SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 5, 1999
CYBEROPTICS CORPORATION
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(Exact name of registrant as specified in its charter)
Minnesota (0-16577) 41-1472057
- ---------------------------------------------------- ----------
(State or other jurisdiction of COMMISSION FILE NO. (I.R.S. Employer
incorporation or organization) Identification No.)
5900 Golden Hills Drive
MINNEAPOLIS, MINNESOTA 55416
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(612) 542-5000
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(Registrant's telephone number, including area code)
<PAGE>
This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by
CyberOptics Corporation (the "Company") on May 20, 1999 (the "Initial 8-K") to
include certain financial information omitted from the Initial Report pursuant
to Item 7(a)(4) of Form 8-K and the consent of independent certified accountants
with respect to the audited financial statements included herein.
This Current Report on Form 8-K/A (including the financial statements and pro
forma financial information included herein) contains forward looking statements
regarding the product development efforts, estimated costs for product
completion, potential product release dates, estimated cost of sales and
estimated product sales growth rates for certain technology under development by
HAMA Laboratories, Inc. (HAMA) and recently acquired by the Company. Such
forward looking statements are subject to substantial risks over which the
Company may have little or no control.
Further, although the Company believes the assumptions upon which the accounting
treatment of the acquired HAMA net assets are appropriate, there can be no
assurances that such accounting treatment, upon review by the Securities and
Exchange Commission (the SEC), will not be questioned and that adjustments to
the purchase accounting will not be required by the SEC.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial statements of the business acquired and interim
financial information.
The balance sheet as of December 31, 1998 and the related
statements of operations, shareholders' equity and cash flows
of HAMA for the year then ended and the report of Mohler,
Nixon & Williams, independent accountants, thereon, together
with the notes thereto, are located at pages 4 through 13 of
the Amendment No. 1 to the Current Report on Form 8-K.
The unaudited balance sheet as of March 31, 1999 and the
related statements of operations and cash flows of HAMA for
the three months ended March 31, 1999 and 1998, and the notes
thereto are located at pages 14 through 17 of the Amendment
No. 1 to Current Report on Form 8-K.
b) Pro forma financial information
The unaudited pro forma combined balance sheet as of March 31,
1999, and the unaudited pro forma combined statements of
income for the year ended December 31, 1998, and for the three
months ended March 31, 1999, and the notes thereto are located
at pages 18 through 28 of the Amendment No. 1 to Current
Report on Form 8-K.
c) Exhibits
Exhibit Number Description
-------------- -----------
*2.1 Asset Purchase Agreement
*2.2 Escrow Agreement
*20.1 Press Release
23.1 Consent of Mohler, Nixon & Williams
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*Filed with the first filing of this Form 8-K
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<PAGE>
HAMA LABORATORIES, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998
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<PAGE>
To the Board of Directors
and Shareholders of
HAMA Laboratories, Inc.
INDEPENDENT ACCOUNTANTS' REPORT
We have audited the accompanying balance sheet of HAMA Laboratories,
Inc. as of December 31, 1998, and the related statements of operations,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of HAMA Laboratories,
Inc. as of December 31, 1998, and the results of its operations, shareholders'
equity and cash flows for the year then ended, in conformity with generally
accepted accounting principles.
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
February 19, 1999, except for
Note 7 as to which the date is
July 8, 1999.
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<PAGE>
HAMA LABORATORIES, INC.
Balance sheet as of December 31, 1998
- --------------------------------------------------------------------------------
Assets
Cash and cash equivalents $277,907
Accounts receivable, net 156,373
Inventories 47,092
- --------------------------------------------------------------------------------
Total current assets 481,372
- --------------------------------------------------------------------------------
Property and equipment, net 6,740
- --------------------------------------------------------------------------------
Total assets $488,112
================================================================================
Liabilities and shareholders' equity
Accounts payable $ 44,240
Other accrued expenses 26,161
- --------------------------------------------------------------------------------
Total current liabilities 70,401
- --------------------------------------------------------------------------------
Common stock - no par value;
1,000,000 shares authorized;
200,000 shares issued and outstanding 1,600
Retained earnings 416,111
- --------------------------------------------------------------------------------
Total shareholders' equity 417,711
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $488,112
================================================================================
See independent accountants' report and
accompanying notes to financial statements.
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<PAGE>
HAMA LABORATORIES, INC.
Statement of operations for the year ended December 31, 1998
- --------------------------------------------------------------------------------
Net sales $ 2,150,441
Cost of sales 506,535
- --------------------------------------------------------------------------------
Gross profit 1,643,906
- --------------------------------------------------------------------------------
Engineering, research and development 383,728
Marketing and selling 110,337
General and administrative 325,229
- --------------------------------------------------------------------------------
Total operating expenses 819,294
- --------------------------------------------------------------------------------
Income from operations 824,612
Interest expense (172)
Interest income 8,125
- --------------------------------------------------------------------------------
Income before income taxes 832,565
Provision for income taxes 1,210
- --------------------------------------------------------------------------------
Net income $ 831,355
================================================================================
See independent accountants' report and
accompanying notes to financial statements.
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<PAGE>
HAMA LABORATORIES, INC.
Statement of shareholders' equity for the year ended December 31, 1998
- --------------------------------------------------------------------------------
Common stock Total
------------------- Retained shareholders'
Shares Amount earnings equity
- --------------------------------------------------------------------------------
December 31, 1997 200,000 $1,600 $304,756 $306,356
Distributions (720,000) (720,000)
Net income 831,355 831,355
- --------------------------------------------------------------------------------
December 31, 1998 200,000 $1,600 $416,111 $417,711
================================================================================
See independent accountants' report and
accompanying notes to financial statements.
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<PAGE>
HAMA LABORATORIES, INC.
Statement of cash flows for the year ended December 31, 1998
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 831,355
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,224
Changes in assets and liabilities:
Accounts receivable 128,932
Inventories 8,872
Prepaid expenses and other 800
Accounts payable (59,822)
Other accrued expenses 7,668
- --------------------------------------------------------------------------------
Net cash provided by operations 920,029
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Distributions to shareholders (720,000)
Repayment of shareholder loan 2,927
- --------------------------------------------------------------------------------
Net cash used by financing activities (717,073)
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents 202,956
Cash and cash equivalents at beginning of year 74,951
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 277,907
================================================================================
Supplemental cash flow information:
- --------------------------------------------------------------------------------
Income taxes paid during the year $ 1,210
Interest paid during the year $ 172
See independent accountants' report and
accompanying notes to financial statements.
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<PAGE>
HAMA LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
HAMA Laboratories, Inc. (the Company) was incorporated in California in
May 1993. The Company designs, manufactures and markets laser-based sensory
products primarily for the semiconductor equipment manufacturing industry.
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 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. The most significant area requiring the use of management's estimates
relates to the determination of the allowance for doubtful accounts.
CASH EQUIVALENTS -
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents
consist of a money market account in a single bank.
CONCENTRATION OF CREDIT RISK -
The Company's product revenues are concentrated in sales to the
semiconductor equipment manufacturing industry, which is a highly competitive,
and rapidly changing industry. Significant technological changes in the industry
or customer requirements, or the emergence of competitive products with new
capabilities or technologies, could adversely affect the Company's operating
results.
Financial investments that potentially subject the Company to
concentration of credit risk consist principally of trade accounts receivable.
The credit risk in the Company's accounts receivable is mitigated by the fact
that the Company performs ongoing credit evaluations of its customer's financial
condition and accounts receivable are primarily derived from customers in
California. Generally, no collateral is required. As of December 31, 1998, no
reserves were deemed necessary for estimated credit losses.
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<PAGE>
Net sales include sales to one customer of approximately $1,200,000 in
1998. Accounts receivable from this customer was approximately $74,000 at
December 31, 1998. Sales to this customer were at the Company's normal trade
payment terms.
Net purchases include purchases from three vendors of approximately
$217,000 in 1998. Accounts payable to these vendors was approximately $25,000 at
December 31, 1998.
INVENTORIES -
Inventories are stated at the lower of cost or market value, with cost
determined using the first-in, first-out method.
PROPERTY AND EQUIPMENT -
Property and equipment are stated at cost. Depreciation is computed on
the straight-line method based on the estimated useful life of three to five
years of the respective assets.
REVENUE RECOGNITION -
Sales are recognized at the time of shipment.
RESEARCH AND DEVELOPMENT -
Research and development costs are charged to operations as incurred.
ADVERTISING -
Advertising costs are expensed as incurred. Advertising expense for the
year ended December 31, 1998 was approximately $61,000.
INCOME TAXES -
The Company has elected Subchapter S tax treatment. Accordingly, income
or loss of the Company is passed through to the shareholders and is reported on
their individual income tax returns. A California tax on Subchapter S
corporations of 1.5% of taxable income was paid for 1998.
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<PAGE>
NOTE 2 - INVENTORIES:
Inventories at December 31, 1998 consist of:
Purchased parts and
materials $43,371
Work-in-process 2,419
Finished goods 1,302
-------
$47,092
=======
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1998 consist of:
Computer $1,570
Office equipment 8,507
------
10,077
Less accumulated depreciation 3,337
------
$6,740
======
Depreciation expense for 1998 was $2,224.
NOTE 4 - FINANCING ARRANGEMENTS:
The Company has a credit agreement with a bank that provides for a
$50,000 line of credit to finance working capital requirements. The line of
credit is generally for a one-year period. Borrowings on the line of credit bear
interest at 11.5%. There were no outstanding borrowings under the line of credit
at December 31, 1998 or during 1998.
NOTE 5 - EMPLOYEE BENEFIT PLANS:
The Company contributed approximately $74,000 to employees during 1998
under a SEP-IRA arrangement. Contributions are allocated to employees based on
15% of the their annual compensation, up to limits as defined in the Internal
Revenue Code, and vest immediately.
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<PAGE>
NOTE 6 - COMMITMENTS:
The Company entered into a facility lease agreement for a period of one
year, which commenced on August 1, 1998 and requires monthly payments through
July 31, 1999 of approximately $4,500. Rent expense for 1998 was approximately
$45,000.
NOTE 7 - SUBSEQUENT EVENT:
The Company's shareholders sold substantially all of the net assets to
CyberOptics Corporation in 1999. In connection with this sale, the Company paid
bonuses to employees in the aggregate amount of approximately $50,000 in May
1999.
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<PAGE>
HAMA LABORATORIES, INC.
BALANCE SHEET
(Unaudited)
(In thousands, except share amounts)
MARCH 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $322
Accounts receivable, net 272
Inventories 54
- --------------------------------------------------------------------------------
Total current assets 648
Property and equipment, net 7
- --------------------------------------------------------------------------------
Total assets $655
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 42
Other accrued expenses 84
- --------------------------------------------------------------------------------
Total current liabilities 126
Shareholders' equity:
Common stock, no par value, 1,000,000 shares
authorized, 200,000 shares issued
and outstanding 2
Retained earnings 527
- --------------------------------------------------------------------------------
Total shareholders' equity 529
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $655
================================================================================
SEE THE ACCOMPANYING NOTE TO INTERIM FINANCIAL STATEMENTS.
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<PAGE>
HAMA LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
THREE MONTHS ENDED MARCH 31,
1998 1999
- --------------------------------------------------------------------------------
Net sales $638 $499
Cost of sales 132 101
- --------------------------------------------------------------------------------
Gross profit 506 398
Research and development expenses 105 105
Selling, general and administrative expenses 87 124
- --------------------------------------------------------------------------------
Income from operations 314 169
Interest income, net -- 2
- --------------------------------------------------------------------------------
Income before income taxes 314 171
Provision for income taxes -- --
- --------------------------------------------------------------------------------
Net income $314 $171
================================================================================
SEE THE ACCOMPANYING NOTE TO INTERIM FINANCIAL STATEMENTS.
-15-
<PAGE>
HAMA LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
THREE MONTHS ENDED MARCH 31,
1998 1999
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 314 $ 171
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1 1
Changes in operating assets and
liabilities:
Accounts receivable (16) (116)
Inventories (40) (7)
Accounts payable (35) (3)
Other accrued expenses 55 58
- --------------------------------------------------------------------------------
Net cash provided
by operating activities 279 104
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders (120) (60)
Increase in cash and cash equivalents 159 44
Cash and cash equivalents - beginning
of period 75 278
- --------------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 234 $ 322
================================================================================
SEE THE ACCOMPANYING NOTE TO INTERIM FINANCIAL STATEMENTS.
-16-
<PAGE>
Notes to Interim Financial Statements
March 31, 1999
1. Interim Reporting:
The interim financial statements presented herein as of March 31, 1999, and for
the three months ended March 31, 1999 and 1998, are unaudited; however, in the
opinion of management, the interim financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of financial position, results of operations and cash flows for the
periods presented.
The results of operations for the three month period ended March 31, 1999, do
not necessarily indicate the results to be expected for the full year. These
interim financial statements should be read in conjunction with the audited
financial statements of HAMA as of and for the year ended December 31, 1998, and
notes thereto, contained in this Amendment No. 1 to the Current Report on Form
8-K.
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<PAGE>
CyberOptics Corporation and HAMA
Pro Forma Financial Information - Narrative Overview
(Unaudited)
The following unaudited pro forma combined balance sheet as of March 31, 1999
and statements of income for the year ended December 31, 1998, and for the three
months ended March 31, 1999, give effect to the acquisition of substantially all
of the net assets of HAMA by CyberOptics Corporation ("the Company") using the
purchase method of accounting. The unaudited pro forma combined financial
statements combine the historical consolidated balance sheet and statement of
operations of the Company and the historical balance sheet and statement of
operations of HAMA (collectively "the Entities"). The unaudited pro forma
combined balance sheet as of March 31, 1999, assumes the Entities were combined
as of March 31, 1999. The unaudited pro forma combined statements of income for
the year ended December 31, 1998 and for the three months ended March 31, 1999,
assume the Entities were combined effective January 1, 1998.
The unaudited pro forma combined financial statements give effect to (i) the
acquisition of HAMA, (ii) the payment of $7.0 million in cash in connection with
the acquisition of the assets of HAMA, and (iii) other adjustments described in
the accompanying notes.
The unaudited pro forma combined financial statements are not necessarily
indicative of the financial position or results of operations of the Company as
they may be in the future or as they might have been for the periods presented
had the Entities actually been combined effective January 1, 1998 or as of the
date of the unaudited pro forma balance sheet. The unaudited pro forma combined
financial statements and accompanying notes should be read in conjunction with
the historical financial statements of CyberOptics, as filed on Form 10-K for
the year ended December 31, 1998 and on Form 10-Q for the three month period
ended March 31, 1999, and the historical financial statements of HAMA, including
the notes to such financial statements, as of December 31, 1998 and for the year
then ended, and as of March 31, 1999 and for the three month periods ended March
31, 1999 and 1998, as set forth in this Form 8-K/A-1. The pro forma adjustments
are based upon information available at this time and upon certain assumptions
that CyberOptics management believes are reasonable in the circumstances.
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<PAGE>
CYBEROPTICS CORPORATION
PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
CYBEROPTICS(1) HAMA(2) ADJUSTMENTS COMBINED
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 17,474 $ 322 $ (7,166)(3) $ 10,630
Marketable securities 10,129 10,129
Accounts receivable, net 5,949 272 6,221
Inventories 5,552 54 5,606
Other current assets 1,455 -- 1,455
-------------- -------------- -------------- --------------
TOTAL CURRENT ASSETS 40,559 648 (7,166) 34,041
Marketable securities 12,284 12,284
Equipment and leasehold improvements, net 2,546 7 2,553
Capitalized patent costs, net 142 142
Other assets, net 731 260(4) 991
Intangibles 5.866(4) 5,866
-------------- -------------- -------------- --------------
TOTAL ASSETS $ 56,262 $ 655 $ (1,040) $ 55,877
============== ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 1,480 $ 42 $ $ 1,522
Income taxes payable 767 767
Accrued expenses 2,026 84 2,110
-------------- -------------- -------------- --------------
TOTAL CURRENT LIABILITIES 4,273 126 -- 4,399
-------------- -------------- -------------- --------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000 shares
authorized, none outstanding
Common stock, no par value, 25,000 shares
authorized, 4,960 shares issued
and outstanding 32,912 2 (2)(5) 32,912
(527)(5)
Retained earnings 19,077 527 (511)(4) 18,566
-------------- -------------- -------------- --------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 51,989 529 (1,040) 51,478
-------------- -------------- -------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 56,262 $ 655 $ (1,040) $ 55,877
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
balance sheet.
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<PAGE>
CYBEROPTICS CORPORATION
NOTES TO PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1999
(IN THOUSANDS)
(UNAUDITED)
(1) Reflects the historical balance sheet of CyberOptics Corporation as
derived from the Company's unaudited balance sheet as of March 31, 1999
as filed on Form 10-Q.
(2) Reflects the historical unaudited balance sheet of HAMA as derived from
the historical unaudited balance sheet of HAMA as of March 31, 1999.
(3) Adjustment reflects the $6,996 cash consideration paid for the purchase
of substantially all of the assets of HAMA and the estimated $170 of
related transaction costs.
(4) Adjustment reflects the portion of the purchase price allocated to
current technology, purchased in-process research and development and the
related deferred tax asset, trademarks and goodwill. Valuation of the
purchased in-process research and development, current technology and
trademarks was conducted by an independent third-party appraisal company.
The purchase price exceeded the estimated fair value of tangible assets
acquired and liabilities assumed by approximately $6,637. This excess
purchase price was allocated first to purchased in-process research and
development and the related deferred tax asset, current technology and
trademarks, with the residual value allocated to goodwill.
The table below is a summary of the preliminary amounts allocated to current
technology, purchased in-process research and development and the related
deferred tax asset, trademarks and goodwill:
Cash $ 6,996
Direct acquisition costs 170
HAMA liabilities assumed 126
-----------
Total purchase price 7,292
Estimated fair value of tangible assets acquired
(approximates recorded book value) 655
-----------
Purchase price in excess of estimated fair value of
tangible assets acquired $ 6,637
===========
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<PAGE>
Estimated fair value of purchased in-process research
and development and goodwill:
Current technology 4,065
In-process research and development, net of tax 511
Deferred tax assets 260
Trademarks 82
Goodwill 1,719
-----------
$ 6,637
===========
The purchased in-process research and development consists of HAMA's current
projects to develop laser-based proximity sensors for robotic semiconductor
wafer handling which can potentially be used in a vacuum environment and laser
micrometers that will potentially determine the orientation and alignment of
semiconductor wafers during the production process. The technology under
development for use in these laser-based sensors utilizes a complex combination
of optical components, firmware and electronics, along with customized
microprocessors and mechanical designs. Specific in-process projects as of the
date of acquisition include development of Laser-Based Vacuum Proximity Sensors,
Six-Inch Laser Micrometers, Mini Through Beam Micrometers and Customizable Kit
Micrometers. The Company is uncertain whether the technology being developed for
either the proximity sensors or the laser micrometers will ultimately meet the
technical specifications required for semiconductor wafer handling or be
commercially acceptable.
Based upon an independent third-party appraisal, management estimates that
$771,100 of the purchase price represents the fair value of purchased in-process
research and development related to proximity sensors and laser micrometers that
have not yet reached technological feasibility and have no alternative future
uses. Based on a valuation prepared by an independent third party appraiser, the
acquired in-process research and development is allocable to the four in-process
projects as follows:
Vacuum Proximity Sensors: $82,000 Six-Inch Laser Micrometers: $210,000
Mini Through Beam Micrometers: $55,000 Customizable Kit Micrometers: $424,100
These amounts were expensed as a non-recurring, charge upon consummation of the
acquisition. These amounts have been reflected as a reduction in stockholders'
equity and have not been included in the unaudited pro forma combined statements
of income due to their non-recurring nature.
-21-
<PAGE>
The independent third-party appraiser utilized the alternative income valuation
approach to determine the estimated fair value of the purchased in-process
research and development. These estimates are based on the following
assumptions:
* The estimated revenues are based upon projected average annual revenue
growth rates for the proximity sensors and the laser micrometers once
each technology individually reaches a point of technological feasibility
and market release. These projections assume that the HAMA sensors under
development achieve a market share of less than 5% of the factory
automation sensor market. Estimated total revenues projected for sales of
proximity sensors and laser micrometers to be developed using the
purchased in-process research and development peak in the year 2002 and
decline rapidly starting in 2003 through 2005 as the next generation of
these systems are expected to enter the market. These projections are
based on estimates made by the Company's management of the estimated
sales potential for individual customers, estimated market growth rates
(supported by independent market data), expected trends in technology and
the nature and projected timing of the introduction of the next
generation of systems.
* The estimated costs of sales as a percentage of revenues are based on the
estimated costs that management believes could be achieved by HAMA
without considering any synergies due to the acquisition by the Company.
* The estimated selling general and administrative expenses are based on
the estimated expense levels of HAMA through year 2001, and are based
primarily on expense levels of similar companies and other industry
comparisons for the years 2002 through 2005, without considering any
synergies due to the acquisition by the Company.
* The discount rate utilized in the alternative income valuation approach
is based on the weighted average cost of capital (WACC). The WACC
calculation produces the average required rate of return of an investment
in an operating enterprise. The WACC estimated by the independent
third-party appraiser for CyberOptics, as a corporate business
enterprise, is 23.2%. The discount rate used in the alternative valuation
approach was 35%. This discount rate is higher than the WACC due to the
inherent uncertainties in the estimates described above including the
uncertainty surrounding the successful development of the purchased
in-process research and development, the estimated useful life of such
completed research and development, the profitability levels of such
completed research and development and the uncertainty of technological
advances that are unknown at this time
-22-
<PAGE>
The Company estimated that the purchased in-process research projects related to
the vacuum proximity sensors, the six-inch laser micrometers, the through beam
micrometers, and the customizable kit micrometers were 25%, 70%, 20% and 70%
complete, respectively, as of the acquisition date. These estimates were based
upon research and development costs incurred to date compared to total estimated
development costs for each project. As of the date of acquisition, the estimated
cost to complete the vacuum proximity sensors project to a point of
technological feasibility was approximately $150,000, expected to be incurred in
the remainder of 1999. As of the date of the acquisition, the estimated cost to
complete the new six-inch laser micrometers, mini through beam micrometers and
the customizable kit micrometers to a point of technological feasibility was
approximately $122,000, $240,000 and $43,000, respectively, expected to be
incurred primarily in the twelve month period following the acquisition. These
estimates are subject to change, given uncertainties of the development process,
and no assurance can be given that deviations from these estimates will not
occur.
As of the date of acquisition, the Company estimated that the initial vacuum
proximity sensor product to be developed from the purchased in-process research
and development may be introduced during the third quarter of 1999. As of the
date of acquisition, the Company anticipated that the initial six-inch laser
micrometer product to be developed from the purchased in-process research and
development may be introduced during fourth quarter of 1999. The anticipated
introduction date for the customizable kit micrometers is the fourth quarter of
1999 and the through beam micrometer is targeted for introduction in mid-2000.
The Company expects that all the purchased in-process research and development
will reach technological feasibility. However, even if technological feasibility
is achieved (of which there can be no assurance) there can be no assurance that
the commercial viability of the purchased in-process research and development
projects will achieve management's expectations.
As of the date of acquisition, the nature of the development efforts related to
the purchased in-process research and development projects, as well as the
efforts required to complete development of those projects into commercially
viable products are discussed below:
Laser-Based Vacuum Proximity Sensors - Early stage development efforts have
focused on preliminary mechanical and electrical designs, and the completion of
early stage prototypes. Environmental and functional testing have just begun on
the early prototypes. Development to be completed includes obtaining feedback
from the prototype testing and determining the level of additional design work
required to complete final mechanical, electrical and optical designs. Once
these processes are completed, management believes that beta prototypes will be
developed and final testing will be performed on the beta units.
-23-
<PAGE>
Six-Inch Laser Micrometers - Development has focused on completion of the
preliminary mechanical, electrical, CCD (Charge coupled device) receiver and
optics designs. Development prototypes have been completed and initial tests
have been performed. Based on the feedback received from the prototype testing,
additional development efforts will be focused on design changes required for
the six-inch micrometer to meet additional technical specifications. If it is
determined that additional development efforts will potentially allow for
development of a product that will meet its specifications, additional
prototypes will be developed. Further functional testing will be performed and
management believes that beta units will then be developed.
Mini Through Beam Micrometers - This product is in the early stages of
development, and efforts have focused preliminary on mechanical, electrical and
optical designs. Once preliminary design efforts are completed, prototypes will
be developed and tested. Future development efforts will depend on the results
of these prototype test results. However, management would anticipate future
development and testing of beta units following this prototype testing.
Customizable Kit Micrometers - Development has focused on completion of the
preliminary mechanical, electrical, CCD receiver and optics designs. Prototypes
have been completed and initial field testing is underway. Initial test results
indicate that the prototypes are performing up to specification in one
application. However, testing in multiple unique applications will be necessary
before the preliminary testing on adaptability of the modular components will be
completed. Other opportunities for testing prototype in other applications are
being sought. It is anticipated that design changes and modifications to the
firmware will be needed as test results are accumulated and analyzed. If it is
determined that additional development efforts will potentially allow for
development of a product that will meet technical specifications, additional
prototypes will be developed. Further functional testing will be performed and
management then believes that beta units will be developed and tested.
If these products are not successfully developed the sales and profitability of
the combined company may be adversely affected in future periods.
(5) Adjustment reflects the elimination of HAMA's historical stockholders'
equity.
-24-
<PAGE>
CYBEROPTICS CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
CYBEROPTICS(1) HAMA(2) ADJUSTMENTS COMBINED
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 36,636 $ 2,150 $ $ 38,786
Cost of revenues 16,499 506 17,005
-------------- -------------- -------------- --------------
Gross margin 20,137 1,644 -- 21,781
Research and development costs 7,072 384 7,456
(124)(5)
Selling, general and administrative expenses 9,881 435 838 (3) 11,031
-------------- -------------- -------------- --------------
Income from operations 3,184 825 (715) 3,294
Interest income (expense), net 2,220 7 (394)(4) 1,833
-------------- -------------- -------------- --------------
Income from operations 5,404 832 (1,109) 5,127
Provision for income taxes 1,735 1 (128)(6) 1,608
-------------- -------------- -------------- --------------
Net income $ 3,669 $ 831 $ (981) $ 3,519
============== ============== ============== ==============
Net income per share - Basic $ 0.71 $ 0.68
Net income per share - Diluted $ 0.69 $ 0.66
Weighted average shares outstanding - Basic 5,192 5,192
Weighted average shares outstanding - Diluted 5,320 5,320
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
statement of income.
-25-
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(1) Reflects the historical results of operations of CyberOptics as derived
from the Company's statement of operations for the year ended December
31, 1998 as filed on Form 10-K.
(2) Reflects the historical results of operations of HAMA as derived from the
statement of operations of HAMA for the year ended December 31, 1998,
contained elsewhere in this Amendment No. 1 to the Current Report on Form
8-K.
(3) Adjustment reflects the annual amortization charge resulting from
amortization of the $5.9 million of identifiable intangibles assets and
goodwill, over an estimated useful life of 7 years.
(4) Adjustment reflects the reduction of interest income resulting from the
liquidation of investments or the use of cash to complete the
acquisition. The estimated rate of return on investments and the cash
balance was 5.5%.
(5) Adjustment reflects contractual reductions in compensation level for
executive officers who have entered into employment contracts pursuant to
which they will be compensated by the Company at levels lower than their
historical compensation. Such employees are expected to perform duties
and responsibilites similar to those performed prior to the acquisition
by the Company. Such adjustment is considered necessary to fairly present
the impact of the acquisition..
(6) Adjustment reflects the estimated income tax impact of the above
adjustments (3), (4), (5) and the historical net income of HAMA for the
year ended December 31, 1998.
-26-
<PAGE>
CYBEROPTICS CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
CYBEROPTICS(1) HAMA(2) ADJUSTMENTS COMBINED
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 7,705 $ 499 $ $ 8,204
Cost of revenues 3,537 101 3,638
-------------- -------------- -------------- --------------
Gross margin 4,168 398 -- 4,566
Research and development Costs 1,752 105 1,857
(31)(5)
Selling, general and administrative expenses 2,164 125 210 (3) 2,468
-------------- -------------- -------------- --------------
Income from operations 252 168 (179) 241
Interest income (expense), net 530 2 (99)(4) 433
-------------- -------------- -------------- --------------
Income from operations 782 170 (277) 675
Provision for income taxes 230 -- (40)(6) 190
-------------- -------------- -------------- --------------
Net income $ 552 $ 170 $ (237) $ 485
============== ============== ============== ==============
Net income per share - Basic $ 0.11 $ 0.10
Net income per share - Diluted $ 0.11 $ 0.10
Weighted average shares outstanding - Basic 4,955 4,955
Weighted average shares outstanding - Diluted 5,039 5,039
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
statement of income.
-27-
<PAGE>
CYBEROPTICS CORPORATION
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
(1) Reflects the historical results of operations of CyberOptics as derived
from the Company's statement of operations for the three months ended
March 31, 1999 as filed on Form 10-Q.
(2) Reflects the historical unaudited results of operations of HAMA as
derived from the unaudited statement of operations of HAMA for the three
months ended March 31, 1999.
(3) Reflects the estimated quarterly amortization charge resulting from
amortization of the $5.9 million of identifiable intangible assets and
goodwill, over an estimated useful life of 7 years.
(4) Adjustment reflects the reduction of interest income resulting from the
liquidation of investments or the use of cash to complete the
acquisition. The estimated rate of return on investments and the cash
balance was 5.5%.
(5) Adjustment reflects contractual reductions in compensation levels for
executive officers who have entered into employment contracts pursuant to
which they will be compensated by the Company at levels lower than their
historical compensation. Such employees are expected to perform duties
and responsibilites similar to those performed prior to the acquisition
by the Company. Such adjustment is considered necessary to fairly present
the impact of the acquisition.
(6) Adjustment reflects the estimated income tax impact of adjustments (3),
(4), (5) and the historical net income of HAMA for the three months ended
March 31, 1999.
-28-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CYBEROPTICS CORPORATION
By /s/ Steven M. Quist
-------------------
Steven M. Quist, President
Dated: July 19, 1999
-29-
Exhibit 23.1 Consent of Mohler, Nixon & Williams:
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File Nos. 33-21092, 33-41509, 33-41515, 33-50510,
33-80838 and 33-39091) of CyberOptics Corporation of our report dated February
19, 1999, except for Note 7 as to which the date is July 8, 1999, relating to
the financial statements of HAMA Laboratories, Inc., which appears in the
Current Report on Form 8-K/A of CyberOptics Corporation dated July 19, 1999.
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
July 19, 1999
