SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM 8-K/A
------------------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 12, 1996
------------------
ZYGO CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-12944 06-0864500
- ---------------------------- ----------- -------------
State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
LAUREL BROOK ROAD, MIDDLEFIELD, CONNECTICUT 06455
- ------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 347-8506
--------------
Not Applicable
---------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
This Form 8-K/A amends the Form 8-K filed with the Commission on September 27,
1996 relating to the acquisition by Zygo Corporation of NexStar Automation, Inc.
This Form 8-K/A contains the information referred to in Item 7 of the Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1. Consolidated Financial Statements of NexStar as of December 31, 1995 and
1994 and for the three years ended December 31, 1995, 1994 and 1993.
o Report of Independent Auditors.
o Consolidated Balance Sheets as of December 31, 1995
and 1994.
o Consolidated Statements of Operations for the years ended December
31, 1995, 1994 and 1993.
o Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993.
o Consolidated Statements of Cash Flows for the years ended December
31, 1995, 1994 and 1993.
o Notes to Consolidated Financial Statements.
2. Interim Consolidated Financial Statements of NexStar as of June 30, 1996
and for the six-month periods ended June 30, 1996 and 1995.
o Consolidated Balance Sheet as of June 30, 1996.
o Consolidated Statements of Operations for the six months ended June
30, 1996 and 1995.
o Consolidated Statement of Stockholders' Equity for the six months
ended June 30, 1996.
o Consolidated Statements of Cash Flows for the six-months ended June
30, 1996 and 1995.
o Notes to Interim Consolidated Financial Statements.
-2-
<PAGE>
B. PRO FORMA FINANCIAL INFORMATION.
1. Pro Forma Consolidated Financial Statements as of June 30, 1996 and for
the year ended June 30, 1996.
o Consolidated Balance Sheets as of June 30, 1996.
o Consolidated Statements of Income for the year ended June 30, 1996.
o Notes to Consolidated Financial Statements.
C. EXHIBITS.
2. The Acquisition Agreement by and among Zygo Corporation,
NX Acquisition Corp. and NexStar Automation, Inc.*
23. Consent of Ehrhardt Keefe Steiner & Hottman PC.
99.1 Press Release issued by NexStar Automation, Inc.
dated September 12, 1996.*
99.2 Press Release issued by the Company and NexStar
Automation, Inc. dated September 13, 1996.*
- --------------
* Previously filed as part of Form 8-K dated September 12, 1996, filed on
September 27, 1996.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZYGO CORPORATION
Date: November 14, 1996 By /S/ GARY K. WILLIS
---------------------------------
Gary K. Willis
President and Chief Executive Officer
-4-
<PAGE>
ZYGO CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
----
NEXSTAR AUTOMATION, INC.
Independent Auditors' Report................................................F-2
Financial Statements:
Consolidated Balance Sheets............................................F-3
Consolidated Statements of Operations..................................F-4
Consolidated Statement of Stockholders' Equity.........................F-5
Consolidated Statements of Cash Flows..................................F-6
Notes to Consolidated Financial Statements.............................F-7
Interim Financial Statements:
Consolidated Balance Sheet.............................................F-14
Consolidated Statements of Operations..................................F-15
Consolidated Statement of Stockholders' Equity.........................F-16
Consolidated Statements of Cash Flows..................................F-17
Notes to Interim Financial Statements..................................F-18
ZYGO CORPORATION/NEXSTAR AUTOMATION, INC.
Pro Forma Consolidated Financial Statements:
Pro Forma Consolidated Financial Information ..........................F-23
Consolidated Balance Sheets............................................F-25
Consolidated Statements of Income......................................F-26
Notes to Consolidated Financial Statements.............................F-27
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
NexStar Automation, Inc. and Subsidiary
Longmont, CO
We have audited the consolidated balance sheets of NexStar Automation, Inc. and
Subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NexStar Automation,
Inc. and Subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Ehrhardt Keefe Steiner & Hottman PC
June 13, 1996
Denver, Colorado
F-2
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1994 1995
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (Note 6) $ 111,827 $ 429,039
Contract receivables 107,092 67,359
Revenue in excess of billings 53,379 79,250
Note receivable - current portion (Note 4) - 13,123
Inventory - 19,165
Prepaid engineering costs - 57,674
Prepaids and other 12,837 21,834
--------------- --------------
Total current assets 285,135 687,444
--------------- --------------
Property and equipment 53,760 121,789
Less accumulated depreciation (6,837) (24,566)
--------------- --------------
46,923 97,223
--------------- --------------
Other assets
Note receivable (Note 4) - 56,877
Deferred offering costs - 26,629
Deposits 2,795 2,333
Organizational costs, net of amortization of $2,256 (1994), $3,384
(1995), and $3,666 (1996) 3,385 2,257
--------------- --------------
Total other assets 6,180 88,096
--------------- --------------
Total assets $ 338,238 $ 872,763
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 148,241 $ 350,363
Line-of-credit (Note 5) 52,700 -
Notes payable (Note 5) 35,000 12,000
Accrued payroll and payroll taxes 25,584 38,753
Deferred tax liability - 11,265
Other accrued expenses 794 6,189
Loss contingency - -
Deferred contract revenue - -
--------------- --------------
Total current liabilities 262,319 418,570
--------------- --------------
Commitments (Note 6)
Stockholders' equity
Common stock, no par value, 100,000,000 shares authorized,
4,847,001 (1994) and 5,171,618 (1995 and 1996) issued and
outstanding 334,688 630,779
Retained deficit (258,769) (176,586)
--------------- --------------
Total stockholders' equity 75,919 454,193
--------------- --------------
Total liabilities and stockholders' equity $ 338,238 $ 872,763
=============== ==============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1993 1994 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Sales
Automation projects revenue (Note 9) $ 225,137 $ 735,445 $ 2,625,930
Consulting revenue 119,190 - -
-------------- ------------- --------------
Total revenue 344,327 735,445 2,625,930
Cost of automation projects (115,437) (437,377) (1,684,603)
-------------- ------------- --------------
Gross profit 228,890 298,068 941,327
Selling, general and administrative expenses
Salaries 121,606 190,556 449,675
Professional fees 306,950 31,295 40,652
Rent 14,472 27,610 91,069
Travel 15,973 18,526 47,726
Utilities 13,443 15,438 28,238
Research and development - 4,946 67,634
Marketing - 3,641 18,792
Depreciation and amortization 2,909 6,299 18,857
Other 6,523 20,207 80,351
-------------- -------------- --------------
481,876 318,518 842,994
-------------- -------------- --------------
Earnings (loss) income before income taxes
and extraordinary item (252,986) (20,450) 98,333
Income tax (expense)\benefit (7,000) 3,584 (16,150)
-------------- ------------- --------------
(Loss) income before extraordinary item (259,986) (16,866) 82,183
Extraordinary item - gain on extinguishment
of debt - net of income tax of $3,969
(Note 8) - 18,083 -
-------------- ------------- --------------
Net income (loss) $ (259,986) $ 1,217 $ 82,183
============== ============= ==============
Net (loss) income per share of common stock
before extraordinary item $ (.15) $ *** $ .02
============== ============= ==============
Net income per share of common stock on
extraordinary item $ - $ *** $ -
============== ============= ==============
Net income per common share $ (.15) $ *** $ .02
============== ============= ==============
Weighted common shares outstanding 1,782,729 4,039,801 5,289,215
============== ============= ==============
</TABLE>
*** Less than .01 per share.
See notes to consolidated financial statements.
F-4
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained
-------------------------------- Paid-in Earnings
Shares Amount Capital (Deficit) Total
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1992 - $ - $ - $ - $ -
Common stock issued for property and
debt 326,302 326 3,753 - 4,079
Common stock issued for cash 1,673,698 1,674 19,247 - 20,921
Net loss - - - (259,986) (259,986)
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 1993 2,000,000 2,000 23,000 (259,986) (234,986)
Recapitalization and issuance of stock
for assets in reverse acquisition
(including 237,560 shares issued for
finders fee) (Note 1) 2,847,001 332,688 (23,000) - 309,688
Net income - - - 1,217 1,217
-------------- ------------- -------------- ------------- --------------
Balance at December 31, 1994 4,847,001 334,688 - (258,769) 75,919
Stock issued for services, valued at
$.46 (Note 3) 54,617 25,000 - - 25,000
Stock issued in conjunction with
private placement (net of offering
costs) (Note 10) 250,000 256,171 - - 256,171
Exercise of stock options for cash
(Note 10) 20,000 14,920 - - 14,920
Net income - - - 82,183 82,183
-------------- ------------- -------------- ------------- --------------
Balance at December 31, 1995 5,171,618 630,779 - (176,586) 454,193
============== ============== ============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1993 1994 1995
--------------- --------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (259,986) $ 1,217 $ 82,183
------------- ------------- -------------
Adjustments to reconcile net income to
net cash provided used by operating
activities -
Depreciation and amortization 2,909 6,313 18,857
Common stock issued for services - - 25,000
Gain on extinguishment of debt - (18,083) -
Changes in assets and liabilities -
Loss contingency
Contract receivables (47,207) (59,885) 39,733
Revenue in excess of billings - (53,379) (25,871)
Inventory - - (76,839)
Prepaids and other - (12,837) (8,997)
Accounts payable 129,713 88,586 202,122
Accrued liabilities 61,002 9,399 18,564
Deferred contract revenue 47,891 (47,891) -
Deferred tax liability - - 11,265
------------- ------------- -------------
194,308 (87,777) 203,834
------------- ------------- -------------
Net cash (used in) provided by
operating activities (65,678) (86,560) 286,017
------------- ------------- -------------
Cash flows from investing activities
Purchase of property and equipment (13,586) (41,903) (68,029)
Proceeds from sale of fixed assets - 2,053 -
Deposits (4,809) 249 462
Note receivable - - (70,000)
------------- ------------- -------------
Net cash (used in) investing
activities (18,395) (39,601) (137,567)
------------- ------------- -------------
Cash flows from financing activities
Borrowing (payment) on line-of-credit - 52,700 (52,700)
Proceeds from notes payable 68,035 237,974 -
Net proceeds from private placement - - 256,171
Cash received upon exercise of stock
options - - 14,920
Deferred offering costs - - (26,629)
Proceeds from reverse acquisition 20,920 3,679 -
Payment on long-term debt - (61,247) (23,000)
------------- ------------- -------------
Net cash provided by financing
activities 88,955 233,106 168,762
------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents 4,882 106,945 317,212
Cash and cash equivalents at beginning of
period - 4,882 111,827
------------- ------------- -------------
Cash and cash equivalents at end of period $ 4,882 $ 111,827 $ 429,039
============= ============= =============
Supplemental schedule of non-cash investing and financing activities
Cash paid during the year for income taxes of $14,100 (1995) and $5,400 (1994)
Issuance of stock in exchange for elimination of debt in conjunction with reverse
acquisition of $311,009 (1994)
Equipment and organization costs donated by stockholder was $4,080 (1993).
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is engaged in the business of designing, assembling, customizing,
installing and supporting production automation systems, which typically
incorporate customized robotics. The Company's focus is directed toward the data
storage, medical/pharmaceutical and food processing industries. The Company
commenced operations on January 4, 1993.
In April of 1994, FBA Ventures Ltd. ("FBA") acquired all the issued and
outstanding common shares of NexStar Corporation ("NexStar") in exchange for
2,700,000 shares of common stock of FBA, of which 2,525,000 shares held in
escrow. For financial reporting purposes, the business combination was accounted
for as an additional capitalization of the Company (a reverse acquisition with
NexStar as the acquirer). NexStar is considered the surviving entity. The
historical financial statements prior to the merger are those of NexStar. The
stockholders of NexStar received 2,700,000 shares of FBA stock for an
approximate 58% interest in the new combined entity. FBA's only assets consisted
of cash and funds advanced to NexStar.
ESCROW AGREEMENT
According to the purchase agreement, 2,525,000 shares of FBA common stock are to
be placed in escrow with the Escrow Agent for the Shareholder. In September of
1994, 224,015 shares were released leaving 2,300,985 escrow shares as of
December 31, 1994. The shareholders may exercise all voting rights of these
shares with certain restrictions. Under the escrow agreement, the shares may be
released annually, on a pro rata basis based on the Company's cumulative cash
flow. In the event that any escrow shares are not released from escrow before
December 31, 2004, those escrow shares are to be canceled. The escrow shares are
presented as outstanding in these financial statements as management believes
they will all be released from escrow.
F-7
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The 1995 consolidated financial statements include the accounts of NexStar
Automation, Inc. and Subsidiary, a Canadian corporation and its wholly owned
subsidiary NexStar Corporation (a Colorado corporation). All significant
intercompany balances and transactions have been eliminated in consolidation.
RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The differences between generally accepted accounting principles used in Canada
(Canadian GAAP) and the United States (U.S. GAAP) do not significantly impact
the financial statements of the Company for all periods presented. All amounts
are expressed in United States dollars.
INVENTORY
Inventory is stated at the lower of cost or market and primarily consists of
purchased raw materials and work in process. Cost is determined using the
first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Replacements, renewals and
improvements are capitalized and costs for repairs and maintenance are expensed
as incurred. Depreciation is computed using the straight-line method over the
estimated useful lives of five years.
ORGANIZATION COSTS
Organization costs are all business start-up costs incurred by the Company.
These costs have been capitalized and are being amortized over a five-year
period.
DEFERRED OFFERING COSTS
Deferred offering costs represent costs incurred in connection with the
Company's proposed public offering in the United States. Deferred offering costs
will be offset against net proceeds, if successful, or expensed in operations if
the offering is unsuccessful.
F-8
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenue from automation projects is accounted for under the
percentage-of-completion method, using labor costs incurred to date in relation
to estimated total labor costs of the contracts to measure the stage of
completion. The cumulative effects of revisions of estimated total contract
costs and revenues are recorded in the period in which the facts requiring the
revision become known. When a loss is anticipated on a contract, the full amount
thereof is provided currently. The differences between amounts billed and
revenue recognized is shown as revenue in excess of billings and deferred
revenue on the accompanying balance sheets.
Totals of revenue earned billings on uncompleted contracts are as follows:
December 31,
---------------------------------
1994 1995
-------------- ---------------
Revenue recognized to date $ 150,250 $ 1,592,565
Billings to date (96,871) (1,513,315)
-------------- ---------------
Revenue in excess of billings $ 53,379 $ 79,250
============== ===============
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid cash investments with original maturity dates of three months or less to
be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company occasionally has deposits in financial institutions which exceed the
federally insured limits as of December 31, 1995. This amount exceeded the
limits by approximately $307,000. The Company reduced its credit risk with
respect to receivables by requiring deposits before production begins and
continually monitors the industries and its customers before granting credit.
RESEARCH AND DEVELOPMENT
Research and development costs for new products are charged to expense as
incurred.
F-9
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain accounts in the December 31, 1994 and 1995 financial statements have
been reclassified to conform with the current period presentation.
INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109") (Note 6).
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - RELATED PARTY TRANSACTIONS
In March of 1995, the Company issued 54,617 shares of its common stock to the
President of the Company as compensation for guarantying the line-of-credit. The
shares were valued at $.46 per share, the fair market value of the stock on the
date of issue.
NOTE 3 - NOTE RECEIVABLE
At December 31, 1995, the Company received a note receivable totaling $70,000.
The note is payable in quarterly installments of $4,107, commencing February
1996 through November 2000. The note bears interest at 7% and is without
collateral. Future maturities of this note are as follows:
Year Ending December 31,
------------------------
1996 $ 13,123
1997 12,775
1998 13,693
1999 14,677
2000 15,732
---------
$ 70,000
=========
F-10
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 4 - NOTES PAYABLE AND LINE-OF-CREDIT
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
-------------- ---------------
<S> <C> <C>
Unsecured notes payable to individuals due on demand. $ 12,000 $ 35,000
============== ===============
</TABLE>
NOTE 5 - COMMITMENTS AND CONTINGENCIES
In February 1995, the Company entered into a lease agreement for its office and
manufacturing facilities. Under the terms of the lease, the Company is obligated
to make monthly payments of $8,166 through termination of the lease on April 1,
1997. Amounts due after December 31, 1995 are as follows:
1996 $ 97,992
1997 24,498
-------------
Total $ 122,490
=============
Rental expense for the years ended December 31, 1995 and 1994 was approximately
$91,000 and $28,000, respectively.
In fiscal 1994, the Company entered into $65,000 line-of-credit agreement with a
bank. During 1995, the line-of-credit was renewed to provide up to $150,000 of
borrowings and matures January 31, 1996. Total outstanding borrowings on the
line-of-credit were $0 and $52,700 at December 31, 1995 and 1994, respectively.
The line is collateralized by the Company's savings account and guaranteed by
the Company's President. The line accrues interest at 7%.
NOTE 6 - INCOME TAXES
Effective for the year ended December 31, 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" (SFAS 109) which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statements and tax basis of assets and
liabilities using the enacted tax rates in effect for the year in which the
difference is expected to reverse. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.
F-11
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 6 - INCOME TAXES (CONTINUED)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1993 1994 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Current tax provision
Federal $ - $ 3,200 $ (4,500)
State - 384 (380)
------------- ------------- -------------
- 3,584 (4,880)
Deferred tax expense
Federal (5,250) - (10,370)
State (1,750) - (900)
------------- ------------- -------------
(7,000) - (11,270)
------------- ------------- -------------
$ (7,000) $ 3,584 $ (16,150)
============= ============= =============
</TABLE>
The principal temporary differences that result in the deferred tax liability
are depreciation for tax purposes in excess of depreciation for financial
reporting purposes as well as other items being amortized for financial
reporting purposes which are currently deductible for tax purposes.
NOTE 7 - GAIN ON EXTINGUISHMENT OF DEBT
During the year ended December 31, 1994, the Company settled outstanding legal
bills totaling $41,052 for $19,000 resulting in an extraordinary gain of
$22,052.
NOTE 8 - MAJOR CUSTOMERS
For the year ended December 31, 1995, 1994, and 1993, approximately 98%, 54%,
and 78% of the Company's sales were to three customers, respectively.
NOTE 9 - STOCKHOLDERS' EQUITY
In August of 1995, the Company completed a private placement for 250,000 shares
of the Company's common stock for proceeds of approximately $256,000 net of
approximately $3,000 of offering costs.
Also during 1995, an option to purchase 20,000 shares of the Company's common
stock at the price of $1.00 (CN$) was exercised.
F-12
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)
The Company has granted the following options and warrants to purchase common
stock as of December 31, 1995:
Number of Exercise Expiration
Options Price Date
--------- --------- ----------
(CN$)
35,000 $ .77 1997
95,000 $ 1.10 1998
115,000 $ 1.00 1998
25,000 $ 1.00 1999
7,000 $ .77 2000
20,000 $ 1.92 2000
80,000 $ 2.20 2000
--------
377,000
========
Number of
Warrants
--------
250,000 $ 1.40 1996
=========
F-13
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 504,287
Contract receivables 283,152
Note receivable -- current portion 12,340
Inventory 18,703
Prepaid engineering costs 43,036
Cost in excess of billing 252,337
Prepaids and other 18,411
-----------
Total current assets 1,132,266
-----------
Property and equipment 198,430
Less accumulated depreciation (40,493)
-----------
157,937
-----------
Other assets
Note receivable 50,601
Deferred offering costs 101,493
Deposits 2,333
Organizational costs, net of amortization of $3,666 1,693
-----------
Total other assets 156,120
-----------
Total assets $ 1,446,323
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 816,564
Notes payable (Note 5) 12,000
Deferred tax liability --
Other accrued expenses 77,354
-----------
Total current liabilities 905,918
-----------
Commitments (Note 6)
Stockholders' equity
Common stock, no par value, 100,000,000 shares
authorized, 5,206,618 issued and outstanding 650,313
Retained deficit (109,908)
-----------
Total stockholders' equity 540,405
-----------
Total liabilities and stockholders' equity $ 1,446,323
===========
See notes to consolidated financial statements.
F-14
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months
Ended June 30,
-----------------------------
1995 1996
----------- -----------
(Unaudited)
Sales
Automation projects revenue $ 1,037,952 $ 2,598,247
Cost of automation projects (643,640) (1,783,762)
----------- -----------
Gross profit 394,312 814,485
Operating expenses
Salaries 226,022 320,574
General and administrative 149,885 399,108
----------- -----------
375,907 719,682
----------- -----------
Income before income taxes 18,405 94,803
Income tax expense (3,681) (28,125)
----------- -----------
Net income $ 14,724 $ 66,678
=========== ============
Net income per common share $ *** $ .01
=========== ===========
Weighted common shares outstanding 4,847,001 5,189,118
=========== ===========
- ----------
*** Less than .01 per share.
See notes to consolidated financial statements.
F-15
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------------ Paid-in Earnings
Shares Amount Capital (Deficit) Total
--------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 5,171,618 $ 630,779 $ -- $ (176,586) $ 454,193
Exercise of stock options at
$.77/share (unaudited) 35,000 19,534 -- -- 19,534
Net income (unaudited) -- -- -- 66,678 66,678
--------- --------- -------- ---------- ---------
Balance at (unaudited) 5,206,618 $ 650,313 $ -- $ (109,908) $ 540,405
========= ========= ======== ========== =========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-----------------------
1995 1996
--------- ---------
(Reviewed)
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 14,724 $ 66,678
--------- ---------
Adjustments to reconcile net income to net cash
provided used by operating activities --
Depreciation and amortization 7,650 16,491
Changes in assets and liabilities --
Loss contingency -- 31,000
Contract receivables (20,716) (215,798)
Revenue in excess of billings -- 79,250
Inventory -- (8,799)
Capitalized costs -- (50,966)
Prepaids and other 3,864 3,422
Accounts payable 23,338 466,201
Accrued liabilities 20,233 1,413
Deferred contract revenue 85,528 (252,332)
Deferred tax liability -- (11,265)
--------- ---------
119,897 58,617
--------- ---------
Net cash (used in) provided by operating activities 134,621 125,295
--------- ---------
Cash flows from investing activities
Purchase of property and equipment (30,014) (76,641)
Proceeds from sale of fixed assets -- --
Deposits 562 --
Note receivable -- 7,060
--------- ---------
Net cash (used in) investing activities (29,452) (69,581)
--------- ---------
Cash flows from financing activities
Cash received upon exercise of stock options 25,000 19,534
Payment on long-term debt (23,000) --
--------- ---------
Net cash provided by financing activities 2,000 19,534
--------- ---------
Net increase (decrease) in cash and cash equivalents 107,169 75,248
Cash and cash equivalents at beginning of period 111,827 429,039
--------- ---------
Cash and cash equivalents at end of period $ 218,996 $ 504,287
========= =========
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- INTERIM FINANCIAL STATEMENTS (UNAUDITED)
In the opinion of Nexstar Automation, Incorporated and Subsidiary (the
"Company"), the accompanying unaudited consolidated financial statements contain
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position of the Company at June 30, 1996 and the
results of their operations and changes in cash flows for the six months ended
June 30, 1996 and 1995. The results of operations for the six months ended June
30, 1996 and 1995 are not necessarily indicative of the results to be expected
for the full year.
NOTE 2 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is engaged in the business of designing, assembling, customizing,
installing and supporting production automation systems, which typically
incorporate customized robotics. The Company's focus is directed toward the data
storage, medical/pharmaceutical and food processing industries. The Company
commenced operations on January 4, 1993.
In April of 1994, FBA Ventures Ltd. ("FBA") acquired all the issued and
outstanding common shares of NexStar Corporation ("NexStar") in exchange for
2,700,000 shares of common stock of FBA, of which 2,525,000 shares held in
escrow. For financial reporting purposes, the business combination was accounted
for as an additional capitalization of the Company (a reverse acquisition with
NexStar as the acquirer). NexStar is considered the surviving entity. The
historical financial statements prior to the merger are those of NexStar. The
stockholders of NexStar received 2,700,000 shares of FBA stock for an
approximate 58% interest in the new combined entity. FBA's only assets consisted
of cash and funds advanced to NexStar.
ESCROW AGREEMENT
According to the purchase agreement, 2,525,000 shares of FBA common stock are to
be placed in escrow with the Escrow Agent for the Shareholder. In September of
1994, 224,015 shares were released leaving 2,300,985 escrow shares as of
December 31, 1994. The shareholders may exercise all voting rights of these
shares with certain restrictions. Under the escrow agreement, the shares may be
released annually, on a prorata basis based on the Company's cumulative cash
flow. In the event that any escrow shares are not released from escrow before
December 31, 2004, those escrow shares are to be canceled. The escrow shares are
presented as outstanding in these financial statements as management believes
they will all be released from escrow.
F-18
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NexStar
Automation, Inc. and Subsidiary, a Canadian corporation and its wholly owned
subsidiary NexStar Corporation (a Colorado corporation). All significant
intercompany balances and transactions have been eliminated in consolidation.
RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
The differences between generally accepted accounting principles used in Canada
(Canadian GAAP) and the United States (U.S. GAAP) do not significantly impact
the financial statements of the Company. All amounts are expressed in United
States dollars.
INVENTORY
Inventory is stated at the lower of cost or market and primarily consists of
purchased raw materials and work in process. Cost is determined using the
first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Replacements, renewals and
improvements are capitalized and costs for repairs and maintenance are expensed
as incurred. Depreciation is computed using the straight-line method over the
estimated useful lives of five years.
ORGANIZATION COSTS
Organization costs are all business start-up costs incurred by the Company.
These costs have been capitalized and are being amortized over a five-year
period.
DEFERRED OFFERING COSTS
Deferred offering costs represent costs incurred in connection with the
Company's proposed public offering in the United States. Deferred offering costs
will be offset against net proceeds, if successful, or expensed in operations if
the offering is unsuccessful.
F-19
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenue from automation projects is accounted for under the
percentage-of-completion method, using labor costs incurred to date in relation
to estimated total labor costs of the contracts to measure the stage of
completion. The cumulative effects of revisions of estimated total contract
costs and revenues are recorded in the period in which the facts requiring the
revision become known. When a loss is anticipated on a contract, the full amount
thereof is provided currently. The differences between amounts billed and
revenue recognized is shown as revenue in excess of billings and deferred
revenue on the accompanying balance sheets.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid cash investments with original maturity dates of three months or less to
be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company occasionally has deposits in financial institutions which exceed the
federally insured limits as of June 30, 1996. This amount exceeded the limits by
approximately $400,000. The Company reduced its credit risk with respect to
receivables by requiring deposits before production begins and continually
monitors the industries and its customers before granting credit.
RESEARCH AND DEVELOPMENT
Research and development costs for new products are charged to expense as
incurred.
INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109") (Note 6).
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-20
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 -- RELATED PARTY TRANSACTIONS
In March of 1995, the Company issued 54,617 shares of its common stock to the
President of the Company as compensation for guarantying the line-of-credit. The
shares were valued at $.46 per share, the fair market value of the stock on the
date of issue.
NOTE 4 -- NOTE RECEIVABLE
At December 31, 1995, the Company received a note receivable totaling $70,000.
The note is payable in quarterly installments of $4,107, commencing February
1996 through November 2000. The note bears interest at 7% and is without
collateral. Future maturities of this note are as follows:
Year Ending December 31,
------------------------
1996 $ 13,123
1997 12,775
1998 13,693
1999 14,677
2000 15,732
--------
$ 70,000
========
NOTE 5 -- NOTES PAYABLE AND LINE-OF-CREDIT
Notes payable consist of the following:
June 30,
1996
-----------
(Unaudited)
Unsecured notes payable to individuals due on demand. $ 12,000
========
F-21
<PAGE>
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
In February 1995, the Company entered into a lease agreement for its office and
manufacturing facilities. Under the terms of the lease, the Company is obligated
to make monthly payments of $8,166 through termination of the lease on April 1,
1997. Amounts due after June 30, 1996 are as follows:
1996 $ 48,996
1997 24,498
--------
Total $ 73,494
========
F-22
<PAGE>
The accompanying pro forma consolidated financial information is presented in
U.S. dollars and has been prepared under U.S. accounting standards.
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Effective as of August 8, 1996, Zygo completed its acquisition of Technical
Instruments Company. Prior to the acquisition, Technical Instrument Company
("TIC") was engaged in two businesses: the proprietary products division which
designs, develops, manufactures, markets, and sells microscopy systems and
subsystems, or modules, and a distribution division which acts as a sales
representative for other firms' products. In connection with the acquisition,
the distribution division was spun off into a new company, Technical Instruments
- - San Francisco, prior to the completion of the acquisition of the TIC stock by
Zygo. The consideration given for the stock acquired was approximately
$11,700,000 in cash and common stock of Zygo valued at $3,000,000. Zygo has
accounted for the acquisition of TIC as a purchase under the U.S. generally
accepted accounting principles ("GAAP").
Effective as of September 12, 1996, Zygo completed its acquisition of NexStar
Automation, Inc. ("NexStar") in which Zygo exchanged 250,000 shares of its
common stock for all of the issued and outstanding shares of NexStar.
The following pro forma consolidated balance sheets and consolidated statements
of income (collectively, the "Pro Forma Financial Statements") were prepared by
Zygo to illustrate the estimated effects of the business combination with TIC
and of the business combination with NexStar which is accounted for as a
pooling-of-interest under U.S. GAAP. The pro forma financial information has
been referred to as "consolidated" with the NexStar pooling and represents the
consolidation of TIC pursuant to purchase accounting. The pro forma consolidated
financial statements do not present the net assets or results of operations of
TIC's discontinued distribution segment. The pro forma consolidated statements
of operations also do not present a nonrecurring charge to earnings of
$10,084,000 relating to in-process research and development of TIC.
Note: In preparing the Pro Forma Financial Statements, financial data from the
same periods as Zygo has been compiled; therefore, the Pro Forma Financial
Statements cover Zygo's fiscal periods and not those of TIC and NexStar.
All amounts in the Pro Forma Financial Statements are stated in U.S. dollars
unless otherwise stated. The Pro Forma Financial Statements give retrospective
effect to material differences between Zygo's and TIC's and NexStar's accounting
policies which have a material impact on the consolidated financial statements.
The Pro Forma Financial Statements also give retrospective effect for the
allocation of the TIC purchase price to the assets and intangibles of TIC. Such
intangibles include patents, licenses, drawings and technology, customer lists,
workforce, in-process research and development, and
F-23
<PAGE>
goodwill. The Pro Forma Financial Statements do not purport to represent what
the consolidated financial position or results of operations actually would have
been if the combination with TIC and NexStar had occurred at the beginning of
the periods or to project the consolidated financial position or results of
operations for any future date or period.
The Pro Forma Financial Statements should be read in conjunction with the
historical consolidated financial statements, including the notes thereto, of
Zygo, TIC, and NexStar, prepared in accordance with the U.S. GAAP.
The Pro Forma Financial Statements are presented utilizing purchase accounting
with respect to the Zygo/TIC consolidation and the pooling-of-interests method
of accounting for the proposed NexStar acquisition. In pooling-of-interests
accounting the recorded assets, liabilities, shareholders' equity, and results
of operations of Zygo/TIC and NexStar become the consolidated assets,
liabilities, shareholders' equity, and results of operations. The Pro Forma
Financial Statements also include pro forma adjustments which are based upon
available information and certain assumptions that management of Zygo believes
are reasonable in the circumstances. Such pro forma adjustments reflect the
effects of (1) the exchange of each NexStar Common Share outstanding for .04
shares of a Zygo share and (2) conforming NexStar's adjusted financial
information to Zygo's basis of accounting.
F-24
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 - UNAUDITED
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ZYGO TIC Pro Forma Pro Forma NexStar Pro Forma Pro Forma
Historical Historical Adjustments Combined Historical(1) Adjustments Combined
---------- ---------- ----------- --------- ------------- ----------- ---------
Assets:
Current assets:
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $17,945 $ -- $(11,694)(A) $ 6,251 $ 504 $ 6,755
Marketable securities 20,035 -- 20,035 -- 20,035
Accounts and notes receivable 9,942 3,411 (316)(B) 13,037 294 391 (M) 13,722
Inventories 7,034 4,380 (704)(C) 10,710 90 38 (N) 10,838
Prepaid Expenses 215 26 241 18 259
Deferred income taxes 1,506 223 424 (D) 2,153 -- 2,153
Capitalized engineering costs -- -- -- -- (23) 23 (O) --
Deferred income taxes -- -- -- -- 252 252
------- ------- -------- ------- ------ ----- -------
Total current assets 56,677 8,040 (12,290) 52,427 1,158 452 54,014
------- ------- -------- ------- ------ ----- -------
Property, plant and equipment, at cost 17,805 485 (2)(E) 18,288 197 (14)(P) 18,471
Less accumulated depreciation 11,436 347 11,783 40 11,823
Net property, plant and equipment 6,369 138 6,505 157 (14) 6,648
Other assets, net 738 98 449 (F) 1,285 77 1,362
Note receivable - long term portion -- -- -- -- 51 51
Goodwill and other intangibles 253 101 6,458 (G) 6,812 -- 6,812
------- ------- -------- ------- ------ ----- -------
Total assets $64,037 $ 8,377 $ (5,385) $67,029 $1,443 $ 438 $68,887
======= ======= ======== ======= ====== ===== =======
Liabilities and Stockholders' Equity:
Current liabilities:
Current portion of long term debt $ -- $ 310 $ 310 $ -- 310
Accounts payable 3,581 2,440 -- 6,021 721 6,742
Notes payable -- 2,100 2,100 -- 2,100
Accrued expenses and progress payments 5,096 1,567 709 (H) 7,372 462 7,834
Income taxes payable 1,244 -- 1,244 -- 1,244
------- ------- -------- ------- ------ ----- -------
Total current liabilities 9,921 6,417 709 17,047 1,183 18,230
Long term debt, excluding current portion -- 351 351 12 363
Deferred income taxes 692 -- 2,599 (I) 3,291 -- 3,291
------- ------- -------- ------- ------ ----- -------
Total liabilities 10,613 6,768 3,308 20,689 1,195 -- 21,884
------- ------- -------- ------- ------ ----- -------
Stockholders' equity:
Common stock 492 464 (454)(J) 502 293 (268)(Q) 527
Additional paid-in-capital 33,829 -- 2,990 (K) 36,819 358 659 (R) 37,836
Retained earnings 19,439 1,145 (11,229)(L) 9,355 (426) 47 (S) 8,976
Net unrealized loss on marketable securities (35) -- (35) -- (35)
------- ------- -------- ------- ------ ----- -------
53,725 1,609 (8,698) 46,641 225 438 47,304
Less treasury shares, at cost 301 -- 301 -- 301
------- ------- -------- ------- ------ ----- -------
Total stockholders' equity 53,424 1,609 (8,693) 46,340 225 438 47,003
Total liabilities and stockholders' equity $64,037 $ 8,377 $ (5,385) $67,029 $1,420 $ 438 $68,887
======= ======= ======== ======= ====== ===== =======
</TABLE>
- --------------
(1) The NexStar historical information has been adjusted to account for the
prior period activities in accordance with Zygo's accounting policy.
F-25
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED JUNE 30,1996 -- UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ZYGO TIC Pro Forma Pro Forma NexStar Pro Forma Pro Forma
Historical Historical Adjustments Combined Historical(1) Adjustments Combined
---------- ---------- ----------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $53,478 $11,085 $64,563 $3,896 $68,459
Cost of goods sold 28,634 5,890 34,524 2,874 69 (W) 37,467
------- ------- ------- ------ -------
Gross Profit 24,844 5,195 30,039 2,022 30,992
------- ------- ------- ------ -------
Selling, general and administrative
expense 8,305 2,811 11,116 1,195 29 (X) 12,311
Research and development expenses 5,538 759 6,297 -- 6,297
Amortization of goodwill -- -- 431 (T) 431 -- 431
------- ------- ------- ------ -------
13,843 3,570 17,844 1,195 19,039
------- ------- ------- ------ -------
Income (loss) from operations 11,001 1,625 12,195 (173) 11,953
Other income/(expense)
Interest income 939 -- (351)(U) 588 7 595
Interest expense -- (286) (286) -- (286)
Miscellaneous expense, net (279) -- (279) -- (279)
------- ------- ------- ------ -------
600 (286) 23 7 30
------- ------- ------- ------ -------
Income/(loss) before income taxes 11,661 1,339 12,218 (166) 11,983
Income tax provision/(benefit) 3,730 493 (105)(V) 4,118 29 (35)(Y) 4,112
------- ------- ------- ------ -------
Net income/(loss) $ 7,931 $ 846 8,100 $ (195) 7,871
======= ======= ======= ====== =======
Net income (loss) per common and
common equivalent share $ 1,53 $ 1.53 $ 1.42
======= ======= =======
Common and common equivalent share
outstanding 5,189 5,287 5,537
======= ======= =======
</TABLE>
- --------------
(1) The NexStar historical information has been adjusted to account for the
prior period activities in accordance with Zygo's accounting policy.
F-26
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
The pro forma information presented is theoretical in nature and not necessarily
indicative of the future consolidated results of operations which would have
resulted had Zygo purchased TIC and NexStar on June 30, 1996, for purposes of
the pro forma combined balance sheets and had Zygo purchased TIC and NexStar on
July 1, 1995, for purposes of the pro forma combined income statements.
NOTE 2.
The Pro Forma Combined Statements of Income do not present the immediate
nonrecurring charge of $10.1 million relating to "in-process research and
development" that would be recognized in connection with the TIC purchase price
allocation.
NOTE 3.
The Pro Forma Combined Statements of Income do not include transaction costs of
$1.0 million associated with the NexStar transaction, which under the
pooling-of-interest method of accounting was expensed when the transaction was
finally consummated.
NOTE 4. PRO FORMA ADJUSTMENTS
(A) Adjustment to reduce cash for the cash portion of the TIC acquisition
consideration plus related transaction costs.
(B) Adjustment to TIC allowance for doubtful accounts.
(C) Adjustment to reduce the value of TIC inventory to the lower of cost or
market for products to be supported by Zygo.
(D) Adjustment to record a deferred tax asset generated as a result of
adjustments (B) and (C).
(E) Adjustment to record the expense of all capitalized equipment with an
original acquisition value of less than $1,000 to conform to Zygo's
accounting policy.
F-27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS)
(F) Adjustment to other assets which includes the purchase cost of 50 percent
holding in Syncotec GmbH acquired in July 1996 by TIC in connection with
the acquisition by Zygo.
(G) Adjustment to record goodwill and other intangibles resulting from the
acquisition of TIC. This excludes the aforementioned $10.1 million of
"in-process research and development" that would be immediately charged off
to operations.
(H) Adjustment to record commissions owed and not accrued for at the time of
closing balance sheet, and to record a warranty provision.
(I) Adjustment to record long term deferred tax liability as a result of
intangible assets recorded in connection with the TIC acquisition.
(J) Adjustment to record the par value of shares issued less the historical
value of TIC's common stock.
(K) Adjustment to record the excess over par value of shares issued in
connection with the TIC acquisition.
(L) Adjustment to record a $10.1 million one-time acquisition-related charge
for the write-off of in-process R&D (Not reflected in the pro forma
combined income statements.) and eliminate the historical retained earnings
of $1,145.
(M) Adjustment to accounts receivable for options and warrants excercised in
connection with the merger of NexStar with Zygo.
(N) Adjustment to increase value of NexStar inventory, relating to a long term
contract, to conform to Zygo's accounting policy.
(O) Adjustment to record the expense of capitalilized engineering costs to
conform to Zygo's accounting policy.
(P) Adjustment to record the expense of all capitalized equipment with an
original acquisition value of less than $1,000 to conform to Zygo's
accounting policy.
F-28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS)
(Q) Adjustment to record the par value of shares issued less the historical
value of NexStar's common stock and to record the excercise of options and
warrants in connection with the merger of NexStar with Zygo.
(R) Adjustment to record the excess over par value of shares issued in
connection with the NexStar acquisition.
(S) Adjustment to retained earnings for items (N), (O), and (P).
(T) Adjustment to record the amortization of goodwill (assumed to occur over a
15-year period of time).
(U) Adjustment to record interest income for cash used in the acquisition of
TIC.
(V) Adjustment to income taxes for reduced interest income.
(W) Adjustment to expense deferred project start-up costs.
(X) Adjustment to expense capitalized IPO costs.
(Y) Adjustment to income taxes for expensed items (W) and (X).
F-29
<PAGE>
EXHIBIT INDEX
NO. DESCRIPTION
--- -----------
2. The Acquisition Agreement by and among
Zygo Corporation, NX Acquisition Corp. and
NexStar Automation, Inc.*
23. Consent of Ehrhardt Keefe
Steiner & Hottman PC.
99.1 Press Release issued by NexStar
Automation, Inc. dated September 12, 1996.*
99.2 Press Release issued by the Company
and NexStar Automation, Inc. dated
September 13, 1996.*
- -----------
* Previously filed as part of Form 8-K dated September 12, 1996, filed on
September 27, 1996.
INDEPENDENT AUDITORS' CONSENT
We consent to incorporation by reference in Registration Statements No.
33-62087, No. 33-57060, No. 33-28728, No. 33-20880, No. 33-34619, and 33-05265
on Forms S-8 of our report dated June 13, 1996, relating to the consolidated
balance sheets of NexStar Automation, Inc. as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended December 31, 1995, 1994, and 1993 which report
appears in the September 12, 1996 Current Report on Form 8-K/A of Zygo
Corporation.
Ehrhardt Keefe Steiner & Hottman PC
November 13, 1996
Denver, Colorado
