization have not been significant to date.
ADVERTISING COSTS
The Company expenses as incurred costs of producing advertising and
sales-related collateral materials. Other production costs associated with
direct mail programs, placement costs associated with magazine or other printed
media and all direct costs associated with trade shows and other sales related
events are expensed when the related direct mail is sent, advertising space is
used or the event is held. Advertising expense for the years ended
September 30, 1998 and 1999 was $60,000 and $67,000, respectively.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation to employees in accordance
with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees," and related interpretation. Accordingly, compensation
expense is recorded for options issued to employees in fixed amounts to the
extent that the fixed exercise prices are less than the fair market value of the
Company's common stock at the date of grant. The Company follows the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation"
(Note 8). All stock-based awards to non-employees are accounted for at their
fair value in accordance with SFAS No. 123.
SEGMENT AND GEOGRAPHIC INFORMATION
The Company has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" (Note 15). SFAS No. 131 establishes
standards for reporting information on operating segments in interim and annual
financial statements. SFAS No. 131 relates to disclosure only and had no impact
on the Company's consolidated financial position or results of operations.
COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income."
Under SFAS No. 130, the Company is required to display comprehensive income and
its components as part of the Company's full set of financial statements. The
measurement and presentation of net income did not change. Comprehensive income
is comprised of net income and other comprehensive income. Other comprehensive
income includes certain changes in equity that are excluded from net
F-35
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income. At September 30, 1999, accumulated other comprehensive income was
comprised of cumulative foreign currency translation adjustments and unrealized
gains and losses on marketable securities. The individual components of
comprehensive income are reflected in the consolidated statement of
stockholders' equity for the years ended September 30, 1997, 1998 and 1999.
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 98-9, "Modification of SOP No. 97-2, Software Revenue Recognition, with
Respect to Certain Transactions" ("SOP 98-9"). SOP 98-9 amends SOP 97-2 to
require recognition of revenue using the "residual method" in circumstances
outlined in SOP 98-9. Under the residual method, revenue is recognized as
follows: (1) the total fair value of undelivered elements, as indicated by
vendor specific objective evidence, is deferred and subsequently recognized in
accordance with the relevant sections of SOP 97-2 and (2) the difference between
the total arrangement fee and the amount deferred for the undelivered elements
is recognized as revenue related to the delivered elements. SOP 98-9 is
effective for transactions entered in fiscal years beginning after March 15,
1999 (fiscal 2000 for the Company). Also, the provisions of SOP 97-2 that were
deferred by SOP 98-4 will continue to be deferred until the date SOP 98-9
becomes effective. The Company does not expect that the adoption of SOP 98-9
will have a significant impact on the Company's results of operations or
financial position.
In June 1998, the Financial Accounting Standard Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as "derivatives"), and for hedging
activities. SFAS 133, as amended by SFAS 137, is effective for all fiscal
quarters of all years beginning after June 15, 2000, with earlier application
encouraged. The Company does not currently use derivative instruments or engage
in hedging activities.
F-36
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. MARKETABLE SECURITIES
The amortized cost and estimated market value of marketable securities were
as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Amortized cost.............................................. $200 $200
Gross unrealized gains...................................... 193 321
---- ----
Market value................................................ $393 $521
==== ====
</TABLE>
UNAUDITED--During the three months ended March 31, 2000, the Company
sold its marketable securities for proceeds of $744,000, resulting in a
recognized gain of $544,000.
4. FIXED ASSETS
Fixed assets consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL SEPTEMBER 30,
LIFE -------------------
(YEARS) 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Land............................................ -- $ 531 $ 555
Buildings and improvements...................... 7 - 39 1,694 1,709
Laboratory equipment............................ 5 308 310
Computer equipment.............................. 5 1,269 1,252
Furniture and fixtures.......................... 7 562 574
Software........................................ 3 130 201
------ -------
4,494 4,601
Less--accumulated depreciation and
amortization.................................. (2,025) (2,207)
------ -------
$2,469 $ 2,394
====== =======
</TABLE>
Total depreciation and amortization expense was $292,000 and $307,000 for
the years ended September 30, 1998 and 1999, respectively.
5. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Accrued commissions......................................... $ 33 $ 60
Accrued payroll and vacation................................ 180 212
Accrued income tax payable.................................. 118 50
Other accrued expenses...................................... 374 451
---- ----
$705 $773
==== ====
</TABLE>
F-37
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG TERM DEBT
Long term debt consists of a mortgage loan on the Ithaca, New York facility,
a term loan on the Louisville, Kentucky facility and a mortgage loan on the
Taipei, Taiwan facility.
The mortgage loan for the Ithaca facility is a 30-year mortgage for $328,000
due in 2019. The unpaid balance on the mortgage loan was $233,000 at
September 30, 1999. The interest rate on the mortgage loan is adjustable
annually and is set 300 basis points over the one-year Treasury bill rate (8.0%
at September 30, 1999). Monthly interest and principal payments are $2,000. The
mortgage loan is guaranteed up to approximately $100,000 by certain officers of
the Company. The mortgage is secured by all real property in Ithaca. The
mortgage also contains certain subjective covenants including a material adverse
change clause. The Company was in compliance with these covenants at
September 30, 1999.
During 1994, the Company entered into a Revised and Replacement Letter loan
agreement (the Agreement) with a bank. The Agreement made available to the
Company a 10-year term loan due in 2005 for an amount not to exceed $650,000.
The unpaid balance was $621,000 at September 30, 1999. The purpose of the
Agreement was to finance the construction of the Company's facility in
Louisville. The Agreement has an adjustable interest rate defined at the prime
rate (8.25% at September 30, 1999). The Agreement is to be repaid in equal
monthly payments of $6,000. Each payment will be applied first to interest with
the remainder applied to principal. Based on the current monthly payments of
$6,000 and an interest rate of 8.25%, the Company will be required to make a
final payment of approximately $490,000 in the year 2005. The Agreement is
secured by the real property located in Louisville. The Company was in
compliance with the related debt covenants at September 30, 1999.
The mortgage loan for the Taiwan facility was refinanced during fiscal 1997
and is due in 2012. At September 30, 1999, the unpaid balance on the mortgage
was $291,000. The interest rate on the mortgage loan is adjusted annually (8.4%
at September 30, 1999). Monthly interest and principal payments are $4,000. The
mortgage loan is secured with the property of a subsidiary of the Company.
Future principal payments for long-term debt as of September 30, 1999 are as
follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
2000........................................................ $ 48
2001........................................................ 52
2002........................................................ 57
2003........................................................ 62
2004........................................................ 67
Thereafter.................................................. 858
------
1,145
Less: current portion....................................... 48
------
$1,097
======
</TABLE>
F-38
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMON STOCK
Each share of the Company's $0.001 par value common stock entitles the
holder to one vote on all matters submitted to a vote of the Company's
stockholders. Common stockholders are entitled to dividends when and if declared
by the board of directors.
In October 1995, a founding stockholder of the Company donated
238,000 shares of common stock back to the Company for distribution to its
employees. The shares are to be equally divided over five consecutive years and
distributed equally to eligible employees. These distributions were effected on
January 1, 1996, 1997, 1998 and 1999 and the final distribution will be made on
January 1, 2000. If an employee decides not to accept the donated shares, those
shares will carryover and be evenly distributed over the remaining years. Any
unclaimed shares in the year 2000 will be returned to the donor. As of
September 30 1999, 46,654 shares remain undistributed.
During 1998 and 1999, the Company repurchased 63,028 and 35,221 shares,
respectively, of common stock from existing stockholders for $97,000 and
$57,000, respectively. As of September 30, 1999, the Company had repurchased an
aggregate of 167,173 shares for treasury.
8. STOCK OPTION PLAN
In fiscal 1992, the Company adopted the Advanced CAE Technology, Inc. Stock
Option Plan (the "Plan") which provides for the grant of incentive stock
options, non-qualified stock options, stock awards and stock purchase rights for
the purchase of up to 2,000,000 shares of the Company's common stock by
officers, employees, consultants and directors of the Company. The Board of
Directors is responsible for administration of the Plan. The term of each option
shall be determined by a committee selected by the Board of Directors, but in no
event shall an option be exercisable after the expiration of 5 years from the
date on which it is granted. Each option may include, at the discretion of the
committee, a vesting period following the grant of any option during which all
or any part of such option remains forfeitable and cannot be exercised. All
options shall provide for full and immediate vesting in the event that the
Company disposes of all or substantially all of its assets as an entity and
dissolves, consolidates or merges into another corporation and not be the
resulting or surviving corporation. The Board of Directors of the Company may at
any time suspend or terminate the Plan or may amend it from time to time.
Under APB 25, no compensation cost has been recognized for employee
stock-based compensation for the years ended September 30, 1998 and 1999. Had
compensation cost been determined based on the fair value at the grant dates for
awards in 1998 and 1999 consistent with the provisions of SFAS No. 123, the
Company's net income (loss) would have been the pro forma amounts indicated
below. Because options vest over several years and additional option grants are
expected to be made in future years, the pro forma results are not
representative of the pro forma results for future years.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1998 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss):
As reported...................................... $307 $(664)
Pro forma........................................ 264 (690)
</TABLE>
F-39
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTION PLAN (CONTINUED)
The fair value of each option grant was estimated on the date of grant under
the minimum value method using the Black-Scholes option-pricing model with the
following assumptions for grants: no dividend yield; volatility of 0.001%;
risk-free interest rates of 5.1% and 5.1% for 1998 and 1999, respectively; and
expected option life of 5 years.
A summary of the status of the Company's stock options as of September 30,
1998 and 1999 and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1998 1999
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year................ 526,769 $1.35 350,719 $1.46
Granted......................................... 35,800 1.58 21,200 1.60
Exercised....................................... (173,800) 1.17 (3,913) 1.48
Canceled........................................ (38,050) 1.49 (9,788) 1.56
---------- ----------
Outstanding at end of year...................... 350,719 1.46 358,218 1.46
========== ==========
Options exercisable at end of year.............. 146,427 233,343
Weighted average fair value of options granted
during the year............................... $ 1.22 $ 1.23
Options available for future grant.............. 1,649,283 1,641,784
</TABLE>
The following table summarizes information about stock options outstanding
at September 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
LIFE SHARES
SHARES (YEARS) EXERCISABLE
EXERCISE PRICE -------- ----------- -----------
<S> <C> <C> <C>
$1.20 - 1.32................................................ 96,418 1.03 96,418
$1.50 - 1.53................................................ 219,400 2.38 129,025
$1.60....................................................... 42,400 4.13 7,900
------- -------
$1.20 - $1.60............................................... 358,218 2.22 233,343
======= =======
</TABLE>
F-40
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
Income (loss) before income taxes and minority interest consists of the
following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Domestic.................................................... $241 $(1,029)
Foreign..................................................... 258 229
---- -------
$499 $ (800)
</TABLE>
The income tax provision (benefit) consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Current:
Federal................................................... $ 21 $ (70)
State..................................................... 23 49
Foreign................................................... 56 59
---- -----
Total current............................................. 100 38
---- -----
Deferred:
Federal................................................... 48 (210)
State..................................................... (10) (37)
---- -----
Total deferred taxes (benefit)............................ 38 (247)
---- -----
Total taxes (benefit)..................................... $138 $(209)
==== =====
</TABLE>
The reconciliation of the provision for income taxes computed at the U.S.
federal statutory tax rate to the actual provision is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Statutory federal rate of 34%............................... $170 $(272)
State income taxes, net of federal effect................... 9 8
Foreign tax rate differential............................... (32) (19)
Permanent differences....................................... 1 12
Change in valuation allowance............................... 30 81
Other....................................................... (40) (19)
---- -----
$138 $(209)
==== =====
</TABLE>
F-41
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
Net deferred tax assets consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ -- $ 194
Tax credits............................................... 234 349
Accrued expenses not deductible for tax purposes.......... 79 109
Other..................................................... 5 8
-------- --------
Gross deferred tax assets............................... 318 660
Deferred tax asset valuation allowance...................... (230) (311)
-------- --------
Total deferred tax assets................................. 88 349
Deferred tax liabilities.................................... (4) (18)
-------- --------
Net deferred tax assets................................... 84 331
======== ========
</TABLE>
Under generally accepted accounting principles, the benefit associated with
future deductible differences is recognized if it is more likely than not that
the benefit will be realized. Management believes that, based on the Company's
historical results of operations, it is more likely than not that a portion of
the Company's deferred tax assets will not be realized. Accordingly, the Company
has recorded a valuation allowance of $230,000 and $311,000 at September 30,
1998 and 1999, respectively. Management believes that the net deferred tax asset
represents management's best estimate, based upon the weight of available
evidence, of the deferred tax asset that will be realized. If such evidence were
to change, based upon near-term operating results and longer-term projections,
the amount of the valuation allowance recorded against the gross deferred tax
asset may be decreased or increased.
As of September 30, 1999, the Company has approximately $293,000 in foreign
tax credits available to offset future income tax and $500,000 in federal net
operating loss carryforwards to offset future taxable income, which begin to
expire in 2019. Under the provisions of the U.S. Internal Revenue Code, certain
substantial changes in the Company's ownership may limit the amount of federal
net operating loss carryforwards and tax credit carryforwards which could be
utilized annually to offset future federal taxable income and taxes payable.
No provision was made in fiscal 1999 for U.S. income taxes on the
undistributed earnings of the foreign subsidiaries, as it is the Company's
intention to utilize those earnings in the foreign operations.
10. BENEFIT PLANS
401(K) SAVINGS PLAN
The Company has established a retirement savings plan under Section 401(k)
of the U.S. Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers
substantially all U.S. based employees of the Company who meet minimum age and
service requirements and allows participants to defer a portion of their annual
compensation on a pre-tax basis. Company contributions to the 401(k) Plan may be
made at the discretion of the Board of Directors. Employer contributions were
$23,000 and $20,000 for the years ending September 30, 1998 and 1999,
respectively. Company contributions to the plan are vested according to the
following schedule: 20 percent after two years of service and an additional
20 percent in each successive year. After six years of service, employees are
100 percent vested.
F-42
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. BENEFIT PLANS (CONTINUED)
PROFIT SHARING PLAN
The Company sponsors a profit sharing plan for all eligible employees. The
amount and distribution of profit sharing is at the sole discretion of the Board
of Directors. Profit sharing expense was $80,000 and $0 for the years ending
September 30, 1998 and 1999, respectively.
BONUS PLAN
The Company also sponsors a bonus plan for employees who, during the
preceding 12 months, have performed substantially above and beyond their
expected level of performance. The amount and distribution of these bonuses is
at the sole discretion of the Board of Directors. The Company paid $3,000 and $0
for the years ending September 30, 1998 and 1999, respectively.
11. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases certain equipment under non-cancelable operating leases
that expire at various dates through 2001. Lease expense for the years ended
September 30, 1998 and 1999 under these leases was $110,000 and $59,000,
respectively.
Future minimum annual lease payments as of September 30, 1999 are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
-------------------------
<S> <C>
2000.................................................. $34
2001.................................................. 1
---
$35
===
</TABLE>
LITIGATION
On February 17, 1999, suit was filed against the Company and one of its
employees by a competitor. The plaintiff is seeking immediate and permanent
injunctive relief in connection with the alleged theft and misappropriation of
the competitor's proprietary trade secrets. Specifically, the suit alleges,
among other things, (i) misappropriation of trade secrets, proprietary
information, unfair competition and civil conspiracy, (ii) breach of contract,
implied covenant of good faith and fiduciary duty, and (iii) fraud against the
individual in his actions to breach his fiduciary duties. The complaint seeks a
permanent injunction against the Company, actual, consequential and punitive
damages, and recovery of all legal costs.
Counterclaims, and amendments thereto, have been filed by the Company,
alleging that the competitor (i) breached certain federal antitrust laws and
(ii) committed defamation and trade libel. The competitor has moved to dismiss
these amended counterclaims.
Through February 11, 2000, based on the stage of developments with the
claims asserted against the Company and the Company's counterclaims, the Company
has not been able to reasonably estimate the amount of possible losses, if any,
related to this litigation. On February 11, 2000, the Company entered a
definitive agreement to be acquired by the counterparty in this litigation
(Note 13). Accordingly, this litigation is being held in abeyance in connection
with the pending acquisition. If the acquisition is completed, this litigation
will be dismissed with prejudice by the agreement of all parties. If for any
reason the acquisition is not completed, management expects that the litigation
will resume.
F-43
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SEGMENT AND GEOGRAPHIC INFORMATION
The Company conducts and manages its business in one industry segment: the
development, marketing and support of software products for plastic injection
molding simulation in the polymer processing industry.
The Company licenses its products to customers throughout the world. Sales
and marketing operations outside the United States are conducted principally
through the Company's international sales subsidiaries in Europe and Asia. The
Company's principal software development facility is located in Ithaca, New
York.
Geographic information regarding the Company's operations was as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
---------------------------------------------
USA EUROPE ASIA CONSOLIDATED
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenue from unaffiliated customers:
Software licenses......................................... $2,150 $1,181 $588 $3,919
Services.................................................. 2,712 520 185 3,417
------ ------ ---- ------
Total................................................... $4,862 $1,701 $773 $7,336
====== ====== ==== ======
Fixed assets, net........................................... $1,899 $ 67 $503 $2,469
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999
---------------------------------------------
USA EUROPE ASIA CONSOLIDATED
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenue from unaffiliated customers:
Software licenses......................................... $1,802 $1,343 $627 $3,772
Services.................................................. 2,890 797 209 3,896
------ ------ ---- ------
Total................................................... $4,692 $2,140 $836 $7,668
====== ====== ==== ======
Fixed assets, net........................................... $1,788 $ 80 $526 $2,394
</TABLE>
Revenues above for the USA include $1,344,000 and $806,000 of export sales
in the years ended September 30, 1998 and 1999, respectively.
13. SUBSEQUENT EVENT--ACQUISITION
On February 11, 2000, the Company entered into a definitive agreement to be
acquired by Moldflow Corporation ("Moldflow.") The purchase price will be
$11.0 million in cash. Completion of the acquisition is subject to satisfaction
of a number of conditions, including Moldflow's ability to obtain satisfactory
financing for the transaction.
UNAUDITED--On April 13, 2000, the acquisition was completed and the Company
became a wholly-owned subsidiary of Moldflow.
F-44
<PAGE>
MOLDFLOW CORPORATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
BASIS OF PRESENTATION
The following unaudited pro forma combined statement of operations gives
effect to the April 13, 2000 acquisition by Moldflow Corporation (the "Company")
of all of the stock of Advanced CAE Technology, Inc., which formerly conducted
business as "C-Mold," as if it had occurred on July 1, 1999. This statement is
based on the actual historical financial statements of the Company and C-Mold,
and the estimates and assumptions set forth below and in the notes to the
unaudited pro forma combined financial information.
The Company's fiscal year ends on June 30 while C-Mold's fiscal year ended
on September 30. The unaudited pro forma combined statement of operations for
the year ended June 30, 2000 combines the Company's and C-Mold's actual results
for the twelve months ended June 30, 2000.
The acquisition was accounted for using the purchase method of accounting
and accordingly, the purchase price was allocated to the assets acquired,
including identifiable intangible assets, and liabilities assumed based upon
management's estimates of fair value, with any excess purchase price being
allocated to goodwill.
The pro forma adjustments are based upon estimates, currently available
information and certain assumptions that management deems appropriate. The
unaudited pro forma combined financial information presented herein is not
necessarily indicative of the historical results the Company would have obtained
had the acquisition occurred on July 1, 1999, as assumed for purposes of the
combined statement of operations, or of the future results of the Company. The
unaudited pro forma combined financial information should be read in conjunction
with the audited financial statements and notes thereto of each of the Company
and C-Mold included elsewhere in this prospectus.
F-45
<PAGE>
MOLDFLOW CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MOLDFLOW PRO FORMA
CORPORATION C-MOLD (A) ADJUSTMENTS COMBINED
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Software licenses............................ $16,742 $2,670 $ -- $19,412
Services..................................... 10,627 3,456 -- 14,083
------- ------ ------- -------
Total revenue.............................. 27,369 6,126 -- 33,495
------- ------ ------- -------
Costs and expenses:
Cost of software licenses revenue............ 785 233 -- 1,018
Cost of services revenue..................... 1,057 1,313 -- 2,370
Research and development..................... 4,074 1,373 -- 5,447
Selling and marketing........................ 13,495 2,358 -- 15,853
General and administrative................... 5,018 820 -- 5,838
Litigation................................... 785 751 -- 1,536
Nonrecurring charges......................... 284 -- (214)(b) 70
Amortization of goodwill and other intangible
assets..................................... 311 -- 1,159 (c) 1,470
------- ------ ------- -------
Total operating expenses................... 25,809 6,848 945 33,602
------- ------ ------- -------
Income (loss) from operations.................. 1,560 (722) (945) (107)
Interest and other income (expense), net....... 2,144 396 -- 2,540
------- ------ ------- -------
Income (loss) before income taxes and
minority interest........................ 3,704 (326) (945) 2,433
Minority interest in income of consolidated
subsidiaries................................. -- 36 (36)(d) --
Provision (benefit) for income taxes........... 251 92 27 370
------- ------ ------- -------
Net income (loss)............................ $ 3,453 $ (454) $ (936) $ 2,063
======= ====== ======= =======
Net income per common share (e):
Basic........................................ $ 1.29 $ 0.62
Diluted...................................... $ 0.48 $ 0.26
Shares used in computing net income
per common share (e):
Basic........................................ 2,667 3,305
Diluted...................................... 7,190 7,828
</TABLE>
The above unaudited pro forma combined statement of operations has been
prepared as if the acquisition had occurred on July 1, 1999 and reflects the
following pro forma adjustments and the related tax effects:
(a) To include the actual results of operations of C-Mold for the period
July 1, 1999 through April 13, 2000, the date of the acquisition.
(b) To eliminate the nonrecurring charge for acquired in-process research
and development.
(c) To reflect amortization of the acquired goodwill and other intangible
assets for a full year.
(d) To eliminate the minority interest in C-Mold which no longer exists
following the acquisition.
(e) To reflect the issuance of 861,538 shares of common stock, at an initial
public offering price of $13.00 per share, to fund the acquisition as if
such shares were issued on July 1, 1999.
F-46
<PAGE>
2,335,000 Shares
[LOGO]
Common Stock
---------------------
PROSPECTUS
---------------------
ADAMS, HARKNESS & HILL, INC.
ROBERT W. BAIRD & CO.
A.G. EDWARDS & SONS, INC.
-----------------
, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
----------------- ---------
<S> <C>
SEC Registration Fee........................................ $ 17,921
NASD Filing Fee............................................. 7,498
Nasdaq National Market Listing Fee.......................... 17,500
Accounting Fees and Expenses................................ 100,000
Legal Fees and Expenses..................................... 150,000
Printing Expenses........................................... 150,000
Blue Sky Qualification Fees and Expenses.................... 15,000
Transfer Agent's Fee........................................ 5,000
Miscellaneous............................................... 37,081
--------
TOTAL..................................................... $500,000
========
</TABLE>
The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq National
Market fees, are in each case estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our certificate of incorporation provides that no director of
Moldflow shall be personally liable to Moldflow or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(1) for any breach of the director's duty of loyalty to Moldflow or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) in respect of unlawful
dividend payments or stock redemptions or repurchases, or (4) for any
transaction from which the director derived an improper personal benefit. In
addition, our third amended and restated certificate of incorporation provides
that if the Delaware General Corporation Law is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Article V of our by-laws provides for indemnification by Moldflow of its
officers and certain non-officer employees under certain circumstances against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement, reasonably incurred in connection with the defense or settlement of
any threatened, pending or completed legal proceeding in which any such person
is involved by reason of the fact that such person is or was an officer or
employee of the registrant if such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
Moldflow, and, with respect to criminal actions or proceedings, if such person
had no reasonable cause to believe his or her conduct was unlawful.
We have entered into indemnification agreements with each of our directors
which provide that we will indemnify our directors for expenses incurred because
of their status as a director to the fullest extent permitted by Delaware law,
our certificate of incorporation and our by-laws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number
of shares of capital stock issued by us since our formation. Also included is
the consideration, if any, received by us for such shares. There was no public
offering in any such transaction and we believe that each
II-1
<PAGE>
transaction was exempt from the registration requirements of the Securities Act
of 1933, as amended, by reason of Section 4(2) thereof, based on the private
nature of the transactions and the financial sophistication of the purchasers,
all of whom had access to complete information concerning us and acquired the
securities for investment and not with a view to the distribution thereof. In
addition, we believe that the transactions described below with respect to
issuances and option grants to our employees and consultants were exempt from
the registration requirements of said Act by reason of Rule 701 promulgated
thereunder.
(a) Issuance of Capital Stock
(i) In August 1997, in connection with our reorganization we issued
2,039,006 shares of its common stock, 2,870,160 shares of its
series A convertible preferred stock and 277,777 shares of its
series B convertible preferred stock to the shareholders of
Moldflow International Pty. Ltd., an Australian corporation, in
exchange for all of the outstanding capital stock of Moldflow
International.
(ii) In March 1998, our shares of common stock, series A convertible
preferred stock and series B convertible preferred stock were
redesignated as series C-1 convertible preferred stock,
series C-2 convertible preferred stock and series C-3 convertible
preferred stock.
(iii) In April 1998, we granted warrants to purchase 20,833 shares of
common stock to Silicon Valley Bank at an exercise price of $7.20
per share.
(iv) In July 1998, we sold 551,287 shares of common stock for an
aggregate purchase price of $198,463.35 which was paid by
promissory notes. These shares are subject to stock restriction
agreements.
(v) In July 1998, we issued 291,087 shares of series C-3 convertible
preferred stock in connection with the conversion into equity of
the outstanding principal balance of approximately $890,000 under
stockholder loan agreements.
(vi) In April 1999, we issued 327 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$117.75.
(vii) In June 1999, we issued 1,562 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$562.50.
(viii) In July 1999, we issued 74 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$26.85.
(ix) In August 1999, we issued 2,715 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$1,240.65.
(x) In September 1999, we issued 327 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$136.50.
(xi) In October 1999, we issued 2,900 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$1,607.10.
(xii) In November 1999, we issued 52 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$37.50.
(xiii) In December 1999, we issued 2,117 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$1,006.80.
(xiv) In January 2000, we issued 4,080 shares of common stock upon the
exercise of stock options at an aggregate exercise price of
$1,708.20.
(xv) In February 2000, we issued 6,778 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise provide of $3,217.40.
II-2
<PAGE>
(xvi) In March 2000, we issued 1,078 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise price of $429.75.
(xvii) In April 2000, we issued 12,170 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise price of $4,628.
(xviii) In May 2000, we issued 6,682 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise price of $3,833.
(xix) In June 2000, we issued 2,970 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise price of $3,650.
(xx) In July 2000, we issued 1,467 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise price of $3,927.
(xxi) In August 2000, we issued 6,471 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise price of $10,529.
(xxii) In September 2000, we issued 4,576 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise price of $5,836.
(xxiii) In October 2000, we issued 5,182 shares of common stock upon the
exercise of previously granted stock options at an aggregate
exercise price of $6,322.
(b) Grants of Stock Options
(i) As of November 1, 2000, options to purchase 545,003 shares of
common stock were outstanding under our 1997 Equity Incentive Plan
of which options to purchase 213,229 shares are exercisable within
60 days of such date. All such options were granted between
August 1997 and March 2000 to our officers, directors, employees,
consultants and advisers.
(ii) As of November 1, 2000, options to purchase 401,712 shares of
common stock were outstanding under our 2000 Stock Option and
Incentive Plan of which options to purchase 312 shares are
exercisable within 60 days of such date. All such options were
granted between March 2000 and November 2000 to our officers,
directors, employees, consultants and advisers.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. The following is a complete list of exhibits filed or
incorporated by reference as part of this Registration Statement.
<TABLE>
<C> <S>
++1.1 Form of Underwriting Agreement
*2.1 Agreement and Plan of Merger, dated February 11, 2000, by
and among the Registrant, Moldflow Merger Corp. (a
subsidiary of the Registrant), Advanced CAE Technology, Inc.
d/b/a C-Mold ("C-Mold") and certain stockholders of C-Mold.
**3.1 Third Amended and Restated Certificate of Incorporation of
the Registrant.
**3.2 Second Amended and Restated By-laws of the Registrant.
*4.1 Specimen certificate for shares of Common Stock, $.01 par
value, of the Registrant.
+++5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the securities offered.
*10.1 Indenture of Lease, dated October 15, 1996, between Moldflow
Pty. Ltd and Mortimer B. Zuckerman and Edward H. Linde,
Trustees of 91 Hartwell Avenue Trust, which relates to space
in a certain building known as, and with an address at, 91
Hartwell Avenue, Lexington, Massachusetts.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
*10.2 Acknowledgment of Assumption of Lease, dated June 28, 1999,
by and among Boston Properties Limited Partnership (as
successor-in-interest to the Trustees of 91 Hartwell Avenue
Trust), Moldflow Pty. Ltd and the Registrant.
*10.3 Stock Purchase Agreement, dated August 25, 1998, among
Ampersand Specialty Materials and Chemicals III Limited
Partnership ("Ampersand III"), Ampersand Specialty Materials
and Chemicals Companion Fund III Limited Partnership
("Ampersand III CF"), JTC Investment Management Pty., Ltd.
("JTC") and Westpac Custodian Nominees Limited (as nominee
for NJI No. 1(A) Investment Fund and NJI No. 1(B) Investment
Fund) ("Westpac").
*10.4 Shareholders Agreement, dated July 18, 1997, ("Shareholders
Agreement") by and among the Registrant, Thomas Investments
Australia Pty Ltd ("Thomas"), Helmet Investments Australia
Pty Ltd ("Helmet"), Floatflow Pty Ltd ("Floatflow"), JTC,
Westpac, Ampersand Specialty Materials and Chemicals II
Limited Partnership ("Ampersand II"), Ampersand III,
Ampersand III CF and Mazza & Riley, Inc.
*10.5 First Amendment to Shareholders Agreement, dated October 24,
1997.
*10.6 Amended and Restated Credit Agreement, dated January 28,
1998, ("Amended and Restated Credit Agreement") by and among
the Registrant, Thomas, Helmet, Floatflow, JTC, Westpac,
Ampersand II, Ampersand III and Ampersand III CF.
*10.7 First Amendment to Amended and Restated Credit Agreement,
dated August 25, 1998.
*10.8 Termination of Amended and Restated Credit Agreement.
*10.9 Loan Agreement, dated April 23, 1998, by and among Silicon
Valley Bank, the Registrant, Moldflow International Pty.
Ltd. and Moldflow Pty. Ltd.
*10.10 Loan Document Modification Agreement No. 2, dated November
30, 1998, by and between Silicon Valley Bank and the
Registrant.
*10.11 Amendment to Loan Modification Agreement No. 2, dated
January 19, 1999, by and between Valley Bank and the
Registrant.
*10.12 Loan Document Modification Agreement No. 3, dated as of June
1, 1999, by and between Silicon Valley Bank and the
Registrant.
*10.13 Loan Modification Agreement No. 4, dated as of October 22,
1999, by and between Silicon Valley Bank and Registrant.
*10.14 Warrant to Purchase Common Stock, dated April 23, 1998,
issued by the Registrant to Silicon Valley Bank.
*10.15 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Marc J.L. Dulude.
*10.16 Amended and Restated Promissory Note, dated September 9,
1999, issued by Marc J.L. Dulude in favor of the Registrant.
*10.17 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Suzanne E. Rogers.
*10.18 Amended and Restated Promissory Note, dated September 9,
1999, issued by Suzanne E. Rogers in favor of the
Registrant.
*10.19 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Kenneth R. Welch.
*10.20 Amended and Restated Promissory Note, dated September 9,
1999, issued by Kenneth R. Welch in favor of the Registrant.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
*10.21 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Richard M. Underwood.
*10.22 Amended and Restated Promissory Note, dated September 9,
1999, issued by Richard M. Underwood in favor of the
Registrant.
*10.23 Service Agreement, dated July 1, 1994, between Moldflow Pty.
Ltd. and A. Roland Thomas.
*10.24 Letter Amendment, dated June 30, 1997, to Service Agreement
between Moldflow Pty. Ltd. and A. Roland Thomas.
*10.25 Letter Agreement dated July 1, 1999, to Service Agreement
between Moldflow Pty. Ltd. and A. Roland Thomas.
*10.26 Loan Agreement, dated July 1, 1999 between Moldflow Pty.
Ltd. and A. Roland Thomas.
*10.27 Moldflow Corporation 2000 Stock Option and Incentive Plan.
*10.28 Form of Incentive Stock Option Agreement under the Moldflow
Corporation 2000 Stock Option and Incentive Plan.
*10.29 Form of Non-Qualified Stock Option Agreement under the
Moldflow Corporation 2000 Stock Option and Incentive Plan.
*10.30 Moldflow Corporation Employee Stock Purchase Plan.
*10.31 Moldflow Corporation 1997 Equity Incentive Plan.
*10.32 Form of Incentive Stock Option Agreement under the Moldflow
Corporation 1997 Equity Incentive Plan.
*10.33 Form of Non-Qualified Stock Option Agreement under the
Moldflow Corporation 1997 Equity Incentive Plan.
*10.34 Form of Non-Qualified Stock Option Agreement for Australian
employees under the Moldflow Corporation 1997 Equity
Incentive Plan.
*10.35 Employment Agreement, dated February 1, 2000, between the
Registrant and Marc J.L. Dulude.
*10.36 Employment Agreement, dated February 1, 2000, between the
Registrant and Suzanne E. Rogers.
*10.37 Employment Agreement, dated February 1, 2000, between the
Registrant and Kenneth R. Welch.
*10.38 Employment Agreement, dated February 1, 2000, between the
Registrant and Richard M. Underwood.
*10.39 Employment Agreement, dated March 20, 2000, between the
Registrant and A. Roland Thomas.
*10.40 Form of Director Indemnification Agreement entered into
between the Registrant and each non-employee director.
*10.41 Form of Non-Qualified Stock Option Agreement for
Non-Employee Directors under the Moldflow Corporation 2000
Stock Option and Incentive Plan.
+10.42 Lease, dated as of June 16, 2000 by and between Wayland
Business Center, LLC as Landlord and Moldflow Corporation as
Tenant.
+10.43 Amendment No. 1 Employment Agreement dated March 20, 2000
between Moldflow Corporation and A. Roland Thomas.
+21.1 Subsidiaries of the Registrant.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
+++23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
+++24.1 Powers of Attorney.
</TABLE>
------------------------
* Previously filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (File No. 333-95289) and incorporated by reference thereto.
** Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission on May 12, 2000
and incorporated by reference thereto.
+ Previously filed as an exhibit to the Registrant's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
September 22, 2000 and incorporated by reference thereto.
++ To be filed by amendment.
+++ Previously filed as an exhibit to this Registration Statement.
(b) FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Accountants on Financial Statement
Schedule.................................................. S-1
Schedule II--Valuation and Qualifying Accounts.............. S-2
</TABLE>
All other schedules have been omitted because they are not required or
because the required information is given in the consolidated financial
statements or notes to those statements.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, on November 22,
2000.
<TABLE>
<S> <C> <C>
MOLDFLOW CORPORATION
BY: /S/ MARC J. L. DULUDE
-----------------------------------------
Marc J. L. Dulude
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Marc J. L. Dulude and Suzanne E. Rogers
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that any said attorney-in-fact and agent, or any
substitute or substitutes of any of them, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MARC J. L. DULUDE President, Chief Executive
-------------------------------------- Officer and Director November 22, 2000
Marc J. L. Dulude (Principal Executive Officer)
Vice President and Chief
* Financial Officer (Principal
-------------------------------------- Financial Officer and November 22, 2000
Suzanne E. Rogers Principal Accounting Officer)
* Director
-------------------------------------- November 22, 2000
A. Roland Thomas
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director
-------------------------------------- November 22, 2000
Charles D. Yie
* Director
-------------------------------------- November 22, 2000
Julian H. Beale
* Director
-------------------------------------- November 22, 2000
Richard A. Charpie
* Director
-------------------------------------- November 22, 2000
Roger Brooks
* Director
-------------------------------------- November 22, 2000
Robert P. Schechter
</TABLE>
<TABLE>
<S> <C>
*By: /s/ MARC J. L. DULUDE
--------------------------------------
Marc J.L. Dulude
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
++1.1 Form of Underwriting Agreement
*2.1 Agreement and Plan of Merger, dated February 11, 2000, by
and among the Registrant, Moldflow Merger Corp. (a
subsidiary of the Registrant), Advanced CAE Technology, Inc.
d/b/a C-Mold ("C-Mold") and certain stockholders of C-Mold.
**3.1 Third Amended and Restated Certificate of Incorporation of
the Registrant.
**3.2 Second Amended and Restated By-laws of the Registrant.
*4.1 Specimen certificate for shares of Common Stock, $.01 par
value, of the Registrant.
+++5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the securities offered.
*10.1 Indenture of Lease, dated October 15, 1996, between Moldflow
Pty. Ltd and Mortimer B. Zuckerman and Edward H. Linde,
Trustees of 91 Hartwell Avenue Trust, which relates to space
in a certain building known as, and with an address at, 91
Hartwell Avenue, Lexington, Massachusetts.
*10.2 Acknowledgment of Assumption of Lease, dated June 28, 1999,
by and among Boston Properties Limited Partnership (as
successor-in-interest to the Trustees of 91 Hartwell Avenue
Trust), Moldflow Pty. Ltd and the Registrant.
*10.3 Stock Purchase Agreement, dated August 25, 1998, among
Ampersand Specialty Materials and Chemicals III Limited
Partnership ("Ampersand III"), Ampersand Specialty Materials
and Chemicals Companion Fund III Limited Partnership
("Ampersand III CF"), JTC Investment Management Pty., Ltd.
("JTC") and Westpac Custodian Nominees Limited (as nominee
for NJI No. 1(A) Investment Fund and NJI No. 1(B) Investment
Fund) ("Westpac").
*10.4 Shareholders Agreement, dated July 18, 1997, ("Shareholders
Agreement") by and among the Registrant, Thomas Investments
Australia Pty Ltd ("Thomas"), Helmet Investments Australia
Pty Ltd ("Helmet"), Floatflow Pty Ltd ("Floatflow"), JTC,
Westpac, Ampersand Specialty Materials and Chemicals II
Limited Partnership ("Ampersand II"), Ampersand III,
Ampersand III CF and Mazza & Riley, Inc.
*10.5 First Amendment to Shareholders Agreement, dated October 24,
1997.
*10.6 Amended and Restated Credit Agreement, dated January 28,
1998, ("Amended and Restated Credit Agreement") by and among
the Registrant, Thomas, Helmet, Floatflow, JTC, Westpac,
Ampersand II, Ampersand III and Ampersand III CF.
*10.7 First Amendment to Amended and Restated Credit Agreement,
dated August 25, 1998.
*10.8 Termination of Amended and Restated Credit Agreement.
*10.9 Loan Agreement, dated April 23, 1998, by and among Silicon
Valley Bank, the Registrant, Moldflow International Pty.
Ltd. and Moldflow Pty. Ltd.
*10.10 Loan Document Modification Agreement No. 2, dated November
30, 1998, by and between Silicon Valley Bank and the
Registrant.
*10.11 Amendment to Loan Modification Agreement No. 2, dated
January 19, 1999, by and between Valley Bank and the
Registrant.
*10.12 Loan Document Modification Agreement No. 3, dated as of June
1, 1999, by and between Silicon Valley Bank and the
Registrant.
*10.13 Loan Modification Agreement No. 4, dated as of October 22,
1999, by and between Silicon Valley Bank and Registrant.
*10.14 Warrant to Purchase Common Stock, dated April 23, 1998,
issued by the Registrant to Silicon Valley Bank.
*10.15 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Marc J.L. Dulude.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
*10.16 Amended and Restated Promissory Note, dated September 9,
1999, issued by Marc J.L. Dulude in favor of the Registrant.
*10.17 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Suzanne E. Rogers.
*10.18 Amended and Restated Promissory Note, dated September 9,
1999, issued by Suzanne E. Rogers in favor of the
Registrant.
*10.19 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Kenneth R. Welch.
*10.20 Amended and Restated Promissory Note, dated September 9,
1999, issued by Kenneth R. Welch in favor of the Registrant.
*10.21 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Richard M. Underwood.
*10.22 Amended and Restated Promissory Note, dated September 9,
1999, issued by Richard M. Underwood in favor of the
Registrant.
*10.23 Service Agreement, dated July 1, 1994, between Moldflow Pty.
Ltd. and A. Roland Thomas.
*10.24 Letter Amendment, dated June 30, 1997, to Service Agreement
between Moldflow Pty. Ltd. and A. Roland Thomas.
*10.25 Letter Agreement dated July 1, 1999, to Service Agreement
between Moldflow Pty. Ltd. and A. Roland Thomas.
*10.26 Loan Agreement, dated July 1, 1999 between Moldflow Pty.
Ltd. and A. Roland Thomas.
*10.27 Moldflow Corporation 2000 Stock Option and Incentive Plan.
*10.28 Form of Incentive Stock Option Agreement under the Moldflow
Corporation 2000 Stock Option and Incentive Plan.
*10.29 Form of Non-Qualified Stock Option Agreement under the
Moldflow Corporation 2000 Stock Option and Incentive Plan.
*10.30 Moldflow Corporation Employee Stock Purchase Plan.
*10.31 Moldflow Corporation 1997 Equity Incentive Plan.
*10.32 Form of Incentive Stock Option Agreement under the Moldflow
Corporation 1997 Equity Incentive Plan.
*10.33 Form of Non-Qualified Stock Option Agreement under the
Moldflow Corporation 1997 Equity Incentive Plan.
*10.34 Form of Non-Qualified Stock Option Agreement for Australian
employees under the Moldflow Corporation 1997 Equity
Incentive Plan.
*10.35 Employment Agreement, dated February 1, 2000, between the
Registrant and Marc J.L. Dulude.
*10.36 Employment Agreement, dated February 1, 2000, between the
Registrant and Suzanne E. Rogers.
*10.37 Employment Agreement, dated February 1, 2000, between the
Registrant and Kenneth R. Welch.
*10.38 Employment Agreement, dated February 1, 2000, between the
Registrant and Richard M. Underwood.
*10.39 Employment Agreement, dated March 20, 2000, between the
Registrant and A. Roland Thomas.
*10.40 Form of Director Indemnification Agreement entered into
between the Registrant and each non-employee director.
*10.41 Form of Non-Qualified Stock Option Agreement for
Non-Employee Directors under the Moldflow Corporation 2000
Stock Option and Incentive Plan.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
+10.42 Lease, dated as of June 16, 2000 by and between Wayland
Business Center, LLC as Landlord and Moldflow Corporation as
Tenant.
+10.43 Amendment No. 1 Employment Agreement dated March 20, 2000
between Moldflow Corporation and A. Roland Thomas.
+21.1 Subsidiaries of the Registrant.
+++23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
+++24.1 Powers of Attorney.
</TABLE>
------------------------
* Previously filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (File No. 333-95289) and incorporated by reference thereto.
** Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission on May 12, 2000
and incorporated by reference thereto.
+ Previously filed as an exhibit to the Registrant's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
September 22, 2000 and incorporated by reference thereto.
++ To be filed by amendment.
+++ Previously filed as an exhibit to this Registration Statement.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
and Stockholders of Moldflow Corporation
Our audits of the consolidated financial statements of Moldflow Corporation
referred to in our report dated August 8, 2000, appearing in the Prospectus
constituting part of this Registration Statement on Form S-1 of Moldflow
Corporation, also included an audit of the financial statement schedule listed
in Item 16(b) of this Form S-1. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 8, 2000
S-1
<PAGE>
SCHEDULE II
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS OF MOLDFLOW CORPORATION
<TABLE>
<CAPTION>
BEGINNING ENDING
ITEM BALANCE ADDITIONS DEDUCTIONS BALANCE
---- --------- --------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
For the year ended June 30, 1998:
Allowance for doubtful accounts................. $ 347 $ 275(a) $ (83)(b) $ 539
Deferred tax asset valuation allowance.......... 7,378 5(a) (1,090)(c) 6,293
For the year ended June 30, 1999:
Allowance for doubtful accounts................. 539 33(a) (340)(b) 232
Deferred tax asset valuation allowance.......... 6,293 416(a) (173)(c) 6,536
For the year ended June 30, 2000:
Allowance for doubtful accounts................. 232 639(a) (165)(b) 706
Deferred tax asset valuation allowance.......... 6,536 1,071(a) (2,310)(c) 5,297
</TABLE>
------------------------
(a) Additional provisions and foreign currency translation effects.
(b) Specific write-offs and foreign currency translation effects.
(c) Utilization of net operating losses, reductions in other deferred tax assets
and foreign currency translation effects.
S-2
