<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ANSOFT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 72-1001909
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
FOUR STATION SQUARE, SUITE 200
PITTSBURGH, PENNSYLVANIA 15219-1119
(412) 261-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE:
COPIES TO:
<TABLE>
<S> <C>
NICHOLAS CSENDES RONALD W. SCHULER, ESQ.
CHIEF EXECUTIVE OFFICER BUCHANAN INGERSOLL PROFESSIONAL CORPORATION
ANSOFT CORPORATION ONE OXFORD CENTRE
FOUR STATION SQUARE, SUITE 200 301 GRANT STREET, 20TH FLOOR
PITTSBURGH, PENNSYLVANIA 15219-1119 PITTSBURGH, PENNSYLVANIA 15219
(412) 261-3200 (412) 562-1414
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective time of the merger described
in this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) PRICE(2) FEE(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01.... 121,030 shares 7.375 892,596.25 $249
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the maximum number of shares to be issued in connection with the
merger. Estimated solely for the purpose of calculating the registration
fee.
(2) Pursuant to Rule 457(o) the registration fee is computed on the basis of the
average high and low sale prices for the Ansoft common stock as quoted on
the Nasdaq National Market on November 17, 1999, as reported in The Wall
Street Journal, Midwest Edition, on November 18, 1999.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PACIFIC NUMERIX CORPORATION
7333 E. DOUBLETREE ROAD, SUITE 270 SCOTTSDALE, ARIZONA 85258
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1999
To the Stockholders of Pacific Numerix Corporation:
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of
PACIFIC NUMERIX CORPORATION, a Nevada corporation, will be held at 8:00 a.m.,
local time, on , 1999 for the following purposes:
1. To consider and vote upon a proposal to approve the merger of Ansoft
Acquisition Corp., a wholly owned subsidiary of Ansoft Corporation, with and
into Pacific Numerix whereby, among other things, each outstanding share of
Pacific Numerix common stock will be converted into the right to receive Ansoft
stock and cash equivalent to approximately 0.09236 shares of Ansoft common stock
and each outstanding share of Pacific Numerix preferred stock will be converted
into the right to receive Ansoft stock and cash equivalent to approximately
.15655 shares of Ansoft common stock, as more fully described in this proxy
statement/prospectus; and
2. To transact such other business as may properly come before the special
meeting or any adjournment or postponement thereof.
This proxy statement/prospectus also constitutes notice to Pacific Numerix
stockholders of appraisal rights with respect to the merger pursuant to Section
92A.410 of the Nevada General Corporation Law.
PACIFIC NUMERIX CORPORATION'S BOARD OF DIRECTORS HAS DETERMINED THAT THE
MERGER IS IN YOUR BEST INTERESTS AND RECOMMENDS THAT YOU VOTE TO APPROVE THE
MERGER.
Each of the foregoing items of business is more fully described in this
proxy statement/prospectus, which we urge you to read carefully.
Stockholders of record at the close of business on October 31, 1999, are
entitled to notice of and to vote at the special meeting and any adjournment or
postponement thereof. Approval of the merger will require the affirmative vote
of the holders of Pacific Numerix capital stock representing a majority of the
votes of the outstanding shares of Pacific Numerix common and preferred stock
entitled to vote.
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON. ANY EXECUTED BUT UNMARKED PROXY CARDS WILL BE VOTED FOR
APPROVAL OF THE MERGER. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN VOTED AT
THE SPECIAL MEETING. ANY STOCKHOLDER ATTENDING THE SPECIAL MEETING MAY VOTE IN
PERSON EVEN IF SUCH STOCKHOLDER HAS RETURNED A PROXY.
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS SUBJECT TO COMPLETION
AND MAY BE CHANGED. ANSOFT CORPORATION MAY NOT ISSUE THE ANSOFT COMMON STOCK IN
THE MERGER UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. NEITHER THE SECURITIES AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
<PAGE> 3
CONTRARY IS A CRIMINAL OFFENSE. THIS PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER
TO SELL SUCH SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY SUCH SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE COMMON STOCK OF ANSOFT CORPORATION IS LISTED FOR QUOTATION ON THE
NASDAQ STOCK MARKET UNDER THE SYMBOL "ANST."
By Order of the Board of Directors,
Anthony Ryan,
Secretary
Phoenix, Arizona
, 1999
This proxy statement/prospectus is dated , 1999, and was
first mailed to stockholders on or about , 1999.
<PAGE> 4
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
- ----------- ------
<S> <C>
SUMMARY..................................................... 1
The Special Meeting (see page 18)......................... 1
The Companies (see page 41)............................... 1
The Merger (see page 20).................................. 1
Interests of Certain Persons in the Merger (see page
35).................................................... 3
Shares Eligible for Future Sale (see page 24)............. 4
Stock Ownership........................................... 5
Market for Common Stock (see page 29)..................... 6
Voting of Directors, Executive Officers and Affiliate
Shares................................................. 6
Selected Financial Data................................... 6
Pacific Numerix........................................... 7
Ansoft.................................................... 7
Unaudited Comparative Per Common Share Data............... 8
RISK FACTORS................................................ 10
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE............. 17
THE SPECIAL MEETING OF THE STOCKHOLDERS OF PACIFIC NUMERIX
CORPORATION............................................... 18
Date, Time and Place of the Special Meeting............... 18
Matters to be Considered at the Special Meeting........... 18
Voting at the Special Meeting; Record Date; Quorum........ 18
Proxies................................................... 19
PROPOSAL 1: THE MERGER...................................... 20
Background of the Merger.................................. 20
Pacific Numerix Reasons for the Merger.................... 20
Federal Income Tax Considerations......................... 22
Accounting Treatment...................................... 23
Appraisal Rights.......................................... 23
Listing of Ansoft Common Stock to be Issued in the
Merger................................................. 25
Restriction on Resales of Ansoft Common Stock............. 25
The Merger Agreement...................................... 25
The Merger................................................ 25
The Effective Time........................................ 25
Directors and Officers of Pacific Numerix After the
Merger................................................. 26
Conversion of Shares in The Merger........................ 26
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
- ----------- ------
<S> <C>
Pacific Numerix's Stock Option and Stock Purchase Plans..... 26
Procedures for Exchanging Stock Certificates.............. 26
Distributions With Respect to Unexchanged Shares.......... 27
No Fractional Shares...................................... 27
Director and Officer Indemnification...................... 27
Conditions to the Merger.................................. 27
Termination............................................... 28
Termination Fee and Expenses.............................. 28
Amendment; Waiver......................................... 28
DESCRIPTION OF ANSOFT COMMON STOCK.......................... 29
COMPARATIVE RIGHTS OF STOCKHOLDERS.......................... 30
Delaware Law and Nevada Law and Current Governing
Documents of Ansoft and Pacific Numerix,
respectively........................................... 30
Cumulative Voting......................................... 30
Special Meetings of Stockholders.......................... 30
Stockholder Consent In Lieu of Meeting.................... 31
Special Transactions...................................... 31
Appraisal/Dissenters Rights............................... 32
Limitation of Liability of Directors and
Indemnification........................................ 32
Interested Stockholders Transactions...................... 33
Dividends................................................. 35
Bylaws.................................................... 35
INTERESTS OF CERTAIN PERSONS IN THE MERGER.................. 36
ANSOFT CORPORATION UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED BALANCE SHEETS AS OF JULY 31, 1999.............. 37
ANSOFT CORPORATION UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR
ENDED APRIL 30, 1999...................................... 38
ANSOFT CORPORATION UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED STATEMENT OF OPERATIONS FOR THREE MONTHS ENDED
JULY 31, 1999............................................. 39
ANSOFT CORPORATION NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS...................................... 40
Note 1. Basis of Presentation............................. 40
INFORMATION REGARDING ANSOFT................................ 41
Business.................................................. 41
Ansoft Strategy........................................... 41
Products.................................................. 41
</TABLE>
ii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
- ----------- ------
<S> <C>
Research and Development.................................... 44
Sales and Marketing....................................... 45
Customers................................................. 45
Customer Service and Support.............................. 46
Competition............................................... 46
Proprietary Rights........................................ 47
Employees................................................. 47
Officers.................................................. 48
Properties................................................ 49
Legal Proceedings......................................... 49
Market for the Registrant's Common Equity and Related
Stockholder Matters.................................... 49
Selected Financial Data................................... 50
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 50
Results of Operations..................................... 52
Comparison of the Three Months Ended July 31, 1999 and
1998................................................... 52
Year Ended April 30, 1999 compared with Year Ended April
30, 1998............................................... 53
Year Ended April 30, 1998 compared with Year Ended April
30, 1997............................................... 55
Quarterly Results of Operations........................... 56
Liquidity and Capital Resources........................... 58
Effects of Inflation...................................... 58
Year 2000 Issues.......................................... 58
Quantitative and Qualitative Disclosure About Market
Risk................................................... 59
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 60
Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform
Act of 1995............................................ 60
Ansoft Financial Data....................................... 61
INFORMATION ABOUT PACIFIC NUMERIX........................... 80
Business.................................................. 80
Products.................................................. 80
Research and Development.................................. 80
Sales and Marketing....................................... 80
Customers................................................. 81
Customer Service and Support.............................. 81
Competition............................................... 81
Proprietary Rights........................................ 81
</TABLE>
iii
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
- ----------- ------
<S> <C>
Employees................................................... 82
Officers.................................................. 82
Properties................................................ 82
Legal Proceedings......................................... 82
Market for the Registrant's Common Equity and Related
Stockholder Matters.................................... 82
Selected Financial Data................................... 83
Management's Discussion of Financial Condition and Results
of Operations.......................................... 84
Results of Operations..................................... 84
Quantitative and Qualitative Disclosure About Market
Risk................................................... 87
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 87
Pacific Numerix Financial Data.............................. 88
OWNERSHIP INFORMATION....................................... 105
Beneficial Ownership of Ansoft Common Stock............... 105
Beneficial Ownership of Pacific Numerix Common Stock...... 106
Management................................................ 106
EXPERTS..................................................... 107
LEGAL MATTERS............................................... 107
Where You Can Find More Information....................... 107
SIGNATURES.................................................. II-5
</TABLE>
iv
<PAGE> 8
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus, and may not contain all of the information that is
important to you. To better understand the merger and to obtain a more complete
description of the legal terms of this transaction, you should read this entire
document carefully. See also "Where You Can Find More Information" on page 107.
THE SPECIAL MEETING (SEE PAGE 18)
The special meeting of the Pacific Numerix stockholders will be held on
[ ], 1999, at 8:00 a.m. local time at the offices of Buchanan
Ingersoll Professional Corporation, One Oxford Centre, Pittsburgh, PA 15219.
The record date for the Pacific Numerix stockholders entitled to receive
notice of and to vote at the Pacific Numerix special meeting is the close of
business on October 31, 1999. On that date, there were 5,030,784 shares of
Pacific Numerix common stock outstanding and 157,000 shares of preferred stock
outstanding.
The purpose of the special meeting is:
- to vote on the approval of the merger agreement
- to take action on any other matters properly brought before the meeting
THE COMPANIES (SEE PAGE 41)
Pacific Numerix Corporation
7333 East Doubletree Ranch Road,
Suite 270
Scottsdale, Arizona 85258
(480) 483-6800
Pacific Numerix provides EDA software that allows their users to evaluate
the effect that choices in parts, materials, physical design, sourcing
decisions, and manufacturing processes have on the performance, quality,
manufacturability, and cost of product designs.
Pacific Numerix, a majority owned subsidiary of Ansoft, is incorporated in
Nevada.
Ansoft Corporation
Four Station Square, Suite 200
Pittsburgh, Pennsylvania 15219
(412) 261-3200
Ansoft Corporation develops, markets and supports high performance
electronic design automation (EDA) software. Ansoft's software is used by
engineers in the design of high performance electronic devices and systems, such
as cellular phones, communications systems, computer circuit boards and motors.
THE MERGER (SEE PAGE 20)
The proposed merger involves the following:
- Ansoft Acquisition Corp., a wholly owned subsidiary of Ansoft, will merge
with and into Pacific Numerix and Ansoft Acquisition Corp's independent
corporate existence will cease
- the common and preferred stock of Pacific Numerix outstanding immediately
prior to the merger will be converted into the right to receive a total
of 121,030 shares of Ansoft common stock and cash of approximately
$7,000.00.
- the Pacific Numerix common and preferred stock currently held by Ansoft
will be retired
- after the merger, the former stockholders of Pacific Numerix receiving
shares of Ansoft Common Stock in the merger will own approximately 1% of
Ansoft common stock issued and outstanding immediately after the merger.
1
<PAGE> 9
We expect to complete the merger by December 31, 1999. However, we cannot
predict the exact timing of the merger because it is subject to a number of
conditions.
If you have any questions about the merger or the annual meeting, please
call Anthony Ryan, Chief Financial Officer and Secretary, Ansoft Corporation, at
(412) 261-3200.
PACIFIC NUMERIX'S REASONS FOR THE MERGER (SEE PAGE 20)
The board of directors of Pacific Numerix believes that the merger provides
Pacific Numerix with the opportunity to combine with Ansoft on terms that are
fair from a financial point of view to Pacific Numerix and its stockholders
(other than Ansoft). The board believes that the merger will, among other
things, provide Pacific Numerix stockholders with the liquidity of a publicly
traded stock.
THE MERGER AGREEMENT (SEE PAGE 25)
We attached, as Annex A, the merger agreement between Pacific Numerix,
Ansoft, and a wholly owned subsidiary of Ansoft. We encourage you to read this
document. Ansoft has also filed with the Securities and Exchange Commission
other related documents as exhibits to its registration statement. Please see
the section titled "Where You Can Find More Information," on page 107, for
instructions on how to obtain copies of those exhibits.
CONDITIONS TO CONSUMMATION OF THE MERGER (SEE PAGE 27)
The parties will complete the merger only if a number of conditions are
satisfied or waived, including the following:
- approval of the merger agreement by the stockholders of Pacific Numerix,
a condition which will be satisfied because Ansoft owns a majority of the
voting power of Pacific Numerix and has indicated that it will approve
the merger agreement.
- as a condition for Ansoft, the exercise of appraisal rights by holders of
not more than 5.0% of Pacific Numerix common and preferred stock in the
aggregate.
- the SEC having declared effective Ansoft's registration statement
covering the Ansoft common stock to be issued in the merger.
- as a condition for Pacific Numerix, listing for quotation on the Nasdaq
National Market of the shares of Ansoft common stock to be issued in the
merger.
TERMINATION (SEE PAGE 28)
Either Ansoft or Pacific Numerix may terminate the merger agreement if:
- for any reason the merger shall not have been consummated within 120 days
after the date of the merger agreement and the failure to consummate the
merger is not caused by a breach of the merger agreement by the
terminating party
- any court of competent jurisdiction or other competent governmental or
regulatory authority shall have issued a nonappealable order restricting,
preventing or otherwise prohibiting the merger
Ansoft and Pacific Numerix also may mutually agree to terminate the merger
agreement prior to completion of the merger.
AMENDMENT OR EXTENSION (SEE PAGE 28)
Consistent with Delaware and Nevada law, the merger agreement provides that
Pacific Numerix and Ansoft may, by mutual agreement, amend, modify, supplement,
extend or abandon the agreement at any time prior to the effective time of the
merger, even following stockholder approval. The merger agreement permits the
boards of directors of Pacific Numerix and Ansoft to amend the merger agreement
after stockholder approval if the amendment does not (1) alter or change the
amount or kind of merger consideration
2
<PAGE> 10
received, (2) alter or change any term of the articles of incorporation of
Pacific Numerix, or (3) alter or change any of the terms and conditions of the
agreement in a way that would adversely affect the holders of any class or
series of securities held by such stockholders.
ACCOUNTING TREATMENT (SEE PAGE 23)
Ansoft will account for this transaction as a purchase.
POST-MERGER BOARD OF DIRECTORS (SEE PAGE 25)
The merger agreement provides that, upon completion of the merger, the
directors of Pacific Numerix shall be:
Zoltan Cendes,
Nicholas Csendes
Pacific Numerix's board of directors will also have four vacancies.
FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 22)
Each Pacific Numerix stockholder will recognize a gain or loss with respect
to each share of Pacific Numerix common stock surrendered equal to the
difference between the stockholder's basis in such share and the fair market
value, as of the effective time of the merger, of the Ansoft common stock and
cash received in exchange therefor.
APPRAISAL RIGHTS (SEE PAGE 23)
Under Nevada law holders of Pacific Numerix common and preferred stock have
the right to demand payment of fair value for their shares, in cash, as
determined by a court, in lieu of the Ansoft common stock they are entitled to
receive in the merger.
It is a condition to the merger that the holders of not more than 5% of
Pacific Numerix common and preferred stock exercise appraisal rights. Ansoft may
waive this right. Pacific Numerix stockholders who desire to exercise their
appraisal rights must carefully follow the procedures described in this proxy
statement/prospectus.
STOCK LISTING
Ansoft will continue to list its common stock on the Nasdaq National Market
after the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 35)
Certain relationships among the directors, officers and stockholders of
Ansoft and Pacific Numerix give rise to conflicts of interest between the
parties in the negotiation of the terms and conditions of the merger. Those
relationships include the following:
- Mr. Zoltan Cendes, the Chairman of the board of directors and Chief
Technology Officer of Ansoft, serves as a director of Pacific Numerix
- Mr. Nicholas Csendes, a director and the President and Chief Executive
Officer of Ansoft, serves as the Chairman, President and a director of
Pacific Numerix
- Mr. Ryan, the Chief Financial Officer and Secretary of Ansoft serves as
Secretary of Pacific Numerix
- Ansoft beneficially owns 75% of the outstanding shares of Pacific Numerix
common stock and 74% of the outstanding shares of preferred stock.
The merger agreement between Pacific Numerix, Ansoft and Ansoft Acquisition
Corp., a wholly-owned subsidiary of Ansoft, and the merger provided for therein
was negotiated on behalf of Pacific Numerix by officers of Pacific Numerix who
also serve as officers of Ansoft based on pricing negotiated with respect to
Ansoft's prior purchases of common and preferred stock of Pacific Numerix from
unaffiliated stockholders of Pacific Numerix.
3
<PAGE> 11
SHARES ELIGIBLE FOR FUTURE SALE (SEE PAGE 24)
Pacific Numerix stockholders who were not Ansoft affiliates at the time the
merger agreement is submitted for approval by Pacific Numerix stockholders may
resell the Ansoft common stock acquired by them in the merger free of these
restrictions.
To our knowledge, no Pacific Numerix stockholder who will be receiving
Ansoft common stock in the merger is an affiliate of Ansoft. These stockholders
are expected to own approximately 1% of Ansoft common stock after the merger.
4
<PAGE> 12
STOCK OWNERSHIP
The following charts illustrate the stock ownership of Pacific Numerix by
the principal officers and directors of Pacific Numerix prior to the merger and
the acquisitions, and the post-merger stock ownership of Ansoft.
PRE-MERGER STOCK OWNERSHIP OF:
Stock Ownership Chart
5
<PAGE> 13
MARKET FOR COMMON STOCK (SEE PAGE 29)
Ansoft common stock is listed for quotation on the Nasdaq Stock Market
under the symbol "ANST." The common stock issued in the merger will be listed
similarly. The table below reflects the high and low prices of the common stock
on the Nasdaq Stock Market for the periods presented. The 1999 periods
separately present the high and low prices through September 30, 1999. On
, 1999, the last trading date prior to the date of this proxy
statement/prospectus, the Ansoft common stock closed at $ per share.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ------ ------- ------
<S> <C> <C>
May 1 through October 31, 1999.............................. $10.000 $5.500
Fiscal Year Ended April 30, 1999............................ $13.750 $4.875
Fiscal Year Ended April 30, 1998............................ $23.250 $4.875
</TABLE>
There is no active trading market for Pacific Numerix common stock.
VOTING OF DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATE SHARES
PACIFIC NUMERIX. Under Nevada law, adoption of the merger agreement
requires the affirmative vote of the holders of at least a majority of the
shares of common stock of Pacific Numerix entitled to vote thereon. Ansoft has
the power to vote approximately 75% of the outstanding Pacific Numerix common
and preferred stock. Pacific Numerix believes that Ansoft will vote for approval
of the merger agreement.
ANSOFT. Under Delaware Law, Ansoft shareholders do not receive a vote.
Under NEVADA LAW, adoption of the merger agreement requires the affirmative vote
of the holders of at least a majority of the shares of common stock of Ansoft
Acquisition Corp. entitled to vote thereon. Ansoft has the power to vote 100% of
the outstanding common stock of that corporation. On September 9, 1999, the
board of directors of Ansoft approved and adopted the merger agreement by
written consent. On September 9, 1999, the board of directors and sole
stockholder of Ansoft Acquisition Corp. approved and adopted the merger
agreement by written consent.
6
<PAGE> 14
SELECTED FINANCIAL DATA
The following tables set forth selected historical consolidated financial
data of Pacific Numerix and Ansoft.
PACIFIC NUMERIX
For a more complete discussion of the financial information presented
below, see "Information About Pacific Numerix."
<TABLE>
<CAPTION>
SEVEN-MONTH
PERIOD
ENDED JULY 31, FISCAL YEAR ENDED DECEMBER 31,
--------------- -------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------- ------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue......................... $1,388 $1,020 $ 2,389 $3,279 $1,575 $1,290 $1,513
Income (loss) from operations......... (305) (836) (1,143) 173 (835) (524) 144
Net income (loss)..................... $ (315) $ (880) $(1,200) $ 136 $ (865) $ (585) $ 73
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JULY 31, ----------------------------------------------
1999 1998 1997 1996 1995 1994
-------- ------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 7 $ 51 $ 33 $ 23 $ 7 $ 26
Working capital (deficit).......... 51 (563) (984) (609) (475) (218)
Total assets....................... 3,494 3,819 3,295 2,753 2,954 2,170
Total stockholders' equity......... $2,813 $2,507 $2,036 $1,831 $1,774 $1,394
</TABLE>
ANSOFT
For a more complete discussion of the financial information presented in
the table below, see "Information About Ansoft -- Selected Financial Data of
Ansoft" and "Ansoft Corporation Financial Statements and Notes."
<TABLE>
<CAPTION>
THREE-MONTH FISCAL YEAR ENDED
PERIOD APRIL 30, 1999
ENDED JULY 31, ----------------- FISCAL YEAR ENDED APRIL 30,
----------------- PRO FORMA ---------------------------------------------
1999 1998 COMBINED 1999 1998 1997 1996 1995
------- ------- ----------------- ------- ------- ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total revenue............ $ 6,911 $ 5,154 $26,864 $24,475 $26,283 $14,188 $8,695 $6,154
Income (loss) from
operations............. (1,508) (2,221) (6,953) (5,605) 2,524 (7,552) 653 (289)
Net income (loss)........ $ (893) $(1,292) $(4,213) $(2,808) $ 4,073 $(6,450) $1,300 $ (305)
Basic net income (loss)
per share.............. $ (0.08) $ (0.11) $ (0.37) $ (0.25) $ 0.42 $ (0.81) $ 0.21 $(0.06)
Diluted net income (loss)
per share.............. $ (0.08) $ (0.11) $ (0.37) $ (0.25) $ 0.39 $ (0.81) $ 0.19 $(0.06)
Weighted average shares
outstanding -- basic... 11,383 11,524 11,422 11,310 9,681 7,955 6,235 5,528
Weighted average shares
outstanding -- diluted... 11,383 11,524 11,422 11,310 10,521 7,955 6,873 5,528
</TABLE>
7
<PAGE> 15
<TABLE>
<CAPTION>
APRIL 30,
JULY 31 --------------------------------------------------
1999 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents...... $ 2,657 $ 2,489 $20,677 $ 312 $10,728 $ 116
Working capital (deficit)...... 15,581 16,699 27,579 (1,936) 11,931 593
Total assets................... 51,963 52,630 49,180 21,951 15,391 1,792
Total stockholders' equity..... 39,580 40,863 45,520 14,917 14,291 1,161
</TABLE>
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
The following table sets forth certain historical per share data of Ansoft
and Pacific Numerix and combined per share data on an unaudited pro forma basis
after giving effect to the business combination on a purchase basis of
accounting, assuming that .09236 shares of Ansoft common stock are issued in
exchange for one share of Pacific Numerix common stock and .15655 shares of
Ansoft common stock are issued in exchange for one share of Pacific Numerix
preferred stock in the business combination. This data should be read in
conjunction with the selected historical financial data, the unaudited pro forma
combined condensed financial data, and the separate historical financial
statements of Ansoft and Pacific Numerix and notes (which are included elsewhere
in this document). The pro forma combined condensed financial data are not
necessarily indicative of the operating results that would have been achieved
had the business combination been consummated as of the beginning of the periods
presented and should not be construed as representative of results for any
future period.
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA
ANSOFT PACIFIC NUMERIX COMBINED
------ --------------- ---------
<S> <C> <C> <C>
Book value per share as of the most recent
period end(2).............................. $ 3.39 $ 0.54 $ 3.39
Income (loss) per share from operations for
most recent fiscal year end(1)........... $(0.50) $(0.22) $(0.61)
Income (loss) per share from operations for
most recent period end(2)................ $(0.13) $ 0.01 $(0.14)
Unaudited Equivalent Pro Forma
Combined--Pacific Numerix
Book value per share as of the most recent
period end(3)............................ $ 0.32
Income (loss) from operations per share for
the most recent fiscal year end(3)....... $(0.06)
Income (loss) from operations per share for
most recent period end(3)................ $(0.01)
</TABLE>
- -------------------------
(1) Ansoft's most recent fiscal year end is April 30, 1999. Pacific Numerix's
most recent fiscal year end is December 31, 1998.
(2) The most recent period end is the three-months ended July 31, 1999 for both
Ansoft and Pacific Numerix.
8
<PAGE> 16
(3) The unaudited equivalent pro forma per share amounts are calculated by
multiplying Ansoft pro forma per share amounts by the assumed weighted
average exchange ratio of .09430 for each outstanding share of Pacific
Numerix stock. This ratio is used for disclosure purposes in this document.
The actual average exchange ratio for each holder of PNC stock will depend
on the holder's mix of common and preferred stock as the exchange ratio is
.09236 and .15655 for common and preferred stock respectively.
Ansoft currently intends to retain the earnings from operations for use in
the operation of its business and does not anticipate paying cash dividends with
respect to its Common Stock in the foreseeable future. The board will determine
payment of any future dividends in light of the then current conditions,
including the Ansoft's earnings and financial condition.
9
<PAGE> 17
RISK FACTORS
BEFORE YOU INVEST IN ANSOFT'S COMMON STOCK, YOU SHOULD BE AWARE THAT THERE
ARE VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CONSIDER
CAREFULLY THESE RISK FACTORS TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED
IN THIS PROSPECTUS BEFORE YOU DECIDE TO PURCHASE SHARES OF ANSOFT'S COMMON
STOCK.
WE MAY BE UNABLE TO
SUCCESSFULLY COMPETE IN THE
HIGHLY COMPETITIVE
ELECTRONIC
DESIGN AUTOMATION ("EDA")
SOFTWARE MARKET The electronic design automation software market
in which Ansoft competes is intensely competitive
and subject to rapid change. In general,
competition comes from major EDA vendors, many of
which have a longer operating history,
significantly greater financial, technical and
marketing resources, greater name recognition and
a larger installed customer base than Ansoft.
These companies also have established
relationships with current and potential
customers of Ansoft. Ansoft's software products
currently compete with certain software offerings
from Hewlett-Packard Corporation ("HP"). Ansoft
also competes directly with certain major EDA
vendors and privately-held companies which also
provide competing products. Ansoft also competes,
on a limited basis, with the internal development
groups of its existing and potential customers,
many of which design and develop customized
design tools for their particular needs. In
addition, the EDA industry has become
increasingly concentrated in recent years as a
result of acquisitions, and further concentration
within the EDA industry could result in increased
competition for Ansoft. Increased competition
could result in price reductions, reduced margins
or loss of market share, any of which could
seriously harm Ansoft's business, operating
results or financial condition. Ansoft may be
unable to compete successfully against current
and future competitors, and competitive pressures
faced by Ansoft could seriously harm Ansoft's
business, operating results and financial
condition.
WE HAVE A HISTORY OF LOSSES
AND OUR FUTURE OPERATING
RESULTS ARE UNCERTAIN Ansoft has incurred net losses in each fiscal
year since its founding with the exception of
fiscal 1998 and 1996. There can be no assurance
that Ansoft's revenue and net income will grow or
be sustained in future periods or that Ansoft
will remain profitable in any future period.
Future operating results will depend on many
factors, including the degree and the rate of
growth of the markets in which Ansoft competes
and the accompanying demand for Ansoft's
products, the level of product and price
competition, the ability of Ansoft to develop and
market new products and to control costs, the
ability of Ansoft to expand its direct sales
force and the ability of Ansoft to attract and
retain key personnel.
OUR QUARTERLY OPERATING
RESULTS ARE DIFFICULT TO
PREDICT We are unable to accurately forecast our future
revenues primarily because of the emerging nature
of the market in
10
<PAGE> 18
which we compete. Our revenues and operating
results generally depend on the size, timing and
structure of significant licenses. These factors
have historically been, and are likely to
continue to be, difficult to forecast. In
addition, our current and future expense levels
are based largely on our operating plans and
estimates of future revenues and are, to a
extent, fixed. We may be unable to adjust
spending sufficiently quickly to compensate for
any unexpected revenue shortfall. Accordingly,
any significant shortfall in revenues in relation
to our planned expenditures would seriously harm
our business, financial condition and results of
operations. Such shortfalls in our revenue or
operating results from levels expected by public
market analysts and investors could seriously
harm the trading price of our common stock.
Additionally, we may not learn of such revenue
shortfalls, earnings shortfalls or other failure
to meet market expectations until late in a
fiscal quarter, which could result in an even
more immediate and serious harm to the trading
price of our common stock. Our quarterly
operating results have varied, and it is
anticipated that our quarterly operating results
will vary, substantially from period to period
depending on various factors, many of which are
outside our control. Due to the foregoing
factors, we cannot predict with any significant
degree of certainty our quarterly revenue and
operating results. Further, we believe that
period-to-period comparisons of our operating
results are not necessarily a meaningful
indication of future performance.
OUR STOCK PRICE IS
EXTREMELY
VOLATILE The trading price of our common stock has
fluctuated significantly in the past, and the
trading price of our common stock is likely to be
highly volatile and could be subject to wide
fluctuations in price in response to such factors
as:
-- Actual or anticipated fluctuations in our
operating results;
-- Announcements of technological
innovations and new products by us or our
competitors;
-- New contractual relationships with
strategic partners by us or our
competitors;
-- Proposed acquisitions by us or our
competitors; and
-- Financial results that fail to meet
public market analyst expectations of
performance.
In addition, the stock market in general, and The
Nasdaq National Market and the market for
technology companies in particular has
experienced extreme price and volume
11
<PAGE> 19
fluctuations that have often been unrelated or
disproportionate to the operating performance of
such companies. These broad market and industry
factors may seriously harm the market price of
our common stock in future periods.
BUSINESSES WE ACQUIRE MAY
NOT PERFORM AS PROJECTED We have acquired or merged with a number of
companies in recent years, including the
acquisitions of: a majority interest in Pacific
Numerix, Compact Software, Inc., the Electronic
Business Unit of MacNeal Schwendler Company and
Boulder Microwave Technologies, and as part of
our efforts to increase revenue and expand our
product and services offerings we may acquire
additional companies. In addition to direct
costs, acquisitions pose a number of risks,
including potential dilution of earnings per
share, delays and other problems of integrating
the acquired products and employees into our
business, the failure to realize expected
synergies or cost savings, the failure of
acquired products to achieve projected sales, the
drain on management time for acquisition-related
activities, possible adverse effects on customer
buying patterns due to uncertainties resulting
from an acquisition, and assumption of unknown
liabilities. The foregoing factors could
seriously harm our business, financial condition
and results of operations.
RISKS ASSOCIATED WITH
COMPANY INVESTMENTS Ansoft invested a portion of the proceeds of its
initial public offering in certain long-, medium-
and short-term investment grade, interest-bearing
securities. The value of Ansoft's investment in
such instruments is subject to the normal risks
of interest-bearing investments. Over time, the
level of interest rates available in the market
changes. As prevailing rates fall, the prices of
bonds and other securities that trade on a yield
basis tend to rise. Conversely, when prevailing
interest rates rise, bond prices generally will
fall. Generally, the longer the maturity of a
fixed-income security, the higher its yield and
the greater its price volatility. As a
consequence, the value of the bonds and other
instruments held by Ansoft could fluctuate
substantially over time, depending upon long-term
and short-term trends and interest rates.
WE MAY LOSE COMPETITIVE
ADVANTAGES IF OUR
PROPRIETARY
RIGHTS ARE INADEQUATELY
PROTECTED Ansoft's success depends, in part, upon its
proprietary technology. We rely on a combination
of patents, trade secrets, copyrights, trademarks
and contractual commitments to protect our
proprietary rights in our software products. We
generally enter into confidentiality or license
agreements with our employees, distributors and
customers, and limit access to and distribution
of our software, documentation and other
proprietary information. Despite these
precautions, a third party may still copy or
12
<PAGE> 20
otherwise obtain and use our products or
technology without authorization, or develop
similar technology independently. In addition,
effective patent, copyright and trade secret
protection may be unavailable or limited in
certain foreign countries. It is possible that we
may fail to adequately protect our proprietary
rights. This would seriously harm Ansoft's
business, operating results and financial
condition.
WE MAY BE UNABLE TO ATTRACT
AND RETAIN THE KEY
MANAGEMENT AND TECHNICAL
PERSONNEL THAT WE NEED TO
SUCCEED Ansoft's future operating results depend in large
part upon the continued services of its key
technical and management personnel, including Dr.
Zoltan J. Cendes, a founder, Chairman of the
Board of Directors and Chief Technology Officer
of Ansoft. Ansoft does not have employment
contracts with Dr. Cendes or any other executive
officer. Ansoft maintains key-man life insurance
with respect to Dr. Cendes in the amount of
$5,000,000. Ansoft's future success will also
depend in large part on its ability to continue
to attract and retain highly skilled technical,
marketing and management personnel. The
competition for such personnel, as well as for
qualified EDA engineers, is intense. If Ansoft is
unable to attract, hire and retain qualified
personnel in the future, the development of new
products and the management of Ansoft's
increasingly complex business would be impaired.
This could seriously harm Ansoft's business,
operating results and financial condition.
WE HAD PREVIOUSLY DEPENDED
UPON THIRD-PARTY
INTERNATIONAL DISTRIBUTORS
AND
HAVE RECENTLY SHIFTED OUR
DISTRIBUTION MODEL TO THE
USE
OF DIRECT SALES PERSONNEL
IN
INTERNATIONAL MARKETS A significant portion of Ansoft's license and
service revenue results from a limited number of
international distributors. During fiscal 1999,
1998 and 1997, revenue from international
distributors accounted for approximately 10%,
19%, and 19%, respectively, of Ansoft's total
revenue. Ansoft's distributors are not obligated
to purchase products from Ansoft and may also
represent other products. Ansoft has recently
shifted its distribution model to the use of
direct sales personnel in international markets.
It is possible that we may fail to sustain or
increase revenue previously derived from
third-party international distributors and,
consequently, seriously harm our business,
financial condition and results of operations.
WE DEPEND ON INTERNATIONAL
SALES FOR A SIGNIFICANT
PERCENTAGE OF OUR REVENUE International revenue, principally from Asian
customers, accounted for approximately 52% and
51% of our total revenue in the three-month
period ended July 31, 1999 and 1998,
respectively. We expect that international
license and service revenue will continue to
account for a significant portion of our total
revenue for the foreseeable
13
<PAGE> 21
future. Our international business activities are
subject to a variety of potential risks,
including:
-- The impact of recessionary environments
in foreign economies;
-- Longer receivables collection periods and
greater difficulty in accounts receivable
collection;
-- Difficulties in staffing and managing
foreign operations;
-- Political and economic instability;
-- Unexpected changes in regulatory
requirements;
-- Reduced protection of intellectual
property rights in some countries; and
-- Tariffs and other trade barriers.
Currency exchange fluctuations in countries in
which we license our products could also
seriously harm our business, financial condition
and results of operations by resulting in pricing
that is not competitive with products priced in
local currencies. Furthermore, we may not be able
to continue to generally price our products and
services internationally in U.S. dollars because
of changing sovereign restrictions on importation
and exportation of foreign currencies as well as
other practical considerations. In addition, the
laws of certain countries do not protect our
products and intellectual property rights to the
same extent, as do the laws of the United States.
Moreover, it is possible that we may fail to
sustain or increase revenue derived from
international licensing and service or that the
foregoing factors will seriously harm our future
international license and service revenue, and,
consequently, seriously harm our business,
financial condition and results of operations.
WE NEED TO SUCCESSFULLY
MANAGE OUR EXPANDING
OPERATIONS Ansoft has experienced rapid growth in recent
years which has placed and could continue to
place a significant strain on the its managerial
and other resources. Revenues have grown from
$6.2 million in fiscal 1995 to $24.4 million in
fiscal year 1999, and the number of employees has
grown from 69 in April 1996 to 234 as of July 31,
1999. Ansoft's ability to manage growth
effectively will require it to continue to
improve its operational and financial systems,
hire and train new employees and add additional
space, both domestically and internationally.
Ansoft may not be successful in addressing such
risks, and the failure to do so would seriously
harm Ansoft's business, financial condition and
results of operations.
14
<PAGE> 22
WE DEPEND ON THE GROWTH OF
THE COMMUNICATIONS,
SEMICONDUCTOR AND
ELECTRONICS
INDUSTRIES Ansoft is dependent upon the communications and
semiconductor industry and, more generally, the electronics industry. These
industries are characterized by rapid
technological change, short product life cycles,
fluctuations in manufacturing capacity and
pricing and gross margin pressures. Segments of
these industries have from time to time
experienced significant economic downturns
characterized by decreased product demand,
production over-capacity, price erosion, work
slowdowns and layoffs. While these industries
have experienced an extended period of
significant economic growth over the past few
years, such economic growth may not continue, and
if it does not, any downturn could be especially
severe on Ansoft. During such downturns, the
number of new integrated circuit design projects
often decreases. Because acquisitions of new
licenses from Ansoft are largely dependent upon
the commencement of new design projects, any
slowdown in these industries could seriously harm
Ansoft's business, financial condition and
results of operations.
ERRORS IN OUR SOFTWARE
PRODUCTS COULD RESULT IN
LOSS
OF MARKET SHARE OR FAILURE
TO
ACHIEVE MARKET ACCEPTANCE Software products as complex as those offered by
Ansoft may contain defects or failures when
introduced or when new versions are released.
Ansoft has in the past discovered software
defects in certain of its products and may
experience delays or lost revenue to correct such
defects in the future. Despite testing by Ansoft,
errors may still be found in new products or
releases after commencement of commercial
shipments, resulting in loss of market share or
failure to achieve market acceptance. Any such
occurrence could seriously harm Ansoft's
business, financial condition and results of
operations.
WE ARE CONTROLLED BY OUR
PRINCIPAL STOCKHOLDERS AND
MANAGEMENT WHICH MAY LIMIT
YOUR ABILITY TO INFLUENCE
STOCKHOLDER MATTERS Our executive officers, directors and principal
stockholders own approximately 49% of the
outstanding shares of Ansoft common stock. As a
result, they have the ability to effectively
control us and direct our affairs, including the
election of directors and approval of significant
corporate transactions. This concentration of
ownership also may have the effect of delaying,
deferring or preventing a change in control of
our company and may make some transactions more
difficult or impossible without the support of
these stockholders. The interests of these
stockholders may conflict with those of other
stockholders.
ANTI-TAKEOVER PROVISIONS IN
ANSOFT'S CERTIFICATE OF
INCORPORATION, BYLAWS, AND
UNDER DELAWARE LAW COULD
PREVENT AN ACQUISITION OF
ANSOFT We have adopted a number of provisions that could
have anti-takeover effects. The Board of
Directors has the authority to issue up to
1,000,000 shares of Preferred Stock without any
further vote or action by Ansoft's stockholders.
This and other provisions of Ansoft's Certificate
of Incorporation, Bylaws and Delaware Law may
have the effect of deterring hostile takeovers or
delaying or
15
<PAGE> 23
preventing changes in control or management,
including transactions in which the stockholders
of the Ansoft might otherwise receive a premium
for their shares over then current market prices.
16
<PAGE> 24
FORWARD-LOOKING STATEMENTS
This document, including information incorporated by reference, contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements relate to expectations concerning matters that are not historical
facts. Words such as "projects," "believes," "anticipates," "plans," "expects,"
"intends," and similar words and expressions are intended to identify
forward-looking statements. Although each of Ansoft and Pacific Numerix believes
that such forward-looking statements are reasonable, neither can assure you that
such expectations will prove to be correct. Important language regarding factors
that could cause actual results to differ materially from such expectations are
disclosed herein including, without limitation, in the "Risk Factors" beginning
on page 10. All forward-looking statements attributable to Ansoft or Pacific
Numerix are expressly qualified in their entirety by such language. Neither
Ansoft nor Pacific Numerix undertakes any obligation to update any
forward-looking statements.
17
<PAGE> 25
THE SPECIAL MEETING
OF THE STOCKHOLDERS OF PACIFIC NUMERIX CORPORATION
DATE, TIME AND PLACE OF THE SPECIAL MEETING
Pacific Numerix will hold the special meeting at 8:00 a.m., local time, on
, 1999, at the offices of Buchanan Ingersoll Professional
Corporation, One Oxford Centre, Pittsburgh, PA 15219. You are being furnished
with a copy of this proxy statement/prospectus and a proxy card so that you can
vote your shares if you do not attend the special meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting, Pacific Numerix stockholders will:
1. Vote on the approval of the Merger Agreement; and
2. Transact such other business as may properly come before the meeting or
any adjournment thereof.
VOTING AT THE SPECIAL MEETING; RECORD DATE; QUORUM
The board of directors has fixed the close of business on October 31, 1999,
as the record date for the determination of stockholders of Pacific Numerix
entitled to notice of and to vote at the special meeting and at any adjournment
or postponement thereof. Only holders of record on the record date will be
entitled to vote at the special meeting. As of October 31, 1999, Pacific Numerix
had 5,030,784 shares of common stock outstanding and 157,000 shares of preferred
stock outstanding. In connection with the special meeting please note the
following:
- each common stockholder of record on October 31, 1999 is entitled to cast
one vote per common share;
- each preferred stockholder of record on October 31, 1999 is entitled to
cast 1 vote per preferred share;
- stockholders may vote their shares at the special meeting either in
person or by proxy;
- the presence, in person or by proxy, of the holders of a majority of the
outstanding common and preferred stock of Pacific Numerix entitled to
vote at the special meeting is necessary to constitute a quorum at the
special meeting. If a quorum is not present or represented at the special
meeting, the stockholders entitled to vote who are present in person or
by proxy, may, by majority vote, adjourn the special meeting from time to
time until a quorum is present or represented;
- the merger agreement must be adopted by the affirmative vote of the
holders of a majority of the combined voting power of shares of Pacific
Numerix common and preferred stock entitled to vote; and
- Pacific Numerix management believes that all of the votes of the shares
of common and preferred stock held by Ansoft, 3,905,514 votes as of the
record date, or
18
<PAGE> 26
approximately 75% of the combined voting power of all Pacific Numerix
common and preferred stock, will be voted in favor of the merger
agreement.
PROXIES
WHO IS SOLICITING PROXIES? Pacific Numerix is furnishing you with this
proxy statement/prospectus in connection with the solicitation of proxies by and
on behalf of the Pacific Numerix board of directors for use at the special
meeting.
HOW WILL THE PROXIES BE VOTED? Proxies in the form enclosed, which are
properly executed and returned and not subsequently revoked, will be voted at
the special meeting. These proxies will be voted in accordance with the
directions specified on the proxies. If no directions are indicated on a
properly executed proxy, such proxy will be voted for approval of the merger
agreement.
If any other matters are properly presented at the special meeting for
consideration, the persons named in the enclosed forms of proxy will have
discretion to vote on such matters in accordance with their best judgment.
However, proxies voting against a specific proposal may not be used by the
persons named in the proxies to vote for adjournment of the meeting for the
purpose of giving management additional time to solicit votes to approve such
proposal.
HOW DO I REVOKE MY PROXY? The grant of a proxy on the enclosed form does
not preclude you from attending the special meeting and voting in person. You
may revoke a proxy at any time before it is voted by:
- delivering a written notice of revocation bearing a later date than the
proxy before the vote is taken at the special meeting
- duly executing a later-dated proxy relating to the same shares of common
or preferred stock and delivering it as indicated below before the vote
is taken at the special meeting
- attending the special meeting and voting in person
Attendance at the special meeting will not in and of itself constitute a
revocation of a proxy. Any written notice of revocation or subsequent proxy must
be delivered to Pacific Numerix, Attention: Anthony Ryan, Secretary, before the
vote is taken at the special meeting.
WHO IS PAYING FOR THE SOLICITATION? Pacific Numerix will bear all expenses
of the solicitation of proxies for the special meeting. In addition to
solicitation by use of the mails, proxies may be solicited from stockholders by
Pacific Numerix directors, officers and employees. Solicitation may take place
in person or by telephone, facsimile or other means of communication. Such
directors, officers and employees will not be additionally compensated, but may
be reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation.
HOW ARE ABSTENTIONS TREATED? Abstentions will be tabulated separately and
will be counted as present at the meeting for purposes of determining whether a
quorum is present at the special meeting. Because the agreement requires the
approval of the holders of at least a majority of the voting power of the
outstanding shares of Pacific Numerix common and preferred stock, abstentions
will have the effect of votes against approval of the agreement.
19
<PAGE> 27
PROPOSAL 1:
THE MERGER
At the special meeting, you will be asked to approve the merger agreement,
in which a wholly-owned subsidiary of Ansoft will merge with and into Pacific
Numerix. As a result of the merger, Pacific Numerix will become a wholly-owned
subsidiary of Ansoft. Pacific Numerix's and Ansoft's board of directors have
each unanimously approved the merger agreement. The merger agreement is attached
as Annex A to this proxy statement/ prospectus.
BACKGROUND OF THE MERGER
Following extensive negotiations between Ansoft and certain major
stockholders of Pacific Numerix, on April 28, 1999, Ansoft purchased from
certain then current stockholders of Pacific Numerix 3,789,014 shares of Pacific
Numerix common stock and 116,500 shares of Pacific Numerix preferred stock. The
purchase price per share of such purchase was 0.09236 shares of Ansoft common
stock for each share of Pacific Numerix common stock, and .15655 shares of
Ansoft common stock for each share of Pacific Numerix preferred stock, for a
total of 372,442 shares of Ansoft common stock, the same conversion ratio that
is being offered by Ansoft pursuant to this proxy statement/ prospectus. The
Ansoft common stock was issued pursuant to exemptions from the registration
requirements of the 1933 Securities Act, pursuant to Section 4(2) of Regulation
D promulgated thereunder concerning transactions not involving a public
offering. Officers of Ansoft thereafter assumed the management and operation of
Pacific Numerix, paid off its outstanding debt, and began to integrate Pacific
Numerix's product marketing and development within Ansoft's established product
marketing and development structure.
On September 9, 1999, the board of directors of Pacific Numerix (by this
time consisting of Nicholas Csendes and Zoltan Cendes, both officers of Ansoft)
concluded that the merger is in the best interests of Pacific Numerix and its
stockholders (other than Ansoft). The board considered all of the information
and factors described below, which constituted all of the material information
and factors known to the board at that time, in deciding to approve the merger.
In reaching this conclusion, the board based its recommendation upon the
totality of the information and factors presented to it or otherwise known to
its members.
FOR THE REASONS SET FORTH ABOVE AND ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS, THE PACIFIC NUMERIX BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
PACIFIC NUMERIX REASONS FOR THE MERGER
Pacific Numerix's board has determined that the terms of the merger and the
merger agreement are fair to, and in the best interests of, Pacific Numerix and
its stockholders. Accordingly, Pacific Numerix's board has approved the merger
agreement and the consummation of the merger and recommends that you vote for
approval of the merger agreement and the merger.
Pacific Numerix's board consulted with its senior management, legal
counsel, independent accountants and financial advisers in reaching its decision
to approve the
20
<PAGE> 28
merger. Among the factors considered by Pacific Numerix's board in its
deliberations were the following:
- historical information concerning Ansoft's financial performance, results
of operations, assets, liabilities, operations, technology, management
and competitive position. This information included public reports of
Ansoft covering the most recent fiscal year and fiscal quarter;
- management's view of the financial condition, results of operations,
assets, liabilities, businesses and prospects of Ansoft and Pacific
Numerix after giving effect to the merger;
- current market conditions and historical trading information with respect
to Ansoft common stock; the terms and conditions of the merger agreement
taken as a whole;
- Ansoft's track record, which clearly demonstrates an ability to compete
effectively in the electronic design automation market.
In addition, the board based its decision, in part, on a presentation of
its senior management. The board believed that combining Pacific Numerix and
Ansoft would result in the following potential operating synergies and cost
savings:
- elimination of duplicate expenses in sales and marketing, business
development, administration, and product development; and
- increased buying power due to the size of the combined entity.
The board also identified and considered a variety of potential negative
factors in its deliberations concerning the merger, including, but not limited
to:
- the risk to Pacific Numerix's stockholders that the value to be received
in the merger could decline significantly due to the fixed exchange
ratio;
- the loss of control over the future operations of Pacific Numerix
following the merger;
- the risk that the potential benefits sought in the merger might not be
fully realized;
- the possibility that the merger might not be consummated and the
potential adverse effects of the announcement of the merger on:
- Pacific Numerix's sales and operating results;
- Pacific Numerix's ability to attract and retain key employees;
- the progress of certain strategic initiatives; and
- the risk that key technical, sales and management personnel might resign
following the closing of the merger.
The board also considered the purchase price of the Pacific Numerix stock
in the April 28, 1999 transaction, and concluded that if would be fair to the
remaining stockholders of Pacific Numerix to receive substantially the same
consideration.
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<PAGE> 29
After due consideration, the board concluded that the potential benefits of
the proposed merger outweighed the possible risks and after fully discussing
these matters the board determined that Ansoft's offer was justified and
proceeded to approve the merger.
The foregoing discussion of the information and factors considered by the
board is not intended to be exhaustive but is believed to include all material
factors considered by the board. In view of the complexity and wide variety of
information and factors, both positive and negative, considered by the board, it
did not find it practical to quantify, rank or otherwise assign relative or
specific weights to the factors considered. The board also did not reach any
specific conclusion with respect to each of the factors considered, or any
aspect of any particular factor. Instead, the board conducted an overall
analysis of the factors described above, including thorough discussions with its
management and legal and accounting advisors. In considering the factors
described above, individual members of the board may have weighed factors
differently. The board considered all these factors as a whole and believe the
factors support its determination to approve the merger. Accordingly, the board
believes the merger is fair to, and in the best interests of, Pacific Numerix
and its stockholders and that Pacific Numerix should proceed with the merger.
During the time period in which Pacific Numerix was engaged in discussions
with Ansoft, it did not receive any unsolicited offers regarding a possible
business combination with any third parties.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material federal income tax
considerations of the merger that are generally applicable to holders of Pacific
Numerix common stock.
This discussion does not deal with all income tax considerations that may
be relevant to you. Some stockholders have particular circumstances such as
stockholders who are dealers in securities, foreign persons, banks, insurance
companies or tax-exempt entities; stockholders who acquired their shares in
connection with previous mergers involving Pacific Numerix or an affiliate;
stockholders who hold their shares as part of a hedging, straddle, conversion or
other risk reduction transaction; or stockholders who acquired their shares in
connection with stock option, stock purchase plans or other compensatory
transactions. In addition, the following discussion does not address the tax
consequences of transactions effectuated prior to or after the merger (whether
or not such transactions are in connection with the merger). Furthermore, no
foreign, state or local tax considerations are addressed in this proxy
statement/prospectus. The discussion is based on federal income tax law in
effect as of the date of this proxy statement/prospectus. These laws could
change at any time, possibly with retroactive effectiveness. Neither Pacific
Numerix nor Ansoft has requested or will request a ruling from the Internal
Revenue Service with regard to any of the tax consequences of the merger.
Accordingly, Pacific Numerix stockholders are urged to consult their own
tax advisors as to the specific tax consequences of the merger. This includes
the applicable federal, state, local and foreign tax consequences to them of the
merger and applicable tax return reporting requirements.
- Gain or loss will be recognized by holders of Pacific Numerix common and
preferred stock solely upon their receipt of Ansoft common stock and cash
in the merger;
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- Each Pacific Numerix stockholder will recognize a gain or loss with
respect to each share of Pacific Numerix common or preferred stock
surrendered equal to the difference between the stockholder's basis in
such share and the sum of 1) the fair market value, as of the effective
time of the merger, of the Ansoft common stock received in exchange
therefor, and 2) the cash received.
ACCOUNTING TREATMENT
The business combination will be accounted for under the purchase method of
accounting. Ansoft will record the assets and liabilities of Pacific Numerix at
their estimated fair value as of the closing date. The remaining intangible
assets of approximately $900,000 recorded with respect to the business
combination are expected to be amortized over a period of three to seven years
following the closing of the business combination.
APPRAISAL RIGHTS
NEVADA LAW
Record holders of Pacific Numerix common and preferred stock that follow
the appropriate procedures are entitled to dissenters' rights under Sections
92A.300 through 92A.500 of the Nevada General Corporation Law (the "Nevada
Dissenters' Statute") in connection with the merger.
The following discussion of the applicable provisions of the Nevada
Dissenters' Statute is not intended to be a complete statement of such
provisions and is qualified in its entirety by reference to the full text of the
Nevada Dissenters' Statute, which is reprinted in its entirety and attached as
Appendix B to this joint proxy statement/prospectus. A person having a
beneficial interest in shares of Pacific Numerix common or preferred stock that
are held of record in the name of another person, such as a bank, broker or
other nominee, must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner if such person wishes to
perfect any dissenters' rights such person may have.
This discussion and Appendix B should be reviewed carefully by any
stockholder of Pacific Numerix who wishes to exercise statutory dissenters'
rights or who wishes to preserve the right to do so, because failure to strictly
comply with any of the procedural requirements of the Nevada Dissenters' Statute
may result in a termination or waiver of dissenters' rights under the Nevada
Dissenters' Statute.
Under the Nevada Dissenters' Statute, each Pacific Numerix stockholder has
the right to dissent from the merger and demand payment of the fair value of his
or her shares of Pacific Numerix common or preferred stock. If a stockholder
elects to dissent, the stockholder must file with Pacific Numerix a written
notice of dissent stating that such stockholder intends to demand payment for
his or her shares if the merger is consummated. Such written notice of dissent
must be filed with Pacific Numerix before the vote of Pacific Numerix
stockholders on the merger. If a stockholder fails to comply with this notice
requirement or votes in favor of the proposed transaction the stockholder will
not be entitled to appraisal rights. The "fair value" of the shares as used in
the Nevada Dissenters' Statute is determined as of the day prior to the Pacific
Numerix stockholder meeting being held to vote upon the merger.
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Within 10 days after the effective date of the merger, Ansoft will give
written notice of the effective date of the merger by certified mail to each
stockholder who filed a written notice of dissent, except for any stockholder
who voted for or consented in writing to the merger. The notice must also state
where demand for payment must be sent and where share certificates shall be
deposited, among other information. Within the time period set forth in the
notice, which may not be less than 30 days nor more than 60 days following the
date notice is delivered, the dissenting stockholder must make a written demand
on Ansoft for payment of the fair value of his or her shares and deposit his or
her share certificates in accordance with the notice.
Within 30 days after the receipt of demand for the fair value of the
dissenter's shares, Ansoft will mail to each dissenting stockholder Pacific
Numerix's financial statements as of the end of the last fiscal year ending not
more than 16 months before the date of payment and the latest available interim
financial statements, if any. These financial statements will be accompanied by
payment in cash of fair value of such stockholder's shares as determined by
Ansoft, plus accrued interest.
A dissenting stockholder, within 30 days following receipt of payment for
the shares, may send Ansoft a notice containing such stockholder's own estimate
of fair value and accrued interest, and demand payment for that amount less the
amount received pursuant to Ansoft's payment of fair value to such stockholder.
If a demand for payment remains unsettled, Ansoft shall petition the court
to determine fair value and accrued interest. If Ansoft fails to commence an
action within 60 days following the receipt of the stockholder's estimate of
fair value, Ansoft shall pay to the stockholder the amount demanded by the
stockholder in the stockholder's notice containing the stockholder's estimate of
fair value and accrued interest.
All dissenting stockholders, whether residents of Nevada or not, must be
made parties to the action and the court shall render judgment for the fair
value of their shares. Each party must be served with the petition. The judgment
shall include payment for the amount, if any, by which the court finds the fair
value of his shares, plus interest, exceeds the amount already paid. If the
court finds that the demand of any dissenting stockholder for payment was
arbitrary, vexatious or otherwise not in good faith, the court may assess costs,
including reasonable fees of counsel and experts, against such stockholder.
Otherwise the costs and expenses of bringing the appraisal action will be
determined by the court and will be apportioned and assessed as the court may
find equitable upon the parties or any of them. In addition, reasonable fees and
expenses of counsel and experts may be assessed against Ansoft if the court
finds that it did not substantially comply with the requirements of the Nevada
Dissenters' Statute or that it acted arbitrarily, vexatiously or not in good
faith.
DELAWARE LAW
Delaware law provides appraisal rights to stockholders of Delaware
corporations in certain situations. Delaware law does not provide appraisal
rights to stockholders of a corporation, such as Ansoft, that issues shares in
connection with a merger but is not itself a constituent corporation in the
merger.
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LISTING OF ANSOFT COMMON STOCK TO BE ISSUED IN THE MERGER
It is a condition to the consummation of the merger that the shares of
Ansoft common stock to be issued in the merger be approved for listing on The
Nasdaq National Market. A description of Ansoft's common stock is provided on
page .
RESTRICTION ON RESALES OF ANSOFT COMMON STOCK
The Ansoft common stock to be issued in the merger will have been
registered under the Securities Act, thereby allowing such shares to be freely
traded without restriction by all former holders of Pacific Numerix common stock
who are not "affiliates" of Pacific Numerix at the time of the special meeting
and who do not become "affiliates" of Ansoft after the merger. Persons who may
be deemed to be affiliates of Ansoft or Pacific Numerix generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of
Ansoft and Pacific Numerix, as well as significant stockholders.
Shares of Ansoft common stock received by those stockholders of Pacific
Numerix who are deemed to be affiliates of Pacific Numerix may be resold without
registration under the Securities Act only as permitted by Rule 145 under the
Securities Act or as otherwise permitted under the Securities Act.
This document does not cover resales of Ansoft common stock received by any
person who may be deemed to be an affiliate of Ansoft or Pacific Numerix.
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT. A COPY OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS
DOCUMENT AND INCORPORATED HEREIN BY REFERENCE. YOU ARE URGED TO READ THE MERGER
AGREEMENT IN ITS ENTIRETY FOR A MORE COMPLETE DESCRIPTION OF THE MERGER. IN THE
EVENT OF ANY DISCREPANCY BETWEEN THE TERMS OF THE MERGER AGREEMENT AND THE
FOLLOWING SUMMARY, THE MERGER AGREEMENT WILL CONTROL.
THE MERGER
Following the approval and adoption of the merger agreement by the
stockholders of Pacific Numerix and the satisfaction or waiver of the other
conditions to the merger, Pacific Numerix will merge with a wholly-owned
subsidiary of Ansoft. Pacific Numerix will continue as the surviving corporation
and a wholly-owned subsidiary of Ansoft.
THE EFFECTIVE TIME
As soon as practicable on or after the closing of the merger, the parties
will cause the merger to become effective by filing a certificate of merger with
the Delaware Secretary of State and the Nevada Secretary of State. The parties
anticipate that this will occur , 1999.
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DIRECTORS AND OFFICERS OF PACIFIC NUMERIX AFTER THE MERGER
At the effective time, the new directors of Pacific Numerix will be the
following: Zolton Cendes and Nicholas Csendes and the officers of Pacific
Numerix shall be: Nicholas Csendes, President, and Anthony Ryan, Secretary and
Treasurer.
CONVERSION OF SHARES IN THE MERGER
At the effective time, each outstanding share of Pacific Numerix common
stock will be automatically canceled and converted into the right to receive
0.09236 shares of Ansoft common stock and each outstanding share of Pacific
Numerix preferred stock will be automatically canceled and converted into the
right to receive .15655 shares of Ansoft common stock, except that shares of
Pacific Numerix common and preferred stock held immediately prior to the
effective time by Pacific Numerix or Ansoft shall be canceled. However, if the
number of Ansoft shares that the holder is entitled to receive is not evenly
divisible by ten (10), the holder shall receive that number of Ansoft shares by
rounding down to the nearest number divisible by ten (10) and the remaining
number of shares, including any fractional share, that the holder has the right
to receive will be paid in cash at a value of $6.95 per Ansoft share. For
example, if a holder is entitled to receive 147 shares of Ansoft common stock,
such holder would receive 140 shares of Ansoft common stock and $48.65 in cash.
In addition, the exchange ratio will be further adjusted to reflect the effect
of any stock split, stock dividend, reorganization, recapitalization,
reclassification or other like change with respect to either Ansoft common stock
or Pacific Numerix common stock that may occur on or after the date of this
document but prior to the merger.
PACIFIC NUMERIX'S STOCK OPTION AND STOCK PURCHASE PLANS
At the effective time, each outstanding option to purchase shares of
Pacific Numerix common stock under Pacific Numerix's Incentive Stock Option Plan
will be canceled by Ansoft regardless of whether they are exercisable.
PROCEDURES FOR EXCHANGING STOCK CERTIFICATES
Promptly after the effective time, Ansoft will mail to the holders of
record of Pacific Numerix stock certificates, (1) a letter of transmittal and
(2) instructions on how to surrender Pacific Numerix stock certificates in
exchange for certificates representing shares of Ansoft common stock, cash for
fractional shares and any dividends or other distributions that they may be
entitled to receive under the merger agreement. HOLDERS OF PACIFIC NUMERIX STOCK
SHOULD NOT SURRENDER THEIR PACIFIC NUMERIX STOCK CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL FROM ANSOFT.
Upon surrendering their Pacific Numerix stock certificates to Ansoft for
cancellation, together with the letter of transmittal and any other documents
required by the exchange agent, the holders of Pacific Numerix stock
certificates will be entitled to receive a certificate representing that number
of whole shares of Ansoft common stock which that holder has the right to
receive. Until surrendered to the exchange agent, outstanding Pacific Numerix
stock certificates will be deemed from and after the effective time to evidence
only the right to receive the number of full shares of Ansoft common stock into
which the shares of Pacific Numerix common stock have converted.
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DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES
Until each Pacific Numerix stockholder surrenders his Pacific Numerix stock
certificate in exchange for an Ansoft stock certificate, that stockholder will
not receive any dividends or other distributions declared or made by Ansoft
after the effective time of the merger. However, once that stockholder
surrenders his or her Pacific Numerix stock certificate to the exchange agent,
he or she will receive (1) an Ansoft stock certificate, (2) cash as payment for
fractional shares, and (3) cash, without interest, as payment for any dividends
or other distributions declared or made by Ansoft after the effective time of
the merger.
NO FRACTIONAL SHARES
No fractional shares of Ansoft common stock will be issued because of the
merger. Instead, each Pacific Numerix stockholder who would be entitled to a
fractional share of Ansoft common stock will receive cash. The amount of cash to
be received by such Pacific Numerix stockholder will be determined as described
above in the Section "Conversion of Shares in the Merger."
DIRECTOR AND OFFICER INDEMNIFICATION
From and after the effective time of the merger, Pacific Numerix will
continue to fulfill its obligations under any indemnification agreements with
its directors and officers that existed as of the effective time of the merger
and any indemnification provisions under Pacific Numerix's organizational
documents that were in effect on the date of the merger agreement.
The articles of incorporation and bylaws of Pacific Numerix following the
merger will contain provisions relating to exculpation and indemnification that
are at least as favorable to the indemnified directors and officers as those
contained in Pacific Numerix's organizational documents that were in effect on
the date of the merger agreement. These indemnification provisions will not be
amended, repealed or otherwise modified for three years after the effective time
of the merger if such modification would adversely affect the rights of
individuals who were directors, officers, employees or agents of Pacific Numerix
immediately prior to the effective time of the merger, unless such modification
is required by law.
CONDITIONS TO THE MERGER
The obligations of Ansoft and Pacific Numerix to effect the merger are
subject to the satisfaction of the following conditions:
-- Pacific Numerix's stockholders approve the merger;
-- the Commission declares the registration statement effective and no stop
order suspending the effectiveness of the registration statement shall
have been issued and no proceeding for that purpose, and no similar
proceeding in respect of this document, shall have been initiated or
threatened in writing by the Commission;
-- no governmental entity enacts, issues, promulgates, enforces or enters
any statute, rule, regulation, executive order, decree, injunction or
other order which is in effect
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and which makes the merger illegal or otherwise prohibits consummation
of the merger;
If any material condition is waived, Ansoft and Pacific Numerix will amend
this document and resolicit the vote of Pacific Numerix's stockholders holders.
TERMINATION
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after the requisite approval of the
stockholders of Pacific Numerix has been obtained:
-- by mutual consent authorized by the boards of both Ansoft and Pacific
Numerix;
-- by either Pacific Numerix or Ansoft if a governmental entity shall have
issued an order, decree or ruling or taken any other action which
permanently restrains, enjoins or otherwise prohibits the merger; or
-- by either Pacific Numerix or Ansoft if the required approval of Pacific
Numerix's stockholders is not obtained, although the right to terminate
the merger agreement shall not be available to Pacific Numerix if the
failure to obtain stockholder approval shall have been caused by Pacific
Numerix in an action or failure to act that constitutes a material
breach by Pacific Numerix of the merger agreement.
TERMINATION FEE AND EXPENSES
Except as set forth below, all fees and expenses incurred in connection
with the merger agreement and the merger shall be paid by the party incurring
such expenses, whether or not the merger is consummated.
AMENDMENT; WAIVER
Subject to a applicable law, the merger agreement may be amended by the
parties at any time by execution of a written instrument signed on behalf of
Ansoft and Pacific Numerix. At any time prior to the effective time of the
merger, any party may, to the extent legally allowed:
-- extend the time for the performance of any of the obligations or other
acts of the other parties to the merger agreement;
-- waive any inaccuracies in the representations and warranties made to
such party as contained in the merger agreement or in any document
delivered pursuant to the merger agreement; and
-- waive compliance with any of the agreements or conditions for the
benefit of such party as contained in the merger agreement.
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DESCRIPTION OF ANSOFT COMMON STOCK
Ansoft is at authorized to issue up to 25,000,000 shares of common stock,
par value $0.01 per share. Holders of shares of Ansoft common stock are entitled
to one vote per share on all matters to be voted on by stockholders. The holders
of Ansoft common stock are entitled to receive such dividends, if any, as may be
declared from time to time by the Ansoft board of directors out of funds legally
available therefor. Upon liquidation or dissolution of Ansoft, the holders of
Ansoft common stock are entitled to share ratably in the distribution of assets,
subject to the rights of the holders of Ansoft preferred stock, if any. Holders
of Ansoft common stock have no preemptive rights, subscription rights or
conversion rights. There are no redemption or sinking fund provisions with
respect to the Ansoft common stock. As of October 31, 1999, there were
approximately 11,726,242 shares of Ansoft common stock outstanding, held by
approximately 386 holders of record.
In addition, Ansoft is authorized to issue shares of preferred stock, $0.01
par value per share, in one or more series as determined by the Ansoft board of
directors. No shares of Ansoft preferred stock are currently issued or
outstanding. The Ansoft board of directors may, without further action by the
stockholders of Ansoft, issue a series of Ansoft preferred stock and fix the
rights and preferences of those shares, including the dividend rights, dividend
rates, conversion rights, exchange rights, voting rights, terms of redemption,
redemption price or prices, liquidation preferences, the number of shares
constituting any series and the designation of such series. The rights of the
holders of Ansoft common stock will be subject to, and may be adversely affected
by, the rights of the holders of any Ansoft preferred stock issued by Ansoft in
the future.
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COMPARATIVE RIGHTS OF STOCKHOLDERS
Pacific Numerix is currently a Nevada corporation, and the rights of
Pacific Numerix's stockholders are governed by Pacific Numerix's articles of
incorporation, bylaws and Nevada law. Ansoft is currently a Delaware
corporation, and the rights of Ansoft's stockholders are governed by Ansoft's
certificate of incorporation, bylaws and Delaware law.
Currently, the rights and privileges of Pacific Numerix's stockholders are,
in many ways, comparable to those of stockholders of Ansoft. Despite the
similarities, however, there are differences. The following is a summary of the
material differences between the rights of Pacific Numerix's stockholders and
the rights of Ansoft's stockholders as of the date of this proxy
statement/prospectus. It is not practical to summarize all of the differences
between Nevada law and Delaware law here. Therefore, you are advised to review
Nevada Law, Delaware Law, the common law, Ansoft's Delaware certificate of
incorporation and bylaws, and Pacific Numerix's Nevada articles of incorporation
and bylaws. These documents are available as described under "Where You Can Find
More Information" on page 107.
DELAWARE LAW AND NEVADA LAW AND CURRENT GOVERNING DOCUMENTS OF ANSOFT AND
PACIFIC NUMERIX, RESPECTIVELY
Under Pacific Numerix's bylaws, the number of directors shall be at least 5
and no more than 20. Under Ansoft's bylaws, the number of directors shall be at
least 1. The number of directors shall be fixed by the board of directors.
Currently, Pacific Numerix has 2 directors with 4 vacancies, and Ansoft has 6.
CUMULATIVE VOTING
Under Nevada corporate law, stockholders of a Nevada corporation do not
have cumulative voting rights in the election of directors unless the articles
of incorporation so provides. Pacific Numerix's Articles of Incorporation does
not provide for cumulative voting.
Under Delaware corporate law, stockholders of a Delaware corporation do not
have cumulative voting rights in the election of directors unless the
certificate of incorporation so provides. Ansoft's Certificate of Incorporation
does not provide for cumulative voting.
SPECIAL MEETINGS OF STOCKHOLDERS
Nevada law does not specifically address who may call special meetings of
stockholders. The Pacific Numerix bylaws provide that special meetings of
shareholders may be called by the President, by the directors on written request
of two members of the board of directors or by the President at the request of
stockholders owning not less than 50% of the outstanding voting shares of the
corporation.
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or any other person authorized to do so in the corporation's
certificate of incorporation or bylaws. The Ansoft bylaws provide that special
meetings of stockholders may be called by the board, the President, or by the
holders of shares entitled to cast not less than 20% of the votes at such
meeting.
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STOCKHOLDER CONSENT IN LIEU OF MEETING
Nevada corporate law states that, unless otherwise provided in a
corporation's articles of incorporation or bylaws, any action required or
permitted to be taken at a meeting of the stockholders may be taken without a
meeting if a written consent thereto is signed by stockholders holding at least
a majority of the voting power, except that if a different proportion of voting
power is required for such an action at a meeting, then that proportion of
written consent is required. Pacific Numerix's bylaws provide for such action by
partial written consent.
Except as otherwise provided by the certificate of incorporation (and
Ansoft's certificate of incorporation is silent on this issue) Delaware
corporate law permits any action required or permitted to be taken at any
meeting of a corporation's stockholders to be taken without a meeting, without a
prior notice and without a vote, upon the written consent of stockholders who
would have been entitled to cast the minimum number of votes necessary to
authorize such action at a meeting of stockholders at which all stockholders
entitled to vote were present and voting.
SPECIAL TRANSACTIONS
Under Nevada corporate law, unless a greater vote is specified in the
certificate of incorporation, the affirmative vote of a majority of the votes
cast by stockholders entitled to vote on the matter is required to approve,
among other things:
- certain amendments to a Nevada corporation's articles of incorporation;
- the sale or other disposition of all or substantially all of a
corporation's assets; or
- the merger or consolidation of the corporation with another corporation.
Pacific Numerix's Articles of Incorporation does not contain provisions
specifying a greater vote requirement. Under Pacific Numerix's Articles of
Incorporation, the holders of common stock are entitled to one vote per share
and the holders of preferred are currently entitled to 1 vote per share of
preferred stock. The holders of the outstanding shares of a class or series are
entitled to vote as a class upon any proposed amendment to the articles of
incorporation, whether or not entitled to vote thereon by the provisions of the
corporation's articles of incorporation, if the amendment would increase or
decrease the aggregate number of authorized shares of such series or class,
increase or decrease the par value of the shares of such class or series or
alter or change the powers, preferences or specific rights of the shares of such
series or class so as to adversely affect them.
Under Delaware corporate law, unless otherwise specified in the certificate
of incorporation:
- an amendment to the certificate of incorporation;
- the voluntary dissolution of the corporation;
- a sale or other disposition of all or substantially all of the assets of
a corporation; or
- a merger or consolidation of a stock corporation with another stock
corporation, requires the affirmative vote of a majority of the
outstanding stock entitled to vote thereon.
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Ansoft's Certificate of Incorporation does not contain any provisions
specifying a greater vote requirement.
APPRAISAL/DISSENTERS RIGHTS
Stockholders of a Nevada corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal rights.
No statutory right of appraisal exists, however, where the stock of the Nevada
corporation is (1) listed on a national securities exchange, (2) included in the
national market system by the National Association of Securities Dealers, Inc.,
or (3) is held of record by at least 2,000 holders, unless certain other
exceptions apply.
Stockholders of a Delaware corporation who dissent from a merger or
consolidation of the corporation may be entitled to appraisal rights.
Stockholders have the right to dissent from such corporate actions and to obtain
payment of the fair value of their shares. There are no statutory rights of
appraisal with respect to stockholders of a corporation who meet the following
conditions:
(1) The shares held by the stockholders must either be:
- listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc., or
- held of record by more than 2,000 stockholders,
(2) Such stockholders must receive either:
- shares of stock or depository receipts of the corporation surviving or
resulting from the merger or consolidation, or
- shares of stock or depository receipts of any other corporation, and
(3) At the effective date of the merger or consolidation the stock or
depository receipts received by the stockholders must be either:
- listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc., or
- held of record by more than 2,000 stockholders (or cash in lieu of
fractional share interests therein).
Ansoft stockholders are not entitled to appraisal rights because they have
no right to vote on the proposed merger.
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION
Nevada law allows a corporation, through its articles of incorporation, to
limit or eliminate the personal liability of directors and officers to the
corporation and its stockholders for damages for breach of fiduciary duty.
However, this provision excludes any limitation on liability for acts or
omissions which involve intentional misconduct, fraud or a
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knowing violation of law or the unlawful payment of a dividend or other
distribution on the corporation's capital stock, or the unlawful purchase of its
capital stock.
The General Corporation Law of Nevada provides that a corporation may
indemnify any person made a party or threatened to be made a party to any type
of proceedings, other than certain actions by or in right of the corporation,
because he or she is or was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, against expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation; or in a criminal proceeding, if he or she had no
reasonable cause to believe his or her conduct was unlawful. Expenses incurred
by an officer or director, or other employees or agents as deemed appropriate by
the board of directors, in defending civil or criminal proceedings may be paid
by the corporation in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it is ultimately determined that such person is not entitled to be indemnified
by the corporation. To indemnify a party, the corporation must determine that
the party met the applicable standards of conduct. The Pacific Numerix Articles
of Incorporation and bylaws provide for limitation of liability and
indemnification to the fullest extent possible under Nevada law.
Under Delaware law, a corporation may include in its certificate of
incorporation a provision that would, subject to the limitations described
below, eliminate or limit directors' liability for monetary damages for breaches
of their fiduciary duty of care. Under the Delaware law, a director's liability
cannot be eliminated or limited:
- for breaches of the duty of loyalty,
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
- for the payment of unlawful dividends or expenditure of funds or unlawful
stock purchase or redemptions, or
- for transactions from which such director derived an improper personal
benefit.
Ansoft's Certificate of Incorporation contains provisions limiting a
director's liability to the fullest extent permitted by Delaware law. Delaware
corporate law also provides Ansoft has broad powers to indemnify its directors
and officers against liabilities they may incur in such capacities, including
liabilities under the Securities Act. Ansoft's Certificate of Incorporation
provides that Ansoft will indemnify its directors and executive officers and may
indemnify other officers to the fullest extent permitted by law. The bylaws also
authorize Ansoft to advance litigation expenses in the case of certain actions,
against an undertaking by the indemnified party to repay such advances if it is
ultimately determined that the indemnified party is not entitled to
indemnification.
INTERESTED STOCKHOLDERS TRANSACTIONS
Sections 78.411 to 78.444 of the General Corporation Law of Nevada,
inclusive, restrict the ability of a resident domestic corporation to engage in
any combination with an interested stockholder for three years after the
interested stockholder's date of acquiring the shares that cause such
stockholder to become an interested stockholder unless the
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combination or the purchase of shares by the interested stockholder on the
interested stockholder's date of acquiring the shares that cause such
stockholder to become an interested stockholder is approved by the board of
directors of the resident domestic corporation before that date. If the
combination was not previously approved, the interested stockholder may effect a
combination after the three-year period only if such stockholder receives
approval from a majority of the disinterested shares or the offer meets various
fair price criteria. For purposes of the foregoing provisions, "resident
domestic corporation" means a Nevada corporation that has 200 or more
stockholders and "interested stockholder" means any person, other than the
resident domestic corporation or its subsidiaries, who is:
- the beneficial owner, directly or indirectly, of ten percent or more of
the voting power of the outstanding voting shares of the resident
domestic corporation; or
- an affiliate or associate of the resident domestic corporation and at any
time within three years immediately before the date in question was the
beneficial owner, directly or indirectly, of ten percent or more of the
voting power of the outstanding shares of the resident domestic
corporation.
The above provisions do not apply to any combination involving a resident
domestic corporation:
- whose original articles of incorporation expressly elect not to be
governed by Sections 78.411 to 78.444 of Nevada law, inclusive;
- which does not, as of the date of acquiring shares, have a class of
voting shares registered with the SEC under Section 12 of the Securities
Act, unless the corporation's articles of incorporation provide
otherwise;
- whose articles of incorporation were amended to provide that the
corporation is subject to the above provisions and which did not have a
class of voting shares registered with the SEC under Section 12 of the
Securities Act on the effective date of such amendment, if the
combination is with an interested stockholder whose date of acquiring
shares is before the effective date of such amendment; or
- that amends its articles of incorporation, approved by a majority of the
disinterested shares, to expressly elect not to be governed by Sections
78.411 to 78.444 of Nevada law, inclusive. Such an amendment, however,
would not become effective until eighteen months after its passage and
would apply only to stock acquisitions occurring after the effective date
of the amendment.
Pacific Numerix does not have a class of voting securities registered with
the SEC under Section 12 of the Securities Act and its articles do not state
that it expressly elects to be governed by Sections 78.411 to 78.444.
A provision of Delaware law prohibits certain transactions between a
Delaware corporation and an "interested stockholder." An "interested
stockholder" for purposes of this Delaware law provision is a stockholder that
is directly or indirectly a beneficial owner of fifteen percent or more of the
voting power of the outstanding voting stock of a Delaware corporation, or its
affiliate or associate. This provision prohibits certain business
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<PAGE> 42
combinations between an interested stockholder and a corporation for a period of
three years after the date the interested stockholder acquired its stock unless:
- the business combination is approved by the corporation's board of
directors prior to the stock acquisition date;
- the interested stockholder acquired at least 85% of the voting stock of
the corporation in the transaction in which such stockholder became an
interested stockholder; or
- the business combination is approved by a majority of the board of
directors and the affirmative vote of two-thirds of disinterested
stockholders.
DIVIDENDS
Except as otherwise provided in Pacific Numerix's Articles of
Incorporation, Nevada law authorizes the corporation to make distributions to
its stockholders, unless:
- the corporation would not be able to pay its debts as they become due in
the usual course of business, or
- the corporation's total assets would be less than the sum of its total
liabilities plus any amount owed, if the corporation would be dissolved
at the time of distribution, to stockholders with preferential rights
superior to those receiving the distribution.
Pacific Numerix's Articles of Incorporation do not contain any further
restrictions on the declaration or payment of dividends. The holders of the then
outstanding preferred and common stock are entitled to receive on an equal share
for share basis, the dividends declared by the board.
Delaware corporate law generally limits dividends to Ansoft to an amount
equal to the excess of the net assets of Ansoft (the amount by which total
assets exceed total liabilities) over its statutory capital, or if there is no
such excess, to its net profits for the current and/or immediately preceding
fiscal year. The board of directors has the authority to declare and pay
dividends.
BYLAWS
Under Nevada law, subject to any bylaws adopted by the stockholders, the
directors may make the bylaws of the corporation. Under the Pacific Numerix
bylaws, the bylaws may be altered, amended or repealed and new bylaws adopted by
a vote of a majority of the board.
Under Delaware corporate law, the stockholders of a Delaware corporation
have the power to adopt, amend, or repeal the corporation's bylaws, unless such
powers also are conferred in the certificate of incorporation to the board of
directors. The Certificate of Incorporation of Ansoft confers the power to alter
or repeal the bylaws to the board by action of the full board.
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<PAGE> 43
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of Pacific Numerix's board of directors
with respect to the merger, you should be aware that members of Pacific
Numerix's board of directors and management have interests in the merger that
are in addition to your interests as a holder of Pacific Numerix common stock
generally. Pacific Numerix's board of directors was aware of these interests and
considered them in approving the merger. The board of directors of Pacific
Numerix is comprised of Zolton Cendes and Nicholas Csendes, both officers and
directors of Ansoft.
Additionally, Ansoft acquired approximately 75% of the voting power of
Pacific Numerix in a transaction with certain major stockholders of Pacific
Numerix that was consummated in April 1999. A brief summary of this transaction
is described on page 20 of this prospectus/proxy statement.
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<PAGE> 44
ANSOFT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF JULY 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
-----------------
PACIFIC PRO FORMA PRO FORMA
ANSOFT NUMERIX ADJUSTMENTS COMBINED
------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............ $ 2,657 $ 8 $ (8)A $ 2,657
Marketable securities................ 17,007 -- 17,007
Accounts receivable.................. 7,411 724 (724)A 7,411
Deferred income taxes................ 126 -- 126
Prepaid expenses and other assets.... 734 -- 734
------- ------ -------
Total current assets................... 27,935 732 27,935
Plant and equipment.................... 4,707 195 (195)A 4,707
Marketable securities.................. 5,721 -- -- 5,721
Other assets........................... 310 -- -- 310
Deferred taxes -- non current.......... 3,218 -- -- 3,218
Capitalized software................... -- 2,567 (2,567)A --
Intangible assets...................... 10,072 -- 648C,D 10,720
------- ------ -------
Total assets........................... $51,963 $3,494 $52,611
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit....................... $ 8,488 $ -- $ 8,488
Accounts payable..................... 206 21 (21)A 206
Accrued expenses..................... 178 360 (300)A,C 238
Income taxes......................... 174 -- 174
Accrued wages........................ 150 -- 150
Deferred revenue..................... 3,158 300 (300)A 3,158
------- ------ -------
Total current liabilities.............. 12,354 681 12,414
Deferred taxes -- non current.......... -- -- --
Other liabilities...................... 136 -- 136
------- ------ -------
Total liabilities...................... 12,490 681 12,550
Minority Interest...................... (107) -- 107A --
Stockholders' equity
Preferred stock...................... -- 2 (2)A --
Treasury stock....................... (1,696) -- 645B (1,051)
Common stock......................... 116 50 (50)A 116
Additional paid-in capital........... 51,509 11,805 (11,713)A,B 51,600
Other accumulated comprehensive
income (loss)..................... (1,282) -- (1,282)
Accumulated deficit.................. (9,067) (9,044) 9,299A,D (9,322)
------- ------ -------
Total stockholders' equity............. 39,580 2,813 40,061
Total liabilities and stockholders'
equity............................... $51,963 $3,494 $52,611
======= ====== =======
</TABLE>
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<PAGE> 45
ANSOFT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 30, 1999
<TABLE>
<CAPTION>
HISTORICAL
------------------
PACIFIC PRO FORMA PRO FORMA
ANSOFT NUMERIX ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Total revenue..................... $24,475 $ 2,389 $26,864
Income (loss) from operations..... (5,605) (1,143) (205)D (6,953)
Net income (loss)................. $(2,808) $(1,200) $ (205)D $(4,213)
======= ======= =======
Basic net income (loss) per
share........................... $ (0.25) $ (0.23) $ (0.37)
======= ======= =======
Diluted net income (loss) per
share........................... $ (0.25) $ (0.23) $ (0.37)
======= ======= =======
Weighted average shares
outstanding used in basic
calculation..................... 11,310 5,135 5,023A 11,422
======= ======= =======
Weighted average shares
outstanding used in diluted
calculation..................... 11,310 5,135 5,023A 11,422
======= ======= =======
</TABLE>
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<PAGE> 46
ANSOFT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
FOR THREE MONTHS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
------------------
PACIFIC PRO FORMA PRO FORMA
ANSOFT NUMERIX ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Total revenue..................... $ 5,304 $ 829 $ (829)A $ 5,304
Income (loss) from operations..... (1,508) 54 (105)A,D (1,559)
Net income (loss)................. $ (893) $ 54 $ (105)A,D $ (944)
======= ======= =======
Basic net income (loss) per
share........................... $ (0.08) $ 0.01 $ (0.08)
======= ======= =======
Diluted net income (loss) per
share........................... $ (0.08) $ 0.01 $ (0.08)
======= ======= =======
Weighted average shares
outstanding used in basic
calculation..................... 11,383 5,135 5,023A,B 11,495
======= ======= =======
Weighted average shares
outstanding used in diluted
calculation..................... 11,383 5,135 5,023A,B 11,495
======= ======= =======
</TABLE>
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<PAGE> 47
ANSOFT CORPORATION
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The unaudited proforma combined financial statements give effect to the
acquisition of Pacific Numerix by Ansoft Corporation in a transaction to be
accounted for by the purchase method of accounting. The unaudited pro forma
combined condensed statements of operations for the year ended April 30, 1999
and the three months ended July 31, 1999 reflect this transaction as if it had
taken place May 1, 1998. The unaudited pro forma combined balance sheet gives
effect to this transaction as if it had taken place on July 31, 1999.
The proforma adjustments included in this unaudited proforma financial
information relating to the allocation of the purchase price for Pacific Numerix
are based on preliminary assumptions and estimates which are subject to
revision. The unaudited proforma combined financial statements are not
necessarily indicative of the results of operations or financial position that
would have occurred had the acquisition been consummated on the dates assumed.
These financial statements are not intended to be a projection of future results
or financial position and do not reflect any synergies that might be achieved
from combined operations. These unaudited proforma combined financial statements
should be read in conjunction with the Ansoft's financial statements and notes
contained elsewhere in this document. Item 7(a) of this report.
Proforma adjustments giving effect to the acquisition in the unaudited
proforma combined balance sheet reflect the following:
(A) The consolidation entry for balances already included in Ansoft
consolidated amounts and the elimination of predecessor shareholders'
equity totaling $2,813, net of adjustments.
(B) Issuance of 112 shares of Ansoft common stock, $.01 par value, valued
at $7.50 per share totaling $841.
(C) Allocation of the purchase price to intangible assets which will be
amortized on a straight-line basis over lives of 3 to 7 years ($900)
and accrued transaction costs ($60).
(D) To record amortization on intangible assets of $900 on a straight-line
basis over estimated useful lives of three years for purchased
technology and work force in place ($386) and seven years for goodwill
and customer list ($514).
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<PAGE> 48
INFORMATION REGARDING ANSOFT
The following is a brief description of the business of Ansoft. Since
Pacific Numerix is a majority-owned subsidiary of Ansoft, the information set
forth below regarding Ansoft reflects the consolidation of Pacific Numerix into
Ansoft. Additional information regarding Ansoft is contained in its filings with
the Commission. For information on how you can obtain copies of such filings,
please see the section entitled "Where You Can Find More Information" on page
107 of this proxy statement/prospectus.
BUSINESS
GENERAL
Ansoft develops, markets and supports electronic design automation ("EDA")
software based on fundamental electromagnetic principles. Such software is used
by engineers in the design of high performance electronic devices and systems,
such as cellular phones, communications systems, computer circuit boards and
motors. As the marketplace demands higher levels of system performance and
miniaturization, the need to model accurately the electromagnetic interaction in
communications, computer devices and electromechanical components and systems is
becoming increasingly important, yet traditional EDA tools do not provide
accurate modeling of electromagnetic interaction. By using the our software,
companies can more easily predict electromagnetic interaction in such systems
and components, thus reducing time-to-market and simultaneously lowering design
and manufacturing costs. Our products are used by design engineers in a wide
range of industries, particularly the rapidly evolving wireless communications
and RF (radio frequency) markets as well as the semiconductor, computer,
automotive and consumer electronics industries.
ANSOFT STRATEGY
Our objective is to become a leading worldwide supplier of EDA software.
Using its proprietary electromagnetic technology as a primary competitive
advantage, we pursue our objective by leveraging our technology leadership;
capitalizing on the growing need for electromagnetic analysis in increasingly
compact and complex electronic and electromechanical components and systems
operating at higher speeds; and expanding its broad range of product
applications to address emerging customer design requirements
PRODUCTS
Our high-frequency (HF) software enables users to design RF integrated
circuits (ICs), antenna and radar systems and microwave components. Our signal
integrity (SI)software enables users to design computer interconnects, IC
Packaging structures and electronic systems by accurately capturing the
degradation in signal quality due to higher clock speeds and smaller physical
dimensions. Our Maxwell Eminence software combines both HF and SI functionality.
We also produce electromechanical software products that enable designers of
electromechanical components and systems to optimize the electrical performance
of their designs while increasing manufacturing yields. Ansoft products are
available for Unix-based workstations and personal computers running Microsoft
Windows 95 and Windows NT.
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<PAGE> 49
ANSOFT HIGH FREQUENCY SOFTWARE
Our High Frequency products address the complete simulation needs of the
RF, Microwave or High Frequency design engineer. Our tools allow for the
evaluation of the physics of individual components, and then the engineer can
easily combine circuit and/or system simulation to clearly evaluate design
concerns. High-frequency software enables users to design RF ICs, antenna and
radar systems and microwave components.
ANSOFT'S SERENADE DESIGN ENVIRONMENT
Ansoft HFSS is a 3D structure electromagnetic field simulator for high
frequency, RF & wireless design needs. Ansoft HFSS brings the power of the
finite element method (FEM) to the engineer's desktop by leveraging advanced
techniques such as automatic adaptive mesh generation and refinement, tangential
vector finite elements, and Adaptive Lanczos Pade Sweep (ALPS). HFSS
automatically computes multiple adaptive solutions until a user-defined
convergence criterion is met. The U.S. list price of Ansoft HFSS is $41,900.
Ensemble is a Method of Moments (MoM) simulation software package for the
design and simulation of RF and wireless circuit and planar antennas for
customers in the communications markets. MoM lends itself well to layered media
such as PCB, MMIC, and planar antenna structures. Ensemble allows designers to
utilize the power of full wave planar simulation by offering an easy-to-use
interface, advanced simulation features, and integration with other products in
the Serenade Design Environment. The U.S. list price of Ensemble is $16,900.
Harmonica is a linear and nonlinear circuit simulator. Harmonica offers
full linear and nonlinear analysis features, including integrated schematic
capture, tuning, optimization, statistical analysis, and design centering (yield
optimization). Libraries of commercial components feature over 100,000 active
and passive devices, allowing easy access to standard transistors, diodes,
resistors, capacitors, and inductors from major manufacturers. In addition,
utilities are included to speed the process of transmission line design,
matching network extraction, and filter synthesis for both lumped and
distributed designs. The U.S. list price of this product ranges from $9,900 to
$21,900.
Symphony is a wireless and wired system simulator. Symphony adds efficient
analog, digital, and mixed-mode (analog and digital) system analysis
capabilities to the Environment. Users can quickly construct a system by
including blocks from libraries of built-in analog RF and digital signal
processing (DSP) components. Trade-offs between different design approaches can
be rapidly investigated at an early stage to reduce design cycle time and avoid
costly redesigns due to RF and DSP system interactions. The U.S. list price of
this product is $11,900 to $28,900.
AnsoftLinks links you and your designs directly to our computational
analysis tools. This capability is available for either HP EEsof Series IV,
Cadence Allegro, or Xynetix Encore BGA technologies. HP EEsof Series IV
high-frequency circuit designs can be directly translated into Ansoft's Serenade
Design Environment. Designs are automatically converted into Serenade projects
using IFF files and a specialized neutral format. Linear and nonlinear
translations are fully supported. The U.S. list price of this product is $4,900.
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ANSOFT SIGNAL INTEGRITY SOFTWARE
Our Signal Integrity products address the complete simulation needs of the
High Speed Electronics design engineer. Our tools allow for the evaluation of
the physics from the chip level through to the board level, and the coupling
concerns of IC packaging, cables, connectors, and interconnects. The engineer
can combine field effects with circuit simulation to clearly evaluate the design
ramifications of higher clock speeds and smaller physical dimensions.
Maxwell Eminence combines the functionality of the Company's high frequency
and signal integrity products to enable designers of wireless communication
systems to design RF components and sub-systems and to evaluate the interaction
between the digital and RF portions of communications systems. This product
allows system designers to model critical path PCB emissions, evaluate component
level electromagnetic interference and to study shielding effectiveness enabling
them to design for FCC and other regulatory guidelines proactively. The U.S.
list price of this product is $64,900.
Maxwell EZ2D Calculator is the first ever, extremely easy-to-use 2D field
solver. Maxwell EZ2D Calculator automatically and adaptively creates the mesh
and solves Maxwell's equations to calculate the characteristic impedances,
velocities, and cross talk between all conductors. This tool combines the ease
of a spreadsheet with the accuracy of a field solver to calculate all the line
parameters for a PCB, MCM or IC stackup. The U.S. list price of this product is
$4,900.
Spicelink (SI 2D and SI 3D) is a 2D or 3D structure electromagnetic field
simulator. SI 2D is a suite of tools which extracts the electrical circuit model
of either 2D or 3D interconnect and performs a SPICE simulation for signal
integrity analysis. This suite has been compiled to increase the productivity of
engineers involved in the physical design of interconnects for high speed
digital applications. The U.S. list price of this product is $34,900.
ParICs is an automated 2D and 3D structure generation modeling tool. It is
a vital component of our software solution for your complex IC package design
needs. The ParICs Physical IC Modeler is an easy to use modeling tool which
allows you to generate geometric models of complex IC packages in minutes. The
desired structures come from common JEDEC leaded package libraries. These
structures can then be used in our complete suite of signal integrity tools for
design, electrical characterization and product documentation.
ANSOFT EM SOFTWARE
Our Electromagnetic/Electromechanical products address the simulation needs
of the Low Frequency design engineer. Our tools allow for the evaluation of the
physics of devices whose components include permanent magnets, DC current
carrying conductors, AC current carrying conductors, time varying excitations,
and nonlinear soft irons or steels. The engineer can evaluate design concerns by
easily computing the force, torque, or inductance, or by observing the actual
field solution. Additional capabilities allow for the comprehensive handling of
motion, mechanical components, and back emf's.
Maxwell 3DFS is a 3D structure electromagnetic field simulator. Maxwell
3DFS uses electromagnetic field simulation to accurately predict product
performance from physical design information. Using technology specifically
designed for electromagnetic analysis, the Maxwell 3DFS allows designers to
experiment with various three dimensional geometries,
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materials and excitation levels to shorten design cycles while saving
prototyping dollars. The U.S. list price of this product ranges from $15,120 to
$29,900.
Maxwell 2DFS is a 2D structure electromagnetic field simulator. Maxwell
2DFS is a comprehensive, easy-to-use software tool for design problems requiring
an accurate, two-dimensional representation of the electric or magnetic field
behavior. Maxwell 2D quickly obtains critical device parameters such as force,
torque, induction and saturation effects from the physical design information on
PCs and UNIX workstations. The integrated parametric analysis module
automatically evaluates change in geometry, material and electrical parameters
allowing all design options to be thoroughly explored within a single
simulation. The U.S. list price of this product ranges from $3,900 to $9,900.
EMSS is an Electromechanical system simulator. EMSS is a single integrated
solution for analyzing the interaction of currents, voltages, and mechanical
loads and motion within an electromechanical device. This system engineering
environment provides fundamental analytical understanding and accurately
predicts the performance and interactions of control system components and
subsystems using your desktop computer. Electric machines, sensors,
transformers, and actuators are a few of the many devices that may be simulated
with EMSS. This virtual prototype of the complete system behavior dramatically
reduces costs and shortens the design cycle. The U.S. list price of this product
ranges from $15,920 to $19,900.
EMAS is a 2D and 3D Electromagnetic Finite Element (FEM) simulation and
analysis software for a wide range of DC, AC, time domain, and coupled
electromagnetic/ electromechanical applications. EMAS abilities include a
comprehensive sensitivity to nonlinear and anisotropic materials. Technologies
include nolinear transients, coupled Electromagnetic/Mechanical solutions,
coupled Electromagnetic/Thermal solutions. Additional capabilities include 1D,
2D, tetra, quadra, penta element types. The U.S. list price of this product
ranges from $19,900 to $44,900.
PEmag is our 2D power electronics parameter simulator. PEmag, part of
Ansoft's Maxwell Designer suite of software, performs advanced electromagnetic
and signal analysis of inductors and transformers. Classical design methods rely
on build-test iterations until appropriate behavior of the component is
achieved. PEmag eliminates this costly design methodology by accurately
simulating magnetic behavior including the effects of frequency, geometry and
material. The magnetic behavior obtained is automatically output to an electric
circuit model. The U.S. list price of this product is $4,900.
RESEARCH AND DEVELOPMENT
Ansoft has a team of research engineers focused on the mathematical and
physical underpinnings of the Company's simulation algorithms. Dr. Zoltan
Cendes, a founder of Ansoft, serves as the technical leader of the group. By
virtue of over 15 years of research and development by Dr. Cendes prior to
Ansoft's inception in 1984, and by Ansoft's internal research and development
staff thereafter, Ansoft has pioneered the following technologies: automatic and
adaptive convergence to solutions, asymptotic waveform evaluation for spectral
domain solutions, transfinite elements, basis evaluation state-space techniques
and fast multiple acceleration algorithms.
Ansoft continually seeks to design and develop new technologies, products
and interfaces based on its core electromagnetic expertise. This effort includes
releasing improved versions of its products on a regular basis as well as
developing new products.
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We assign an interdisciplinary team of personnel from research and development,
software development, documentation, quality assurance, customer support and
marketing to each product development project. Ansoft develops cooperative
relationships with major customers with respect to beta-testing its new products
or enhancements and implementing suggestions for new product features. We also
maintain cooperative relationships with the major hardware vendors on which our
products operate. We believe that our team approach and cooperative
relationships allow us to design products that respond on a timely basis to
emerging trends in computing, graphics and networking technologies.
As of April 30, 1999, our product development group consisted of 91
employees. Ansoft seeks to hire experts in the fields of electromagnetic
engineering, high speed circuit simulation, applied mathematics and software
development.
During fiscal 1999, 1998 and 1997, research and development expenses were
$8.4 million, $7.3 million and $3.0 million, respectively.
SALES AND MARKETING
Ansoft markets and sells its products worldwide through its direct sales
force and distributors. We hire application engineers with significant industry
experience who can analyze the needs of its customers and gain technical insight
into the development of future products and enhancements to existing products.
Our application engineers work with the direct sales force to provide on-site
support during critical stages of the user's benchmark, evaluation and
implementation processes. We generate sales leads through customer referrals,
advertising in trade publications and on the World Wide Web. In addition, Ansoft
participates in industry trade shows and organizes seminars to promote and
expand the adoption of its products.
Direct. In North America, Ansoft maintains sales and support offices in
Arizona, Northern and Southern California, Florida, Massachusetts, Michigan, New
Jersey, Ohio, Pennsylvania, Texas, Wisconsin, and a telemarketing sales group
operating from its Pittsburgh headquarters. In Asia, we maintain direct sales
and support offices in Japan, Korea, Singapore, Taiwan, and China. In Europe, we
maintain sales and support offices in England, Germany, France, and Italy. As of
April 30, 1999, Ansoft had a direct sales force of 46 representatives, supported
by 75 employees in application engineering, marketing and sales administration.
We also have distribution agreements with various international
distributors. We support our distributors and their customers with technical,
sales and management personnel.
CUSTOMERS
Ansoft has significant breadth in its installed base with over 500
customers in the communications, semiconductor, automotive/industrial, computer,
consumer electronics and defense/aerospace industries. No single customer in our
installed base accounted for more than 10% of total revenue within any of the
past three fiscal years. The following table lists a representative sample of
our current worldwide end-user customers by industry.
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<PAGE> 53
<TABLE>
<S> <C> <C>
COMMUNICATIONS SEMICONDUCTOR AUTOMOTIVE/INDUSTRIAL
Motorola Intel ABB
Ericsson Anam Semiconductor Chrysler
Andrew Corporation Applied Materials Cutler Hammer
GEC-Marconi Amkor Electronics Daimler Benz
Hughes ETRI Delphi Packard
Italtel S.p.A. Harris Semiconductor Dupont
Lucent Technologies Triquint Semiconductor Eaton
Metawave LG Ford Motor
Communications Molex General Motors
Celwave VLSI Honda
Qualcomm Teradyne Hyundai
Rockwell Texas Instruments Nissan
Siemens Robert Bosch
EMS Wolff Controls
Nortel
ST Microelectronics
COMPUTER CONSUMER ELECTRONICS DEFENSE/AEROSPACE
Fujitsu Daewoo Electronics Raytheon
Hitachi Kyocera Bell Helicopter
Honeywell General Electric Boeing
IBM Matsushita Jet Propulsion Laboratory
NEC Mitsubishi Lawrence Livermore Lab.
Seagate Nikon Lockheed-Martin
Tektronix Phillips Northrop Grumman
Sharp Allied Signal
Sony TRW
Toshiba US Naval Research Laboratory
</TABLE>
CUSTOMER SERVICE AND SUPPORT
Sales of Ansoft software include one year of customer support services;
thereafter annual one year maintenance contracts may be purchased. Customer
support services include on-line and telephone support for design engineers and
on-site and in-house training on all products. Customers with maintenance
agreements receive all product enhancement releases without additional charge.
Product upgrades that add significant new functionality are provided to
customers for an additional fee.
Ansoft offers a variety of training programs for customers ranging from
introductory level courses to advanced training.
COMPETITION
The EDA software industry is highly competitive and is characterized by
continuing advances in products and technologies. In general, competition comes
from major EDA vendors, many of which have a longer operating history,
significantly greater financial, technical and marketing resources, greater name
recognition and a larger installed customer base than Ansoft. Ansoft competes
directly with certain major EDA vendors and privately-held companies which also
provide products based on electromagnetic principles
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<PAGE> 54
derived from Maxwell's Equations. There can be no assurance that the major EDA
vendors and other EDA companies will not expand and develop new products in the
electromagnetics-based EDA market. Ansoft also competes, on a limited basis,
with the internal development groups of its existing and potential customers,
many of whom design and develop customized design tools for their particular
needs. In addition, the EDA industry has become increasingly concentrated in
recent years as a result of acquisitions, and further concentration within the
EDA industry could result in increased competition for Ansoft. Ansoft's software
products currently compete with certain software offerings from Hewlett-Packard
Corporation ("HP"). In 1989, Ansoft entered into a distribution arrangement with
Hewlett-Packard Corporation ("HP") under which HP formerly distributed Ansoft's
HFSS product on an exclusive basis (the "HP Agreement"). The HP Agreement has
since expired, and HP has no right to distribute Ansoft's HFSS product. Ansoft
currently sells HFSS through its own sales force and other distributors. There
can be no certainty that Ansoft will be able to compete successfully against HP.
The failure of Ansoft to compete successfully against current and future
competitors would have a material adverse effect on Ansoft's business, operating
results and financial condition. Ansoft believes that its current products
compete effectively on the basis of product functionality, solution speed and
accuracy, reliability, price, ease of use and technical support for applications
which require accurate modeling of electromagnetic interaction. However, there
is no assurance that Ansoft will not face competitive technologies that could
hinder its future prospects.
PROPRIETARY RIGHTS
Ansoft is heavily dependent on its proprietary software technology. We rely
on a combination of non-competition and confidentiality agreements with our
employees, license agreements, copyrights, trademarks and trade secret laws to
establish and protect proprietary rights to Ansoft technology. Ansoft does not
hold any patents. All Ansoft software is shipped with a security lock which
limits software access to authorized users. In addition, we do not license or
release its source code. Effective copyright and trade secret protection of our
proprietary technology may be unavailable or limited in certain foreign
countries.
Compact Software(R), Maxwell(R), Harmonica(R), Ensemble(R), ParICs(R), and
Serenade(R), are registered United States trademarks of Ansoft.
EMPLOYEES
As of July 31, 1999, Ansoft had a total of 234 employees, including 96 in
research and development, 121 in sales, marketing, and customer support services
and 17 in administration. None of our employees is represented by a collective
bargaining agreement, nor has Ansoft experienced any work stoppage. Ansoft
considers its relations with its employees to be good. Many of our employees are
highly skilled, and there is no assurance that we will be able to attract and
retain sufficient technical personnel in the future.
47
<PAGE> 55
OFFICERS
The following table sets forth certain information concerning each of the
officers of Ansoft:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Zoltan J. Cendes, Ph.D......... 53 Chief Technology Officer
Nicholas Csendes............... 55 President, and Chief Executive Officer
Padmanabhan Premkumar.......... 35 Vice President -- Marketing
Jack Parkes.................... 39 Vice President -- Engineering
Anthony L. Ryan................ 31 Chief Financial Officer
</TABLE>
Dr. Zoltan J. Cendes is a founder of Ansoft and has served as Chairman of
the Board of Directors of Ansoft and its chief research scientist since its
formation in 1984. Since 1982, Dr. Cendes has been a university professor in
electrical and computer engineering at Carnegie Mellon University. Dr. Cendes
has lectured throughout North America, Europe and Asia on the topic of
electromagnetics and finite element analysis and has published over 100
publications on these topics. Dr. Cendes directs the research efforts of Ansoft.
Nicholas Csendes is a founder of Ansoft and has served as President, Chief
Executive Officer and Secretary since 1992 and a director since 1984. Mr.
Csendes was a senior investment officer with Sun Life of Canada, a major
international financial institution focusing on the sale of life insurance and
retirement products ("Sun Life"), for over 15 years. Since 1985, Mr. Csendes has
been involved with various public and private companies including a
publicly-held interactive software company, and has been an officer, director
and a controlling stockholder of American Banner Resources, Inc. ("ABR"), a
privately-held holding company with various interests in real estate and public
and private securities.
Padmanabhan Premkumar joined Ansoft in 1989. From 1991 to 1995, Mr.
Premkumar was in charge of Ansoft's software development programs as Vice
President -- Development. Since 1995, Mr. Premkumar has been Vice President --
Marketing, responsible for product planning, marketing and commercialization of
existing software product enhancements and the commercial development of new
products. Prior to joining Ansoft, Mr. Premkumar was a research associate in the
Robotics Laboratory at the University of Toledo.
Jack Parkes joined Ansoft in 1990. In May 1997, Mr. Parkes was appointed
Vice President -- Engineering. Mr. Parkes joined Ansoft in 1990 with over 10
years of experience in electrical engineering. Prior to joining Ansoft, Mr.
Parkes was a senior design and development engineer with Loral Corporation
("Loral") and, prior to joining Loral, with Texas Instruments, Inc.
Anthony L. Ryan joined Ansoft in 1995 as corporate controller. In May 1997,
Mr. Ryan was appointed Chief Financial Officer. From 1991 to 1995, Mr. Ryan
worked as a certified public accountant with KPMG LLP, an international
accounting firm.
Dr. Zoltan J. Cendes and Mr. Nicholas Csendes are brothers. There are no
other family relationships between the executive officers of Ansoft.
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<PAGE> 56
PROPERTIES
Ansoft occupies approximately 23,000 square feet of space at its
headquarters in Pittsburgh, Pennsylvania under a lease expiring in 2006. We also
leases sales and support offices in Arizona, California, Colorado, New Jersey,
Wisconsin, Europe and Asia. Our current aggregate annual rental expense for
these facilities is approximately $1.3 million. Ansoft believes that its
existing facilities are adequate for its current needs and that suitable
additional space will be available when needed.
LEGAL PROCEEDINGS
Ansoft is not a party to any litigation and is not aware of any threatened
litigation, unasserted claims or assessments that could have material adverse
effect on our business, consolidated operating results or financial condition.
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Ansoft's common stock has been traded on the Nasdaq National Market under
the symbol ANST since April 3, 1996. The following table sets forth, for the
periods indicated, the range of high and low last reported sale prices for the
common stock as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR ENDED APRIL 30, 2000
1st Quarter................................................ $10.000 $ 5.625
2nd Quarter................................................ 9.000 5.500
FISCAL YEAR ENDED APRIL 30, 1999
1st Quarter................................................ 13.750 8.375
2nd Quarter................................................ 6.563 5.125
3rd Quarter................................................ 6.250 4.875
4th Quarter................................................ $ 8.000 $ 6.125
FISCAL YEAR ENDED APRIL 30, 1998
1st Quarter................................................ 9.000 4.875
2nd Quarter................................................ 23.250 8.375
3rd Quarter................................................ 16.688 10.000
4th Quarter................................................ $15.375 $11.375
</TABLE>
Ansoft has never paid any cash dividends on its common stock. Ansoft
currently intends to retain the earnings from operations for use in the
operation of its business and does not anticipate paying cash dividends with
respect to its common stock in the foreseeable future. The payment of any future
dividends will be determined by the board of directors in light of the then
current conditions, including Ansoft's earnings and financial condition.
On October 31, 1999, Ansoft had approximately 386 shareholders of record,
of which certain of the recordholders were registered clearing agencies holding
common stock on behalf of participants of such clearing agencies.
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<PAGE> 57
SELECTED FINANCIAL DATA
The selected condensed consolidated financial data presented below for the
five years ended April 30, 1999 are derived from our Consolidated Financial
Statements and related Notes thereto which have been audited by KPMG LLP,
independent certified public accountants. The operating results are not
necessarily indicative of the results to be expected for any other interim
period or any future fiscal year. The selected condensed consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and related Notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
THREE-MONTH
PERIOD
ENDED JULY 31, FISCAL YEAR ENDED APRIL 30,
----------------- ---------------------------------------------
1999 1998 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total revenue............ $ 6,911 $ 5,154 $24,475 $26,283 $14,188 $8,695 $6,154
Income (loss) from
operations............. (1,508) (2,221) (5,605) 2,524 (7,552) 653 (289)
Net income (loss)........ $ (893) $(1,292) $(2,808) $ 4,073 $(6,450) $1,300 $ (305)
Basic net income (loss)
per share.............. $ (0.08) $ (0.11) $ (0.25) $ 0.42 $ (0.81) $ 0.21 $(0.06)
Diluted net income (loss)
per share.............. $ (0.08) $ (0.11) $ (0.25) $ 0.39 $ (0.81) $ 0.19 $(0.06)
Weighted average shares
outstanding -- basic... 11,383 11,524 11,310 9,681 7,955 6,235 5,528
Weighted average shares
outstanding -- diluted... 11,383 11,524 11,310 10,521 7,955 6,873 5,528
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
JULY 31, ------------------------------------------------
1999 1999 1998 1997 1996 1995
-------- --------- ------- ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents... $ 2,657 $ 2,489 $20,677 $ 312 $10,728 $ 116
Working capital (deficit)... 15,581 16,699 27,579 (1,936) 11,931 593
Total assets................ 51,963 52,630 49,180 21,951 15,391 1,792
Total stockholders'
equity.................... 39,580 40,863 45,520 14,917 14,291 1,161
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking statements that
involve substantial risks and uncertainties. When used in this Prospectus, the
words "anticipate," "plan,"
50
<PAGE> 58
"believe," "estimate," "expect" and similar expressions as they relate to Ansoft
or its management are intended to identify such forward-looking statements.
Ansoft's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed in "Risk Factors" section included in Ansoft's report on Form 10-K for
the fiscal year ended April 30, 1999.
OVERVIEW
Ansoft develops, markets and supports electronic design automation ("EDA")
software based on fundamental electromagnetic principles. Ansoft's software is
used by engineers in the design of high performance electronic devices and
systems, such as cellular phones, communications systems, computer circuit
boards and motors. As the marketplace demands higher levels of system
performance and miniaturization, the need to model accurately the
electromagnetic interaction in communications, computer devices and
electromechanical components and systems is becoming increasingly important, yet
traditional EDA tools do not provide accurate modeling of electromagnetic
interaction. By using Ansoft's software, companies can more easily predict
electromagnetic interaction in such systems and components, thus reducing time
to market and simultaneously lowering design and manufacturing costs. Ansoft's
products are used by design engineers in a wide range of industries,
particularly the rapidly evolving wireless communications and RF (radio
frequency) markets as well as the semiconductor, computer, automotive and
consumer electronics industries.
License revenue consists principally of revenue from the licensing of
Ansoft's software and is generally recognized when the software has been shipped
and there are no significant remaining obligations. Service revenue consists of
maintenance fees for providing system updates, user documentation and technical
support for software products, and is recognized ratably over the term of the
maintenance agreement. Other revenue consists primarily of revenue earned on
development contracts with government-sponsored entities. Revenue under these
arrangements is recognized as the service is performed.
Effective April 28, 1999, Ansoft acquired a majority interest in Pacific
Numerix. Effective July 24, 1996, April 9, 1997 and August 8, 1997, Ansoft
acquired the Electronic Business Unit of MacNeal Schwendler Company, Compact
Software, Inc., and Boulder Microwave Technologies, respectively. The cost of
these acquisitions has been allocated on the basis of the estimated fair value
of the assets acquired and the liabilities assumed. The acquisitions have been
accounted for as purchases, and their respective financial results have been
included in the accompanying consolidated financial statements since the date of
their respective acquisitions.
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<PAGE> 59
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of total revenue of each item in the Company's consolidated statements of
operations:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
------------------------------------
THREE MONTHS FISCAL YEAR
ENDED ENDED
JULY 31, APRIL 30,
------------ --------------------
1999 1998 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue
License................................... 77% 63% 73% 76% 84%
Service and other......................... 23 37 27 24 16
--- --- --- --- ---
Total revenue.......................... 100 100 100 100 100
--- --- --- --- ---
Costs and expenses
Sales and marketing....................... 66 83 70 48 56
Research and development.................. 34 40 34 28 21
General and administrative................ 12 12 12 9 12
Amortization.............................. 9 8 7 5 3
Acquired in process research and
development............................ -- -- -- -- 62
--- --- --- --- ---
Total costs and expenses............... 122 143 123 90 153
--- --- --- --- ---
Income (loss) from operations............... (22) (43) (23) 10 (53)
Interest, net............................... 6 7 7 2 5
--- --- --- --- ---
Income (loss) before income taxes........... (16) (36) (16) 12 (48)
Income taxes benefit........................ 3 11 5 4 3
Net income (loss)........................... (13)% (25)% (11)% 16% (45)%
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED JULY 31, 1999 AND 1998
REVENUE. Total revenue in the three-month period ended July 31, 1999
increased 34% to $6.9 million from $5.2 million in the comparable period of the
preceding fiscal year. License revenue during the three-month period ended July
31, 1999 increased 64% to $5.3 million from $3.2 million during the comparable
period in the prior fiscal year. The increase is primarily attributable to
strong demand for our HFSS product, and to a recovery of sales in the
Asia-Pacific region. Service and other revenue decreased by 16% due to the
completion of a research and development cost-sharing contract during 1998.
International revenue accounted for 52% and 51% of Ansoft's total product
revenue in the three-month period ended July 31, 1999 and 1998, respectively.
SALES AND MARKETING EXPENSES. Sales and marketing expenses consist of
salaries, commissions paid to internal sales and marketing personnel and
international distributors, promotional costs and related operating expenses.
Sales and marketing expenses increased by 8% to $4.6 million in the three-month
period ended July 31, 1999, as compared to $4.3 million in the same period in
the previous fiscal year. The increase is attributable to an
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<PAGE> 60
increase in Ansoft's sales force as a result of the acquisitions as well as
increased marketing efforts, including advertising in trade publications and
increased participation in industry trade shows. Sales and marketing expenses
represented 66% and 83% of total revenue in the three-month period ended July
31, 1999 and 1998, respectively. Ansoft expects that sales and marketing
expenses will decrease as a percentage of sales although increase in absolute
dollars in future periods.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
include all costs associated with the development of new products and
enhancements to existing products. Research and development expenses for the
three-month period ended July 31, 1999 increased 15% to $2.4 million, as
compared to $2.1 million for the same period in the previous fiscal year. The
increase is due to increased research and development personnel primarily as a
result of the PNC acquisition. Research and development expense represented 34%
and 40% of total revenue in the three-month period ended July 31, 1999 and 1998,
respectively. Ansoft anticipates that research and development expenses will
decrease as a percentage of sales although increase in absolute dollars in
future periods.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three-month period ended July 31, 1999 increased 27% to $807,000, as
compared to $635,000 for the same period in the previous fiscal year. The
increase is due to additional costs required to support the increase in
operations, including the hiring of additional administrative personnel. General
and administrative expenses represented 12% of total revenue in the three-month
period ended July 31, 1999 and 1998. Ansoft anticipates that general and
administrative expenses will decrease as a percentage of sales although increase
in absolute dollars in future periods.
AMORTIZATION EXPENSE. Amortization expense for the three-month period
ended July 31, 1999 increased to $642,000, as compared to $422,000 for the same
period in the previous fiscal year. The increase is due to the amortization of
the additional intangible assets acquired during fiscal 1999.
OTHER INCOME. Other income for the three-month period ended July 31, 1999
was $390,000, comparable to $379,000 reported for the same period in the
previous fiscal year.
INCOME TAXES. In the three-month period ended July 31, 1999, Ansoft
recorded a net income tax benefit of $225,000 resulting from the recognition of
deferred tax assets in accordance with the Financial Accounting Standards
Board's SFAS No. 109, "Accounting for Income Taxes." Ansoft's net deferred tax
asset of $3.3 million as of July 31, 1999, consists primarily of net operating
loss carryforwards for federal income tax purposes, which are available to
offset future taxable income, and expire in increments beginning in April 2004,
through April 2019. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
YEAR ENDED APRIL 30, 1999 COMPARED WITH YEAR ENDED APRIL 30, 1998
REVENUE. Total revenue for the year ended April 30, 1999 decreased 7% to
$24.5 million from $26.3 million in the previous fiscal year. The decrease in
total revenue is primarily attributable to a decrease in service revenue due to
the completion of a research and development cost sharing contract during 1998.
License revenue during the year ended April 30, 1999 decreased 11% to $17.8
million from $20.0 million during the previous fiscal year. Service and other
revenue increased by 5% to $6.6 million for the year ended April 30, 1999, as
compared with $6.3 million in the previous year. The increase in service
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<PAGE> 61
and other revenue is attributable to the continued growth of the installed base
of customers and increased focus on marketing annual maintenance agreements.
This increase was reduced by a decrease in revenue recognized under research and
development cost sharing agreements.
International revenue, principally from Asia, accounted for 52% and 48% of
our total product revenue in the years ended April 30, 1999 and 1998,
respectively. Ansoft's future international sales may be subject to additional
risks associated with international operations, including currency exchange
fluctuations, tariff regulations and requirements for export, which licenses may
on occasion be delayed or difficult to obtain.
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased by
35% to $17.1 million in the year ended April 30, 1999, as compared to $12.6
million in the previous fiscal year. The increase is primarily attributable to
Ansoft's shift in its distribution model to the use of direct sales personnel in
Asia and other foreign markets, as well as increased marketing efforts,
including advertising in trade publications and increased participation in
industry trade shows. Sales and marketing expenses represented 70% and 48% of
total revenue in the years ended April 30, 1999 and 1998, respectively. Ansoft
expects to increase sales and marketing expenditures both domestically and
internationally as part of its continuing effort to expand its markets,
introduce new products, build marketing staff and programs and expand its
international presence. Ansoft expects that sales and marketing expenses will
decrease as a percentage of sales although increase in absolute dollars in
future periods.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the year ended April 30, 1999 increased 15% to $8.4 million, as compared to $7.3
million for the previous fiscal year. The increase is due to increased research
and development personnel primarily as a result of the acquisitions. Research
and development expenses represented 34% and 28% of total revenue in the years
ended April 30, 1999 and 1998, respectively. Ansoft anticipates that research
and development expenses will increase in absolute dollars in future periods.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the year ended April 30, 1999 increased 26% to $2.9 million, as compared to
$2.3 million for the previous fiscal year. The increase is due to additional
costs required to support the increase in operations, including the hiring of
additional administrative personnel. General and administrative expenses
represented 12% and 9% of total revenue in the years ended April 30, 1999 and
1998, respectively. The Company anticipates that general and administrative
expenses will increase in absolute dollars in future periods.
AMORTIZATION EXPENSE. Amortization expense for the year ended April 30,
1999 increased to $1.7 million, as compared to $1.5 million for the previous
fiscal year. The increase is due to recording amortization of additional
intangible assets acquired in recent years.
INTEREST (NET). Interest income (net) for the year ended April 30, 1999
increased to $1.6 million, compared to $549,000 for the previous fiscal year.
Interest income increased due to the higher net investment balance made
available from the proceeds from the public offering of 2.3 million shares in
March of 1998.
INCOME TAXES. In the year ended April 30, 1999, Ansoft recorded a net
income tax benefit of $1.2 million, resulting from the recognition of deferred
tax assets in accordance with the Financial Accounting Standards Board's SFAS
No. 109, "Accounting for Income
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<PAGE> 62
Taxes." Ansoft's net deferred tax asset of $3.1 million as of April 30, 1999,
consists primarily of net operating loss carry forwards for federal income tax
purposes, which are available to offset future taxable income, and expire in
increments beginning in April 2004, through April 2012. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.
YEAR ENDED APRIL 30, 1998 COMPARED WITH YEAR ENDED APRIL 30, 1997
REVENUE. Total revenue for the year ended April 30, 1998 increased 85% to
$26.3 million from $14.2 million in the previous fiscal year, primarily due to
increases in license revenue. License revenue during the year ended April 30,
1999 increased 67% to $20.0 million from $12.0 million during the previous
fiscal year. The growth of license revenue is attributable to the continued
increase in sales of existing Ansoft products as well as sales of the expanded
suite of products offered by Ansoft as a result of the acquisitions. Service and
other revenue increased by 182% to $6.3 million for the year ended April 30,
1998, as compared with $2.2 million in the previous year. The increase in
service and other revenue is attributable to an increase in revenue recognized
under research and development cost sharing agreements as well as the continued
growth of the installed base of customers and increased focus on marketing
annual maintenance agreements.
International revenue, principally from Asia, accounted for 48% and 41% of
Ansoft's total product revenue in the years ended April 30, 1998 and 1997,
respectively.
In 1989, Ansoft entered into a distribution arrangement with
Hewlett-Packard Corporation ("HP") under which HP formerly distributed the
Company's HFSS product on an exclusive basis (the "HP Agreement"). The HP
Agreement has since expired, and HP has no right to distribute Ansoft's HFSS 4.0
product. Ansoft currently sells the latest version of its HFSS product, Ansoft
HFSS 6.0, through its own sales force and other distributors. Revenue from the
HP Agreement accounted for 3% and 12% of total revenue in the years ended April
30, 1998 and 1997, respectively.
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased by
59% to $12.6 million in the year ended April 30, 1998, as compared to $7.9
million in the previous fiscal year. The increase is attributable to an increase
in Ansoft's sales force as a result of the acquisitions as well as increased
marketing efforts, including advertising in trade publications and increased
participation in industry trade shows. Sales and marketing expenses represented
48% and 56% of total revenue in the years ended April 30, 1998 and 1997,
respectively.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the year ended April 30, 1998 increased 144% to $7.3 million, as compared to
$3.0 million for the previous fiscal year. The increase is due to increased
research and development personnel primarily as a result of the acquisitions.
Research and development expenses represented 28% and 22% of total revenue in
the years ended April 30, 1998 and 1997, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the year ended April 30, 1998 increased 41% to $2.3 million, as compared to
$1.6 million for the previous fiscal year. The increase is due to additional
costs required to support the increase in operations, including the hiring of
additional administrative personnel. General and administrative expenses
represented 9% and 12% of total revenue in the years ended April 30, 1998 and
1997, respectively.
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<PAGE> 63
AMORTIZATION EXPENSE. Amortization expense for the year ended April 30,
1998 increased to $1.5 million, as compared to $407,000 for the previous fiscal
year. The increase is due to recording amortization of intangible assets
acquired in Fiscal 1997 for a full fiscal year and to recording amortization of
the additional intangible assets acquired during fiscal 1998.
INTEREST (NET). Interest income for the year ended April 30, 1999
decreased to $709,000, compared to $902,000 for the previous fiscal year.
Interest income decreased due to the use of cash in partial payment for the
fiscal 1998 and fiscal 1997 acquisitions. Interest expense for the year ended
April 30, 1998 decreased to $160,000, compared to $220,000 for the previous
fiscal year. Interest expense decreased due to decreased borrowing.
INCOME TAXES. In the year ended April 30, 1999, Ansoft recorded a net
income tax benefit of $1.0 million, resulting from the recognition of previously
unrecognized deferred tax assets in accordance with the Financial Accounting
Standards Board's SFAS No. 109, "Accounting for Income Taxes."
QUARTERLY RESULTS OF OPERATIONS
The following table presents unaudited quarterly results in dollar amounts
and as a percentage of total revenue for each quarter of fiscal 1999 and fiscal
1998. The information has been prepared on a basis consistent with Ansoft's
annual consolidated financial statements and, in the opinion of management,
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information for such periods. Ansoft's
quarterly results have been in the past, and may be in the future, subject to
fluctuations due to increased competition, the timing of new product
announcements, changes in pricing policies by Ansoft or its competitors, market
acceptance of new and enhanced versions of Ansoft's products and the size and
timing of significant licenses. Ansoft believes that results of operations for
the interim periods are not necessarily indicative of the results to be expected
for any future period. Ansoft's business has been seasonal, with revenues in the
first fiscal quarter typically lower than the fourth quarter of the preceding
fiscal year.
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<PAGE> 64
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
FISCAL 1999 FISCAL 1998
------------------------------------------ ------------------------------------------
APRIL 30, JAN. 31, OCT. 31, JULY 31, APRIL 30, JAN. 31, OCT. 31, JULY 31,
1999 1999 1998 1998 1998 1998 1997 1997
--------- -------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
License............................. $5,862 $4,769 $ 3,977 $ 3,239 $6,064 $5,005 $4,891 $4,016
Service and other................... 1,868 1,321 1,524 1,915 1,755 1,840 1,393 1,319
------ ------ ------- ------- ------ ------ ------ ------
Total Revenue.................... 7,730 6,090 5,501 5,154 7,819 6,845 6,284 5,335
------ ------ ------- ------- ------ ------ ------ ------
Costs and expenses
Sales and marketing................. 4,470 4,267 4,072 4,252 4,079 3,145 2,867 2,557
Research and development............ 2,186 2,033 2,106 2,066 1,949 1,976 1,864 1,510
General and administrative.......... 757 706 695 635 655 600 597 470
Amortization........................ 545 434 434 422 410 395 376 314
------ ------ ------- ------- ------ ------ ------ ------
Total costs and expenses......... 7,958 7,440 7,307 7,387 7,093 6,116 5,704 4,851
------ ------ ------- ------- ------ ------ ------ ------
Income (loss) from operations......... (228) (1,350) (1,806) (2,221) 726 729 580 484
Interest income (expense)............. 389 404 416 379 254 108 96 91
------ ------ ------- ------- ------ ------ ------ ------
Income (loss) before taxes............ 161 (946) (1,390) (1,842) 980 837 676 575
Income tax benefit.................... (30) 290 400 550 370 240 220 170
------ ------ ------- ------- ------ ------ ------ ------
Net income (loss)................... $ 131 $ (656) $ (990) $(1,292) $1,350 $1,077 $ 896 $ 745
------ ------ ------- ------- ------ ------ ------ ------
Basic net income (loss) per share... $ 0.01 $(0.06) $ (0.09) $ (0.11) $ 0.13 $ 0.12 $ 0.10 $ 0.08
====== ====== ======= ======= ====== ====== ====== ======
Diluted net income (loss) per
share............................ $ 0.01 $(0.06) $ (0.09) $ (0.11) $ 0.12 $ 0.11 $ 0.09 $ 0.08
====== ====== ======= ======= ====== ====== ====== ======
Weighted average number of shares
outstanding -- basic................ 11,032 11,231 11,453 11,524 10,639 9,205 9,130 8,989
Weighted average number of shares
outstanding -- diluted.............. 11,800 11,231 11,453 11,524 11,589 10,187 10,121 9,621
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUE
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
License................................ 76% 78% 72% 63% 78% 73% 77% 75%
Service and other.................... 24 22 28 37 22 27 23 25
--- --- ---- --- --- --- --- ---
Total Revenue..................... 100 100 100 100 100 100 100 100
--- --- ---- --- --- --- --- ---
Costs and expenses
Sales and marketing.................. 58 70 74 83 52 46 46 48
Research and development............. 28 33 38 40 25 29 30 28
General and administrative........... 10 12 13 15 8 9 9 9
Amortization......................... 7 7 8 5 5 6 6 6
Acquired in process research and
development....................... -- -- -- -- -- -- -- --
--- --- ---- --- --- --- --- ---
Total costs and expenses.......... 103 122 133 143 91 89 91 91
--- --- ---- --- --- --- --- ---
Income (loss) from operations.......... (3) (22) (133) (43) 9 11 9 9
Interest income........................ 5 7 8 7 3 1 2 2
Income (loss) before taxes............. 2 (15) (25) (36) 12 12 11 11
Income tax benefit..................... -- 4 7 11 5 4 3 3
--- --- ---- --- --- --- --- ---
Net income (loss)...................... 2% (11)% (18)% (25)% 17% 16% 14% 14%
=== === ==== === === === === ===
</TABLE>
57
<PAGE> 65
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1999, Ansoft had $2.7 million in cash and cash equivalents
and working capital of $15.6 million. Net cash provided by (used in) operating
activities was $691,000 and $(735,000) in the three months ended July 31, 1999
and 1998, respectively. Net cash provided by (used in) investing activities was
$(1.4) million and $(14.9) million in the three months ended July 31, 1999 and
1998, respectively. Capital expenditures, consisting primarily of purchases of
computer equipment, were $264,000 and $385,000 in the three months ended July
31, 1999 and 1998, respectively. Net cash provided by financing activities
includes cash proceeds from the issuance of Common Stock totaling $19,000 and
$57,000 in the three months ended July 31, 1999 and 1998, respectively.
Ansoft has available a $10.0 million secured line of credit from a domestic
financial institution at an interest rate equal to LIBOR plus an applicable
margin rate. The line of credit is secured by the marketable securities held
with the institution. As of July 31, 1999, $8.5 million was the outstanding
balance on the line of credit. Ansoft believes that the available funds will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the foreseeable future. Thereafter, if cash generated
from operations is insufficient to satisfy Company's liquidity requirements,
Ansoft may seek additional funds through equity or debt financing. There can be
no assurance that additional financing will be available or that, if available,
such financing will be on terms favorable to Ansoft.
ACQUISITIONS. On July 24, 1996, the Company acquired the EBU for $5.6
million in cash. On April 9, 1997, the Company acquired all of the outstanding
capital stock of Compact for $3.0 million in cash and 1.3 million shares of the
Company's Common Stock. On August 11, 1997, the Company acquired Boulder by the
merger of Boulder with and into the Company, in consideration for $743,000 in
cash and 108,000 shares of the Company's Common Stock. On April 28, 1999, Ansoft
acquired a majority of the outstanding stock of Pacific Numerix for 372,000
shares and $600,000 in cash. The acquisitions were accounted for as a purchases,
and the financial results of the acquired entities have been included in the
accompanying consolidated financial statements since the respective date of the
acquisitions.
EFFECTS OF INFLATION
To date, inflation has not had a material impact on Ansoft's consolidated
financial results.
YEAR 2000 ISSUES
We have recently evaluated the products we currently support to determine
if they are Year 2000 ready. Most of our products do not rely on knowledge of
the date (date-sensitive data) for performance or functionality. Our products
only use date-sensitive data with respect to the licensing of our products.
STATE OF READINESS. The results of this evaluation revealed that most of
Ansoft's supported products are Year 2000 ready. Ansoft plans to offer patches
or upgrades to the supported products currently not Year 2000 ready.
During 1998, an evaluation was done to Ansoft's internal support systems to
determine if they are Year 2000 ready to support our operations beyond the year
2000. We
58
<PAGE> 66
currently uses third party software systems and applications, some of which are
not Year 2000 ready. Ansoft intends to stop using these software products or
upgrade or replace them as part of its growth plan.
Although Ansoft intended to replace or upgrade these systems prior to June
30, 1999, the work will be extended to December 31, 1999. The failure by Ansoft
to complete such work prior to December 31, 1999 could have a material adverse
effect on our business, financial condition and operations.
COSTS. Ansoft does not have a project tracking system that tracks the cost
and time that its own internal employees spend on the Year 2000 project. Based
on Ansoft's assessment, the cost incurred to date has not had a material impact
to our results of operations. We expects that costs directly related to Year
2000 in excess of normal upgrade and maintenance costs would not exceed
approximately $100,000 for both costs incurred to date and future costs.
However, there is no assurance that the costs may not exceed this amount.
RISKS. Ansoft is requesting its vendors to provide Year 2000 compliance
certificates for all its internal support systems. However, Ansoft only intends
to perform testing on its critical internal support systems. Inoperability
related to Year 2000 problems of internal systems that are certified Year 2000
ready by the vendor and not tested by us could have an adverse impact on our
operational efficiency.
The patches or upgrades provided by Ansoft as the remedies to make its
products Year 2000 ready may not be accepted by the customer, which could have
an adverse impact on Ansoft's business.
Ansoft believes that the purchasing patterns of customers and potential
customers may be affected by Year 2000 issues as companies expend significant
resources to correct or patch their current software systems for Year 2000
readiness. These expenditures may result in reduced funds available to purchase
software products such as those offered by Ansoft, which could result in a
material adverse effect on our business, financial condition and results of
operation. In addition, we do not have any meaningful data as to the state of
its customers' Year 2000 readiness.
CONTINGENCY PLANS. Ansoft does not presently have a contingency plan for
handling Year 2000 problems that are not detected and corrected prior to their
occurrences. Upon completion of testing and implementation activities, Ansoft
will be able to assess the areas requiring contingency planning and expects to
develop appropriate planning at that time. Any failure of Ansoft to address any
unforeseen Year 2000 problems could adversely affect our business, financial
condition and results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
INTEREST RATE RISK. Ansoft's exposure to market risk for changes in
interest rates relates primarily to its investment portfolio. Ansoft mitigates
its risk by diversifying its investments among credit quality securities and
limits the amount of credit exposure to any one issuer. Ansoft does not hedge
any interest rate exposures.
FOREIGN CURRENCY RISK. Ansoft transacts business in various foreign
currencies. Accordingly, Ansoft is subject to exposure from adverse movements in
foreign currency exchange rates. As of July 31, 1999, Ansoft had no hedging
contracts outstanding. Ansoft
59
<PAGE> 67
assesses the need to utilize financial instruments to hedge currency exposures
on an ongoing basis.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
NONE. There has not been a change of accountants in the past 24 months nor
has any disagreement on any matter of accounting principles or practices been
reported on Form 8-K during the same period.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" which are not historical are
"forward looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent
Ansoft's present expectations or beliefs concerning future events. Ansoft
cautions that such statements are qualified by important factors that could
cause actual results to differ materially from those in the forward looking
statements including those factors identified in "Additional Risk Factors."
Results actually achieved thus may differ materially from expected results
included in these statements.
60
<PAGE> 68
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Ansoft Corporation:
We have audited the accompanying consolidated balance sheets of Ansoft
Corporation and subsidiaries as of April 30, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
April 30, 1999. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ansoft
Corporation and subsidiaries as of April 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended April 30, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Pittsburgh, Pennsylvania
May 26, 1999
61
<PAGE> 69
ANSOFT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
JULY 31, APRIL 30, APRIL 30,
1999 1999 1998
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents...................... $ 2,657 $ 2,489 $20,677
Marketable securities.......................... 17,007 16,461 --
Accounts receivable, net of allowance for
doubtful accounts of $175, $175 and $150,
respectively................................ 7,411 8,645 7,465
Deferred income taxes.......................... 126 126 2,145
Prepaid expenses and other assets.............. 734 709 536
------- ------- -------
Total current assets............................. 27,935 28,430 30,823
Plant and equipment.............................. 4,707 4,663 3,097
Marketable securities............................ 5,721 5,730 6,703
Other assets..................................... 310 475 260
Deferred taxes -- non current.................... 3,218 2,993 --
Intangible assets................................ 10,072 10,339 8,297
------- ------- -------
Total assets..................................... $51,963 $52,630 $49,180
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit................................. $ 8,488 $ 7,446 $ --
Accounts payable............................... 206 329 534
Accrued expenses............................... 178 404 264
Income taxes................................... 174 174 286
Accrued wages.................................. 150 150 347
Deferred revenue............................... 3,158 3,228 1,813
------- ------- -------
Total current liabilities........................ 12,354 11,731 3,244
Deferred taxes -- non current.................... -- -- 237
Other liabilities................................ 136 143 179
------- ------- -------
Total liabilities................................ 12,490 11,874 3,660
Minority Interest................................ (107) (107) --
Stockholders' equity
Preferred stock, par value $0.01 per share;
1,000 shares authorized, no shares
outstanding................................. -- -- --
Treasury stock 306 and 283 shares,
respectively................................ (1,696) (1,556) --
Common stock, par value $0.01 per share; 25,000
authorized; issued 11,689, 11,658 and 11,516
shares, respectively........................ 116 116 115
Additional paid-in capital..................... 51,509 51,490 50,728
Other accumulated comprehensive income
(loss)...................................... (1,282) (1,013) 43
Accumulated deficit............................ (9,067) (8,174) (5,366)
------- ------- -------
Total stockholders' equity....................... 39,580 40,863 45,520
Total liabilities and stockholders' equity....... $51,963 $52,630 $49,180
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
62
<PAGE> 70
ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR
ENDED JULY 31, ENDED APRIL 30,
----------------- ---------------------------
1999 1998 1999 1998 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue
License............................... $ 5,304 $ 3,239 $17,847 $19,974 $11,950
Service and other..................... 1,607 1,915 6,628 6,309 2,238
------- ------- ------- ------- -------
Total revenue...................... 6,911 5,154 24,475 26,283 14,188
Cost and expenses
Sales and marketing................... 4,592 4,252 17,061 12,643 7,939
Research and development.............. 2,378 2,066 8,391 7,299 2,993
General and administrative............ 807 635 2,937 2,322 1,647
Amortization.......................... 642 422 1,691 1,495 407
Acquired in process research and
development........................ -- -- -- -- 8,754
------- ------- ------- ------- -------
Total costs and expenses........... 8,419 7,375 30,080 23,759 21,740
------- ------- ------- ------- -------
Income (loss) from operations........... (1,508) (2,221) (5,605) 2,524 (7,552)
Interest income......................... 477 390 1,693 709 902
Interest expense........................ (87) (11) (106) (160) (220)
------- ------- ------- ------- -------
Income (loss) before income taxes....... (1,118) (1,842) (4,018) 3,073 (6,870)
Income tax benefit...................... 225 550 1,210 1,000 420
------- ------- ------- ------- -------
Net income (loss).................. $ (893) $(1,292) $(2,808) $ 4,073 $(6,450)
======= ======= ======= ======= =======
Basic net income (loss) per share....... $ (0.08) $ (0.11) $ (0.25) $ 0.42 $ (0.81)
======= ======= ======= ======= =======
Diluted net income (loss) per share..... $ (0.08) $ (0.11) $ (0.25) $ 0.39 $ (0.81)
======= ======= ======= ======= =======
Weighted average shares outstanding used
in basic calculation.................. 11,383 11,524 11,310 9,681 7,955
======= ======= ======= ======= =======
Weighted average shares outstanding used
in diluted calculation................ 11,383 11,524 11,310 10,521 7,955
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 71
ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
OTHER
COMMON STOCK ADDITIONAL TREASURY STOCK ACCUMULATED
COMPREHENSIVE ---------------- PAID-IN ---------------- ACCUMULATED COMPREHENSIVE
INCOME (LOSS) SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT INCOME (LOSS)
------------- ------- ------ ---------- ------ ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1996.......... -- $ 7,636 $ 76 $17,204 -- -- $(2,989) --
Issuance of common stock......... -- 1,353 14 7,106 -- -- -- --
Net loss......................... (6,450) -- -- -- -- -- (6,450) --
Unrecognized loss on marketable
securities..................... (44) -- -- -- -- -- -- (44)
------- ------- ---- ------- ---- ------- ------- -------
$(6,494)
Balance, April 30, 1997.......... 8,989 $ 90 $24,310 -- -- $(9,439) $ (44)
Issuance of common stock......... 2,527 25 26,418 -- -- -- --
Net income....................... 4,073 -- -- -- -- -- 4,073 --
Unrecognized gain on marketable
securities..................... 87 -- -- -- -- -- -- 87
------- ------- ---- ------- ---- ------- ------- -------
$ 4,160
Balance, April 30, 1998.......... 11,516 $115 $50,728 -- -- $(5,366) $ 43
Purchase of treasury stock....... -- -- -- -- (656) (3,728) -- --
Issuance of common stock......... -- 142 1 762 373 2,172 -- --
Net loss......................... (2,808) -- -- -- -- -- (2,808) --
Foreign currency translation..... (23) -- -- -- -- -- -- (23)
Unrecognized loss on marketable
securities..................... (1,033) -- -- -- -- -- -- (1,033)
------- ------- ---- ------- ---- ------- ------- -------
$(3,864)
Balance, April 30, 1999.......... 11,658 $116 $51,490 (283) $(1,556) $(8,174) $(1,013)
Purchase of treasury stock
(unaudited).................... -- -- -- -- (23) (140) -- --
Issuance of common stock
(unaudited).................... -- 31 -- 19 -- -- -- --
Net loss (unaudited)............. (893) -- -- -- -- -- (893) --
Foreign currency translation
(unaudited).................... (39) -- -- -- -- -- -- (39)
Unrecognized loss on Marketable
securities (unaudited)......... (230) -- -- -- -- -- -- (230)
------- ------- ---- ------- ---- ------- ------- -------
$(1,162)
Balance, July 31, 1999
(unaudited).................... 11,689 $116 $51,509 (306) $(1,696) $(9,067) $(1,282)
</TABLE>
See accompanying notes to consolidated financial statements.
64
<PAGE> 72
ANSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JULY 31, FISCAL YEAR ENDED APRIL 30,
------------------ -----------------------------
1999 1998 1999 1998 1997
------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)....................................... $ (893) $ (1,292) $ (2,808) $ 4,073 $ (6,450)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation....................................... 220 210 983 640 299
Amortization....................................... 642 422 1,691 1,495 429
Acquired in process research and development....... -- -- -- -- 8,754
Deferred taxes..................................... (225) (638) (1,211) (465) (420)
Changes in assets and liabilities
Accounts receivable................................ 1,234 1,344 (1,180) (3,336) (1,971)
Prepaid expenses and other assets.................. (25) (379) (173) (254) (191)
Other long-term assets............................. 158 (11) (251) (257) 10
Accounts payable................................... (123) 61 (205) 385 (196)
Accrued wages and expenses......................... (227) (527) (169) (778) (13)
Deferred revenue................................... (70) 75 1,415 653 152
------- -------- -------- ------- --------
Net cash provided (used) by operating activities........ 691 (735) (1,908) 2,156 403
------- -------- -------- ------- --------
Cash flows from investing activities
Purchases of plant and equipment...................... (264) (385) (2,549) (1,532) (811)
Investment in acquired businesses..................... -- (160) (770) (2,285) (8,600)
Sale of marketable securities......................... -- -- -- 534 5,878
Purchases of marketable securities.................... (766) (14,380) (16,521) -- (11,614)
------- -------- -------- ------- --------
Net cash used in investing activities................... (1,405) (14,925) (19,840) (3,283) (15,147)
------- -------- -------- ------- --------
Cash flows from financing activities
Proceeds from line of credit, net..................... 1,042 -- 7,446 (4,208) 4,208
Purchase of treasury stock............................ (140) -- (4,177) -- --
Proceeds from the issuance of common stock, net....... 19 57 314 25,700 120
------- -------- -------- ------- --------
Net cash provided by financing activities............... 921 57 3,583 21,492 4,328
------- -------- -------- ------- --------
Net increase (decrease) in cash and cash equivalents.... 207 (15,603) (18,165) 20,365 (10,416)
Effect of exchange rate changes on cash............... (39) (96) (23) -- --
Cash and cash equivalents at beginning of period........ 2,489 20,677 20,677 312 10,728
------- -------- -------- ------- --------
Cash and cash equivalents at end of period.............. $ 2,657 $ 4,978 $ 2,489 $20,677 $ 312
======= ======== ======== ======= ========
Supplemental disclosures of cash flow information
Cash paid for interest................................ $ 88 $ 4 $ 106 $ 160 $ 221
======= ======== ======== ======= ========
Cash paid for income taxes............................ $ 0 $ 20 $ 44 $ 80 $ 13
======= ======== ======== ======= ========
Plant and equipment acquired through assumption of
liability.......................................... $ -- $ -- $ 203 $ 179 $ --
======= ======== ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
65
<PAGE> 73
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(INFORMATION AS OF JULY 31, 1999 AND FOR THE PERIOD ENDED
JULY 31, 1999 AND 1998 IS UNAUDITED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Ansoft is a leading developer of electronic design automation ("EDA")
software. Its products are used by engineers in the design of high performance
electrical devices and systems, such as cellular phones, satellite
communications, computer circuit boards, motors and ABS braking systems.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, from the date of inception or acquisition. All
intercompany transactions have been eliminated. Effective July 24, 1996, April
9, 1997 and August 8, 1997, the Company acquired the Electronic Business Unit
(the "EBU") of The MacNeal Schwendler Company ("MSC"), Compact Software Inc.
("Compact"), and Boulder Microwave Technologies, Inc. ("Boulder"), respectively.
The Company acquired the majority interest in Pacific Numerix Corporation
("Pacific Numerix") on April 28, 1999.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and disclosure of contingent assets and liabilities. The estimates
and assumptions used in the accompanying financial statements are based on
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from those estimates.
CASH EQUIVALENTS
Cash equivalents include only highly liquid debt instruments purchased with
original maturity dates of three months or less.
MARKETABLE SECURITIES
Marketable Securities consist of corporate bonds and government agency
issues and are classified as of April 30, 1999 and 1998 as available for sale.
Marketable securities available for sale are recorded at fair market value based
on quoted market prices and any unrecorded gains or losses are recorded as a
separate component of stockholders' equity. Costs of investments sold are
determined on the basis of specific identification.
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<PAGE> 74
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PLANT AND EQUIPMENT
Plant and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation for financial reporting purposes is computed using
the straight-line method based upon the estimated useful lives of the assets
which range from three to seven years. Assets acquired under capital leases and
leasehold improvements are amortized over their useful life or the lease term,
as appropriate.
INTANGIBLE ASSETS
Intangible assets consist mainly of customer lists, established workforce,
and purchased technology which are being amortized on a straight line basis over
seven, three and three years, respectively. Purchased technology represents
acquired software which has been fully developed, achieved technological
feasibility, reached commercial viability, and is generating revenue. The
carrying value of intangible assets are reviewed whenever circumstances occur
which indicate that the carrying value may not be recoverable.
REVENUE RECOGNITION
Revenue consists primarily of fees for licenses of the Company's software
products, maintenance and customer support.
SOFTWARE REVENUE. Prior to May 1, 1998, the Company complied with the
American Institute of Certified Public Accountants' (AICPA) Statement of
Position (SOP) 91-1, "Software Revenue Recognition". Revenue from the sale of
software licenses was recognized after shipment of the products and fulfillment
of acceptance terms, if any, providing that no significant vendor and
post-contract support obligations remained and collection of the related
receivable was probable. Any remaining insignificant vendor or post-contract
support obligations were accrued at the time the revenue was recognized. In the
first quarter of fiscal 1999, the Company adopted the provisions of the AICPA
SOP 97-2, "Software Revenue Recognition" (SOP 97-2). SOP 97-2 generally requires
revenue earned on software arrangements involving multiple elements to be
allocated to each element based on the relative fair values of the elements. The
revenue allocated to software products generally is recognized after shipment of
the products and fulfillment of acceptance terms. The effect of adopting SOP
97-2 on May 1, 1998 was not material.
SERVICE AND OTHER REVENUE. Maintenance revenue is deferred and recognized
ratably over the term of the maintenance agreement, which is typically 12
months. Revenue from customer training, support and other services is recognized
as the service is performed. Other revenue consists primarily of revenue earned
on development contracts with government-sponsored entities. Revenue under these
arrangements is recognized as the service is performed.
SOFTWARE DEVELOPMENT COSTS
In accordance with Statement of Financial Accounting Standards (SFAS) No.
86, the Company has evaluated the establishment of technological feasibility of
its various products during the development phase. Due to the dynamic changes in
the market, the
67
<PAGE> 75
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company has concluded that it cannot determine, with any reasonable degree of
accuracy, technological feasibility until the development phase of the project
is nearly complete. The time period during which costs could be capitalized from
the point of reaching technological feasibility until the time of general
product release is generally very short and, consequently, the amounts that
could be capitalized pursuant to SFAS No. 86 are not material to the Company's
financial position or results of operations. Therefore, the Company charges all
research and development expenses to operations in the period incurred.
INCOME TAXES
Income taxes are provided for under the provisions of SFAS No. 109,
"Accounting for Income Taxes," for all periods presented. Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date. Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of common and common equivalent shares outstanding during the period. Common
equivalent shares are not included in the per share calculations where their
inclusion would be antidilutive, except that in accordance with certain SEC
Staff Accounting Bulletins, common and common equivalent shares issued during
the 12 months preceding the initial filing of the Registration Statement for the
Company's initial public offering have been included in the calculation using
the treasury stock method as if they were outstanding for all periods presented.
In February 1997, Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("SFAS 128") was issued by the Financial Accounting
Standards Board. SFAS 128 requires the presentation of both basic and diluted
earnings per share. Under SFAS 128, "basic earnings (loss) per share" is
calculated based upon the weighted average number of common shares actually
outstanding, and "diluted earnings per share" is calculated based upon the
weighted average number of common shares outstanding and other potential common
shares if they are dilutive. SFAS 128 was adopted in the Company's third quarter
of fiscal 1998. Prior periods have been restated to conform with SFAS 128.
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<PAGE> 76
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations for the years presented:
<TABLE>
<CAPTION>
INCOME PER SHARE
(LOSS) SHARES AMOUNT
------- ------ ---------
<S> <C> <C> <C>
THREE MONTHS ENDED JULY 31, 1999
Basic net income (loss) per share........ $ (893) 11,383 $(0.08)
======= ====== ======
Effect of dilutive securities:
Stock options.......................... -- -- --
------- ------ ------
Diluted net income (loss) per share...... $ (893) 11,383 $(0.08)
======= ====== ======
THREE MONTHS ENDED JULY 31, 1998
Basic net income (loss) per share........ $(1,292) 11,524 $(0.11)
======= ====== ======
Effect of dilutive securities:
Stock options....................... -- -- --
------- ------ ------
Diluted net income (loss) per share...... $(1,292) 11,524 $(0.11)
======= ====== ======
FISCAL YEAR ENDED APRIL 30, 1999
Basic net income (loss) per share........ $(2,808) 11,310 $(0.25)
Effect of dilutive securities:
Stock options.......................... -- -- $ --
------- ------ ------
Diluted net income (loss) per share...... $(2,808) 11,310 $(0.25)
======= ====== ======
FISCAL YEAR ENDED APRIL 30, 1998
Basic net income (loss) per share........ $ 4,073 9,681 $ 0.42
Effect of dilutive securities:
Stock options.......................... -- 840 $(0.03)
======= ====== ======
Diluted net income (loss) per share...... $ 4,073 10,521 $ 0.39
======= ====== ======
FISCAL YEAR ENDED APRIL 30, 1997
Basic net income (loss) per share........ $(6,450) 7,955 $(0.81)
Effect of dilutive securities:
Stock options.......................... -- -- $ --
------- ------ ------
Diluted net income (loss) per share...... $(6,450) 7,955 $(0.81)
======= ====== ======
</TABLE>
STOCK BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards
69
<PAGE> 77
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(SFAS) No. 123 "Accounting for Stock-Based Compensation." This statement permits
a company to choose either a new fair value based method of accounting for its
stock-based compensation arrangements or to comply with APB Opinion 25 intrinsic
value based method adding pro forma disclosures of net income and earnings per
share computed as if the fair value based method had been applied in the
financial statements. The Company has adopted SFAS No. 123 by retaining APB
Opinion 25 method of accounting for stock-based compensation with annual pro
forma disclosures of net income and earnings per share.
COMPREHENSIVE INCOME
Comprehensive Income In 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130
"Reporting Comprehensive Income, "which was adopted by the Company in the first
quarter of fiscal 1999. SFAS No. 130 establishes rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's results of operations or
stockholders' equity. SFAS No. 130 requires companies to report a new,
additional measure of income on the income state mentor to create a new
financial statement that has the new measure of income on it. "Comprehensive
income" includes foreign currency translation gains and losses and other
unrealized gains and losses that have been previously excluded from net income
and reflected instead in equity. The Company has reported the components of
comprehensive income on its consolidated statements of stockholders' equity.
2. ACQUISITIONS AND RELATED INTANGIBLE ASSETS
On July 24, 1996, the Company acquired the EBU for $5,600 in cash. On April
9, 1997, the Company acquired all of the outstanding capital stock of Compact
for $3,000 in cash and 1,273 shares of the Company's Common Stock. On August 11,
1997, the Company acquired Boulder by the merger of Boulder with and into the
Company, in consideration for $743 in cash and 108 shares of the Company's
Common Stock. On April 28th, 1999, Ansoft acquired the majority of the
outstanding stock of Pacific Numerix for 377 shares and $600 in cash. The cost
of these acquisitions has been allocated on the basis of the estimated fair
value of the assets acquired and the liabilities assumed. The allocation of the
EBU and Compact acquisitions resulted in charges of $3,100 and $5,700 recorded,
respectively, in fiscal 1997 based on the future expected cash flows of certain
acquired in process research and development that had not reached technological
feasibility. The acquisitions have been accounted for as purchases, and their
respective financial results have been included in the accompanying consolidated
financial statements since the date of their respective acquisitions.
The following unaudited pro forma summary presents information as if the
acquisition of Pacific Numerix occurred at the beginning of the periods
presented. The pro forma information is provided for information purposes only.
It is based on historical information and does not necessarily reflect the
actual results that would have occurred, nor is it necessarily indicative of
future results of operations of the combined enterprise.
70
<PAGE> 78
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED APRIL 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Revenue............................................ $26,864 $29,562
Pro forma net income (loss)........................ $(4,553) $ 3,357
Pro forma net income (loss) per common share....... $ (0.39) $ 0.31
</TABLE>
3. PLANT AND EQUIPMENT
Plant and equipment consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
----------------
1999 1998
------ ------
<S> <C> <C>
Computers and equipment.............................. $6,237 $4,232
Furniture and fixtures............................... 903 628
Leasehold improvements............................... 389 120
------ ------
7,529 4,980
Less allowances for depreciation and amortization.... 2,866 1,883
------ ------
$4,663 $3,097
====== ======
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Customer list...................................... $10,281 $ 8,146
Established work force............................. 1,679 1,206
Purchased technology............................... 1,398 273
Goodwill........................................... 574 574
------- -------
13,932 10,199
Less allowances for amortization................... 3,593 1,902
------- -------
$10,339 $ 8,297
======= =======
</TABLE>
71
<PAGE> 79
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. MARKETABLE SECURITIES
Marketable securities, classified as available for sale, are summarized as
follows:
<TABLE>
<CAPTION>
UNREALIZED
AMORTIZED GAIN MARKET
COST (LOSS) VALUE
--------- ---------- -------
<S> <C> <C> <C>
April 30, 1999 Marketable
Securities.......................... $23,181 $(990) $22,191
April 30, 1998 Marketable
Securities............................ $ 6,660 $ 43 $ 6,703
</TABLE>
The carrying values of debt securities as of April 30, 1999, by contractual
maturity is shown below:
<TABLE>
<S> <C>
Due in less than one year................................... $16,461
Due in one to five years.................................... $ 1,664
Due in five to ten years.................................... $ 4,067
-------
$22,191
=======
</TABLE>
Gross realized and unrealized gains (losses) on sales of securities in
fiscal 1999, 1998 and 1997 were immaterial.
6. LINE OF CREDIT
The Company has available a $10,000 secured line of credit from a domestic
financial institution at an interest rate equal to LIBOR plus an applicable
margin rate. The line of credit is secured by the marketable securities held
with the institution. As of April 30, 1999, $7,400 was the outstanding balance
on the line of credit and the weighted average interest rate was 4.52%.
7. LEASES
The Company leases its corporate headquarters in Pittsburgh, Pennsylvania,
and other facilities under operating lease agreements which expire over the next
six years. Rental expense incurred by the Company under operating lease
agreements totaled $1,281, $978
72
<PAGE> 80
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and $548 for the years ended April 30, 1999, 1998 and 1997, respectively. The
future minimum lease payments for such operating leases as of April 30, 1999,
are:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 30,
- ---------------------
<S> <C>
2000........................................................ 1,025
2001........................................................ 915
2002........................................................ 872
2003........................................................ 817
2004........................................................ 629
Thereafter.................................................. 1,126
------
$5,384
======
</TABLE>
8. STOCKHOLDERS' EQUITY
In February 1998, the Company closed its public offering of 2,300 shares of
Common Stock. The net proceeds of the offering were approximately $25,500, after
deducting applicable costs and expenses.
In April 1996, the Company closed its initial public offering of 1,500
shares of common stock at $8.50 per share. The net proceeds of the offering were
approximately $11,400, after deducting applicable costs and expenses.
9. COMMON STOCK OPTIONS
The Company's 1988 Stock Option Plan (1988 Plan) authorizes the issuance of
850 shares of Common Stock for the grant of incentive or nonstatutory stock
options to employees and directors. Under the terms of the 1988 Plan, options to
purchase Common Stock are granted at no less than the stock's estimated fair
market value at the date of the grant and may be exercised during specified
future periods as determined by the Board of Directors. The 1988 Plan provides
that the options shall expire no more than ten years after the date of the
grant.
In March 1995, the Board of Directors approved a 1995 Stock Option Plan
(1995 Plan) that authorized the issuance of up to 350 shares of Common Stock for
the grant of incentive or no statutory stock options to employees and directors.
The Board of Directors approved an additional 1,850 shares of Common Stock for
grant. Under the terms of the 1995 Plan, options to purchase Common Stock are
granted at no less than the stock's estimated fair market value at the date of
the grant and may be exercised during specified future periods as determined by
the Board of Directors. The 1995 Plan provides that the options shall expire no
more than ten years after the date of the grant.
73
<PAGE> 81
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Shares underlying outstanding options under the 1988 Plan and the 1995 Plan
are as follows:
<TABLE>
<CAPTION>
SHARES UNDERLYING
OUTSTANDING OPTIONS
----------------------
SHARES PRICE
------ ------------
<S> <C> <C>
Outstanding, April 30, 1996...................... 835 $1.00-$ 2.00
Granted.......................................... 270 $5.00-$ 6.50
Exercised...................................... (80) $1.14-$ 2.00
Canceled....................................... (33) $2.00-$ 5.38
----- ------------
Outstanding, April 30, 1997...................... 992 $1.00-$ 6.50
Granted........................................ 544 $5.00-$16.63
Exercised...................................... (121) $1.00-$ 5.38
Canceled....................................... (100) $2.00-$10.13
----- ------------
Outstanding, April 30, 1998...................... 1,515 $1.00-$16.63
Granted........................................ 1,135 $5.06-$ 5.56
Exercised...................................... (142) $1.14-$ 5.38
Canceled....................................... (426) $2.00-$16.63
----- ------------
Outstanding, April 30, 1999...................... 2,073 $1.14-$ 6.00
===== ============
</TABLE>
Options to purchase 822 shares of Common Stock were exercisable as of April
30, 1999 and options to purchase 728 shares of Common Stock were available for
future grant as of April 30, 1999.
In addition to the options described above, the Chairman of the Board of
Directors received an option to purchase 200 shares of Common Stock at an
exercise price of $5.00 per share in April 1995. At that time, such exercise
price was considered to be above the estimated fair market value. As of April
30, 1998, all such options were still outstanding and unexercised. The options
expire ten years after the date of the grant.
As permitted under Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation," the Company has elected
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), and related Interpretations, in accounting for
stock-based awards to employees. Under APB 25, because the exercise price of the
Company's employee stock options generally equals the market price of the
underlying stock on the date of grant, no compensation expense has been
recognized in the Company's consolidated financial statements during fiscal
1999, 1998 or 1997.
Pro forma information regarding net income and earnings (loss) per share is
required by SFAS 123. This information is required to be determined as if the
Company had accounted for its employee stock options (including shares issued
under the Stock Purchase Plan, collectively called "options") granted subsequent
to April 30, 1995 under
74
<PAGE> 82
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the fair value method prescribed by SFAS 123. The fair value of options granted
in fiscal years 1999, 1998 and 1997, reported below has been estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Risk-free rate (%)
Low.......................................... 4.05 5.79 5.55
High......................................... 5.67 6.42 6.54
Volatility (%)................................. 54.00 34.00 55.92
Expected Life (in Years)....................... 9.66 10.00 10.00
Dividend Yield (%)............................. 0.00 0.00 0.00
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in the opinion
of management, the existing models do not necessarily provide a reliable single
measure of the fair value of its options. However, based solely on this
analysis, the weighted average estimated fair value of employee stock options
granted during 1999, 1998 and 1997 was $3.57, $5.82 and $3.94 per share,
respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (unaudited):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
----------------------------
1999 1998 1997
------- ------ -------
<S> <C> <C> <C>
Pro forma net income (loss)............... $(3,742) $3,373 $(6,711)
Pro forma net income (loss) per common
share................................... $ (0.33) $ 0.32 $ (0.84)
</TABLE>
Because the Company anticipates making additional grants and options vest
over several years, the effects on pro forma disclosures of applying SFAS 123
are not likely to be representative of the effects on pro forma disclosures of
future years. SFAS 123 is applicable only to options granted subsequent to April
30, 1995.
75
<PAGE> 83
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
as of April 30, 1999:
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
---------------------------------------- OPTIONS OUTSTANDING
WEIGHTED- ------------------------
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AT APRIL 30, CONTRACTUAL EXERCISE AT APRIL 30, EXERCISE
EXERCISE PRICES 1999 LIFE PRICE 1999 PRICE
- --------------- ------------ ----------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
$1.14-$2.00.......... 405 4.74 $1.82 377 $1.81
$3.50-$5.00.......... 575 6.90 $4.86 334 $4.76
$5.06-$6.00.......... 1,093 9.10 $5.20 111 $5.34
</TABLE>
10. EXPORT SALES, MAJOR CUSTOMERS AND CREDIT RISK
Export sales, principally to Asia, accounted for 52%, 48% and 41% of total
product revenue in 1999, 1998 and 1997, respectively. Included in export sales
to Asia were sales to Japan, which accounted for approximately 16%, 16% and 13%
of total revenue in fiscal 1999, 1998, and 1997, respectively. No other foreign
country accounted for more than 10% of total revenue during these periods.
The Company entered into a distribution arrangement with Hewlett-Packard
Corporation ("HP") under which HP formerly distributed the Company's HFSS
product on an exclusive basis (the "HP Agreement"). The HP Agreement has since
expired, and HP has no right to distribute the Company's HFSS 4.0 product. The
Company currently sells the latest version of its HFSS product, Ansoft HFSS 6.0,
through its own sales force and other distributors. Revenue from the HP
Agreement accounted for 3% and 12% of total revenue in fiscal 1998 and 1997,
respectively.
The Company markets its software products to customers throughout the world
directly and through distributors and generally does not require collateral.
However, letters of credit are obtained from certain international customers
prior to shipment. The Company performs ongoing credit evaluations of its
customers and maintains an allowance for potential credit losses. The Company
believes that it has adequately provided for credit losses.
76
<PAGE> 84
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAX
The provisions for income taxes consists of the following:
<TABLE>
<CAPTION>
APRIL 30,
---------------------------
1999 1998 1997
------- ------- -----
<S> <C> <C> <C>
Current:
Federal................................. $ -- $ 333 $ --
Foreign................................. -- -- --
State................................... -- 95 --
------- ------- -----
Total................................ -- 428 --
Deferred:
Federal................................. (1,057) (1,447) (316)
State................................... (153) 19 (104)
------- ------- -----
Total................................ (1,210) (1,428) (420)
------- ------- -----
Total benefit for income taxes............ $(1,210) $(1,000) $(420)
======= ======= =====
</TABLE>
The Company's actual income tax expense (benefit) differs from the expected
income tax expense (benefit) computed by applying the statutory federal income
before income taxes as a result of the following:
<TABLE>
<CAPTION>
APRIL 30,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Income tax expense (benefit) at statutory
rate..................................... $(1,366) $ 1,044 $(2,335)
State income tax, net of federal
offset................................. (101) 142 (419)
Net deductible intangible assets......... -- -- --
Expiration of state net operating
losses................................. -- 241 61
Change in valuation allowance............ 43 (2,857) 2,258
Reduction in state deferred tax due to
decrease in state effective tax rate... -- 243 --
Other, net............................... 214 187 15
------- ------- -------
Actual income tax benefit................ $(1,210) $(1,000) $ (420)
======= ======= =======
</TABLE>
In addition to the income tax expense (benefit) reported above, a deferred
tax liability of $640 was recorded during the fiscal year ended April 30, 1998
in connection with the acquisition of Boulder.
77
<PAGE> 85
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
APRIL 30,
----------------
1999 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward.................... $3,295 $2,089
Allowance for doubtful accounts.................... 66 56
Alternative minimum tax credit carryforward........ 86 --
Foreign Tax Credit carryforward.................... -- --
Intangible Assets.................................. 71 --
Net Unrealized Losses on Available for Sale
Securities...................................... 340 --
------ ------
Total gross deferred tax assets...................... 3,858 $2,145
Less valuation allowance............................. 383 --
------ ------
Net deferred tax assets.............................. 3,475 2,145
------ ------
Deferred tax liabilities:
Intangible assets.................................. -- (61)
Property, plant, and equipment..................... (356) (176)
------ ------
Total gross deferred tax liability................... (356) (237)
------ ------
Net deferred taxes................................... $3,119 $1,908
====== ======
</TABLE>
The valuation allowance for deferred tax assets as of May 1, 1998 and 1997
was $0 and $2,857, respectively. The net change in the total valuation allowance
for the years ended April 30, 1999 and April 30, 1998 was an increase of $383
and a decrease of $2,857, respectively. Management evaluates the recoverability
of the deferred tax assets and the level of the valuation on a quarterly basis.
In assessing the realizability of the deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
An additional gross deferred tax benefit of $340 was generated in the year
ended April 30, 1999 with respect to unrealized losses on available for sale
securities. Since it was more likely than not that some portion, or all of, the
unrealized loss would not be realized, management placed a valuation of $340
upon this deferred tax asset, and no benefit was reported in stockholder's
equity or income.
78
<PAGE> 86
ANSOFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of April 30, 1999, the Company had net operating loss carryforwards for
federal income tax purposes of $9,100 which are available to offset future
federal taxable income, if any, through April 30, 2019.
11. RELATED PARTY TRANSACTIONS
Certain of the Company's principal stockholders are also members of the
Board of Directors and executive management.
12. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) savings and retirement plan which covers its
full-time employees who have attained the age of 21 and have completed six
months of service. Eligible employees make voluntary contributions to the plan
up to 15% of their annual compensation. The Company is not required to
contribute, nor has it contributed, to the 401(k) Plan.
13. COMMITMENTS AND CONTINGENCIES
The Company is not a party to any litigation and is not aware of any
threatened litigation, unasserted claims or assessments that could have a
material adverse effect on the Company's business, consolidated operating
results or consolidated financial condition.
79
<PAGE> 87
INFORMATION ABOUT PACIFIC NUMERIX
BUSINESS
Pacific Numerix provides EDA software that allow their users to evaluate
the effect that choices in parts, materials, physical design, sourcing
decisions, and manufacturing processes have on the performance, quality,
manufacturability, and cost of product designs. Pacific Numerix allows its
customers and clients to easily place EDVS into existing environments by
interfacing with all major CAE software vendors.
PRODUCTS
Pacific Numerix Electronic Design Validation System (EDVS) is a powerful
tool suite that provides virtual design-to-manufacturing prototyping and signal
integrity and EMI/EMC analysis at all levels: IC, first-level packaging, PCB,
and system. Moreover, Pacific Numerix offers a complementary mechanical analysis
tool suite including thermal, vibration, fatigue, and solder simulation. The
U.S. list price of these products ranges from $27,000 to $80,000.
RESEARCH AND DEVELOPMENT
Pacific Numerix continually seeks to design and develop new technologies,
products and interfaces. This effort includes releasing improved versions of its
products on a regular basis as well as developing new products. Pacific Numerix
research and development team is closely integrated with Ansoft's signal
integrity development team in the development of future products.
As of July 31, 1999, Pacific Numerix's product development group consisted
of 9 employees. During fiscal 1998 and 1997, research and development expenses
were $562,000 and $413,000, respectively.
SALES AND MARKETING
Pacific Numerix products are marketed and sold worldwide in conjunction
with Ansoft's direct sales force. Pacific Numerix generates sales leads through
customer referrals, advertising in trade publications and on the World Wide Web.
In addition, Pacific Numerix participates in industry trade shows and organizes
seminars to promote and expand the adoption of its products.
Pacific Numerix also has distribution agreements with various international
distributors. Pacific Numerix supports its distributors and their customers with
technical, sales and management personnel.
In February 1999, Pacific Numerix entered into OEM license agreement with
Cadence Designs Systems, Inc. This agreement was assigned to Ansoft in June
1999. Under this agreement, Ansoft becomes a platinum member of the Cadence
Alanza Group Connections Program for its extraction and modeling environment,
Turbo Package Analyzer, and the underlying three-dimensional (3-D) parasitic
extraction engine, Parasitic Parameters. Platinum members make commitments to
work together to analyze, develop, and optimize the flow of data among Cadence
and Ansoft's tools.
80
<PAGE> 88
CUSTOMERS
Pacific Numerix has an installed base with over 100 customers in the
communications, semiconductor, computer, consumer electronics and
defense/aerospace industries. During fiscal 1998, one customer represented 10%
of total revenue. During fiscal 1997, one customer represented 25% of total
revenue. The following is a list of a representative sample of Pacific Numerix's
current worldwide end-user customers:
Sony, IBM, Real 3D, Siemens, Sun Microsystems, Intel, Hyundai, Texas
Instruments, Amkor Western Digital, Tandem Computer, Symbios Logic,
Tektronix, Silicon Graphics, Rockwell, Lucent Technologies, Lsi Logic,
Lockheed Martin, Hana Technologies, GEC Marconi, Allied Signal, Alcatel
Network Systems Inc.
CUSTOMER SERVICE AND SUPPORT
Sales of Pacific Numerix's software include one year of customer support
services; thereafter annual one year maintenance contracts may be purchased.
Customer support services include on-line and telephone support for design
engineers and on-site and in-house training on all products. Customers with
maintenance agreements receive all product enhancement releases without
additional charge. Product upgrades that add significant new functionality are
provided to customers for an additional fee.
Pacific Numerix offers a variety of training programs for customers ranging
from introductory level courses to advanced training.
COMPETITION
The electronic design automation software market in which Pacific Numerix
competes is intensely competitive and subject to rapid change. In general,
competition comes from major EDA vendors, many of which have a longer operating
history, significantly greater financial, technical and marketing resources,
greater name recognition and a larger installed customer base than Pacific
Numerix. These companies also have established relationships with current and
potential customers of Pacific Numerix. Pacific Numerix also competes, on a
limited basis, with the internal development groups of its existing and
potential customers, many of which design and develop customized design tools
for their particular needs. In addition, the EDA industry has become
increasingly concentrated in recent years as a result of acquisitions, and
further concentration within the EDA industry could result in increased
competition for Pacific Numerix. Increased competition could result in price
reductions, reduced margins or loss of market share, any of which could
seriously harm Ansoft's business, operating results or financial condition.
Pacific Numerix may be unable to compete successfully against current and future
competitors, and competitive pressures faced by Ansoft could seriously harm
Ansoft's business, operating results and financial condition.
PROPRIETARY RIGHTS
Pacific Numerix is heavily dependent on its proprietary software
technology. Pacific Numerix relies on a combination of confidentiality
agreements with its employees, license agreements, copyrights, trademarks and
trade secret laws to establish and protect proprietary rights to Pacific Numerix
technology. Pacific Numerix does not hold any patents. All Pacific Numerix
software is shipped with a security lock which limits software access to
authorized users. In addition, Pacific Numerix does not license or release its
81
<PAGE> 89
source code. Effective copyright and trade secret protection of Pacific
Numerix's proprietary technology may be unavailable or limited in certain
foreign countries.
EMPLOYEES
As of July 31, 1999, Pacific Numerix had a total of 15 employees, including
9 in research and development, 5 in sales, marketing, and customer support
services and 1 in administration. None of Pacific Numerix's employees are
represented by a collective bargaining agreement, nor has Pacific Numerix
experienced any work stoppage. Pacific Numerix considers its relations with its
employees to be good. Many of Pacific Numerix's employees are highly skilled,
and there is no assurance that Pacific Numerix will be able to attract and
retain sufficient technical personnel in the future.
OFFICERS
The following table sets forth certain information concerning each of the
officers of Pacific Numerix:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Nicholas Csendes............... 55 President, and Chief Executive Officer
Anthony L. Ryan................ 31 Chief Financial Officer, Secretary and
Treasurer
</TABLE>
Nicholas Csendes has served as President and Chief Executive Officer since
April 28, 1999. Mr. Csendes is also a founder of Ansoft and has served as its
President, Chief Executive Officer and Secretary since 1992 and a director since
1984.
Anthony L. Ryan has served as Chief Financial Officer since April 28, 1999.
Mr. Ryan also serves as Chief Financial Officer of Ansoft.
PROPERTIES
Pacific Numerix occupies approximately 3,200 square feet of space in
Scottsdale, Arizona under a lease expiring in 2002. Pacific Numerix's current
aggregate annual rental expense for these facilities is approximately $80,000.
Pacific Numerix believes that its existing facilities are adequate for its
current needs and that suitable additional space will be available when needed.
LEGAL PROCEEDINGS
Pacific Numerix is not a party to any litigation and is not aware of any
threatened litigation, unasserted claims or assessments that could have material
adverse effect on its business, consolidated operating results or financial
condition.
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no active trading market for Pacific Numerix common stock.
Pacific Numerix has never paid any cash dividends on its common stock, and
does not anticipate paying cash dividends with respect to its Common Stock in
the foreseeable future. The payment of any future dividends will be determined
by the board of directors
82
<PAGE> 90
in light of the then current conditions, including the Pacific Numerix earnings
and financial condition.
On October 31, 1999, the Company had approximately 243 shareholders of
record.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SEVEN-MONTH
PERIOD
ENDED JULY 31, FISCAL YEAR ENDED DECEMBER 31,
--------------- -------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------- ------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenue............ $1,388 $1,020 $ 2,389 $3,279 $1,575 $1,290 $1,513
Income (loss) from
operations............. (305) (836) (1,143) 173 (835) (524) 144
Net income (loss)........ $ (315) $ (880) $(1,200) $ 136 $ (865) (585) $ 73
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JULY 31, ------------------------------------------
1999 1998 1997 1996 1995 1994
-------- ------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 7 $ 51 $ 33 $ 23 $ 7 $ 26
Working capital (deficit)........ 51 (563) (984) (609) (475) (218)
Total assets..................... 3,494 3,819 3,295 2,753 2,954 2,170
Total stockholders' equity....... $2,813 $2,507 $2,036 $1,831 $1,774 $1,394
</TABLE>
83
<PAGE> 91
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of total revenue of each item in the Company's consolidated statements of
operations:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
------------------------------------
SEVEN MONTHS
ENDED FISCAL YEAR ENDED
JULY 31, DECEMBER 31,
------------ --------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue
Product Sales............................ 62% 46% 51% 68% 65%
Maintenance revenue...................... 36 42 41 19 27
Service.................................. 2 12 8 13 8
--- --- --- --- ---
Total revenue......................... 100 100 100 100 100
--- --- --- --- ---
Costs and expenses
Sales and marketing...................... 53 82 67 59 73
Research and development................. 36 32 23 12 20
General and administrative............... 13 48 26 13 39
Depreciation and amortization............ 20 20 32 11 21
--- --- --- --- ---
Total costs and expenses.............. 122 182 148 95 153
--- --- --- --- ---
Income (loss) from operations.............. (22) (82) (48) 5 (53)
Other, net................................. (1) (4) (2) (1) 2
--- --- --- --- ---
Income (loss) before income taxes.......... (23) (86) (50) 4 (55)
Income taxes benefit....................... -- -- -- -- --
--- --- --- --- ---
Net income (loss).......................... (23)% (86)% (50)% 4% (55)%
=== === === === ===
</TABLE>
SEVEN-MONTH PERIOD ENDED JULY 31, 1999 COMPARED WITH SEVEN-MONTH PERIOD ENDED
JULY 31, 1998
REVENUE. Total revenue for the seven-month period ended July 31, 1999
increased 36% to $1.4 million from $1.0 million in the previous comparable
period. Product revenue during this period increased 80% to $855,000 from
$474,000 during the previous comparable period. The increase in product revenue
is primarily attributable to higher sales in the Asia-Pacific region.
Maintenance revenue increased by 18% to $500,000 for the seven-month period
ended July 31, 1999, as compared with $424,000 in the previous comparable
period. The increase in maintenance revenue is attributable to the continued
growth of the installed base of customers.
International revenue, principally from Asia, accounted for 55% and 30% of
the Company's total product revenue in the seven-month periods ended July 31,
1999 and 1998, respectively.
84
<PAGE> 92
SALES AND MARKETING EXPENSES. Sales and marketing expenses decreased by
12% to $733,000 for the seven-month period ended July 31, 1999, as compared with
$832,000 in the previous comparable period. The decrease is primarily
attributable to the utilization of Ansoft's sales and marketing efforts to
generate revenue. Sales and marketing expenses represented 53% and 82% of total
revenue in the seven-month periods ended July 31, 1999 and 1998, respectively.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the seven-month period ended July 31, 1999 increased 55% to $504,000, as
compared to $326,000 in the previous comparable period. The increase is due to
increased research and development personnel primarily as a result of additional
personnel. Research and development expenses represented 36% and 32% of total
revenue in the seven-month periods ended July 31, 1999 and 1998, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the seven-month period ended July 31, 1999 decreased 65% to $173,000, as
compared to $495,000 in the previous comparable period. The decrease is due to
the departure of executive administrative personnel during the year. General and
administrative expenses represented 13% and 48% of total revenue in the
seven-month periods ended July 31, 1999 and 1998, respectively.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense for the seven-month period ended July 31, 1999 increased to $282,000, as
compared to $203,000 in the previous comparable period. The increase is due to
recording amortization of previously capitalized software development costs.
OTHER EXPENSE (NET). Other expense consists primarily of interest expense
on the notes payable and loans payable to related parties. Other expense (net)
for the seven-month period ended July 31, 1999 decreased to $11,000, compared to
$44,000 for the previous fiscal year. Interest expense decreased due to the
lower notes payable balance during the seven-month period ended July 31, 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
REVENUE. Total revenue for the year ended December 31, 1998 decreased 27%
to $2.4 million from $3.3 million in the previous fiscal year. Product revenue
during the year ended December 31, 1998 decreased 45% to $1.2 million from $2.2
million during the previous fiscal year. The decrease in product revenue is
primarily attributable to lower sales in the Asia-Pacific region. Maintenance
revenue increased by 62% to $991,000 for the year ended December 31, 1998, as
compared with $613,000 in the previous year. The increase in maintenance revenue
is attributable to the continued growth of the installed base of customers.
International revenue, principally from Asia, accounted for 26% and 52% of
the Company's total product revenue in the years ended December 31, 1998 and
1997, respectively.
The Company has recently shifted its distribution model to the use of
Ansoft's worldwide direct sales personnel. There can be no assurance that this
transition will not result in dislocations or delays in penetration in these
markets or that the recent shift will not result in start-up costs and other
expenses. These expenses may be incurred before a commensurate level of revenues
are generated in these markets. Failure to generate a
85
<PAGE> 93
requisite level of revenues in light of these expenses could have a material
adverse effect on the Company's business, operating results and financial
condition.
SALES AND MARKETING EXPENSES. Sales and marketing expenses consist of
salaries, commissions paid to internal sales and marketing personnel and
international distributors, promotional costs and related operating expenses.
Sales and marketing expenses decreased by 17% to $1.6 million in the year ended
December 31, 1998, as compared to $1.9 million in the previous fiscal year. The
decrease is primarily attributable to the Company's decreased product sales.
Sales and marketing expenses represented 67% and 59% of total revenue in the
years ended December 31, 1998 and 1997, respectively.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
include all costs associated with the development of new products and
enhancements to existing products. Research and development expenses for the
year ended December 31, 1998 increased 36% to $562,000, as compared to $413,000
for the previous fiscal year. The increase is due to increased research and
development personnel primarily as a result of additional personnel. Research
and development expenses represented 23% and 12% of total revenue in the years
ended December 31, 1998 and 1997, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the year ended December 31, 1998 increased 45% to $615,000, as compared to
$423,000 for the previous fiscal year. The increase is due to additional costs
required to support operations, including the hiring of additional
administrative personnel. General and administrative expenses represented 26%
and 13% of total revenue in the years ended December 31, 1998 and 1997,
respectively.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense for the year ended December 31, 1998 increased to $764,000, as compared
to $347,000 for the previous fiscal year. The increase is due to recording
amortization of previously capitalized software development costs.
OTHER EXPENSE (NET). Other expense consists primarily of interest expense
on the notes payable and loans payable to related parties. Other expense (net)
for the year ended December 31, 1998 increased to $58,000, compared to $37,000
for the previous fiscal year. Interest expense increased due to the higher notes
and loans payable balance during fiscal 1998.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
REVENUE. Total revenue for the year ended December 31, 1997 increased 108%
to $3.3 million from $1.6 million in the previous fiscal year. Product revenue
during the year ended December 31, 1997 increased 116% to $2.2 million from $1.0
million during the previous fiscal year. The increase in product revenue is
primarily attributable to higher sales in the Asia-Pacific region. Maintenance
revenue increased by 45% to $613,000 for the year ended December 31, 1997, as
compared with $423,000 in the previous year. The increase in maintenance revenue
is attributable to the continued growth of the installed base of customers.
International revenue, principally from Asia, accounted for 52% and 31% of
the Company's total product revenue in the years ended December 31, 1997 and
1996, respectively.
86
<PAGE> 94
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased by
68% to $1.9 million in the year ended December 31, 1997, as compared to $1.1
million in the previous fiscal year. The increase is primarily attributable to
the Company's increased product sales. Sales and marketing expenses represented
59% and 73% of total revenue in the years ended December 31, 1997 and 1996,
respectively.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the year ended December 31, 1997 increased 29% to $413,000, as compared to
$320,000 for the previous fiscal year. The increase is due to increased research
and development personnel primarily as a result of additional personnel.
Research and development expenses represented 13% and 20% of total revenue in
the years ended December 31, 1997 and 1996, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the year ended December 31, 1997 decreased 31% to $423,000, as compared to
$610,000 for the previous fiscal year. The decrease is due to the departure of
executive administrative personnel during the year. General and administrative
expenses represented 13% and 39% of total revenue in the years ended December
31, 1997 and 1996, respectively.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense for the year ended December 31, 1997 increased to $347,000, as compared
to $338,000 for the previous fiscal year. The increase is due to recording
amortization of previously capitalized software development costs.
OTHER EXPENSE (NET). Other expense consists primarily of interest expense
on the notes payable and loans payable to related parties. Other expense (net)
for the year ended December 31, 1997 increased to $37,000, compared to $30,000
for the previous fiscal year. Interest expense increased due to the higher notes
and loans payable balance during fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1999, the funding requirements of the operating activities
of Pacific Numerix were provided by Ansoft.
Ansoft believes that its available funds will be sufficient to meet its
anticipated cash needs for Pacific Numerix's working capital and capital
expenditures for at least the next twelve months. Thereafter, if cash generated
from operations is insufficient to satisfy our liquidity requirements, we may
seek additional funds through equity or debt financing. There can be no
assurance that additional financing will be available or that, if available,
such financing will be on terms favorable to us.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None. There has not been a change of accountants in the past 24 months nor
has there been any disagreement on any matter of accounting principles or
practices during the same period.
87
<PAGE> 95
INDEPENDENT AUDITORS' REPORT
To The Board of Directors of
Pacific Numerix Corporation
We have audited the accompanying balance sheets of Pacific Numerix
Corporation as of December 31, 1998 and 1997, and the related statements of
operations, changes in stockholders' equity, and cash flows for the years ended
December 31, 1998, 1997 and 1996. 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 audits 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 Pacific Numerix Corporation
as of December 31, 1998 and 1997, and the results of its operations, changes in
stockholders' equity, and its cash flows for the years ended December 31, 1998,
1997 and 1996, 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 12 to the
financial statements, the Company sustained a substantial operating loss for the
year ended December 31, 1998. In addition, the Company used substantial amounts
of working capital in its operations and as of December 31, 1998, current
liabilities exceed current assets by $563,737. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 12. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Certified Public Accountants
Phoenix, Arizona
February 13, 1999
88
<PAGE> 96
PACIFIC NUMERIX CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
JULY 31, -------------------------
1999 1998 1997
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 1).... $ 7,493 $ 51,231 $ 33,301
Accounts receivable -- trade (Note
1)................................. 724,272 647,445 170,279
Prepaid expenses and other current
assets............................. -- 44,120 45,394
----------- ----------- -----------
Total Current Assets............... 731,765 742,796 248,974
Software development costs, net (Note
1).................................... 2,567,199 2,849,429 2,785,970
Property and equipment, net (Notes 1 and
2).................................... 194,860 226,363 259,908
----------- ----------- -----------
Total Assets....................... $ 3,493,824 $ 3,818,588 $ 3,294,852
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable -- current portion (Note
3)................................. $ -- $ 348,805 $ 256,667
Capital lease obligations -- current
portion (Notes 1 and 4)............ -- 5,744 11,762
Loans payable to related parties (Note
5)................................. 298,751 272,000 222,000
Accounts payable...................... 21,151 18,693 152,861
Accrued liabilities................... 61,094 162,923 234,052
Deferred revenue (Note 1)............. 300,000 498,368 355,744
----------- ----------- -----------
Total Current Liabilities.......... 680,996 1,306,533 1,233,086
----------- ----------- -----------
Long-Term Liabilities:
Notes payable -- long-term portion
(Note 3)........................... -- -- 15,278
Capital lease obligation -- long-term
portion (Notes 1 and 4)............ -- 4,589 10,333
----------- ----------- -----------
-- 4,589 25,611
----------- ----------- -----------
Commitments: (Note 8)................... -- -- --
Stockholders' Equity: (Note 7)
Preferred stock....................... 1,570 1,570 1,570
Additional paid-in
capital -- preferred............... 312,430 312,430 312,430
Common stock.......................... 49,774 49,774 45,524
Additional paid-in
capital -- common.................. 11,493,217 10,872,412 9,204,662
Accumulated deficit................... (9,044,163) (8,728,720) (7,528,031)
----------- ----------- -----------
Total Stockholders' Equity......... 2,812,828 2,507,466 2,036,155
----------- ----------- -----------
Total Liabilities And Stockholders'
Equity........................... $ 3,493,824 $ 3,818,588 $ 3,294,852
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
89
<PAGE> 97
PACIFIC NUMERIX CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SEVEN MONTHS FISCAL YEAR ENDED
ENDED JULY 31, DECEMBER 31,
------------------------ ---------------------------------------
1999 1998 1998 1997* 1996*
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales.................. $ 854,710 $ 474,351 $ 1,217,606 $2,226,142 $1,029,383
Maintenance revenue............ 500,443 424,126 990,843 613,121 422,978
Services revenue............... 32,550 121,848 180,336 440,031 122,872
---------- ---------- ----------- ---------- ----------
Total Revenue............... 1,387,703 1,020,325 2,388,785 3,279,294 1,575,233
Costs and Expenses:
Sales and marketing............ 733,303 831,985 1,591,341 1,923,194 1,142,148
Research and development....... 504,349 326,403 561,663 412,602 319,673
General and administrative..... 172,762 494,910 614,844 423,462 610,260
Depreciation and
amortization................ 282,230 203,079 763,974 346,982 338,243
---------- ---------- ----------- ---------- ----------
Total Costs and Expenses.... 1,692,644 1,856,377 3,531,822 3,106,240 2,410,324
---------- ---------- ----------- ---------- ----------
Net Income (Loss)
from Operations................ (304,941) (836,052) (1,143,037) 173,054 (835,091)
---------- ---------- ----------- ---------- ----------
Other Income (Expense):
Interest expense............... (10,919) (45,127) (57,735) (38,083) (42,087)
Interest income................ 417 696 1,456 634 12,030
Loss on disposal of fixed
assets...................... -- -- (1,373) -- --
---------- ---------- ----------- ---------- ----------
(10,502) (44,431) (57,652) (37,449 (30,057)
---------- ---------- ----------- ---------- ----------
Net Income (Loss)................ $ (315,443) $ (880,483) $(1,200,689) $ 135,605 $ (865,148)
========== ========== =========== ========== ==========
</TABLE>
- -------------------------
* As restated, for comparative purposes only.
The Accompanying Notes are an Integral Part of the Financial Statements
90
<PAGE> 98
PACIFIC NUMERIX CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------- -----------------------------------
ADDITIONAL ADDITIONAL
$.01 PAID-IN $.01 PAID-IN ACCUMULATED
SHARES PAR VALUE CAPITAL SHARES PAR VALUE CAPITAL DEFICIT TOTAL
------- --------- ---------- --------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995.... 157,000 $1,570 $312,430 3,913,130 $39,131 $ 8,219,255 $(6,798,488) $1,773,898
Sale of common stock for cash,
net of costs................ -- -- -- 100,500 1,005 199,995 -- 201,000
Exercise of options for cash,
net of costs................ -- -- -- 360,227 3,602 716,852 -- 720,454
Options issued for services... -- -- -- -- -- 1,000 -- 1,000
Net loss...................... -- -- -- -- -- -- (865,148) (865,148)
------- ------ -------- --------- ------- ----------- ----------- ----------
Balance, December 31, 1996.... 157,000 $1,570 $312,430 4,375,318 $43,738 $ 9,137,102 $(7,663,636) $1,831,204
Exercise of options for cash,
net of costs................ -- -- -- 134,591 1,346 -- -- 1,346
Stock issued for services..... -- -- -- 44,000 440 67,560 -- 68,000
Net income.................... -- -- -- -- -- -- 135,605 135,605
------- ------ -------- --------- ------- ----------- ----------- ----------
Balance, December 31, 1997.... 157,000 1,570 312,430 4,553,909 45,524 9,204,662 (7,528,031) 2,036,155
Sale of common stock for cash,
net of costs................ -- -- -- 425,000 4,250 1,667,750 -- 1,672,000
Net loss...................... -- -- -- -- -- -- (1,200,689) (1,200,689)
------- ------ -------- --------- ------- ----------- ----------- ----------
Balance, December 31, 1998.... 157,000 $1,570 $312,430 4,978,909 $49,774 $10,872,412 $(8,728,720) $2,507,466
Conversion of note payable
(unaudited)................. -- -- -- -- -- 620,805 -- 1,672,000
Net loss (unaudited).......... -- -- -- -- -- -- (315,443) (315,443)
------- ------ -------- --------- ------- ----------- ----------- ----------
Balance, July 31, 1999
(unaudited)................. 157,000 $1,570 $312,430 4,978,909 $49,774 $11,493,217 $(9,044,163) $2,507,466
======= ====== ======== ========= ======= =========== =========== ==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
91
<PAGE> 99
PACIFIC NUMERIX CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Cash received from customers...................... $ 1,310,876 $ 796,512 $ 2,054,243 $ 3,346,359 $ 1,602,057
Cash paid to suppliers and employees.............. (1,509,786) (1,698,799) (2,971,871) (2,776,146) (1,600,496)
Interest received................................. 417 696 1,456 634 12,030
Interest paid..................................... (10,919) (45,127) (57,735) (38,083) (42,087)
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by operating
activities.................................... (209,412) (946,718) (973,907) 532,764 (28,496)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment................ (40,478) (16,881) (72,734) (176,141) (27,911)
Cash received from sale of fixed assets........... -- -- 7,382 -- --
Software development costs........................ (282,230) (454,311) (729,909) (718,279) (681,064)
----------- ----------- ----------- ----------- -----------
Net cash used by investing activities........... (322,708) (471,192) (795,261) (894,420) (708,975)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from notes payable....................... -- 37,556 1,456,641 240,000 50,000
Proceeds from loans payable to related parties.... 1,113,776 -- 310,000 408,000 239,331
Repayment of notes payable........................ (348,805) -- (1,379,781) (16,666) (19,264)
Repayment of loans payable to related parties..... (272,000) (222,000) (260,000) (236,970) (749,074)
Repayment of capital leases....................... (4,589) (5,771) (11,762) (23,760) (20,951)
Proceeds from issuance of stock................... -- 1,672,000 1,672,000 1,346 921,454
Collection of stock subscriptions receivable...... -- -- -- -- 331,791
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities....... 488,382 1,444,229 1,787,098 371,950 753,287
----------- ----------- ----------- ----------- -----------
Net increase in cash and cash equivalents........... (43,738) 26,319 17,930 10,294 10,294
Cash and cash equivalents at beginning of year...... 51,231 33,301 33,301 23,007 23,007
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year............ $ 7,493 $ 59,620 $ 51,231 $ 33,301 $ 33,301
=========== =========== =========== =========== ===========
Reconciliation of Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities:
Net Income (Loss)................................. $ (315,443) $ (880,483) $(1,200,689) $ 135,605 $ (865,148)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation.................................... 31,503 56,982 97,524 88,927 72,587
Amortization.................................... 250,727 146,097 666,450 258,055 265,656
Loss on disposal of fixed assets................ -- -- 1,373 -- --
Other accrued liabilities converted to loans
payable....................................... -- -- -- -- 20,000
Employee advances credited against loans
payable....................................... -- -- -- -- (79,443)
Common stock issued for services rendered....... -- -- -- 68,000 1,000
Changes in Assets and Liabilities:
Accounts receivable-trade....................... 76,827 (223,813) (477,166) 67,065 26,824
Prepaid expenses and other current assets....... 44,120 6,366 1,274 (31,176) (1,782)
Employee advances............................... -- -- -- -- 238,783
Accounts payable................................ 2,458 (102,134) (134,168) 79,199 28,631
Accrued liabilities............................. (101,829) 58,614 (71,129) (215,334) 151,075
Deferred revenue................................ (198,368) (56,663) 142,624 82,423 113,321
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by operating activities.... $ (210,005) $ (995,034) $ (973,907) $ 532,764 $ (28,496)
=========== =========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
92
<PAGE> 100
NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the years ended December 31, 1998 and 1997, the Company recognized
investing and financing activities that affected assets, liabilities, and
equity, but did not result in cash receipts or disbursements.
The non-cash activity for the year ended December 31, 1998 was as follows:
The Company abandoned fixed assets with a carrying value of $1,373 and
an original cost of $107,695.
The non-cash activities for the year ended December 31, 1997, are as
follows:
The Company purchased $20,184 of computer equipment through the
execution of capital leases.
The Company issued common stock for services rendered in the amount of
$68,000.
The non-cash activities for the year ended December 31, 1996, are as
follows:
The Company offset $45,918 of accrued vacation against employee
advances.
The Company offset $79,443 of employee advances against debt.
The Company settled $125,361 of employee advances as part of a
severance package (See Note 3).
The Company purchased $7,750 of computer equipment through the
execution of capital leases.
The Company issued options to a director for services rendered, in the
amount of $1,000.
93
<PAGE> 101
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JULY 31, 1999 AND FOR THE PERIOD ENDED
JULY 31, 1999 AND 1998 IS UNAUDITED)
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES:
NATURE OF BUSINESS:
Pacific Numerix Corporation (the "Company") is a Corporation, which was
duly formed and organized under the laws of the State of California on September
27, 1984. The Company was reincorporated as a Nevada corporation in June 1995.
The Company's principal business activities include the development, sale and
distribution of computer software products for the design and manufacture of
printed circuit boards and integrated circuits primarily for manufacturing
clients, both domestic and foreign.
INTERIM FINANCIAL INFORMATION
The interim financial statements for the seven month periods ended July 31,
1999 and 1998 are unaudited. In the opinion of management, such statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair representation of the results of the interim period. The
results of operations for the seven month period ended July 31, 1999 are not
necessarily indicative of the results of the entire year.
PERVASIVENESS OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents are considered to be all highly liquid
investments purchased with an initial maturity of three (3) months or less.
ACCOUNTS RECEIVABLE -- TRADE:
The Company provides for potentially uncollectible accounts receivable by
use of the allowance method. The allowance is provided based upon a review of
the individual accounts outstanding, and the Company's prior history of
uncollectible accounts receivable. Management believes all receivables are fully
collectible as of December 31, 1998 and 1997. Accordingly, no provisions for
uncollectible accounts have been included in the accompanying financial
statements.
94
<PAGE> 102
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost. Depreciation is provided for
on the straight-line method over the estimated useful lives of the assets. The
average lives range from three to five years. Maintenance and repairs that
neither materially add to the value of the property nor appreciably prolong its
life are charged to expense as incurred. Betterments or renewals are capitalized
when incurred. Depreciation expense was $97,524, $88,927, and $72,587,
respectively, for the years ended December 31, 1998, 1997 and 1996.
The Company is the lessee of computer equipment under three (3) capital
lease agreements expiring through May, 2001. The assets and liabilities under
the capital lease agreements are recorded at the lower of the present value of
the minimum lease payments or the fair value of the assets. The assets are being
depreciated over their estimated productive lives. Depreciation of the assets
under the capital lease agreements is included in depreciation expense as noted
above, for the years ended December 31, 1998, 1997 and 1996.
SOFTWARE DEVELOPMENT COSTS:
The Company capitalizes software development costs in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed." Capitalization of
software development costs begins upon the establishment of technological
feasibility of the product. The establishment of technological feasibility and
the ongoing assessment of the recoverability of these costs requires
considerable judgement by management with respect to certain external factors
including, but not limited to, anticipated future gross product revenue,
estimated economic life, and changes in software and hardware technology.
Amortization of capitalized software development costs begins when the products
are available for general release to customers and is computed on a
product-by-product basis using straight-line amortization with useful lives of
five years or, if less, the remaining estimated economic life of the product.
The Company evaluates the estimated net realizable value of each software
product at each balance sheet date and records writedowns to net realizable
value for any products for which expected future cash flows is less than the net
book value. It is reasonably possible that the estimates of anticipated future
gross revenues, the remaining estimated economic life of the products, or both,
could differ form those used to assess the recoverability of these costs.
For the years ended December 31, 1998, 1997 and 1996, accumulated
amortization was $1,458,303 and $791,853, and $533,798, respectively.
Amortization expense was $666,450, $258,055 and $265,656, respectively, for the
years ended December 31, 1998, 1997 and 1996.
REVENUE RECOGNITION AND DEFERRED REVENUE:
Product revenue consists principally of revenue earned under software
license agreements and is recognized when the software has been shipped, there
are no significant obligations remaining, and collection is probable. Service
revenue consists primarily of revenues received for performing consulting and
customer training and is recognized as the
95
<PAGE> 103
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
services are performed. Maintenance revenue consists of fees for providing
product updates, user documentation and technical support. Maintenance revenue
is being recognized ratably over the applicable lives of the respective
contracts, generally one year.
The Company uses distributors for certain of its sales. Revenue generated
through distributors is generally recorded at the gross sales price paid by the
customer. Commissions withheld by distributors are recorded as sales and
marketing expense.
DEFERRED INCOME TAXES:
Deferred income taxes are provided on an asset and liability method,
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carry forwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, there is uncertainty of the utilization of the operating
losses in future periods. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.
STOCK-BASED COMPENSATION:
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and the related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals or exceeds the
market price of the underlying stock on the date of grant, no compensation
expense is recorded. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation".
NOTE 2
PROPERTY AND EQUIPMENT:
At December 31, 1998 and 1997, property and equipment consists of:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Computer equipment............................. $ 490,628 $ 543,827
Furniture and fixtures......................... 70,467 59,881
--------- ---------
561,095 603,708
Less: accumulated depreciation................. (334,732) (343,800)
--------- ---------
$ 226,363 $ 259,908
========= =========
</TABLE>
96
<PAGE> 104
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3
NOTES PAYABLE:
At December 31, 1998 and 1997, notes payable consist of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Note payable to an individual, with interest at
the rate of 8% per annum, due in monthly-fixed
principal installments of $1,389 plus interest,
due November, 1999; unsecured.................. $ -- $ 31,945
$900,000 line of credit with Key Bank, due on
demand with interest at the bank's prime
rate, interest due monthly; guaranteed by a
stockholder of the Company................... 340,000 240,000
Note payable to Imperial Premium Finance, with
an interest rate of 10.75% per annum, due in
monthly payments of $1,514 plus interest, due
July 1999; unsecured......................... 8,805 --
--------- ---------
348,805 271,945
Less: current portion.......................... (348,805) (256,667)
--------- ---------
$ -- $ 15,278
========= =========
</TABLE>
During the year ended December 31, 1996, the Company adopted a plan to
restructure the management of the Company. As a result, the Company's President
and Business Manager were relieved of their duties. The Company offered both
individuals severance packages that consisted of approximately six months salary
and other benefits. The Company has recorded a liability of approximately
$175,000 in the accompanying financial statements in regard to the severance
packages. In addition, employee advances to the former President of the Company
in the approximate amount of $125,000 were settled.
97
<PAGE> 105
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4
OBLIGATIONS UNDER CAPITAL LEASES:
The Company is the lessee of computer equipment with a cost of $27,934
under three capital lease agreements, which expire through May, 2001. As of
December 31, 1998, future minimum lease payments due under the capital lease
agreements, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999........................................................ $ 7,002
2000........................................................ 4,140
2001........................................................ 1,035
-------
Total minimum lease payments................................ 12,177
Less: amount representing interest.......................... (1,844)
-------
Present value of net minimum lease payments................. 10,333
Less: current maturities of capital lease obligations....... (5,744)
-------
Long-term maturities of capital lease obligations........... $ 4,589
=======
</TABLE>
The interest rates under the capital lease obligations range from
approximately fifteen percent (15%) to twenty percent (20%) per annum, and are
imputed based on the lessor's implicit rate of return at the inception of the
lease.
NOTE 5
RELATED PARTY TRANSACTIONS:
As of December 31, 1998 and 1997, the Company has loans payable to
corporate stockholders in the amounts of $272,000 and $222,000, respectively;
with interest at the rate of 9% to 9.25% per annum. The loans are due on demand
and are unsecured.
98
<PAGE> 106
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6
INCOME TAXES:
As of December 31, 1998 and 1997, deferred tax assets and (liabilities)
consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Software development costs.................. $(1,200,000) $(1,170,000)
Federal loss carry forwards................. 3,590,000 3,150,000
State loss carry forwards................... 355,000 230,000
Other....................................... 37,500 46,000
----------- -----------
2,782,500 2,256,000
Less: valuation allowances.................. (2,782,500) (2,256,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The Company has established a valuation allowance equal to the full amount
of the deferred tax assets primarily because of uncertainty in the utilization
of net operating loss carry forwards.
99
<PAGE> 107
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1998, there are net operating losses available for carry
forward to offset future federal and state taxable income. The carry forward
amounts and expirations are as follows:
<TABLE>
<CAPTION>
YEAR OF EXPIRATION FEDERAL CALIFORNIA ARIZONA
- ------------------ ----------- ---------- ----------
<S> <C> <C> <C>
1999............................ $ -- $ -- $ 155,000
2000............................ 320,000 -- 1,425,000
2001............................ 675,000 -- 975,000
2002............................ 845,000 340,000 625,000
2003............................ 745,000 400,000 1,290,000
2004............................ 870,000 390,000 --
2005............................ 860,000 340,000 --
2006............................ 720,000 360,000 --
2007............................ 705,000 20,000 --
2008............................ 355,000 -- --
2009............................ 155,000 -- --
2010............................ 1,425,000 -- --
2011............................ 975,000 -- --
2012............................ 625,000 -- --
2013............................ 1,290,000 -- --
----------- ---------- ----------
$10,565,000 $1,850,000 $4,470,000
=========== ========== ==========
</TABLE>
NOTE 7
STOCKHOLDERS' EQUITY:
PREFERRED STOCK:
The Company is authorized to issue 200,000 shares of convertible, callable,
voting, preferred stock, $.01 par value, of which 157,000 shares were issued and
outstanding as of December 31, 1998 and 1997. The preferred stock is redeemable
at the Company's option for $3 per share, and is convertible into common stock
on a one-for-one basis, at an initial conversion price of $2 per share. The
conversion price is adjusted if the Company sells common stock for less than the
current conversion price.
COMMON STOCK:
The Company is authorized to issue 10,000,000 shares of common stock, $.01
par value, of which 4,978,909 and 4,553,909 shares were issued and outstanding
as of December 31, 1998, 1997 and 1996, respectively.
During the year ended December 31, 1998, the Company completed a Private
Placement Memorandum offering of common stock. The offering sold 425,000 units
with
100
<PAGE> 108
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
each unit consisting of one share of common stock and one option to purchase
common stock at $4 per share.
STOCK OPTIONS:
Employee Options:
The Company has a compensatory stock option plan covering its directors,
officers, key employees and service providers. Under the terms of the plan, the
Company has reserved an aggregate of 2,000,000 shares of common stock for
distribution. The exercise price will be determined by the compensation
committee, not to be less than one hundred percent (100%) of the fair market
value the common stock on the date of grant, except for options granted in lieu
of compensation. Some options may be granted as qualified incentive stock
options. Options may be exercised on a one-for-one basis, within ten (10) years
of the date of grant.
Following is a summary of the status of the employee option plan during the
years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995........... 870,301 $1.69
Granted.................................... 160,930 2.00
--------- -----
Outstanding at December 31, 1996........... 1,031,231 $1.74
Granted.................................... 344,103 2.00
Exercised.................................. (118,241) .01
Forfeited.................................. (101,060) 1.60
--------- -----
Outstanding at December 31, 1997........... 1,156,033 2.00
Granted.................................... 191,500 3.11
Forfeited.................................. (171,103) 2.00
--------- -----
Outstanding at December 31, 1998........... 1,176,430 $2.18
========= =====
</TABLE>
Following is a summary of the status of the employee options as of December
31, 1998:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF REMAINING
EXERCISE PRICE OPTIONS CONTRACTUAL LIFE
- -------------- --------- ----------------
<S> <C> <C>
$2.00...................................... 1,069,930 6 years
$4.00...................................... 106,500 9 years
</TABLE>
The stock options issued to employees have an exercise price not less than
the fair market value of the Company's common stock on the date of grant. In
accordance with accounting for such options utilizing the intrinsic value
method, there is no related
101
<PAGE> 109
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
compensation expense recorded in the Company's financial statements for the
years ended December 31, 1998, 1997 and 1996. Had compensation cost for
stock-based compensation been determined based on the fair value of the options
at the grant dates consistent with the method of SFAS 123, the Company's net
income (loss) for the years ended December 31, 1998, 1997 and 1996 would have
been reduced to the pro forma amounts presented below:
<TABLE>
<CAPTION>
1998 1997 1996
----------- -------- ---------
<S> <C> <C> <C>
Net income (loss):
As reported..................... $(1,200,689) $135,605 $(865,148)
Pro forma....................... $(1,212,726) $112,605 $(866,236)
</TABLE>
The fair value of option grants is estimated as of the date of grant
utilizing the Black-Scholes option-pricing model with the following weighted
average assumptions for grants in 1998 and 1997, expected life of options of two
(2) years, risk-free interest rates of eight percent (8%), and a zero percent
(0%) dividend yield. The weighted average fair value at date of grant for
options granted during 1998, 1997 and 1996 approximated $.06, $.07, and $.01,
respectively.
Stockholder Options:
The Company has granted options in connection with various stock offerings.
The options are exercisable on a one-for-one basis. Following is a summary of
the status of the stockholders options during the years ended December 31, 1998
and 1997:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1996........... 34,500 $1.25
Exercised.................................. (16,350) 1.25
Forfeited.................................. (18,150) 1.25
------- -----
Outstanding at December 31, 1997........... -- --
Granted.................................... 425,000 4.00
------- -----
Outstanding at December 31, 1998........... 425,000 $4.00
======= =====
</TABLE>
The shareholder options outstanding as December 31, 1998 have a remaining term
of two (2) years.
NOTE 8
COMMITMENTS:
The Company currently leases office space in Scottsdale, Arizona under a
non-cancelable operating lease agreement, which expires in June, 1999. Under the
terms of the lease, the Company pays monthly rent of $10,154. In addition, the
Company is currently leasing office equipment, computer equipment, and property
in Scottsdale, Arizona under
102
<PAGE> 110
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
non-cancelable operating lease agreements expiring through October, 2002. Under
the terms of the leases, the Company pays lease payments ranging from $175 to
$870 per month. For the years ended December 31, 1998, 1997 and 1996, expense
under the aforementioned non-cancelable operating lease agreements was
approximately $150,000, $134,000 and $122,000 respectively.
Future minimum lease payments due under the operating lease agreements, are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999........................................................ $ 93,108
2000........................................................ 22,828
2001........................................................ 3,035
2002........................................................ 458
--------
$119,429
========
</TABLE>
NOTE 9
EMPLOYEE BENEFIT PLANS:
The Company has implemented a profit sharing plan covering virtually all
full-time employees. The plan is designed as a 401(k) profit sharing plan.
Employees are permitted to make voluntary contributions to the plan. In
addition, the Company can make contributions to the Plan. These contributions
are at the discretion of the Board of Directors, and are subject to certain
limitations. For the years ended December 31, 1998 and 1997, the Company made no
discretionary contributions.
NOTE 10
YEAR 2000 ISSUE: (UNAUDITED)
Like other companies, Pacific Numerix Corporation could be adversely
affected if the computer systems we, our suppliers, or our customers use do not
properly process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the "Year
2000" issue. Additionally, this issue could impact non-computer systems and
devices such as production equipment, elevators, etc. At this time, because of
the complexities involved in the issue, management cannot provide assurances
that the Year 2000 issue will not have an impact on the Company's operations.
NOTE 11
SUBSEQUENT EVENTS:
Subsequent to December 31, 1998 the Company signed a Letter of Intent with
Ansoft Corporation, in which Ansoft Corporation desires to purchase all of the
outstanding common and preferred stock of the Company in exchange for shares of
Ansoft Corporation's common stock. The Company is currently negotiating the
terms of the
103
<PAGE> 111
PACIFIC NUMERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
agreement with Ansoft Corporation and anticipates closing the transaction prior
to April 1999, subject to the due diligence procedures of the companies.
NOTE 12
GOING CONCERN:
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company has sustained a
substantial operating loss for the year ending December 31, 1998. In addition,
the Company used substantial amounts of working capital in its operations and as
of December 31, 1998 current liabilities exceed current assets by $563,737.
In view of these matters, realization of a major portion of the assets in
the accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financing requirements, and the success of its future operations. Management
believes that actions being presently taken, including the potential sale of its
stock as discussed in Note 11, provide the opportunity for the Company to
continue as a going concern.
104
<PAGE> 112
OWNERSHIP INFORMATION
BENEFICIAL OWNERSHIP OF ANSOFT COMMON STOCK
The following table sets forth certain information regarding beneficial
ownership of Ansoft's common stock as of July 31, 1999 (i) by each person who is
known by Ansoft to beneficially own more than five percent of its common stock,
(ii) by each of Ansoft's directors (each of whom has been nominated to serve an
additional one year term), (iii) by Ansoft's Chief Executive Officer and Chief
Technology Officer ("Named Executive Officers"), and (iv) by all current
officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS(2)
- ------------------- -------------------- ----------
<S> <C> <C>
Thomas A.N. Miller(3)........................... 1,712,003 14%
Nicholas Csendes(4)............................. 1,707,003 14%
Ulrich L. and Meta M. Rohde(5).................. 1,272,728 11%
Zoltan J. Cendes(6)............................. 1,245,618 10%
John N. Whelihan(7)............................. 30,000 *
Jacob K. White(8)............................... 15,000 *
All directors and named officers as a group
(6 persons)(4)(5)(6)(7)(8).................... 5,982,352 49%
</TABLE>
- -------------------------
* Less than 1%.
(1) The business address of the stockholder is Four Station Square, Pittsburgh,
PA 15219.
(2) The information contained in the table above reflects "beneficial ownership"
of the common stock within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Unless otherwise
indicated, all shares of common stock are held directly with sole voting and
dispositive power.
(3) Excludes 147,000 shares held by trusts for the benefit of certain family
members of Mr. Miller with respect to which trusts Mr. Miller is not a
trustee and disclaims any beneficial ownership.
(4) Excludes 152,000 shares held by trusts for the benefit of certain family
members of Mr. Csendes with respect to which trusts Mr. Csendes is not a
trustee and disclaims any beneficial ownership.
(5) Dr. Ulrich Rohde and Dr. Meta Rohde share voting power and dispositive power
with respect to all such 1,272,728 shares.
(6) Includes 235,000 shares issuable upon exercise of options exercisable within
60 days of July 31, 1999.
(7) Includes 24,000 shares issuable upon exercise of options exercisable within
60 days after July 31, 1999. Also includes 6,000 shares jointly owned with
Mr. Whelihan's spouse.
(8) Includes 15,000 shares issuable upon exercise of options exercisable within
60 days of July 31, 1999.
105
<PAGE> 113
BENEFICIAL OWNERSHIP OF PACIFIC NUMERIX COMMON STOCK
The following table sets forth certain information regarding beneficial
ownership of Pacific Numerix's common stock as of July 31, 1999 (i) by each
person who is known by Pacific Numerix to beneficially own more than five
percent of its common stock, (ii) by each of Pacific Numerix's directors (each
of whom has been nominated to serve an additional one year term), (iii) by
Pacific Numerix's Chief Executive Officer and Chief Financial Officer ("Named
Executive Officers"), and (iv) by all current officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ---------------- -------------------- ----------
<S> <C> <C>
Ansoft Corporation.............................. 3,789,014 75%
Zoltan Cendes................................... 0 0%
Nicholas Csendes................................ 0 0%
Anthony L. Ryan................................. 0 0%
All directors and named officers as a group (2
persons)...................................... 0 0%
</TABLE>
- -------------------------
* Less than 1%.
MANAGEMENT
The Commission allows Ansoft to "incorporate by reference" information into
this proxy statement/prospectus, which means important information may be
disclosed to you by referring you to another document filed separately with the
Commission. In this respect, Ansoft is specifically incorporating by reference
the information in its latest annual report on Form 10-K concerning the officers
and directors of Ansoft and the executive compensation portion of the Form 10-K.
Pacific Numerix will have no compensated executive officers and the
directors will be Nicholas Csendes and Zoltan Cendes. For more information
concerning these individuals, see "Information Regarding Ansoft -- Officers" on
page 48.
106
<PAGE> 114
EXPERTS
The consolidated financial statements and schedule of Ansoft Corporation as
of April 30, 1999 and 1998, and for each of the years in the three-year period
ended April 30, 1999, have been included herein and in the registration
statement in reliance upon the reports of KPMG LLP, independent auditors,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements as of December 31, 1998 and 1997 and
for each of the three years in the period ended December 31, 1998 of Pacific
Numerix included in this document have been so included in reliance on the
report of Semple and Cooper, LLP independent accountants, given on the authority
of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the shares of Ansoft common stock to be issued in
connection with the merger is being passed upon for Ansoft by Buchanan Ingersoll
Professional Corporation, Pittsburgh, Pennsylvania. Attorneys of that firm who
are representing Ansoft in this transaction own an aggregate of 200 shares of
Ansoft common stock.
WHERE YOU CAN FIND MORE INFORMATION
Ansoft files annual, quarterly and special reports, proxy statements and
other information with the Commission. You may read and copy any reports,
statements or other information filed by Ansoft at the Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C., 20549, or at any of
the Commission's other public reference rooms in New York, New York and Chicago,
Illinois. Please call the Commission at 1-800-SEC-0330 for further information
on the public reference rooms. Ansoft's Commission filings are also available to
the public from commercial document retrieval services and at the web site
maintained by the Commission at http://www.sec.gov.
Ansoft filed a registration statement to register the Ansoft common stock
to be issued to Pacific Numerix's stockholders in the merger. This proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of Ansoft in addition to being a proxy statement of Pacific Numerix
for the meeting of Pacific Numerix's stockholders. As allowed by the
Commission's rules, this proxy statement/prospectus does not contain all the
information you can find in the Ansoft registration statement or the exhibits to
the registration statement.
The Commission allows Ansoft to "incorporate by reference" information into
this proxy statement/prospectus, which means important information may be
disclosed to you by referring you to another document filed separately with the
Commission. The information of Ansoft incorporated by reference is deemed to be
part of this proxy statement/prospectus, except for information superseded by
information in (or incorporated by reference in) this proxy
statement/prospectus. This proxy statement/prospectus incorporates by reference
the documents set forth below that have been previously filed
107
<PAGE> 115
with the Commission. The following documents contain important information about
Ansoft and its finances and are hereby incorporated by reference:
1. Ansoft's Annual Report on Form 10-K for the year ended April 30, 1999.
Ansoft is also incorporating by reference additional documents that it may
file with the Commission pursuant to be Exchange Act between the date of this
proxy statement/prospectus and the date of the special meeting.
Ansoft has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Ansoft, and Pacific Numerix has
supplied all information contained in this proxy statement/prospectus relating
to Pacific Numerix.
If you are a stockholder of Ansoft you may have been sent some of the
documents incorporated by reference, but you can obtain any of them through
Ansoft or the Commission. Documents incorporated by reference, are available
from Ansoft without charge, excluding any exhibits which are not specifically
incorporated by reference as exhibits in this proxy statement/prospectus.
Pacific Numerix's stockholders may obtain documents incorporated by reference in
this proxy statement/prospectus by requesting them in writing or by telephone
from the appropriate party at the following address:
Ansoft Corporation
Four Station Square, Suite 200
Pittsburgh, Pennsylvania 15219
Attention: Anthony Ryan
If you would like to request documents from either company, please do so by
, 1999 (10 days prior to the special meeting), to receive them
before the special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/ PROSPECTUS TO VOTE ON THE APPROVAL OF THE
MERGER AGREEMENT. NEITHER ANSOFT NOR PACIFIC NUMERIX HAS AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS DATED
, 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY OTHER DATE, AND NEITHER
THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO PACIFIC NUMERIX' STOCKHOLDERS
NOR THE ISSUANCE OF ANSOFT COMMON STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION ON TO THE CONTRARY.
108
<PAGE> 116
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PACIFIC NUMERIX CORPORATION
AND
ANSOFT ACQUISITION CORP.
AND
ANSOFT CORPORATION
NOVEMBER 19, 1999
<PAGE> 117
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. THE MERGER............................................... 2
1.1 The Merger of Sub into PNC.......................... 2
1.2 Effective Time and Effective Date................... 2
1.3 Effects of the Merger............................... 3
1.4 Articles of Incorporation and Bylaws................ 3
1.5 Directors........................................... 3
1.6 Officers............................................ 3
2. CLOSING, CLOSING DATE AND CONSIDERATION.................. 3
2.1 The Closing and Closing Date........................ 3
2.2 Conversion of Capital Stock......................... 4
2.3 Surrender of Certificates........................... 4
3. CONDITIONS PRECEDENT TO OBLIGATIONS OF ANSOFT AND SUB.... 5
3.1 Stockholder Approval................................ 5
3.2 Dissenter's Rights.................................. 5
3.3 Registration Statement.............................. 5
3.4 Governmental Restraint.............................. 5
4. CONDITIONS PRECEDENT TO OBLIGATIONS OF PNC............... 5
4.1 Registration Statement.............................. 5
4.2 Stockholder Approval................................ 5
4.3 Governmental Restraint.............................. 5
4.4 Listing of Common Stock............................. 6
5. TERMINATION.............................................. 6
5.1 Termination......................................... 6
5.2 Effect of Termination............................... 6
6. GENERAL PROVISIONS....................................... 6
6.1 Governing Law....................................... 6
6.2 Notices............................................. 6
6.3 Assignment.......................................... 7
6.4 Entire Agreement; Amendments........................ 7
6.5 Interpretation...................................... 8
6.6 Waivers............................................. 8
6.7 Partial Invalidity.................................. 8
6.8 Counterparts........................................ 8
6.9 Third-Party Beneficiaries........................... 8
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 19th day
of November, 1999, by and among Pacific Numerix Corporation, a Nevada
corporation ("PNC"), Ansoft Acquisition Corp., a Nevada corporation ("Sub") and
Ansoft Corporation, a Delaware corporation ("Ansoft").
BACKGROUND
WHEREAS, Ansoft owns 100% of the issued and outstanding stock of Sub; and
WHEREAS, Ansoft owns greater than 50% of the combined voting power of the
issued and outstanding capital stock of PNC; and
WHEREAS, the respective Boards of Directors of Ansoft, Sub and PNC and the
sole shareholder of Sub have each approved the merger of Sub with and into PNC,
with PNC as the surviving corporation, upon the terms and conditions set forth
herein and have approved this Agreement; and
WHEREAS, in accordance with the Agreement, it is proposed that Sub be
merged with and into PNC and that the presently issued and outstanding shares of
capital stock of PNC be converted into common stock of Ansoft (the "Merger");
and
WHEREAS, PNC, Ansoft, and Sub desire to enter into and carry out the
transactions contemplated by this Agreement in accordance with the terms hereof,
and the provisions of the Delaware General Corporation Law and the Nevada
General Corporation Law; and
NOW, THEREFORE, for and in consideration of the premises and of the mutual
promises, stipulations, agreements, covenants and conditions herein contained,
and for the purpose of stating the terms and conditions of the Merger, the mode
of carrying the same into effect, the manner of converting the shares of the
capital stock of PNC issued and outstanding immediately prior to the Effective
Time (as hereafter defined) of the Merger into Ansoft Common Stock (as
hereinafter defined), and the manner of converting the shares of Sub Common
Stock (as hereinafter defined) issued and outstanding immediately prior to the
Effective Time into shares of PNC common stock, and such other details and
provisions as are deemed desirable and in accordance with the applicable
provisions of the Delaware and Nevada General Corporation Law, the parties
hereto agree as follows, intending to be legally bound hereby:
1. THE MERGER
1.1 The Merger of Sub into PNC
Subject to the terms and upon the conditions set forth herein, on the
Closing Date (as defined in Article 2 hereof), PNC and Sub shall cause Articles
of Merger to be executed and filed with the Secretary of the State of Nevada in
form mutually satisfactory to PNC and Ansoft (the "Articles of Merger").
1.2 Effective Time and Effective Date
The effective date of the Merger shall be the date upon which the Articles
of Merger are filed with the Secretary of the State of Nevada (the "Effective
Date"), and the
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effective time of the Merger shall be the time on the Effective Date at which
the Articles of Merger are filed with the Secretary of State of the State of
Nevada (the "Effective Time"). At the Effective Time, Sub will be merged with
and into PNC with PNC as the surviving corporation, and the separate existence
of Sub shall cease. "Surviving Corporation" shall mean PNC from and after the
Effective Time.
1.3 Effects of the Merger
The Merger shall have the effects set forth in the Nevada General
Corporation Law, as amended. Following the Effective Time, the corporate
existence of PNC shall continue unaffected and unimpaired, and, as the Surviving
Corporation, PNC shall continue to be a corporation governed by the laws of the
State of Nevada.
1.4 Articles of Incorporation and Bylaws
(a) The articles of incorporation of PNC (the "Articles of Incorporation"),
as in effect immediately prior to the Effective Time, shall be the articles of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
(b) The bylaws of PNC as in effect immediately prior to the Effective Time
shall be the bylaws of the Surviving Corporation, until thereafter changed or
amended as provided therein or by applicable law.
1.5 Directors
The directors of the Surviving Corporation from and after the Effective
Time, and until the earlier of their respective death, resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be, shall be: Zoltan Cendes and Nicholas Csendes.
1.6 Officers
The officers of the Surviving Corporation from and after the Effective
Time, and until the earlier of their respective death, resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be, shall be: Nicholas Csendes, President Anthony Ryan, Secretary, Treasurer
and Chief Financial Officer.
2. CLOSING, CLOSING DATE AND CONSIDERATION
2.1 The Closing and Closing Date
The closing of the transactions contemplated hereby (the "Closing") shall
take place at the offices of Buchanan Ingersoll Professional Corporation, One
Oxford Centre, 301 Grant Street, 20th Floor, Pittsburgh, PA 15219, at 10:00 a.m.
local time on , 1999, or at such other time and place as the
parties mutually agree. The time and date of the Closing is hereinafter referred
to as the "Closing Date."
2.2 Conversion of Capital Stock
At the Effective Time on the Effective Date, the capital stock of PNC and
the capital stock of Sub outstanding immediately prior thereto shall be canceled
or converted, as the case may be, as follows (the "Merger Consideration"):
(a) Each share of common stock, $.01 par value, of PNC (the
"Corporation Common Stock") issued and outstanding immediately prior
thereto (other than shares
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of Corporation Common Stock held by Ansoft) (the total of which shall not
exceed 1,241,770 shares) shall be converted into the right to receive
.09236 shares of common stock, par value $.01 per share, of Ansoft (the
"Ansoft Common Stock").
(b) Each share of preferred stock, $.01 par value, of PNC (the
"Corporation Preferred Stock") issued and outstanding immediately prior
thereto (other than the shares of Corporation Preferred Stock held by
Ansoft (the total of which shall not exceed 40,500 shares) shall be
converted into the right to receive .15655 shares of Ansoft Common Stock;
(c) If the number of shares of Ansoft Common Stock that the holder is
entitled to receive pursuant to Sections 2.2(a) and (b) is not evenly
divisible by (10); the holder shall receive that number of shares of Ansoft
Common Stock after rounding down to the nearest number evenly divisible by
ten (10) and the remaining shares of Ansoft Common Stock the stockholder
has the right to receive will be paid in cash at a value of $6.95 per
Ansoft share.
(d) Each share of Corporation Common Stock issued and held in the
treasury of PNC or held by Ansoft shall be canceled and retired.
(e) Each share of common stock, par value $.01 per share, of Sub (the
"Sub Common Stock") issued and outstanding immediately prior thereto shall
be converted into one share of common stock, $.01 par value, of the
Surviving Corporation, and each share of Sub Common Stock issued and held
in the treasury of Sub, if any, shall be canceled and retired.
(f) Each outstanding option, whether exercisable or not, to purchase
shares of Corporation Common Stock or Corporation Preferred Stock issued
pursuant to PNC's Incentive Stock Option Plan or otherwise will be canceled
and void and all such rights to exercise any option shall be terminated and
of no further force or effect.
2.3 Surrender of Certificates
(a) From and after the Effective Time, each holder of certificates
representing shares of Corporation Common Stock and Corporation Preferred
Stock converted by virtue of the Merger into the right to receive Ansoft
Common Stock, upon surrender of such certificates to Ansoft (the "Exchange
Agent"), shall be entitled forthwith to receive in exchange therefor the
Merger Consideration to which such holder is entitled pursuant to the terms
of this Agreement.
(b) From and after the Effective Time, each certificate which, prior
to the Effective Time, represented outstanding Corporation Common Stock or
Corporation Preferred Stock, shall evidence only the right to receive the
Merger Consideration on the basis set forth in Article 2 hereof. The
aforesaid conversion shall be complete and effective at the Effective Time
without regard to the date or dates upon which outstanding certificates of
Corporation Common Stock are surrendered for such Merger Consideration.
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3. CONDITIONS PRECEDENT TO OBLIGATIONS OF ANSOFT AND SUB
On or prior to the Effective Time, PNC will have satisfied or caused to be
satisfied each of the following conditions, unless waived in writing by Ansoft
and Sub:
3.1 Stockholder Approval
The stockholders of PNC shall have approved and adopted this Agreement and
the Merger pursuant to the requirements of PNC's articles of incorporation and
bylaws and the Nevada General Corporation Law.
3.2 Dissenter's Rights
No more than 5% of the holders, in the aggregate, of Corporation Common
Stock and Corporation Preferred Stock shall have exercised their statutory
rights of appraisal.
3.3 Registration Statement
A registration statement covering the Ansoft Common Stock to be issued
pursuant to this Agreement shall have been declared effective in accordance with
the provisions of the Securities Act of 1933, as amended, and no stop order with
respect thereto shall be in effect at the Effective Time.
3.4 Governmental Restraint
The consummation of the Merger shall not be restrained, enjoined or
prohibited by any order, judgment, decree, injunction or ruling of a court of
competent jurisdiction or any governmental entity entered after the parties have
used their reasonable best efforts to prevent such entry. There shall not have
been any statute, rule or regulation enacted, promulgated or deemed applicable
to the Merger by any governmental entity that prevents the consummation of the
Merger.
4. CONDITIONS PRECEDENT TO OBLIGATIONS OF PNC
On or prior to the Effective Date, Ansoft and Sub will have satisfied each
of the following conditions unless waived in writing by PNC:
4.1 Registration Statement
A registration statement covering the Ansoft Common Stock to be issued
pursuant to this Agreement shall have been declared effective in accordance with
the provisions of the Securities Act of 1933, as amended, and no stop order with
respect thereto shall be in effect at the Effective Time.
4.2 Stockholder Approval
The Stockholders of PNC shall have approved and adopted this Agreement and
the Merger pursuant to the requirements of PNC's articles of incorporation and
bylaws and the Nevada General Corporation Law.
4.3 Governmental Restraint
The consummation of the Merger shall not be restrained, enjoined or
prohibited by any order, judgment, decree, injunction or ruling of a court of
competent jurisdiction or any governmental entity entered after the parties have
used their reasonable best efforts to prevent such entry. There shall not have
been any statute, rule or regulation enacted,
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promulgated or deemed applicable to the Merger by any governmental entity that
prevents the consummation of the Merger.
4.4 Listing of Common Stock
The shares of Ansoft Common Stock to be issued pursuant to the Merger shall
have been approved for listing on the NASDAQ National Market, subject only to
official notice of issuance.
5. TERMINATION
5.1 Termination
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, notwithstanding approval thereof by the
stockholders of PNC:
(a) by mutual written agreement of PNC and Ansoft;
(b) by either PNC or Ansoft, if the Merger has not been consummated by
the 120th day following approval of the Merger by the stockholders of PNC,
provided that the right to terminate this Agreement pursuant to this
Section 5.1(b) will not be available to any party whose breach of any
provision of this Agreement results in the failure of the Merger to be
consummated by such time; and
(c) by either PNC or Ansoft, if there shall be any law or regulation
that makes consummation of the Merger illegal or otherwise prohibited or if
any judgment, injunction, order or decree enjoining the parties from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable.
The party desiring to terminate this Agreement pursuant to this Section 5.1
(other than pursuant to Section 5.1(a) shall give written notice of such
termination to the other party.
5.2 Effect of Termination
If this Agreement is terminated pursuant to Section 5.1, this Agreement
will become void and of no effect with no liability on the part of any party
hereto or its respective directors, officers or stockholders. Nothing herein
shall relieve any party from liability for any breach of this Agreement.
6. GENERAL PROVISIONS
6.1 Governing Law
This Agreement will be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, without regard to any
jurisdiction's conflicts or choice of law provisions.
6.2 Notices
All notices or other communications required or permitted hereunder will be
in writing and will be deemed given or delivered when delivered personally, by
registered or
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certified mail, by legible facsimile transmission or by overnight courier (fare
prepaid) addressed as follows:
<TABLE>
<S> <C>
If to Ansoft or Sub, to: With a copy to:
Ansoft Corporation Buchanan Ingersoll Professional
Four Station Square, Suite 200 Corporation
Pittsburgh, PA 15219 One Oxford Centre, 301 Grant Street
Attn: Anthony L. Ryan Pittsburgh, PA 15219
Telecopy: 412-471-9427 Attn: Ronald W. Schuler, Esquire
Telecopy: 412-562-1041
If to PNC, to:
Pacific Numerix Corporation
Four Station Square, Suite 200
Pittsburgh, PA 15219
Attn: Anthony L. Ryan
Telecopy: 412-471-9427
</TABLE>
or to such address as such party may indicate by a notice delivered to the other
parties. Notice will be deemed received the same day (when delivered personally
or when sent by facsimile transmission with evidence of delivery), five (5) days
after mailing (when sent by registered or certified mail) and the next business
day (when delivered by overnight courier). Any party to this Agreement may
change its address to which all communications and notices may be sent by
addressing notices of such change in the manner provided.
6.3 Assignment
This Agreement may not be assigned by any party without the prior written
consent of the other parties.
6.4 Entire Agreement; Amendments
This Agreement along with any schedules or exhibits attached hereto and the
documents delivered in connection herewith is an integrated document, contains
the entire agreement between the parties, wholly cancels, terminates and
supersedes any and all previous and/or contemporaneous oral agreements,
negotiations, commitments and writings of the parties with respect to such
subject matter. No change, modification, extension, termination, notice of
termination, discharge, abandonment or waiver of this Agreement or any of its
provisions, nor any representation, promise or condition relating to this
Agreement, will be binding upon any party unless made in writing and signed by
such party. This Agreement may be amended, modified, supplemented, extended or
abandoned by the mutual agreement of the partners at any time prior to the
Effective Time, even following stockholder approval, provided that after
stockholder approval is received the amendment does not (1) alter or change the
amount or kind of merger consideration received (2) alter or change any term of
the articles of incorporation of PNC, or (3) alter or change any of the terms
and conditions of the agreement in a way that would adversely affect the holders
of any class or series of securities held by such stockholders.
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6.5 Interpretation
Article titles and headings to Sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of any of the provisions of this Agreement. All references to
Sections and subsections contained in this Agreement refer to the Sections and
subsections of this Agreement. All references to Annexes, Schedules or Exhibits
contained in this Agreement are references to the Annexes, Schedules or Exhibits
described on the list immediately following the signature page hereto. All
references to the words "include" or "including" mean "including without
limitation." Any and all Schedules, Exhibits, statements, reports, certificates
or other documents or instruments referred to in or attached to this Agreement,
including the "Background" portion of this Agreement, are incorporated by
reference as though fully set forth at the point referred to in this Agreement.
There will be no presumption against any party on the ground that such party was
responsible for preparing this Agreement or any part of it. All pronouns and any
variations thereof will be deemed to refer to the masculine, feminine, neuter,
singular or plural as the context may require.
6.6 Waivers
Any term or provision of this Agreement may be waived, or the time for its
performance may be extended, by the party or parties entitled to the benefit
thereof, but any such waiver must be in writing and must comply with the notice
provisions contained in Section 6.2. The failure of any party to enforce at any
time any provision of this Agreement will not be construed to be a waiver of
such provision, nor in any way to affect the validity of this Agreement or any
part of it or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement will be held to constitute
a waiver of any other or subsequent breach.
6.7 Partial Invalidity
Wherever possible, each provision will be interpreted in such manner as to
be effective and valid under applicable law, but in case any one or more of
these provisions will, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
will not affect any other provisions of this Agreement, and this Agreement will
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein, unless the deletion of such
provision or provisions would result in such a material change as to cause the
completion of these transactions to be unreasonable.
6.8 Counterparts
This Agreement may be executed in one or more counterparts, each of which
will be considered an original instrument and all of which together will be
considered one and the same agreement, and will become effective when
counterparts, which together contain the signatures of each party, will have
been delivered to Ansoft and PNC. Delivery of executed signature pages by
facsimile transmission will constitute effective and binding execution and
delivery of this Agreement.
6.9 Third-Party Beneficiaries
This Agreement will not confer any rights or remedies upon any person other
than the parties to this Agreement and their respective successors and permitted
assigns.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Merger Agreement to be
executed on as of the date first written above.
<TABLE>
<S> <C>
ANSOFT CORPORATION
By: /s/ NICHOLAS CSENDES
------------------------------------------------
Name: Nicholas Csendes
Title: President and CEO
ANSOFT ACQUISITION CORP.
By: /s/ NICHOLAS CSENDES
------------------------------------------------
Name: Nicholas Csendes
Title: President
PACIFIC NUMERIX CORPORATION
By: /s/ NICHOLAS CSENDES
------------------------------------------------
Name: Nicholas Csendes
Title: President
</TABLE>
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ANNEX B
RIGHTS OF DISSENTING OWNERS
92A.300 DEFINITIONS. As used in NRS 92A.300 to 92A.500, inclusive, unless
the context otherwise requires, the words and terms defined in NRS 92A.305 to
92A.335, inclusive, have the meanings ascribed to them in those sections.
92A.305 "BENEFICIAL STOCKHOLDER" DEFINED. "Beneficial stockholder" means a
person who is a beneficial owner of shares held in a voting trust or by a
nominee as the stockholder of record.
92A.310 "CORPORATE ACTION" DEFINED. "Corporate action" means the action of
a domestic corporation.
92A.315 "DISSENTER" DEFINED. "Dissenter" means a stockholder who is
entitled to dissent from a domestic corporation's action under NRS 92A.380 and
who exercises that right when and in the manner required by NRS 92A.410 to
92A.480, inclusive.
92A.320 "FAIR VALUE" DEFINED. "Fair value," with respect to a dissenter's
shares, means the value of the shares immediately before the effectuation of the
corporate action to which he objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be inequitable.
92A.325 "STOCKHOLDER" DEFINED. "Stockholder" means a stockholder of record
or a beneficial stockholder of a domestic corporation.
92A.330 "STOCKHOLDER OF RECORD" DEFINED. "Stockholder of record" means the
person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic corporation.
92A.335 "SUBJECT CORPORATION" DEFINED. "Subject corporation" means the
domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective or
the surviving or acquiring entity of that issuer after the corporate action
becomes effective.
92A.340 COMPUTATION OF INTEREST. Interest payable pursuant to NRS 92A.300
to 92A.500, inclusive, must be computed from the effective date of the action
until the date of payment, at the average rate currently paid by the entity on
its principal bank loans or, if it has no bank loans, at a rate that is fair and
equitable under all of the circumstances.
92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP. A
partnership agreement of a domestic limited partnership or, unless otherwise
provided in the partnership agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited partnership are
available for any class or group of partnership interests in connection with any
merger or exchange in which the domestic limited partnership is a constituent
entity.
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92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED LIABILITY
COMPANY. The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited limited-liability company is a constituent entity.
92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT
CORPORATION. 1. Except as otherwise provided in subsection 2 and unless
otherwise provided in the articles or bylaws, any member of any constituent
domestic nonprofit corporation who voted against the merger may, without prior
notice, but within 30 days after the effective date of the merger, resign from
membership and is thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before his resignation
and is thereby entitled to those rights, if any, which would have existed if
there had been no merger and the membership had been terminated or the member
had been expelled.
2. Unless otherwise provided in its articles of incorporation or bylaws, no
member of a domestic nonprofit corporation, including, but not limited to, a
cooperative corporation, which supplies services described in chapter 704 of NRS
to its members only, and no person who is a member of a domestic nonprofit
corporation as a condition of or by reason of the ownership of an interest in
real property, may resign and dissent pursuant to subsection 1.
92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS AND
TO OBTAIN PAYMENT FOR SHARES. 1. Except as otherwise provided in NRS 92A.370 to
92A.390, a stockholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic corporation
is a party:
(1) If approval by the stockholders is required for the merger by
NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation and
he is entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged with
its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's interests
will be acquired, if he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders
to the event that the articles of incorporation, bylaws or a resolution of
the board of directors provides that voting or nonvoting stockholders are
entitled to dissent and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under NRS
92A.300 to 92A.500, inclusive, may not challenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with respect to him
or the domestic corporation.
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92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN CLASSES OR
SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER. 1. There is no
right of dissent with respect to a plan of merger or exchange in favor of
stockholders of any class or series which, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting at
which the plan of merger or exchange is to be acted on, were either listed on a
national securities exchange, included in the national market system by the
National Association of Securities Dealers, Inc., or held by at least 2,000
stockholders of record, unless:
(a) The articles of incorporation of the corporation issuing the
shares provide otherwise; or
(b) The holders of the class or series are required under the plan of
merger or exchange to accept for the shares anything except:
(1) Cash, owner's interests or owner's interests and cash in lieu
of fractional owner's interests of:
(I) The surviving or acquiring entity; or
(II) Any other entity which, at the effective date of the plan
of merger or exchange, were either listed on a national securities
exchange, included in the national market system by the National
Association of Securities Dealers, Inc., or held of record by a
least 2,000 holders of owner's interests of record; or
(2) A combination of cash and owner's interests of the kind
described in sub-subparagraphs (I) and (II) of subparagraph (1) of
paragraph (b).
2. There is no right of dissent for any holders of stock of the surviving
domestic corporation if the plan of merger does not require action of the
stockholders of the surviving domestic corporation under NRS 92A.130.
92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY TO
SHARES REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER. 1. A
stockholder of record may assert dissenter's rights as to fewer than all of the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the subject corporation in
writing of the name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares held
on his behalf only if:
(a) He submits to the subject corporation the written consent of the
stockholder of record to the dissent not later than the time the beneficial
stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the
beneficial stockholder or over which he has power to direct the vote.
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92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT. 1. If a
proposed corporate action creating dissenters' rights is submitted to a vote at
a stockholders' meeting, the notice of the meeting must state that stockholders
are or may be entitled to assert dissenters' rights under NRS 92A.300 to
92A.500, inclusive, and be accompanied by a copy of those sections.
2. If the corporate action creating dissenters' rights is taken by written
consent of the stockholders or without a vote of the stockholders, the domestic
corporation shall notify in writing all stockholders entitled to assert
dissenters' rights that the action was taken and send them the dissenter's
notice described in NRS 92A.430. (Last amended by Ch. 208, L. '97, eff.
10-1-97.)
92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES. 1. If a proposed
corporate action creating dissenters' rights is submitted to a vote at a
stockholders' meeting, a stockholder who wishes to assert dissenter's rights:
(a) Must deliver to the subject corporation, before the vote is taken,
written notice of his intent to demand payment for his shares if the
proposed action is effectuated; and
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1 is
not entitled to payment for his shares under this chapter.
92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT
RIGHTS; CONTENTS. 1. If a proposed corporate action creating dissenters' rights
is authorized at a stockholders' meeting, the subject corporation shall deliver
a written dissenter's notice to all stockholders who satisfied the requirements
to assert those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and when
certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to
what extent the transfer of the shares will be restricted after the demand
for payment is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to the news media or to the stockholders of the terms of
the proposed action and requires that the person asserting dissenter's
rights certify whether or not he acquired beneficial ownership of the
shares before that date;
(d) Set a date by which the subject corporation must receive the
demand for payment, which may not be less than 30 nor more than 60 days
after the date the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
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92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF RIGHTS
OF STOCKHOLDER. 1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice for this
certification; and
(c) Deposit his certificates, if any, in accordance with the terms of
the notice.
2. The stockholder who demands payment and deposits his certificates, if
any, before the proposed corporate action is taken retains all other rights of a
stockholder until those rights are canceled or modified by the taking of the
proposed corporate action.
3. The stockholder who does not demand payment or deposit his certificates
where required, each by the date set forth in the dissenter's notice, is not
entitled to payment for his shares under this chapter. (Last amended by Ch. 208,
L. '97, eff. 10-1-97.)
92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER DEMAND
FOR PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER. 1. The subject corporation may
restrict the transfer of shares not represented by a certificate from the date
the demand for their payment is received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the proposed corporate
action.
92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS. 1. Except as otherwise
provided in NRS 92A.470, within 30 days after receipt of a demand for payment,
the subject corporation shall pay each dissenter who complied with NRS 92A.440
the amount the subject corporation estimates to be the fair value of his shares,
plus accrued interest. The obligation of the subject corporation under this
subsection may be enforced by the district court:
(a) Of the county where the corporation's registered office is
located; or
(b) At the election of any dissenter residing or having its registered
office in this state, of the county where the dissenter resides or has its
registered office. The court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, a statement
of income for that year, a statement of changes in the stockholders' equity
for that year and the latest available interim financial statements, if
any;
(b) A statement of the subject corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under NRS
92A.480; and
14
<PAGE> 131
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF DISSENTER'S
NOTICE. 1. A subject corporation may elect to withhold payment from a dissenter
unless he was the beneficial owner of the shares before the date set forth in
the dissenter's notice as the date of the first announcement to the news media
or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment, after
taking the proposed action, it shall estimate the fair value of the shares, plus
accrued interest, and shall offer to pay this amount to each dissenter who
agrees to accept it in full satisfaction of his demand. The subject corporation
shall send with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a statement of
the dissenters' right to demand payment pursuant to NRS 92A.480.
92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT
CORPORATION; DEMAND FOR PAYMENT OF ESTIMATE. 1. A dissenter may notify the
subject corporation in writing of his own estimate of the fair value of his
shares and the amount of interest due, and demand payment of his estimate, less
any payment pursuant to NRS 92A.460, or reject the offer pursuant to NRS 92A.470
and demand payment of the fair value of his shares and interest due, if he
believes that the amount paid pursuant to NRS 92A.460 or offered pursuant to NRS
92A.470 is less than the fair value of his shares or that the interest due is
incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this section
unless he notifies the subject corporation of his demand in writing within 30
days after the subject corporation made or offered payment for his shares.
92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT
CORPORATION; POWERS OF COURT; RIGHTS OF DISSENTER. 1. If a demand for payment
remains unsettled, the subject corporation shall commence a proceeding within 60
days after receiving the demand and petition the court to determine the fair
value of the shares and accrued interest. If the subject corporation does not
commence the proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it shall
commence the proceeding in the county where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
entity was located.
3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the proceeding
as in an action against their shares. All parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced under
subsection 2 is plenary and exclusive. The court may appoint one or more persons
as appraisers to receive evidence and recommend a decision on the question of
fair value. The appraisers have the powers described in the order appointing
them, or any amendment thereto. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
15
<PAGE> 132
5. Each dissenter who is made a party to the proceeding is entitled to a
judgment:
(a) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the subject
corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the subject corporation elected to withhold payment
pursuant to NRS 92A.470.
92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS AND
FEES. 1. The court in a proceeding to determine fair value shall determine all
of the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess the
costs against the subject corporation, except that the court may assess costs
against all or some dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily, vexatiously or not in
good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if
the court finds the subject corporation did not substantially comply with
the requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of
any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously or not in good
faith with respect to the rights provided by NRS 92A.300 to 92A.500,
inclusive.
3. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the subject corporation, the
court may award to those counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess
the costs against the subject corporation, except that the court may assess
costs against all or some of the dissenters who are parties to the proceeding,
in amounts the court finds equitable, to the extent the court finds that such
parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68
or NRS 17.115.
16
<PAGE> 133
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising in
connection with certain lawsuits to which they may be made parties by reason of
their being directors, officers, employees or agents if they have been
successful on the merits or otherwise. Article VII of the Registrant's
Certificate of Incorporation and Article VI of the Registrant's Bylaws provide
for indemnification of the Registrant's directors, officers, employees and other
agents to the extent and under the circumstances permitted by Delaware Law. The
Registrant has also entered into agreements with its directors and officers that
will require the Registrant, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors to the fullest extent not prohibited by law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The following exhibits are filed herewith or incorporated herein by
reference:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 19, 1999,
by and among Ansoft Corporation, Ansoft Acquisition Corp.
and Pacific Numerix (without exhibits) (included as Appendix
A to the proxy statement/prospectus forming a part of this
Registration Statement and incorporated herein by
reference).
3.1 Amended and Restated Certificate of Incorporation of Ansoft
(incorporated by reference from Registration Statement No.
33-40189).
3.2 Certificate of Amendment to Ansoft's Amended and Restated
Certificate of Incorporation (incorporated by reference from
Registration Statement No. 333-40189).
3.3 Bylaws of Ansoft, (incorporated by reference from
Registration Statement No. 333-1398).
5.1 Opinion of Buchanan Ingersoll Professional Corporation,
regarding the validity of the securities being registered
(filed herewith).
10.1 1988 Stock Option Plan of the Company (incorporated by
reference from Registration Statement No. 333-1398).
10.2 1995 Stock Option Plan of the Company (incorporated by
reference from Registration Statement No. 333-1398).
10.3 Zoltan Cendes Stock Option Agreement, dated April 30, 1995
(incorporated by reference from Registration Statement No.
333-1398).
</TABLE>
II-1
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.4 Office Lease Agreement between Commerce Court Associates and
the Company dated June 7, 1989 (incorporated by reference
from Registration Statement No. 333-1398).
10.5 Amendment No. 1 to Office Lease Agreement between Commerce
Court Associates and the Company dated March 17, 1994
(incorporated by reference from Registration Statement No.
333-1398).
10.6 Software Distribution Agreement, by and between the Company
and the Hewlett-Packard, dated January 1, 1994 (incorporated
by reference from Registration Statement No. 333-1398).
10.7 First Amendment to Software Distribution Agreement, by and
between the Company and Hewlett-Packard, dated May 9, 1995
(incorporated by reference from Registration Statement No.
333-1398).
10.8 Second Amendment to Software Distribution Agreement, by and
between the Company and Hewlett-Packard, dated September 7,
1995 (incorporated by reference from Registration Statement
No. 333-1398).
10.9 Underwriting Agreement dated April 3, 1996 by and between
Registrant and Janney Montgomery Scott Inc. and Pennsylvania
Merchant Group Ltd., as representatives for the Underwriters
identified therein (incorporated by reference from
Registration Statement No. 333-1390).
10.10 Jacob K. White Stock Option Agreement dated February 1,
1996, as amended (incorporated by reference from
Registration Statement No. 333-40189).
10.11 John N. Whelihan Stock Option Agreement dated February 1,
1996, as amended (incorporated by reference from
Registration Statement No. 333-40189).
10.12 Asset Purchase Agreement by and between Ansoft Corporation
and The MacNeal-Schwendler Corporation dated as of July 24,
1996 for the Electronic Business Unit (incorporated by
reference from the Company's Current Report filed on Form
8-K dated August 9, 1996, as amended by the Company's
Current Report filed on Form 8-K/A dated October 8, 1997).
10.13 Stock Purchase Agreement by and between Ansoft Corporation
and Dr. Ulrich L. Rohde and Dr. Meta Rohde dated as of April
9, 1997 (incorporated by reference from the Company's
Current Report filed on form 8-K dated April 22, 1997, as
amended by the Company's Current Report filed on Form 8-K/A
dated June 26, 1997.
10.14 Registration Rights Agreement between the Company and Dr.
Ulrich L. Rohde and Dr. Meta Rohde dated as of April 9, 1997
(incorporated by reference from Registration Statement No.
333-40189).
21.1 Subsidiaries of the registrant (incorporated by reference
from the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1997).
23.1 Consent of KPMG LLP
23.2 Consent of Semple and Cooper LLP
</TABLE>
II-2
<PAGE> 135
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
23.3 Consent of Buchanan Ingersoll Professional Corporation
(contained in their opinion to be filed as Exhibit 5.1).
24.1 Power of Attorney (filed herewith on signature page).
99.1 Form of proxy card for Pacific Numerix special meeting
(filed herewith)
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE ADDITIONS
AS OF THE CHARGED TO BALANCE AS OF
BEGINNING OF COSTS AND THE END OF
THE PERIOD EXPENSES DEDUCTIONS THE PERIOD
------------ ---------------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Three-month period ended July 31,
1999
Allowance for doubtful accounts... 175 -- -- 175
Year ended April 30, 1999
Allowance for doubtful
accounts..................... 150 25 -- 175
Year ended April 30, 1998
Allowance for doubtful
accounts..................... 125 25 -- 150
Year ended April 30, 1997
Allowance for doubtful
accounts..................... 125 -- -- 125
</TABLE>
ITEM 22. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(e) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to the initial BONA FIDE offering thereof.
B. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
C. The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (B) immediately proceeding, or (ii) that purports to meet
the requirements of
II-3
<PAGE> 136
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purpose of determining any liability under the Securities Act of
1933, as amended, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
D. Insofar a indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed it the Act and will be governed by the final adjudication of
such issue.
E. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporate (by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
F. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all in concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-4
<PAGE> 137
SIGNATURES
Pursuant to he requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh on November
19, 1999.
ANSOFT CORPORATION
By: /s/ NICHOLAS CSENDES
------------------------------------
Nicholas Csendes
CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes, and appoints Nicholas Csendes and Anthony L. Ryan
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendment) to this registration statement and to file the same with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof. This power of
attorney may be executed in counterparts.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON NOVEMBER 19, 1999:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ NICHOLAS CSENDES Director and President and Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer)
Nicholas Csendes
/s/ ZOLTAN CENDES Director and Chief Technology Officer and
- --------------------------------------------- Chairman of the Board of Directors
Zoltan Cendes
/s/ THOMAS A.N. MILLER Director
- ---------------------------------------------
Thomas A.N. Miller
/s/ ULRICH L. ROHDE Director
- ---------------------------------------------
Ulrich L. Rohde
/s/ JOHN N. WELIHAN Director
- ---------------------------------------------
John N. Welihan
/s/ JACOB WHITE Director
- ---------------------------------------------
Jacob White
/s/ ANTHONY L. RYAN Chief Financial Officer (Principal Financial and
- --------------------------------------------- Accounting Officer
Anthony L. Ryan
</TABLE>
II-5
<PAGE> 138
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 19, 1999,
by and among Ansoft Corporation, Ansoft Acquisition Corp.
and Pacific Numerix (without exhibits) (included as Appendix
A to the proxy statement/prospectus forming a part of this
Registration Statement and incorporated herein by
reference).
3.1 Amended and Restated Certificate of Incorporation of Ansoft
(incorporated by reference from Registration Statement No.
33-40189).
3.2 Certificate of Amendment to Ansoft's Amended and Restated
Certificate of Incorporation (incorporated by reference from
Registration Statement No. 333-40189).
3.3 Bylaws of Ansoft, (incorporated by reference from
Registration Statement No. 333-1398).
5.1 Opinion of Buchanan Ingersoll Professional Corporation,
regarding the validity of the securities being registered
(filed herewith).
10.1 1988 Stock Option Plan of the Company (incorporated by
reference from Registration Statement No. 333-1398).
10.2 1995 Stock Option Plan of the Company (incorporated by
reference from Registration Statement No. 333-1398).
10.3 Zoltan Cendes Stock Option Agreement, dated April 30, 1995
(incorporated by reference from Registration Statement No.
333-1398).
10.4 Office Lease Agreement between Commerce Court Associates and
the Company dated June 7, 1989 (incorporated by reference
from Registration Statement No. 333-1398).
10.5 Amendment No. 1 to Office Lease Agreement between Commerce
Court Associates and the Company dated March 17, 1994
(incorporated by reference from Registration Statement No.
333-1398).
10.6 Software Distribution Agreement, by and between the Company
and the Hewlett-Packard, dated January 1, 1994 (incorporated
by reference from Registration Statement No. 333-1398).
10.7 First Amendment to Software Distribution Agreement, by and
between the Company and Hewlett-Packard, dated May 9, 1995
(incorporated by reference from Registration Statement No.
333-1398).
10.8 Second Amendment to Software Distribution Agreement, by and
between the Company and Hewlett-Packard, dated September 7,
1995 (incorporated by reference from Registration Statement
No. 333-1398).
10.9 Underwriting Agreement dated April 3, 1996 by and between
Registrant and Janney Montgomery Scott Inc. and Pennsylvania
Merchant Group Ltd., as representatives for the Underwriters
identified therein (incorporated by reference from
Registration Statement No. 333-1390).
10.10 Jacob K. White Stock Option Agreement dated February 1,
1996, as amended (incorporated by reference from
Registration Statement No. 333-40189).
</TABLE>
II-6
<PAGE> 139
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.11 John N. Whelihan Stock Option Agreement dated February 1,
1996, as amended (incorporated by reference from
Registration Statement No. 333-40189).
10.12 Asset Purchase Agreement by and between Ansoft Corporation
and The MacNeal-Schwendler Corporation dated as of July 24,
1996 for the Electronic Business Unit (incorporated by
reference from the Company's Current Report filed on Form
8-K dated August 9, 1996, as amended by the Company's
Current Report filed on Form 8-K/A dated October 8, 1997).
10.13 Stock Purchase Agreement by and between Ansoft Corporation
and Dr. Ulrich L. Rohde and Dr. Meta Rohde dated as of April
9, 1997 (incorporated by reference from the Company's
Current Report filed on form 8-K dated April 22, 1997, as
amended by the Company's Current Report filed on Form 8-K/A
dated June 26, 1997.
10.14 Registration Rights Agreement between the Company and Dr.
Ulrich L. Rohde and Dr. Meta Rohde dated as of April 9, 1997
(incorporated by reference from Registration Statement No.
333-40189).
21.1 Subsidiaries of the registrant (incorporated by reference
from the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1997).
23.1 Consent of KPMG LLP
23.2 Consent of Semple and Cooper LLP
23.3 Consent of Buchanan Ingersoll Professional Corporation
(contained in their opinion to be filed as Exhibit 5.1).
24.1 Power of Attorney (filed herewith on signature page).
99.1 Form of proxy card for Pacific Numerix special meeting
(filed herewith)
</TABLE>
II-7
<PAGE> 1
Exhibit 5.01
November 19, 1999
Ansoft Corporation
Four Station Square, Suite 200
Pittsburgh, PA 15219
Dear Sirs:
We have acted as counsel to Ansoft Corporation, a Delaware corporation
("Ansoft," the "Company" or the "Registrant"), in connection with its
Registration Statement on Form S-4 (the "Registration Statement") filed with
the Securities and Exchange Commission relating to the proposed offering of the
Company's common stock, par value $.01 per share (the "Shares"), pursuant to
the terms of the Agreement and Plan of Merger, dated as of November 19, 1999,
(the "Merger Agreement") by and among Ansoft, Ansoft Acquisition Corp., a
Nevada corporation and a wholly-owned subsidiary of Ansoft ("Merger Sub") and
Pacific Numerix Corporation ("PNC"), which provides for the merger of Merger
Sub with and into PNC, with PNC surviving the merger (the "Merger"). The Shares
are to be issued to the shareholders of PNC in accordance with the terms of the
Merger Agreement, in exchange for such shareholder's shares of PNC common and
preferred stock.
In connection with the proposed offering, we have examined the Company's
Certificate of Incorporation and Bylaws, as presently in effect, the Company's
relevant corporate proceedings, the draft Registration Statement on Form S-4
covering the proposed offering, including the proxy statement/prospectus filed
as a part of the Registration Statement, the Merger Agreement, and such other
documents, records, certificates or public officials, statutes and decisions as
we considered necessary to express the opinions contained herein. In the
examination of such documents, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity to the original documents of all documents submitted to us
as certified or photostatic copies.
Based on the foregoing, we are of the opinion that:
1. The Shares have been duly authorized for issuance.
2. The Shares when issued and delivered to the shareholders of PNC in
exchange for shares of PNC common and preferred stock in accordance with the
terms of the Merger Agreement, will be validly issued, fully paid and
nonassessable.
Our opinion is limited to the laws of the Commonwealth of Pennsylvania,
the General Corporation Law of the State of Delaware and the United States of
America, insofar as such laws apply, and we express no opinion as to conflicts
of law rules, or the laws of any states or
<PAGE> 2
jurisdictions, including federal laws regulating securities or other federal
laws, or the rules and regulations of stock exchanges or any other regulatory
body, other than as specified above.
We assume no obligation to advise you of any changes to the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this opinion letter and shall not be quoted in whole
or in part or otherwise referred to, nor filed with or furnished to any
governmental agency or other person or other entity, without the prior written
consent of this firm.
We hereby consent to the filing of this opinion letter as Exhibit 5.01 to
the Registration Statement and to any reference to us in the Prospectus which
is a part hereof.
Sincerely,
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
By: /s/ Ronald W. Schuler
---------------------------------
Ronald W. Schuler
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Ansoft Corporation:
The audits referred to in our report dated May 26, 1999, included the related
financial statement schedule for each of the years in the three-year period
ended April 30, 1999, included in the registration statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" and "Selected Financial Data" in the
prospectus.
KPMG LLP
/s/ KPMG LLP
- ------------------------
Pittsburgh, Pennsylvania
November 22, 1999
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
As independent certified public accountants, we hereby consent to the inclusion
of our report dated February 13, 1999, on the financial statements of Pacific
Numerix Corporation for the years ended December 31, 1998, 1997 and 1996, in
Ansoft Corporation's Form S-4 Registration Statement, and to the reference to us
under the caption "Experts" contained in the Prospectus.
/s/ Semple & Cooper, LLP
- ------------------------
Semple & Cooper, LLP
Certified Public Accountants
Phoenix, Arizona
November 19, 1999
INDEPENDENT MEMBER OF THE BDO SEIDMAN ALLIANCE
<PAGE> 1
Exhibit 99.01
PROXY
PACIFIC NUMBERIX CORPORATION
This Proxy Is Solicited On Behalf Of The Board of Directors Of The Company
The undersigned hereby appoints Nicholas Csendes or Anthony L. Ryan, or any one
or more of them, with power of substitution to each, as proxies to represent and
to vote as designated on the reverse all the shares of Common Stock and
Preferred Stock held of record at the close of business on October 31, 1999 by
the undersigned at the special meeting of the Stockholders of Pacific Numerix
Corporation to be held at the offices of Buchanan Ingersoll Professional
Corporation, One Oxford Centre, Pittsburgh, PA 15219, on ____________, 1999 at
8:00 a.m. and at any adjournment thereof.
- --------------------------------------------------------------------------------
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
SPECIAL MEETING OF STOCKHOLDERS
PACIFIC NUMERIX CORPORATION
________________, 1999
- -------------------------------------------------------------------------------
[ X ] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
FOR AGAINST ABSTAIN
1. To approve the merger [ ] [ ] [ ]
agreement in which
Ansoft Acquisition
Corp., a wholly owned
subsidiary of Ansoft
Corporation will merge
with and into the
Company.
This proxy, when properly executed will be voted in the manner directed herein
by the undersigned stockholder. Unless otherwise specified in the squares
provided, the proxies shall vote FOR the approval of the merger agreement. The
proxies shall have discretionary power to vote upon such other matters as may
properly come before the meeting or any adjournment thereof.
A majority of such proxies who shall be present and shall act at the meeting (or
if only one shall be present and act, then that one) may exercise all powers
hereunder.
By: _______________________________________________ Dated:___________, 1999
NOTE: Stockholder sign here exactly as name appears hereon.
