<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 18, 2000
(July 12, 2000)
SPATIAL TECHNOLOGY INC.
-----------------------
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-288-42 84-1035353
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No)
2425 55TH STREET, SUITE 100
BOULDER, COLORADO 80301
(303) 544-2900
(Address of Principal Executive Offices
and telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On July 12, 2000 (the "Closing Date"), pursuant to the terms of the Asset
Purchase Agreement (the "Purchase Agreement") by and Between Spatial Technology
Inc, a Delaware corporation (the "Company"), Prescient Technologies, Inc., a
Delaware corporation ("Prescient") and Stone & Webster Incorporated, a Delaware
corporation the Company acquired certain assets and liabilities of Prescient
Technologies, Inc. ("Prescient") for total consideration of approximately $1.2
million, including $100,000 cash and 300,000 shares of common stock (the
"Acquisition"). The purchase price was determined through negotiations between
the Company and Prescient.
In connection with the Acquisition, the parties to the Purchase
Agreement also executed an Escrow Agreement, pursuant to which an additional
50,000 shares of common stock (the "Escrow Shares") are to be held in escrow
pursuant to the Purchase Agreement, and will be released to Prescient upon the
attainment of certain performance objectives relating to the execution of
certain customer contracts.
The forward looking statements contained herein involve risks and
uncertainties. Actual results and developments may differ materially from those
described herein, due to a number of factors, including future performance and
additional factors discussed in the Company's most recent Form 10-KSB.
(b) Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited financial statements of Prescient Technologies, Inc. as of December
31, 1998 and 1999 and for the years then ended and unaudited interim
financial statements of Prescient Technologies, Inc. as of June 30, 2000 and
for the six months ended June 30, 1999 and 2000.
2
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Spatial Technology Inc.:
We have audited the accompanying balance sheets of Prescient Technologies, Inc.
as of December 31, 1998 and 1999, and the related statements of operations,
stockholder's deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Prescient Technologies, Inc. as
of December 31, 1998 and 1999, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Boulder, Colorado
October 6, 2000
3
<PAGE> 4
PRESCIENT TECHNOLOGIES, INC.
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1998 1999 2000
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Trade accounts receivable, net of allowance
for doubtful accounts of $59, $25 and $25
in 1998, 1999 and 2000, respectively .............. $ 1,005 1,016 298
Prepaid expenses and other ......................... 120 280 209
-------- -------- --------
Total current assets ........................... 1,125 1,296 507
Property and equipment, net ........................... 599 370 209
Capitalized software development costs, net ........... 555 715 817
-------- -------- --------
Total assets ................................... $ 2,279 2,381 1,533
======== ======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Bank overdraft ..................................... $ -- 130 60
Trade accounts payable ............................. 182 118 181
Due to affiliate, net .............................. 10,707 15,584 16,946
Accrued expenses and other liabilities ............. 140 322 162
Deferred revenue ................................... 331 490 636
-------- -------- --------
Total liabilities .............................. 11,360 16,644 17,985
-------- -------- --------
Stockholder's deficit
Common stock, $.01 par value, 12,000,000 shares
authorized; 10,000,000 shares issued and
outstanding in 1998, 1999 and 2000 ................ 100 100 100
Additional paid-in capital ......................... 2 2 2
Accumulated deficit ................................ (9,083) (14,265) (16,454)
Subscription receivable ............................ (100) (100) (100)
-------- -------- --------
Total stockholder's deficit .................... (9,081) (14,263) (16,452)
-------- -------- --------
Commitments and contingencies
Total liabilities and stockholder's deficit .... $ 2,279 2,381 1,533
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
PRESCIENT TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30
----------------------- ------------------------
1998 1999 1999 2000
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
License fees .................... $ 2,081 1,929 906 281
Maintenance ..................... 819 906 449 450
Professional services ........... 865 278 179 293
------- ------- ------- -------
Total revenue ............... 3,765 3,113 1,534 1,024
------- ------- ------- -------
Cost of revenue:
License fees .................... 365 860 258 236
Maintenance ..................... 209 214 71 160
Professional services ........... 464 105 44 163
------- ------- ------- -------
Total costs of revenue ...... 1,038 1,179 373 559
------- ------- ------- -------
Gross profit ................ 2,727 1,934 1,161 465
------- ------- ------- -------
Operating expenses:
Sales and marketing ............. 4,700 4,279 2,123 1,757
Research and development ........ 938 1,701 713 630
General and administrative ...... 1,376 1,136 623 267
------- ------- ------- -------
Total operating expenses .... 7,014 7,116 3,459 2,654
------- ------- ------- -------
Net loss .................... $(4,287) (5,182) (2,298) (2,189)
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
PRESCIENT TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDER'S DEFICIT
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------- PAID-IN ACCUMULATED SUBSCRIPTION STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE DEFICIT
---------- ---------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1998 ............. 10,000 $ -- 2 (4,796) -- (4,794)
Issuance of common stock to affiliate.... 9,990,000 100 -- -- (100) --
Net loss ................................ -- -- -- (4,287) -- (4,287)
---------- ---------- ---------- ---------- ---------- ----------
Balances at December 31, 1998 ........... 10,000,000 100 2 (9,083) (100) (9,081)
Net loss ................................ -- -- -- (5,182) -- (5,182)
---------- ---------- ---------- ---------- ---------- ----------
Balances at December 31, 1999 ........... 10,000,000 100 2 (14,265) (100) (14,263)
Net loss (unaudited) .................... -- -- -- (2,189) -- (2,189)
---------- ---------- ---------- ---------- ---------- ----------
Balances at June 30, 2000 (unaudited).... 10,000,000 $ 100 2 (16,454) (100) (16,452)
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
PRESCIENT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30
----------------------- ------------------------
1998 1999 1999 2000
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss .............................................. $(4,287) (5,182) (2,298) (2,189)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization .................... 693 754 365 380
Changes in operating assets and liabilities:
Trade accounts receivable ....................... 930 (11) (208) 718
Prepaid expenses and other assets ............... 207 (160) (43) 71
Trade accounts payable .......................... 121 (64) (23) 63
Due to affiliate ................................ 3,203 4,877 2,275 1,362
Accrued expenses and other liabilities .......... (174) 182 79 (160)
Deferred revenue ................................ (150) 159 253 146
------- ------- ------- -------
Net cash provided by operating activities ..... 543 555 400 391
------- ------- ------- -------
Cash flows from investing activities:
Acquisition of property and equipment ................. (255) (162) (51) (32)
Capitalized software development costs ................ (454) (523) (349) (289)
------- ------- ------- -------
Net cash used by investing activities ......... (709) (685) (400) (321)
------- ------- ------- -------
Cash flows from financing activities - bank overdraft .... -- 130 -- (70)
------- ------- ------- -------
Net decrease in cash and cash equivalents ..... (166) -- -- --
Cash and cash equivalents at beginning of period ......... 166 -- -- --
------- ------- ------- -------
Cash and cash equivalents at end of period ............... $ -- -- -- --
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(1) Organization and Summary of Significant Accounting Policies
(a) Business and Basis of Financial Statement Presentation
Prescient Technologies, Inc. (Prescient or the Company) is a
wholly-owned subsidiary of Stone & Webster, Incorporated, and
was originally incorporated under the laws of the State of
Delaware on May 6, 1992 as Stone & Webster Advanced Systems
Development Services, Inc. On June 13, 1996 the incorporation
was amended, changing the name to Prescient Technologies, Inc.
Prescient, is a provider of engineering data quality software
solutions for manufacturers. The Company's engineering quality
tools are used in aerospace, automotive, electronics and other
discrete manufacturing industries for detecting, assessing,
correcting and preventing product development problems caused
by inaccurate, incomplete or inconsistent design modeling
practices.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The accompanying unaudited financial information as of June 30,
2000 and for the six months ended June 30, 1999 and 2000 has
been prepared in accordance with generally accepted accounting
principles for interim financial information. All significant
adjustments, consisting of only normal and recurring
adjustments, that, in the opinion of management, are necessary
for a fair presentation of the results of operations and cash
flows for the six months ended June 30, 1999 and 2000, have
been included. Operating results for the six months ended June
30, 1999 and 2000 are not necessarily indicative of the results
that may be expected for the full year.
(b) Property and Equipment
Equipment is recorded at cost and depreciated over the useful
lives of the assets, which range from two to three years. Costs
of maintenance and repairs are charged to operations as
incurred. Purchased computer software represents software and
enhancements purchased from third parties, and is amortized
over its estimated useful life of two years, beginning at
purchase, or for enhancements, when the software is
incorporated into the Company's products.
(c) Capitalized Software Development Costs
The Company accounts for software development costs in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, "Accounting for the Costs of Computer Software
to Be Sold, Leased or Otherwise Marketed," which provides that
capitalization of costs begins when technological feasibility
has been established and ceases when the product is available
for general release to customers, at which time amortization
begins on a product-by-product basis. Capitalized costs are
amortized over the estimated useful life of the product or the
ratio of the current gross revenues to the total of current and
estimated total future gross revenues for the product,
whichever is greater. Software development costs capitalized in
the years ended December 31, 1999 and 2000 and the six months
ended June 30, 1999 and 2000 were $457,000, $523,000, $349,000
and $290,000, respectively. Amortization of software
development costs for the years ended December 31, 1999 and
2000 and the six months ended June 30, 1999 and 2000 was
$213,000, $363,000, $165,000 and $187,000, respectively.
8
<PAGE> 9
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(d) Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash
and cash equivalents, trade receivables, accounts payable, and
accrued expenses and other liabilities. The carrying values of
these financial instruments approximate fair value because of
their short-term nature.
(e) Long-Lived Assets and Assets to Be Disposed Of
In accordance with SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
the Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and
used in operations is generally measured by a comparison of the
carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
equal to the amount by which the carrying amounts of the assets
exceed the fair values. Assets to be disposed of are reported
at the lower of the carrying amount or fair value, less costs
to sell. No asset impairment was recognized in 1998, 1999 or
2000.
(f) Revenue Recognition
The Company recognizes revenue in accordance with the
provisions of Statement of Position 97-2, "Software Revenue
Recognition" (SOP 97-2) which requires that revenue for
licensing, selling, leasing, or otherwise marketing computer
software be recognized when evidence of an arrangement exists,
delivery of the product has occurred, collectibility of the
related receivable is assured and the vendor's fee is fixed or
determinable. In addition, revenue is recognized for the
multiple elements of software arrangements based upon the
vendor specific objective evidence of fair value for each
element. Accordingly, revenue from products or services is
recognized based upon shipment of products or performance of
services. In December 1998, the American Institute of Certified
Public Accountants (AICPA) issued SOP No. 98-9, "Modification
of SOP No. 97-2, Software Revenue Recognition, with Respect to
Certain Transactions." SOP No. 98-9 clarifies certain
provisions of SOP No. 97-2, and effectively defers the required
adoption of those provisions until the Company's fiscal year
beginning January 1, 2000. Effective January 1, 1999, the
Company adopted the provisions of SOP No. 98-9, and the impact
on the Company's results of operations, financial position or
cash flows was not material. License fee revenue is recognized
upon completion of a signed contract and delivery of the
software. Revenue from maintenance contracts is deferred and
recognized ratably over the period of the agreement. Training
and consulting revenue is recognized upon completion of the
training or performance of services, respectively.
(g) Stock-Based Compensation
The Company accounts for its stock-based compensation plan in
accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25), and related interpretations. As such, compensation expense
is recorded on the date of grant only if the current fair value
of the underlying stock exceeds the exercise price. Under SFAS
123, "Accounting for Stock-Based Compensation," entities are
permitted to recognize as expense the fair value of all
stock-based awards on the date of grant over the vesting
period. Alternatively, SFAS 123 also allows entities to
continue to apply the provisions of APB 25 and provide pro
forma net earnings disclosures as if the fair-value-based
method defined in SFAS 123 had been applied. The Company has
elected to continue to apply the provisions of APB 25 and
provide the pro forma disclosures required by SFAS 123.
9
<PAGE> 10
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(h) Liquidity
The Company incurred net losses in 1998, 1999 and 2000 and has
a deficit in stockholder's equity as of June 30, 2000. The net
losses have primarily been funded by advances from Stone &
Webster, Incorporated. These advances are reflected in the
accompanying balance sheet as due to affiliate. Without
advances from Stone & Webster, Incorporated, the Company would
be required to obtain additional sources of financing. It is
uncertain such additional sources of financing would be
available to the Company.
(i) Income Taxes
The Company accounts for income taxes under the provisions of
SFAS 109, "Accounting for Income Taxes." SFAS 109 requires the
use of the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income
taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to
differences between the financial statement carrying amounts
and the tax bases of existing assets and liabilities.
(2) Property and Equipment
Property and equipment consists of the following (amounts in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and office equipment ..................... $ 1,719 1,811 1,811
Purchased computer software ....................... 183 253 285
------- ------- -------
1,902 2,064 2,096
Less accumulated depreciation and amortization .... (1,303) (1,694) (1,887)
------- ------- -------
$ 599 370 209
======= ======= =======
</TABLE>
(3) Stockholder's Equity
Stock Options
In July 1998, the Company adopted an equity incentive plan (the Plan)
pursuant to which the Company's Board of Directors may issue restricted
common stock and grant incentive stock options and non-statutory stock
options to employees, directors and consultants. The Plan authorizes
issuances and grants of options to purchase up to 1,900,000 shares of
authorized but unissued common stock. Incentive and non-statutory stock
options generally vest over four years and expire upon the earlier of
30 days after termination of employment or ten years from the date of
grant.
10
<PAGE> 11
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Option activity during the years ended December 31, 1998 and 1999 and
the six months ended June 30, 2000 consisted of the following:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF OPTIONS AVERAGE OPTIONS
OUTSTANDING EXERCISE PRICE EXERCISABLE
----------- -------------- -----------
<S> <C> <C> <C>
Balance at January 1, 1998 .............. -- --
Granted ................................. 388,300 $ 1.50
Forfeited ............................... (35,200) 1.50
--------
Balance at December 31, 1998 ............ 353,100 1.50 --
Granted ................................. 456,000 1.50
Forfeited ............................... (160,700) 1.50
--------
Balance at December 31, 1999 ............ 648,400 1.50 52,600
Granted (unaudited) ..................... -- 1.50
Forfeited (unaudited) ................... (34,500)
--------
Balance at June 30, 2000 (unaudited) .... 613,900 1.50 80,975
========
</TABLE>
The weighted average fair value of all options granted during 1998,
1999 and 2000 was $.81 per share on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: no
expected dividends, volatility of 25%, risk-free interest rate of
approximately 6.4% and an expected life of 10 years. The remaining
weighted average contractual life of options outstanding at December
31, 1999 was approximately 3 years.
If the Company determined compensation expense based on the fair value
of the options at the grant date under SFAS 123, the Company's net loss
would have been approximately $4,142,000 and $5,165,000, for the years
ended December 31, 1998 and 1999, respectively.
Subscription Receivable
In July 1998, Stone & Webster, Incorporated increased its investment by
subscribing to 9,990,000 shares at $.01 per share. The subscription
receivable is reflected as a reduction of equity.
(4) Income Taxes
Income tax benefit relating to losses incurred differs from the amounts
that would result from applying the federal statutory rate as follows
(amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1999
-------- --------
<S> <C> <C>
Expected tax benefit .................................... $(1,500) (1,814)
Change in valuation allowance for deferred tax assets ... 1,424 1,779
Other, net .............................................. 76 35
------- -------
Income tax benefit ...................................... $ -- --
======= =======
</TABLE>
11
<PAGE> 12
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Temporary differences that give rise to significant components of
net deferred tax assets and liabilities are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1999
-------- --------
<S> <C> <C>
Net operating loss carryforwards ............................ $ 4,629 6,457
Other, net .................................................. 83 201
------- -------
Gross deferred tax assets ................................... 4,712 6,658
Valuation allowance ......................................... (4,476) (6,255)
------- -------
Net deferred tax assets ..................................... $ 236 403
======= =======
Deferred tax liabilities - research and development costs ... $ (236) (403)
------- -------
Total deferred tax liabilities .............................. $ (236) (403)
======= =======
</TABLE>
At December 31, 1999 and June 30, 2000, the Company had cumulative net
operating loss carryforwards for income tax purposes of approximately
$14,800,000 and $17,000,000, respectively, which will expire in various
amounts through the year 2020, if not utilized.
Due to the uncertainty regarding the utilization of net operating loss
carryforwards, no tax benefits for losses have been recorded by the
Company in any periods, and a valuation allowance has been recorded for
the entire amount of the deferred tax asset.
(5) Leases
The Company is obligated for payments of approximately $90,000 through
December 31, 2000 for leases related to office space and equipment.
Rent expense for operating leases, which is recognized using the
straight-line method over the lease term, for the years ended December
31, 1998 and 1999 and the six months ended June 30, 1999 and 2000 was
approximately $437,000, $441,000, $215,000 and $304,000, respectively.
(6) Employee Benefit Plans
The Company has a defined contribution 401(k) plan which covers
substantially all employees and allows employee contributions of up to
15% of their compensation, subject to the maximum amount allowed under
the Internal Revenue Code. The Company matches 25% of the first 1% of
an employee's contribution, and may also provide a discretionary
contribution each year. The Company's contributions to the Plan totaled
$27,000 in 1998 and $20,000 in 1999. In addition, the Company's
employees are eligible to participate in a pension plan sponsored by
Stone & Webster Incorporated. Costs of the plan charged to the Company
were $8,000 and $39,000 in 1998 and 1999, respectively.
12
<PAGE> 13
PRESCIENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(7) Revenue and Significant Customers
Revenue by geographic area is summarized as follows (amounts in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------- ----------------
1998 1999 1999 2000
------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
United States .... $2,945 2,385 1,220 940
Europe ........... 615 725 312 66
Asia ............. 205 3 2 18
------ ------ ------ ------
Total ...... $3,765 3,113 1,534 1,024
====== ====== ====== ======
</TABLE>
No individual customers accounted for greater than 10% of total revenue
during 1998 or 1999.
(8) Sale of the Company
On July 12, 2000, substantially all of the net assets of the Company
were acquired by Spatial Technology Inc. (Spatial) for $100,000 cash
and 300,000 shares of the common stock of Spatial. An additional 50,000
shares of Spatial common stock are required to be issued if certain
performance objectives are attained.
13
<PAGE> 14
(b) Unaudited pro forma condensed combined financial statements as of June 30,
2000 and for the six months ended June 30, 2000 and the year ended December
31, 1999.
SPATIAL TECHNOLOGY INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On July 12, 2000, the Company acquired substantially all of the net
assets of Prescient Technologies, Inc. ("Prescient) for total consideration of
$1.2 million, including $100,000 cash and 300,000 shares of common stock. In
addition, the Company may be required to issue an additional 50,000 shares of
common stock if certain performance objectives are met. The additional shares,
if any, will be recorded as additional acquisition consideration at the time of
issuance.
The unaudited pro forma condensed combined balance sheet presents the
financial position of the Company as of June 30, 2000 giving effect to the
Prescient acquisition as if it had occurred on such date. The unaudited pro
forma condensed combined statements of operations of the Company for the six
months ended June 30, 2000 and the year ended December 31, 1999, assume that the
Prescient acquisition was completed on January 1, 1999.
The unaudited pro forma condensed combined financial statements have
been derived from the historical financial statements of the Company. The pro
forma adjustments and the assumptions on which they are based are described in
the accompanying notes to the unaudited pro forma condensed combined financial
statements. The unaudited pro forma condensed combined financial statements,
including the notes thereto, are qualified in their entirety by reference to,
and should be read in conjunction with, the historical financial statements and
the notes thereto of the Company which were previously reported in the Company's
Report on Form 10-KSB for the year ended December 31, 1999 and the Quarterly
Reports on Form 10-QSB for the quarters ended March 31, 2000 and June 30, 2000,
and the audited financial statements and the notes thereto of Prescient as of
December 31, 1998 and 1999 and for the years then ended, and the unaudited
interim financial statements as of June 30, 2000 and for the six months ended
June 30, 1999 and 2000, included elsewhere in this Current Report on Form 8-K.
The unaudited pro forma condensed combined financial statements are not
necessarily indicative of the financial position or operating results that would
have occurred had the acquisition of Prescient been completed at that date, or
at the beginning of the period for which the transaction has been given effect,
nor the financial results of the combined company in the future.
14
<PAGE> 15
SPATIAL TECHNOLOGY INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2000
(In Thousands)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
SPATIAL PRESCIENT FOR PRESCIENT TOTAL
------------ ------------ ------------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........... $ 3,331 $ -- $ (100)(a) $ 3,231
Accounts receivable, net............ 4,475 298 -- 4,773
Prepaid expenses and other.......... 819 209 -- 1,028
----------- ----------- ---------- ----------
Total current assets............. 8,625 507 (100) 9,032
Equipment, net......................... 2,513 209 -- 2,722
Software costs, net.................... 2,082 817 (29)(b) 2,870
----------- ----------- ---------- ----------
$ 13,220 $ 1,533 $ (129) $ 14,624
=========== =========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.................... $ 1,370 $ 241 $ (15)(c) $ 1,596
Due to affiliate.................... -- 16,946 (16,946)(d) --
Accrued expenses.................... 1,442 162 (2)(e) 1,602
Deferred revenue.................... 2,569 636 (392)(f) 2,813
----------- ----------- ---------- ----------
Total current liabilities........ 5,381 17,985 (17,355) 6,011
----------- ----------- ---------- ----------
Stockholder's Equity
Common stock........................ 115 100 (97)(a) (g) 118
Additional paid-in capital.......... 32,849 2 940 (a) (g) 33,791
Accumulated deficit................. (24,986) (16,454) 16,283 (h) (25,157)
Subscription receivable............. -- (100) 100 (i) --
Other comprehensive loss............ (139) -- -- (139)
----------- ----------- ---------- ----------
Total stockholders' equity....... 7,839 (16,452) 17,226 8,613
----------- ----------- ---------- ----------
$ 13,220 $ 1,533 $ (129) $ 14,624
=========== =========== ========== ==========
</TABLE>
15
<PAGE> 16
SPATIAL TECHNOLOGY INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
SPATIAL PRESCIENT FOR PRESCIENT TOTAL
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Revenue................................ $ 7,252 $ 1,024 $ -- $ 8,276
Cost of revenue........................ 1,293 559 131 (j) 1,983
----------- ----------- ---------- ----------
Gross profit........................... 5,959 465 (131) 6,293
Operating expenses:
Sales and marketing.................... 3,782 1,757 -- 5,539
Research and development............... 5,398 630 -- 6,028
General and administrative............. 1,796 267 -- 2,063
----------- ----------- ---------- ----------
Total operating expenses............... 10,976 2,654 -- 13,630
----------- ----------- ---------- ----------
Loss from operations................... (5,017) (2,189) (131) (7,337)
Other income (expense)................. 105 -- -- 105
----------- ----------- ---------- ----------
Loss before income taxes............... (4,912) (2,189) (131) (7,232)
Income taxes........................... 138 -- -- 138
----------- ----------- ---------- ----------
Net loss............................... $ (5,050) $ (2,189) $ (131) $ (7,370)
=========== =========== ========== ==========
Loss per common share:
Basic and Diluted...................... $ (0.46) $ (0.66)
Weighted average number of
shares outstanding
Basic and Diluted................... 10,914 300 (a) 11,214
</TABLE>
16
<PAGE> 17
SPATIAL TECHNOLOGY INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
SPATIAL PRESCIENT FOR PRESCIENT TOTAL
------------ ------------ -------------- -----------
<S> <C> <C> <C> <C>
Revenue................................ $ 14,900 $ 3,113 $ -- $ 18,013
Cost of revenue........................ 1,132 1,179 263 (j) 2,574
----------- ----------- ---------- ----------
Gross profit........................... 13,768 1,934 (263) 15,439
Operating expenses:
Sales and marketing.................... 5,918 4,279 -- 10,197
Research and development............... 7,742 1,701 -- 9,443
General and administrative............. 2,362 1,136 -- 3,498
Acquired in-process research
and development...................... 500 -- -- 500
----------- ----------- ---------- ----------
Total operating expenses............... 16,522 7,116 -- 23,638
Loss from operations................... (2,754) (5,182) (263) (8,199)
Other income (expense)................. 139 -- -- 139
----------- ----------- ---------- ----------
Net income (loss) before income taxes.. (2,615) (5,182) (263) (8,060)
Income taxes........................... 246 -- -- 246
----------- ----------- ---------- ----------
Net income (loss)...................... $ (2,861) $ (5,182) $ (263) $ (8,306)
=========== =========== ========== ==========
Loss per common share:
Basic and Diluted...................... $ (0.31) $ (0.86)
Weighted average number of
shares outstanding
Basic and Diluted.................... 9,345 300 (a) 9,645
</TABLE>
17
<PAGE> 18
SPATIAL TECHNOLOGY INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The Prescient acquisition was accounted for using the purchase method
of accounting. The pro forma adjustments have been prepared on the basis of
assumptions described in the following notes and includes assumptions relating
to the allocation of the consideration paid for the assets and liabilities of
Prescient based on preliminary estimates of their fair values. The actual
allocation of such consideration may differ from that reflected in the pro forma
financial information after valuations and finalization of the purchase
accounting entries, including the allocation to acquired in-process research and
development. In the opinion of the Company's management, all adjustments
necessary to present fairly such pro forma financial information have been made
based on the terms and structure of the Prescient acquisition agreement.
The pro forma financial statements give effect to the following pro
forma adjustments related to the prescient acquisition:
(a) To record the consideration of $1.2 million paid by the Company in
connection with the acquisition of Prescient, including $100,000 cash
and 300,000 shares of common stock.
(b) To adjust long-term intangible assets for the excess of the fair value
of the acquired net assets over the acquisition consideration.
(c) To adjust accounts payable for amounts not assumed by the Company in
connection with the acquisition.
(d) To eliminate amount due to affiliate of Prescient which was forgiven as
part of the acquisition by the Company.
(e) To record liabilities incurred by the Company in connection with
acquisition, including direct legal and accounting expenses totaling
$136,000, and to record the elimination of accrued liabilities totaling
$138,000 not assumed by the Company in connection with acquisition.
(f) To reduce deferred revenue to the fair value of the deferred revenue
assumed by the Company in connection with the acquisition.
(g) To eliminate Prescient common stock of $100,000 and additional paid in
capital of $2,000.
(h) To eliminate Prescient's accumulated deficit and reflect a $171,000
charge for acquired in-process research and development pursuant to the
acquisition of certain assets of Prescient.
(i) To eliminate Prescient's stock subscription receivable.
(j) To reflect the additional amortization of intangible assets from the
Prescient acquisition. The acquisition of certain assets and
liabilities of Prescient resulted in approximately $788,000 of software
costs, which are being amortized over their estimated useful lives of
three years.
18
<PAGE> 19
(c) Exhibits
Exhibit Description
Number of Document
10.37 Asset Purchase Agreement, by and between the
Company, Prescient and Stone & Webster, dated as of
June 28, 2000.
23.1 Consent of KPMG LLP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPATIAL TECHNOLOGY INC.
Date: October 18, 2000 /s/ Todd S. Londa
----------------------------------
Todd S. Londa
Vice President, Administration and
Corporate Controller
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.37 Asset Purchase Agreement, by and between the Company,
Prescient and Stone & Webster, dated as of June 28, 2000.
23.1 Consent of KPMG LLP.
</TABLE>