<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
March 8, 1995
---------------------------------
Date of Report (Date of earliest event reported)
FSI INTERNATIONAL, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-17276 41-1223238
--------- ------- -------------------
(State of Incorporation) (Commission file number) (I.R.S. Employer
Identification No.)
322 Lake Hazeltine Drive, Chaska, Minnesota 55318
- ------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Telephone Number: (612) 448-5440
----------------------------------------------------
(Registrant's telephone number, including area code)
================================================================================
Exhibit Index is located at page 25 of 27 pages
1
<PAGE>
FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
- ------- -------------------------------------
On March 8, 1995, Applied Chemical Solutions, a California corporation,
merged with and into ACS Acquisition Corp., a Minnesota corporation and a wholly
owned subsidiary of the Registrant. Concurrently with the merger, ACS
Acquisition Corp. changed its name to Applied Chemical Solutions, Inc.
Following the acquisition, the Registrant intends to continue the acquired
company's business of designing, manufacturing, marketing and supporting
chemical delivery, purification, blending and generating systems used in the
fabrication of semiconductor devices.
In connection with the acquisition, which will be accounted for as a
pooling of interests, the Registrant issued a total of 530,736 shares of its
common stock. An aggregate of 39,805 of such shares were deposited in escrow to
provide a fund for satisfying any indemnification obligations to the Registrant
pursuant to the terms of the Agreement and Plan of Reorganization dated December
23, 1994 (as amended). In addition, the Registrant issued options covering, in
the aggregate, 107,379 shares of the Registrant's common stock in substitution
of previously outstanding options to acquire shares of the acquired company's
common stock.
Additional information regarding the terms of the acquisition are
included in the Agreement and Plan of Reorganization and the News Release
included herein as exhibits.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- ------- ---------------------------------
The following information follows or is attached hereto
as an exhibit:
<TABLE>
<CAPTION>
(a) Financial Statements of Business Acquired Page No.
----------------------------------------- --------
<S> <C>
Financial Statements of Applied Chemical
Solutions:
Independent Auditors' Report 5
Statements of Operations for the fiscal years ended
July 31, 1993 and 1994 and for the quarters ended
October 31, 1993 and 1994 (unaudited) 6
Balance Sheets as of July 31, 1993 and 1994 and
October 31, 1994 (unaudited) 7
Statements of Cash Flows for the years ended
July 31, 1993 and 1994 and for the quarters
ended October 31, 1993 and 1994 (unaudited) 8
Statements of Stockholders' (Deficit) Equity for the
fiscal years ended July 31, 1993 and 1994 and for
the three months ended October 31, 1994 (unaudited) 9
Notes to Financial Statements 10
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
(b) Pro Forma Combined Financial Information of FSI
-----------------------------------------------
International, Inc. and Applied Chemical Solutions Page No.
-------------------------------------------------- --------
<S> <C>
Description of the Pro Forma
Combined Financial Information 16
Unaudited Pro Forma Combined Statement of
Operations for the fiscal years ended August 29,
1992, August 28, 1993 and August 27, 1994 and
for the quarters ended November 27, 1993 and
November 26, 1994 17
Unaudited Pro Forma Combined Balance Sheet as of
November 26, 1994 22
Notes to Unaudited Pro Forma Combined Financial
Information 23
(c) Exhibits
--------
5 Agreement and Plan of Reorganization
dated December 23, 1994 by and among
FSI International, Inc., ACS Acquisition
Corp., Applied Chemical Solutions and
certain significant shareholders (as amended).
Incorporated by reference to exhibit 5 to the
Registrant's current report on Form 8-K dated
January 5, 1995 and to exhibits 2.3 and 2.4
to the Registrant's Registration Statement on
Form S-4 (File No. 33-88254).
The Registrant hereby agrees to furnish
supplementary a copy of any omitted schedule
or exhibit to the Commission upon request.
99 Press Release of FSI International, Inc.
dated March 9, 1995.
</TABLE>
3
<PAGE>
ITEM 7(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
- --------- ------------------------------------------
APPLIED CHEMICAL SOLUTIONS
FINANCIAL STATEMENTS
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Applied Chemical Solutions:
We have audited the accompanying balance sheets of Applied Chemical Solutions
as of July 31, 1993 and 1994, and the related statements of operations, cash
flows and stockholders' deficit for the years 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 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 financial statements referred to above present fairly, in
all material respects, the financial position of Applied Chemical Solutions at
July 31, 1993 and 1994, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of any of this uncertainty.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
December 9, 1994, except as to note 15,
which is as of December 23, 1994.
5
<PAGE>
APPLIED CHEMICAL SOLUTIONS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY
31, QUARTER ENDED OCTOBER 31,
----------------------- --------------------------
1993 1994 1993 1994
---------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales...................... $1,470,270 $ 1,592,376 $ 216,924 $3,278,878
Cost of goods sold......... 1,039,874 1,270,683 149,120 2,284,318
---------- ----------- ------------ ------------
Gross profit........... 430,396 321,693 67,804 994,560
Selling, general and
administrative expenses... 463,360 1,123,969 202,102 499,435
Research and development
expenses.................. 146,132 217,372 61,998 89,676
---------- ----------- ------------ ------------
Operating income
(loss)................ (179,096) (1,019,648) (196,296) 405,449
Other income (expense),
net....................... (6,353) 4,000 (4,267) 4,337
---------- ----------- ------------ ------------
Income (loss) before income
taxes..................... (185,449) (1,015,648) (200,563) 409,786
Income tax expense......... -- -- -- --
---------- ----------- ------------ ------------
Net income (loss)...... $ (185,449) $(1,015,648) $ (200,563) $ 409,786
========== =========== ============ ============
Net income (loss) per
common share.......... $ (0.07) $ (0.43) $ (0.11) $ 0.15
========== =========== ============ ============
Weighted average common
shares and common share
equivalents............... 2,593,693 2,364,826 1,909,863 2,808,801
========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
APPLIED CHEMICAL SOLUTIONS
BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
-------------------- OCTOBER 31,
ASSETS 1993 1994 1994
------ -------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $171,891 $ 529,398 $ 613,363
Accounts receivable, net of allowance for
doubtful accounts of $0, $25,000, and
$25,000, respectively..................... 306,878 689,006 1,185,497
Inventories................................ -- 143,676 242,162
Prepaid expenses and other current assets.. 17,059 229,173 129,955
-------- ---------- ----------
Total current assets..................... 495,828 1,591,253 2,170,977
-------- ---------- ----------
Leasehold improvements and equipment, net.... 38,584 103,519 129,695
Deposits and other assets.................... 85,370 85,327 81,122
-------- ---------- ----------
$619,782 $1,780,099 $2,381,794
======== ========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
----------------------------------------------
<S> <C> <C> <C>
Current liabilities:
Trade accounts payable..................... $364,918 $ 742,864 $ 918,054
Demand notes payable to shareholders....... 130,000 -- --
Accrued expenses........................... 158,023 341,000 549,444
Customer deposits.......................... 11,250 840,700 607,388
-------- ---------- ----------
Total current liabilities................ 664,191 1,924,564 2,074,886
-------- ---------- ----------
Stockholders' (deficit) equity:
Preferred stock, no par value; 5,000,000
shares authorized; none issued and
outstanding............................... -- -- --
Common stock, no par value: 10,000,000
shares authorized; issued and outstanding,
1,909,863, 2,492,663, and 2,509,298
shares, respectively...................... 741,823 1,407,415 1,449,002
Additional paid-in-capital................. -- 250,000 250,000
Accumulated deficit........................ (786,232) (1,801,880) (1,392,094)
-------- ---------- ----------
Total stockholders' (deficit) equity..... (44,409) (144,465) 306,908
Commitments (note 3).........................
-------- ---------- ----------
$619,782 $1,780,099 $2,381,794
======== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
APPLIED CHEMICAL SOLUTIONS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED QUARTER ENDED
JULY 31, OCTOBER 31,
---------------------- -------------------
1993 1994 1993 1994
--------- ----------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Operating Activities
Net income (loss)............... $(185,449) $(1,015,648) $(200,563) $409,786
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization. 19,315 38,872 9,473 12,192
Noncash interest expense...... -- 6,503 3,277 --
Stock issued for services..... -- 141,376 -- 41,587
Loss on disposal of fixed
asset........................ -- 3,419 -- --
Changes in operating assets
and liabilities:
Accounts receivable......... (306,878) (382,128) 123,604 (496,491)
Inventories................. 55,502 (143,676) (3,315) (98,486)
Prepaid expenses and other
current assets............. (17,059) (212,114) 4,570 99,218
Trade accounts payable...... 336,715 377,946 (80,337) 175,189
Accrued expenses............ 119,723 182,977 27,027 208,445
Customer deposits........... 11,250 829,450 92,250 (233,312)
--------- ----------- --------- --------
Net cash provided by (used in)
operating activities......... 33,119 (173,023) (24,014) 118,128
--------- ----------- --------- --------
Investing Activities
Acquisition of leasehold
improvements and equipment..... (43,673) (101,749) (14,519) (38,368)
Increase in deposits and other
assets......................... (38,614) (12,755) (4,183) 4,205
Proceeds from sale of equipment. -- 7,321 -- --
--------- ----------- --------- --------
Net cash used in investing
activities................... (82,287) (107,183) (18,702) (34,163)
--------- ----------- --------- --------
Financing Activities
Proceeds from the issuance of
demand notes payable........... 130,000 -- -- --
Principal payments on short-term
debt........................... -- (40,000) -- --
Net proceeds from issuance of
common stock................... -- 427,713 -- --
Proceeds from issuance of
warrants....................... -- 250,000 -- --
--------- ----------- --------- --------
Net cash provided by financing
activities................... 130,000 637,713 -- --
--------- ----------- --------- --------
Increase (decrease) in cash and
cash equivalents................. 80,832 357,507 (42,716) 83,965
Cash and cash equivalents at
beginning of period.............. 91,059 171,891 171,891 529,398
--------- ----------- --------- --------
Cash and cash equivalents at end
of period........................ $ 171,891 $ 529,398 $ 129,175 $613,363
========= =========== ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
APPLIED CHEMICAL SOLUTIONS
STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
YEARS ENDED JULY 31, 1993 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
NUMBER OF ADDITIONAL ACCUMULATED
SHARES AMOUNT PAID-IN-CAPITAL DEFICIT TOTAL
--------- ---------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, July 31, 1992.. 2,767,457 $ 728,939 $ -- $ (600,783) $ 128,156
Stock issuance for
services............... 17,406 13,055 -- -- 13,055
Rescission of shares.... (875,000) (171) -- -- (171)
Net loss................ -- -- -- (185,449) (185,449)
--------- ---------- -------- ------------ -----------
Balance, July 31, 1993.. 1,909,863 741,823 -- (786,232) (44,409)
Stock issuance in
financing round........ 169,792 413,726 -- -- 413,726
Stock issuance upon
exercise of options.... 275,777 13,987 -- -- 13,987
Stock issuance for
services............... 98,630 141,376 -- -- 141,376
Stock issued upon debt
conversion............. 38,601 96,503 -- -- 96,503
Warrant issuance........ -- -- 250,000 -- 250,000
Net loss................ -- -- -- (1,015,648) (1,015,648)
--------- ---------- -------- ------------ -----------
Balance, July 31, 1994.. 2,492,663 1,407,415 250,000 (1,801,880) (144,465)
Stock issuance for
services (unaudited)... 16,635 41,587 -- -- 41,587
Net income (unaudited).. -- -- -- 409,786 409,786
--------- ---------- -------- ------------ -----------
Balance, October 31,
1994 (unaudited)....... 2,509,298 $1,449,002 $250,000 $ (1,392,094) $ 306,908
========= ========== ======== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
APPLIED CHEMICAL SOLUTIONS
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JULY 31, 1993 AND 1994
(INFORMATION AS OF OCTOBER 31, 1994 AND FOR THE QUARTERS ENDED
OCTOBER 31, 1993 AND 1994 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The condensed financial statements at October 31, 1994 and for the quarters
ended October 31, 1993 and 1994 are unaudited. In the opinion of management of
the Company, such unaudited financial statements include all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the information set forth therein. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. Results of the
interim periods are not necessarily indicative of the results for the entire
year.
Revenue Recognition
Revenue from chemical management systems is recognized using the percentage
of completion method. Earned revenue is based on the percentage that incurred
costs to date bear to total estimated costs after giving effect to the most
recent estimates of total costs. Losses on projects are recognized in the
period in which it is determined that it is probable that a loss will be
incurred.
Cash and Cash Equivalents
All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents and are stated at the
lower of cost or market.
Inventories
Inventories are valued at the lower of cost, determined by the first-in,
first-out method, or net realizable value.
Leasehold Improvements and Equipment
Leasehold improvements are carried at cost and are amortized over a three
year period or the term of the underlying lease, whichever is shorter.
Equipment is carried at cost and depreciated on a straight-line method over
their estimated economic lives. Principal economic lives for equipment are 1 to
5 years. When assets are retired or disposed of, the cost and accumulated
depreciation thereon is removed from the accounts and gains or losses are
included in other income (expense). Maintenance and repairs are expensed as
incurred; significant renewals and betterments are capitalized.
Patents
Patents are capitalized and amortized over their estimated economic or legal
lives, whichever is shorter, ranging up to five years.
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting. The Company accounts
for tax credits as reductions of income tax expense in the year in which such
credits are utilized for tax purposes.
10
<PAGE>
APPLIED CHEMICAL SOLUTIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company utilizes the asset and liability method for computing its
deferred taxes as specified by Statement of Financial Accounting Standards
(FAS) No. 109, Accounting for Income Taxes. Under the asset and liability
method, deferred taxes are based on the difference between the financial
statement and tax basis or assets and liabilities and the enacted tax rates.
Product Warranty
The Company, in general, warrants new equipment sold to the original
purchaser to be free from defects in material and workmanship for up to 18
months depending upon the product. Provision is made for the estimated cost of
maintaining product warranties at the time the product is sold.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed based on the weighted average
number of shares and common stock equivalents outstanding during the year. For
purposes of fiscal 1993 and 1994 and the quarter ended October 31, 1993, this
computation does not include stock options and stock warrants as the effect
would be antidilutive. For purposes of the quarter ended October 31, 1994, all
stock options and stock warrants are reflected in the computation of common
stock equivalents. For all periods presented, fully diluted and primary net
income (loss) per common share are the same.
(2) CONTINUATION AS A GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. During the fiscal year ended July 31, 1994
the Company experienced a loss of $1,015,648, had an accumulated deficit of
$1,801,880, a stockholders deficit of $144,465 and a working capital deficit of
$333,311. Accordingly, there is substantial doubt about the Company's ability
to continue in existence. The Company's continued existence is dependent upon
management's ability to achieve profitability and resolve its liquidity
problems. The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue to exist. Management
believes that in order to meet the planned levels of growth and profitability,
the Company will require additional financing. The Company will seek
alternative financing which may include asset based lending, the issuance of
debt or equity securities or other forms of private capital. There can be no
assurance that such additional financing will be available on satisfactory
terms, if at all, when needed. Management believes the Company could reduce
expenditures and alter its operations, if necessary, to a level that would
lessen the Company's dependence on outside financing sources. (See note 15.)
(3) LEASE COMMITMENTS
The Company is obligated under operating lease agreements for equipment and
manufacturing and office facilities.
Future minimum lease payments for all leases with noncancelable lease terms
in excess of one year at July 31, 1994 are as follows:
<TABLE>
<S> <C>
Fiscal Year Ending July 31:
1995........................................................ $ 78,348
1996........................................................ 79,212
1997........................................................ 68,411
--------
Total minimum lease payments.............................. $225,971
========
</TABLE>
11
<PAGE>
APPLIED CHEMICAL SOLUTIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Rental expense for all operating leases was $31,161 and $16,577 for the years
ended July 31, 1993 and 1994, respectively.
(4) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JULY 31
------------- OCTOBER 31,
1993 1994 1994
---- -------- -----------
<S> <C> <C> <C>
Work in process................................. $-- $ 46,301 $ 96,134
Raw materials and purchased parts............... -- 97,375 146,028
---- -------- --------
$-- $143,676 $242,162
==== ======== ========
</TABLE>
(5) LEASEHOLD IMPROVEMENTS AND EQUIPMENT
The components of leasehold improvements and equipment are as follows:
<TABLE>
<CAPTION>
1993 1994
------- --------
<S> <C> <C>
Leasehold improvements....................................... $ -- $ 14,309
Office furniture and equipment............................... 47,807 115,375
Tooling...................................................... -- 1,248
------- --------
47,807 130,932
Less accumulated depreciation and amortization............... (9,223) (27,413)
------- --------
$38,584 $103,519
======= ========
</TABLE>
(6) PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets are summarized as follows:
<TABLE>
<CAPTION>
1993 1994
------- --------
<S> <C> <C>
Commissions.............................................. $ -- $151,889
Other.................................................... 17,059 77,284
------- --------
$17,059 $229,173
======= ========
</TABLE>
(7) DEPOSITS AND OTHER ASSETS
Deposits and other assets are summarized as follows:
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Patents, net.............................................. $78,044 $78,045
Other..................................................... 7,326 7,282
------- -------
$85,370 $85,327
======= =======
</TABLE>
12
<PAGE>
APPLIED CHEMICAL SOLUTIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
Commissions............................................ $ 40,831 $160,542
Estimated product warranties........................... 75,398 78,941
Other.................................................. 41,794 101,517
-------- --------
$158,023 $341,000
======== ========
</TABLE>
(9) DEMAND NOTES PAYABLE TO SHAREHOLDERS
At July 31, 1993 the Company had $130,000 of demand notes payable to various
shareholders. The notes were payable on demand on or after November 9, 1993
with interest at an annual rate of 10%. During fiscal 1994, $90,000 of these
notes along with accrued interest of $6,503 were converted into common stock.
The remaining notes and related accrued interest were paid in full.
(10) INCOME TAXES
As discussed in note 1, the Company utilizes FAS 109 "Accounting for Income
Taxes."
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at July 31,
1993 and 1994 are as follows:
<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss.................................. $153,400 $466,500
Estimated product warranty cost..................... 25,600 26,800
R&D credit carryover................................ 22,300 34,300
Other, net.......................................... 700 9,200
-------- --------
Total gross deferred tax assets................... 202,000 536,800
Valuation allowance............................... (202,000) (536,800)
-------- --------
Net deferred tax assets......................... $ -- $ --
======== ========
</TABLE>
The effective tax rate differs from the statutory federal income tax rate as
follows:
<TABLE>
<CAPTION>
1993 1994
----- -----
<S> <C> <C>
Expected federal income tax expense (benefit)............. (34.0%) (34.0%)
Change in the valuation allowance......................... 30.5 33.0
Other items, net.......................................... 3.5 1.0
----- -----
-- % -- %
===== =====
</TABLE>
The Company has tax net operating loss carryforwards at July 31, 1994 of
$1,372,000 and research and experimentation credit carryforwards of $34,300
which begin to expire in 2005. The financial statements do not reflect the
benefit of any of these future carryforwards. Federal tax rules impose
limitations on the utilization of these carryforwards following certain changes
in ownership. If such change were to occur, the limitation could reduce the
amount of these benefits that would be available to offset future taxable
income each year, starting with the year of ownership change.
13
<PAGE>
APPLIED CHEMICAL SOLUTIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During the quarter ended October 31, 1994 the Company utilized approximately
$410,000 of its tax net operating loss carryforwards, resulting in no tax
expense for the quarter. The Company's net tax operating loss carryforwards at
October 31, 1994 was $962,000.
(11) STOCK OPTIONS AND WARRANTS
The Company has two Stock Option Plans, the 1990 Stock Plan and the 1993
Flexible Stock Incentive Plan (1993 Plan).
The Company's 1990 Stock Plan was replaced by the 1993 Flexible Stock
Incentive Plan (the 1993 Plan) during fiscal year 1993. The options outstanding
under the 1990 Stock Plan as of the adoption of the 1993 Plan remain in effect.
The Company's Stock Option Plans (the Option Plans) authorize grants of
options to purchase shares of the Company's stock to officers, directors,
nonemployees and employees. Under the Option Plans, options become exercisable
at a date determined by the Option Committee. The option prices are fixed by
the Option Committee and may not be less than the fair market value of the
stock at the time the option is granted. Options expire ten years after the
date granted or on a prior date as fixed by the Option Committee.
The activity under all plans is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------
AVAILABLE PRICE
ACTIVITY DESCRIPTION FOR GRANT OUTSTANDING RANGE
-------------------- ---------- ----------- ----------
<S> <C> <C> <C>
July 31, 1992......................... 2,000,000 275,494 $ 0.05
Additional shares authorized........ 1,000,000 -- --
Granted............................. (481,006) 481,006 0.75-1.25
Exercised........................... -- -- --
Canceled............................ (1,518,994) (25,000) 1.25
---------- --------
July 31, 1993......................... 1,000,000 731,500 0.05-1.25
Granted............................. (61,000) 61,000 1.25-2.50
Exercised........................... -- (275,777) 0.05-0.75
Canceled............................ -- (717) 0.75
---------- --------
July 31, 1994......................... 939,000 516,006 0.75-2.50
---------- --------
Number of shares exercisable at
July 31, 1994........................ 422,233 $0.75-2.50
==========
</TABLE>
(12) STOCKHOLDERS' DEFICIT
During fiscal 1993, the Company issued 17,406 shares of common stock valued
at $13,055 to a member of the board of directors for consulting services
performed.
During fiscal 1993, the Company entered into a settlement agreement with one
of the founders regarding the original capitalization of the Company. As part
of the settlement, the founder returned 875,000 shares to the Company in
exchange for the rescission of all notes receivable from the founder and notes
payable to the founder. The net value of these notes payable and the notes
receivable was $25,829 payable. Also, the Company assumed $26,000 of personal
tax liability of the founder related to the transaction.
During fiscal 1994, the Company issued a warrant for the purchase of 118,000
shares for $250,000 to a third-party. The warrant is exercisable at $2.50 per
share. The warrant expires on January 1, 1999. The third-party also received an
exclusive license agreement for one of the Company's products.
14
<PAGE>
APPLIED CHEMICAL SOLUTIONS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During fiscal 1994, the Company issued 169,792 shares at $2.50 per share in a
private placement. The net proceeds from the private placement were $413,726.
Demand notes payable from shareholders and related accrued interest, totaling
$96,503 were converted into 38,601 shares of common stock during fiscal 1994.
The Company issued 98,630 shares for services rendered by and for goods
purchased from various consultants and vendors during fiscal 1994.
The Company issued 275,777 shares upon the exercise of options.
(13) SUPPLEMENTARY CASH FLOW INFORMATION
The Company paid interest in fiscal 1993 and 1994 of $10,127 and $4,976,
respectively.
(14) SIGNIFICANT SALES
The following summarizes significant customers comprising 10% or more of the
Company's direct customer sales:
<TABLE>
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
Customer A..................................................... 59% 43%
Customer B..................................................... 31% --
Customer C..................................................... -- 21%
Customer D..................................................... 10% 10%
Customer E..................................................... -- 11%
</TABLE>
(15) SUBSEQUENT EVENT
On December 23, 1994, the Company entered into an Agreement and Plan of
Reorganization with FSI International, Inc. (FSI). Under the agreement, the
Company's stockholders will exchange all of their common stock of the Company
for common stock of FSI.
15
<PAGE>
ITEM 7(b) PRO FORMA FINANCIAL INFORMATION
- --------- -------------------------------
Unaudited Pro Forma Combined Financial Information
As of November 26, 1994 and for the quarters ended November 27, 1993 and
November 26, 1994 and for each of the fiscal years
in the three year period ended August 27, 1994
FSI International, Inc. ("FSI") and Applied Chemical Solutions ("ACS")
The following unaudited pro forma combined financial information presents the
pro forma effect of the acquisition of ACS by FSI on FSI's historical financial
position and results of operations using the pooling of interests method of
accounting. The pro forma combined statements of operations for the fiscal
years ended August 29, 1992, August 28, 1993 and August 27, 1994 and the
quarters ended November 27, 1993 and November 26, 1994 are presented as though
the acquisition had occurred immediately prior to the beginning of the
respective periods using FSI's consolidated statements of operations for the
fiscal years ended August 29, 1992, August 28, 1993 and August 27, 1994 and the
quarters ended November 27, 1993 and November 26, 1994 and ACS's statements of
operations for the fiscal years ended July 31, 1992, 1993 and 1994 and the
quarters ended October 31, 1993 and 1994. The pro forma combined balance sheet
as of November 26, 1994 is presented as though the acquisition had occurred on
November 26, 1994 using FSI's consolidated balance sheet as of November 26, 1994
and ACS's balance sheet as of October 31, 1994. The pro forma combined
financial information should be read in conjunction with the historical
financial information of FSI and ACS. The pro forma combined financial
information has been prepared and included as required by the rules and
regulations of the Securities and Exchange Commission and does not purport to be
indicative of the results that actually would have been obtained if the
acquisition had been effected on the dates indicated or of the results which may
be obtained in the future.
16
<PAGE>
FSI INTERNATIONAL, INC.
AND APPLIED CHEMICAL SOLUTIONS
UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
HISTORICAL
------------------------
APPLIED
FSI CHEMICAL
INTERNATIONAL, SOLUTIONS PRO FORMA
INC. YEAR COMBINED
YEAR ENDED ENDED YEAR ENDED
AUGUST 29, JULY 31, PRO FORMA AUGUST 29,
1992 1992 ADJUSTMENTS 1992
-------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Sales................... $46,878,835 $ -- $46,878,835
Cost of goods sold...... 28,108,592 -- 28,108,592
----------- --------- ---------- -----------
Gross profit........ 18,770,243 -- 18,770,243
Selling, general and
administrative
expenses............... 10,810,818 59,830 10,870,648
Research and development
expenses............... 9,739,857 334,830 10,074,687
----------- --------- ---------- -----------
Operating loss...... (1,780,432) (394,660) (2,175,092)
Interest expense........ (464,589) -- (464,589)
Other income, net....... 47,633 6,691 54,324
----------- --------- ---------- -----------
Loss before income
taxes.............. (2,197,388) (387,969) (2,585,357)
Income tax expense...... 392,000 -- 392,000
----------- --------- ---------- -----------
Loss before equity
in loss of
affiliates......... (2,589,388) (387,969) (2,977,357)
Equity in loss of
affiliates............. (372,779) -- (372,779)
----------- --------- ---------- -----------
Net loss............ $(2,962,167) $(387,969) $(3,350,136)
=========== ========= ========== ===========
Net loss per common
share.............. $ (0.72) $ (0.16) $ (0.72)(B)
=========== ========= ========== ===========
Weighted average common
shares and common share (2,467,143)(B)
equivalents............ 4,141,124 2,467,143 496,251 (B) 4,637,375
=========== ========= ========== ===========
</TABLE>
17
<PAGE>
FSI INTERNATIONAL, INC.
AND APPLIED CHEMICAL SOLUTIONS
UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
FSI APPLIED
INTERNATIONAL, CHEMICAL PRO FORMA
INC. SOLUTIONS COMBINED
YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 28, JULY 31, PRO FORMA AUGUST 28,
1993 1993 ADJUSTMENTS 1993
-------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales................... $76,952,039 $1,470,270 $78,422,309
Cost of goods sold...... 48,422,454 1,039,874 49,462,328
----------- ---------- ---------- -----------
Gross profit........ 28,529,585 430,396 28,959,981
Selling, general and
administrative
expenses............... 14,034,445 463,360 14,497,805
Research and development
expenses............... 11,556,854 146,132 11,702,986
----------- ---------- ---------- -----------
Operating income
(loss)............. 2,938,286 (179,096) 2,759,190
Interest expense........ (547,556) -- (547,556)
Other expense, net...... (118,755) (6,353) (125,108)
----------- ---------- ---------- -----------
Income (loss) before
income taxes....... 2,271,975 (185,449) 2,086,526
Income tax expense...... 360,000 -- 360,000
----------- ---------- ---------- -----------
Income (loss) before
equity in earnings
of affiliates...... 1,911,975 (185,449) 1,726,526
Equity in earnings of
affiliates............. 1,277,261 -- 1,277,261
----------- ---------- ---------- -----------
Net income (loss)... $ 3,189,236 $ (185,449) $ 3,003,787
=========== ========== ========== ===========
Net income (loss)
per common share... $ 0.68 $ (0.07) $ 0.57(B)
=========== ========== ========== ===========
Weighted average common
shares and common share (2,593,693)(B)
equivalents............ 4,668,047 2,593,693 610,776 (B) 5,278,823
=========== ========== ========== ===========
</TABLE>
18
<PAGE>
FSI INTERNATIONAL, INC.
AND APPLIED CHEMICAL SOLUTIONS
UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
FSI APPLIED
INTERNATIONAL, CHEMICAL PRO FORMA
INC. SOLUTIONS COMBINED
YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 27, JULY 31, PRO FORMA AUGUST 27,
1994 1994 ADJUSTMENTS 1994
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales................... $94,047,571 $ 1,592,376 $ (529,750)(C) $95,110,197
Cost of goods sold...... 53,962,955 1,270,683 (438,103)(C) 54,795,535
----------- ----------- ----------- -----------
Gross profit........ 40,084,616 321,693 (91,647) 40,314,662
Selling, general and
administrative
expenses............... 18,328,635 1,123,969 19,452,604
Research and development
expenses............... 15,524,106 217,372 15,741,478
----------- ----------- ----------- -----------
Operating income
(loss)............. 6,231,875 (1,019,648) (91,647) 5,120,580
Interest expense........ (413,696) -- (413,696)
Other income, net....... 151,822 4,000 155,822
----------- ----------- ----------- -----------
Income (loss) before
income taxes....... 5,970,001 (1,015,648) (91,647) 4,862,706
Income tax expense...... 1,254,000 -- 1,254,000
----------- ----------- ----------- -----------
Income (loss) before
equity in
earnings of
affiliates......... 4,716,001 (1,015,648) (91,647) 3,608,706
Equity in earnings of
affiliates............. 1,799,750 -- 1,799,750
----------- ----------- ----------- -----------
Net income (loss)... $ 6,515,751 $(1,015,648) $ (91,647) $ 5,408,456
=========== =========== =========== ===========
Net income (loss)
per common share... $ 1.08 $ (0.43) $ 0.82(B)
=========== =========== =========== ===========
Weighted average common
shares and (2,364,826)(B)
common share
equivalents............ 6,043,319 2,364,826 567,885 (B) 6,611,204
=========== =========== =========== ===========
</TABLE>
19
<PAGE>
FSI INTERNATIONAL, INC.
AND APPLIED CHEMICAL SOLUTIONS
UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
FSI APPLIED
INTERNATIONAL, CHEMICAL PRO FORMA
INC. SOLUTIONS COMBINED
QUARTER ENDED QUARTER ENDED QUARTER ENDED
NOVEMBER 27, OCTOBER 31, PRO FORMA NOVEMBER 27,
1993 1993 ADJUSTMENTS 1993
-------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sales................... $21,038,701 $ 216,924 $21,255,625
Cost of goods sold...... 12,376,716 149,120 12,525,836
----------- --------- ---------- -----------
Gross profit........ 8,661,985 67,804 8,729,789
Selling, general and
administrative
expenses............... 4,112,931 202,102 4,315,033
Research and development
expenses............... 3,341,290 61,998 3,403,288
----------- --------- ---------- -----------
Operating income
(loss)............. 1,207,764 (196,296) 1,011,468
Interest expense........ (201,314) -- (201,314)
Other income (expense),
net.................... 5,347 (4,267) 1,080
----------- --------- ---------- -----------
Income (loss) before
income taxes ...... 1,011,797 (200,563) 811,234
Income tax expense...... 185,000 -- 185,000
----------- --------- ---------- -----------
Income (loss) before
equity in earnings
of affiliates...... 826,797 (200,563) 626,234
Equity in earnings of
affiliates............. 413,800 -- 413,800
----------- --------- ---------- -----------
Net income (loss)... $ 1,240,597 $(200,563) $ 1,040,034
=========== ========= ========== ===========
Net income (loss)
per common share .. $ 0.25 $ (0.11) $ 0.19(B)
=========== ========= ========== ===========
Weighted average common
shares and (1,909,863)(B)
common share
equivalents............ 4,942,693 1,909,863 441,575 (B) 5,384,268
=========== ========= ========== ===========
</TABLE>
20
<PAGE>
FSI INTERNATIONAL, INC.
AND APPLIED CHEMICAL SOLUTIONS
UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
FSI APPLIED
INTERNATIONAL, CHEMICAL PRO FORMA
INC. SOLUTIONS COMBINED
QUARTER ENDED QUARTER ENDED QUARTER ENDED
NOVEMBER 26, OCTOBER 31, PRO FORMA NOVEMBER 26,
1994 1994 ADJUSTMENTS 1994
-------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sales................... $28,071,901 $3,278,878 $ (611,338)(C) $30,739,441
Cost of goods sold...... 14,986,299 2,284,318 (505,577)(C) 16,765,040
----------- ---------- ----------- -----------
Gross profit........ 13,085,602 994,560 (105,761) 13,974,401
Selling, general and
administrative
expenses............... 5,842,759 499,435 6,342,194
Research and development
expenses............... 4,772,611 89,676 4,862,287
----------- ---------- ----------- -----------
Operating income.... 2,470,232 405,449 (105,761) 2,769,920
Interest expense........ (5,726) -- (5,726)
Other income, net....... 122,274 4,337 126,611
----------- ---------- ----------- -----------
Income before income
taxes.............. 2,586,780 409,786 (105,761) 2,890,805
Income tax expense...... 724,300 -- 724,300
----------- ---------- ----------- -----------
Income before equity
in earnings of
affiliates......... 1,862,480 409,786 (105,761) 2,166,505
Equity in earnings of
affiliates............. 1,000,400 -- 1,000,400
----------- ---------- ----------- -----------
Net income.......... $ 2,862,880 $ 409,786 $ (105,761) $ 3,166,905
=========== ========== =========== ===========
Net income per
common share....... $ 0.43 $ 0.15 $ 0.44(B)
=========== ========== =========== ===========
Weighted average common
shares and (2,808,801)(B)
common share
equivalents............ 6,621,289 2,808,801 599,182 (B) 7,220,471
=========== ========== =========== ===========
</TABLE>
21
<PAGE>
FSI INTERNATIONAL, INC.
AND APPLIED CHEMICAL SOLUTIONS
UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
FSI APPLIED
INTERNATIONAL, CHEMICAL PRO FORMA
INC. SOLUTIONS COMBINED
NOVEMBER 26, OCTOBER 31, PRO FORMA NOVEMBER
ASSETS 1994 1994 ADJUSTMENTS 26, 1994
------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents.......... $ 6,965,639 $ 613,363 $ 7,579,002
Trade accounts
receivable, less
allowances for
doubtful accounts of
$675,000............. 20,474,868 1,185,497 21,660,365
Trade accounts
receivable from
affiliates........... 4,919,576 -- 4,919,576
Inventories........... 17,624,890 242,162 17,867,052
Deferred income tax
benefit.............. 1,832,000 -- 1,832,000
Prepaid expenses and
other current assets. 4,203,836 129,955 $ 943,680(C) 5,277,471
----------- ----------- ---------- -----------
Total current
assets........... 56,020,809 2,170,977 943,680 59,135,466
----------- ----------- ---------- -----------
Leasehold improvements
and equipment, net..... 6,205,732 129,695 6,335,427
Investment in
affiliates............. 5,495,099 -- 5,495,099
Deposits and other
assets................. 4,464,221 81,122 4,545,343
----------- ----------- ---------- -----------
$72,185,861 $2,381,794 $ 943,680 $75,511,335
=========== =========== ========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Current maturities of
long-term debt....... $ 98,529 $ -- $ 98,529
Trade accounts
payable.............. 11,348,368 918,054 12,266,422
Accrued expenses...... 9,347,781 549,444 9,897,225
Customer deposits..... 2,854,499 607,388 3,461,887
Deferred revenue...... 3,388,393 -- $1,141,088(C) 4,529,481
----------- ----------- ---------- -----------
Total current
liabilities...... 27,037,570 2,074,886 1,141,088 30,253,544
----------- ----------- ---------- -----------
Long-term debt, less
current maturities..... 22,421 -- 22,421
Stockholders' equity:
Preferred stock....... -- -- --
Common stock.......... 27,237,371 1,449,002 (D) 28,686,373
Additional paid-in-
capital.............. -- 250,000 250,000
Retained earnings
(deficit)............ 17,888,499 (1,392,094) (197,408)(C) 16,298,997
----------- ----------- ---------- -----------
Total
stockholders'
equity........... 45,125,870 306,908 (197,408) 45,235,370
----------- ----------- ---------- -----------
$72,185,861 $ 2,381,794 $ 943,680 $75,511,335
=========== =========== ========== ===========
</TABLE>
22
<PAGE>
FSI INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following pro forma items are reflected in the accompanying unaudited pro
forma combined balance sheet and statements of operations.
(A) ACS's financial statements have been combined on a one month lag basis
for purposes of all pro forma information. Should FSI decide to conform
ACS's fiscal year end to the last Saturday in August at some later time,
an adjustment to retained earnings will be made for the effect of the
change.
(B) Pro forma net income (loss) per common share was computed by dividing pro
forma net income (loss) by the pro forma combined weighted average number
of common and common equivalent shares outstanding. The pro forma
adjustment for combined weighted average number of common and common
equivalent shares was based upon the weighted average number of common
and common equivalent shares of ACS multiplied by the exchange ratio. For
purposes of the pro forma combined statement of operations for the fiscal
year ended August 29, 1992, common stock equivalents are not included as
it would be antidilutive.
(C) Adjustments to conform ACS's revenue recognition policy to FSI's revenue
recognition policy. FSI's revenue recognition policy is to recognize
revenue upon successful completion of a project's phases and milestones.
ACS recognizes revenue based upon costs incurred to date as a percentage
of estimated total costs. Adjustments were made to the unaudited pro
forma combined statements of operations for the year ended August 27,
1994 and quarter ended November 26, 1994 as a result of the different
policies. No other periods presented were affected by the difference in
policy and as such no adjustments were needed in the unaudited pro forma
combined financial information for such periods.
(D) FSI's common shares outstanding as of November 26, 1994 were 6,141,383
shares. ACS's common shares outstanding as of October 31, 1994 were
2,509,298 shares. Pro forma combined common shares outstanding as of
November 26, 1994 were 6,646,113 shares, which represent ACS's common
shares outstanding multiplied by the exchange ratio combined with FSI's
common shares outstanding.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
FSI INTERNATIONAL, INC.
------------------------------
(Registrant)
Dated: March 22, 1995 By: /s/ Benno Sand
------------------------------
Benno Sand, Executive Vice President
and Chief Financial Officer
on behalf of the Registrant and as
Principal Financial Officer
24
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ----------- --------
<S> <C> <C>
5 Agreement and Plan of Reorganization dated December 23, 1994 by and
among FSI International, Inc., ACS Acquisition Corp., Applied
Chemical Solutions, and certain significant shareholders (as
amended). Incorporated by reference to exhibit 5 to the
Registrant's current report on Form 8-K dated January 5, 1995 and
to exhibits 2.3 and 2.4 to the Registrant's Registration Statement
on Form S-4 (File No. 33-88254).
99 Press Release of FSI International, Inc. dated March 9, 1995. electroni-
cally filed
</TABLE>
25
<PAGE>
DATE: March 9, 1995
FROM: FOR:
Padilla Speer Beardsley Inc. FSI International, Inc.
224 Franklin Avenue West 322 Lake Hazeltine Drive
Minneapolis, Minnesota 55404 Chaska, Minnesota 55318
(Nasdaq: FSII)
Bob Brin (612) 871-8877 Benno Sand (612) 448-8936
FOR IMMEDIATE RELEASE
- ---------------------
FSI INTERNATIONAL, INC., ANNOUNCES COMPLETION OF THE ACQUISITION
OF APPLIED CHEMICAL SOLUTIONS
MINNEAPOLIS, March 9 -- FSI International, Inc., (Nasdaq: FSII) today said
that it has consummated its previously announced agreement to acquire Applied
Chemical Solutions ("ACS"). Under the agreement, ACS shareholders are entitled
to receive, in the aggregate, approximately 530,700 shares of FSI common stock.
In addition, FSI has issued options covering, in the aggregate, approximately
107,400 shares of FSI common stock in substitution of previously outstanding
options to acquire ACS common stock.
The acquisition of ACS, with its people and technology expertise,
positions FSI's Chemical Management Division to provide a broader range of
products to existing and future customers. ACS's proprietary vacuum delivery
technology combined with FSI's chemical management technology will allow
customers the opportunity to obtain virtually all their chemical management
products and support services from one source, including
(more)
<PAGE>
FSI International, Inc.
March 9, 1995
Page 2
chemical delivery and blending systems, point of use chemical generation systems
and slurry delivery and blending systems, used in conjunction with chemical
management planarization (CMP) technology. ACS's operations are located in
Hollister, California.
FSI International, Inc. is a leader in producing automated surface
conditioning equipment for processing silicon wafers. The company develops,
manufactures, markets and services photoresist processing cluster tools, spray
processing systems, vapor phase processing systems and chemical management
systems for use in the fabrication of advanced semiconductor integrated
circuits. FSI's customers include semiconductor manufacturers located throughout
North America, Europe, Japan and the Far East.
# # #
