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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
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<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD ______________ TO ______________
COMMISSION FILE NUMBER: 0-23150
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IBIS TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
MASSACHUSETTS 04-2987600
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
32 CHERRY HILL DRIVE, DANVERS, MA 01923
(Address of principal executive (Zip Code)
offices)
</TABLE>
Registrant's telephone number, including area code:
(978) 777-4247
Securities registered pursuant to Section 12(b) of the Exchange Act:
None.
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.008 Par Value Per Share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant (without admitting that any person whose shares
are not included in such calculation is an affiliate) on March 10, 2000, was
$583,156,119, based on the last sale price as reported by the Nasdaq National
Market System.
As of March 10, 2000, the registrant had 8,259,477 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents (or parts thereof) are incorporated by reference
into the following parts of this Form 10-K: Certain information required in
Part III of this Annual Report on Form 10-K is incorporated from the
Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held
on May 4, 2000.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Ibis Technology Corporation ("Ibis") develops, manufactures and markets
SIMOX-SOI implantation equipment and wafers for the worldwide semiconductor
industry. SIMOX, which stands for Separation by IMplantation of OXygen, is a
form of silicon-on-insulator, or SOI, technology that creates an insulating
barrier below the top surface of a silicon wafer. Our proprietary Ibis 1000
oxygen implanter produces SIMOX-SOI wafers by implanting oxygen atoms just below
the surface of a silicon wafer to create a very thin layer of silicon dioxide
between the thin operating region of the transistor at the surface and the
underlying silicon itself. The layer of silicon dioxide acts as an insulator for
the devices etched on the surface of the silicon wafer and reduces the
electrical current leakage which otherwise slows integrated circuit performance
and increases the loss of power during circuit operation. Through this process
our customers can produce integrated circuits which we believe offer significant
advantages over circuits constructed on conventional silicon wafers, which
advantages include:
- substantially improved microprocessor speed,
- reduced power consumption,
- reduced soft error rate, and
- higher temperature operation.
These characteristics make SIMOX-SOI wafers, and the finished integrated
circuits, well-suited for many commercial applications, including:
- servers and workstations,
- portable and desktop computers,
- wireless communications devices such as laptop computers, personal digital
assistants and mobile phones,
- integrated optical components, and
- extreme environment electronics.
Ibis began operations in 1988, producing four, five and six inch SIMOX-SOI
wafers, mainly for military applications, on a NV-200 implanter manufactured by
Eaton Corporation ("Eaton"). Since 1989, we have spent in excess of $18 million
in developing our proprietary oxygen implanter (the Ibis 1000) and advanced
proprietary processing technologies which enable the production of SIMOX-SOI
wafers capable of meeting the requirements of high volume commercial
applications, including the production of eight inch wafers. The Ibis 1000
prototype, with proprietary beam scanning technology, became operational in
1993, permitting Ibis to begin producing wafers of this size. The first
fully-automated production version of the Ibis 1000 implanter was completed in
May 1995, enabling volume production of high-quality SIMOX-SOI wafers. Since
then, Ibis has constructed eight additional implanters for internal wafer
production requirements and for customers. Additional implanters are currently
under construction. Ibis believes that our demonstrated ability to supply high
quality, competitively priced wafers and our increased wafer production
capacity, together with substantial progress in our customers' development
programs, are accelerating the acceptance of Ibis-produced SIMOX-SOI wafers for
mainstream commercial applications. Over the last several years, Ibis has
focused on integrating SIMOX-SOI wafers into commercial applications, which have
substantially higher volume potential than military applications, our initial
target market. In 1999, substantially all of our sales of SIMOX-SOI wafers were
for commercial applications. During the last couple of years, leading
manufacturers including our customers, Mitsubishi Electric Corporation and
Bookham Technology, Ltd., announced the commercial adoption of SIMOX-SOI
technology utilizing Ibis-produced SIMOX-SOI wafers in their products.
Ibis has sold SIMOX-SOI wafers to most of the world's leading commercial
semiconductor manufacturers, including Advanced Micro Devices, Fujitsu,
Honeywell, IBM, Intel, Mitsubishi Electric, Motorola,
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National Semiconductor, NEC, Philips, Samsung, Sharp, Texas Instruments, and
Toshiba. These commercial shipments have been used principally for evaluation
purposes or pilot production in products, including microprocessors, gate
arrays, ASICs (application specific integrated circuits), memories (DRAMs,
SRAMs, etc.), and cellular and mobile radio components. For any potential
customer who is ultimately committed to designing and building integrated
circuits on SIMOX-SOI wafers, the time required will be lengthy. The cycle
typically goes from initial sampling of SIMOX-SOI wafers to more intensive
sampling, the manufacture of prototype integrated circuits, circuit process
modifications, yield optimization, pilot production and finally to production.
This is a normal cycle in the semiconductor industry for any new advanced
material such as Ibis' SIMOX-SOI. In addition, Ibis supplies SIMOX-SOI wafers to
military-oriented semiconductor manufacturers such as Allied-Signal Aerospace
and Honeywell for use in production applications.
Ibis believes that strategic alliances will play an important role in
developing a worldwide commercial market for our SIMOX-SOI wafers. In
September 1995, Ibis and Motorola entered into an agreement whereby Motorola
provided funding to us to expand our SIMOX-SOI wafer production capacity to meet
the requirements of Motorola for its commercial programs. The implanter that was
constructed with this funding became operational in September 1996 and shipments
to Motorola under the terms of this Agreement commenced shortly thereafter. The
two companies continue to work closely to advance the processing and testing of
SIMOX-SOI material in conjunction with Motorola's rigorous quality standards.
Ibis also has a strategic alliance agreement with Mitsubishi Materials, under
which Mitsubishi markets and sells Ibis manufactured SIMOX-SOI wafers in Japan
and the Pacific Rim. Ibis and Mitsubishi have collaborated on joint research and
development focused on the commercial deployment of SIMOX-SOI technology for
many years. In 1998, Mitsubishi Materials Silicon Corporation, a subsidiary of
Mitsubishi Materials, purchased an Ibis 1000 oxygen implanter in order to
establish a Japanese-based manufacturing facility of Ibis' SIMOX-SOI wafers. In
July 1999, Ibis completed an agreement to license our standard and
Advantox-Registered Trademark- SIMOX-SOI wafer fabrication process to Mitsubishi
Materials Silicon Corporation. The agreement consists of an initial royalty fee
and future royalties based on a percentage of Mitsubishi's SIMOX-SOI wafer
sales. Also, in January 2000, Ibis, Mitsubishi and Samsung Electronics entered
into a joint development agreement to optimize SIMOX-SOI material for use in
high performance CMOS SOI devices. Also See "--Strategic Alliances."
In 1996, Ibis began selling its Ibis 1000 implanters to semiconductor
manufacturers and in 1998 we experienced a significant increase in this area of
our business.
Ibis was incorporated in Massachusetts on October 7, 1987 and commenced
operations in January 1988. Ibis' executive offices are located at 32 Cherry
Hill Drive, Danvers, Massachusetts 01923. Our telephone number is
(978) 777-4247.
OUR STRATEGY
We are seeking to become the world leader in SIMOX-SOI technology with the
quality, cost and size required for mainstream commercial applications. Our
objective is to make our SIMOX-SOI wafers the preferred advanced materials
substrate for mainstream commercial applications. Key elements of our strategy
for achieving this objective include:
CAPITALIZING ON A FUNDAMENTAL TREND IN SEMICONDUCTOR
MANUFACTURING. Semiconductor manufacturers face an increasing demand for faster
integrated circuit speed, less power consumption, minimum soft error and smaller
chip size. These manufacturers prefer to satisfy the demand with minimal
additions or modifications to their existing equipment base. SIMOX-SOI
technology is a leading alternative to address this need. We plan to focus on
our major key customers in the semiconductor industry who we expect to lead the
way in the adoption of SIMOX-SOI technology. We plan to continue to focus a
majority of our technical and marketing resources on these key customers and
continue with our joint development activities with all of our customers.
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PURSUING STRATEGIC MARKETING, MANUFACTURING AND DISTRIBUTION ALLIANCES. We
intend to continue to pursue relationships through which third parties could
distribute some of our products or could assist us in research and development
activities. As evidence of this strategy, we have entered into business
development agreements or strategic alliances with Mitsubishi Materials Silicon,
Samsung Electronics, Motorola and Okmetic of Finland, a key European silicon
supplier. In addition, we are pursuing the possibility of forming strategic
partnerships with semiconductor capital equipment manufacturers, silicon wafer
manufacturers and suppliers of components for our machines. We also intend to
pursue partnerships which could give us the right to complementary technology
and/or products.
ENHANCING AND EXTENDING CURRENT PRODUCT OFFERINGS. We intend to use our
technical expertise to expand our core product functionality, add products to
our existing product line and further advance our process technology. We intend
to capitalize on the technology embodied in the Ibis 1000 for our next
generation oxygen implanter, which will include 300mm wafer size capability and
enhancements to increase throughput and reduce production costs. In addition, we
plan to continue to improve existing, and develop additional,
SIMOX-Advantox-Registered Trademark- products.
INCREASING OUR SIMOX-SOI WAFER AND IMPLANTATION EQUIPMENT MANUFACTURING
CAPACITY. This past year we expanded our Class 10 clean room facility by 32%
and increased our Ibis 1000 implanter manufacturing area by approximately 42%.
We are currently building additional Ibis 1000 implanters for internal wafer
production and are expanding our clean room. We intend to bring additional
implanters on-line at Ibis and further expand our clean room facility, as
required by demand. In addition, we are currently negotiating a lease for
additional space.
MARKETING, SALES AND CUSTOMERS
We focus our direct selling efforts on the world's leading semiconductor
manufacturers, most of which are presently our customers. Our sales personnel
together with strategic partners, our senior management and engineering and
scientific personnel interact with the research and development, manufacturing,
purchasing and marketing departments of our customers. Our objective in these
broad-based sales efforts is to promote the adoption of SIMOX-SOI technology on
an industry-wide basis.
Overseas, we rely on our direct sales force, together with the use of
strategic partners, to market our products. We have a strategic alliance with
Mitsubishi Materials, under which Mitsubishi markets and sells our SIMOX-SOI
wafers in Japan and the Pacific Rim. The purchase by Mitsubishi Materials
Silicon of an Ibis 1000 oxygen implanter will establish SIMOX-SOI manufacturing
capability in Japan to service this marketplace. We have also targeted Europe as
an area of focus for our products. In April 1998, we entered into a strategic
alliance with Okmetic. Under the terms of this agreement, Okmetic will market
our SIMOX-SOI wafers in Europe, excluding the United Kingdom. See
"Business--Strategic Alliances."
The following table sets forth, in thousands of dollars, the amount of
revenue derived from our significant customers during the fiscal years ended
1997, 1998 and 1999, as well as the percent of our revenue represented by these
customers' purchases:
<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
CUSTOMER DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT
- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
IBM.......................... $538 8% $7,905 51% $11,846 71%
Mitsubishi................... 581 9% 4,419 29% 1,592 10%
Motorola..................... 856 13% 607 4% 480 3%
</TABLE>
The increases in sales to IBM in 1998 and 1999 and to Mitsubishi in 1998
resulted primarily from the sale of a total of five units of Ibis 1000 oxygen
implanter equipment at a sale price of approximately $4,000,000 each. See
Note 14 of Notes to Financial Statements for industry segment information.
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Set forth below is a list of some of our customers who have purchased our
Ibis 1000 oxygen implanter machines or our SIMOX-SOI wafers, either directly
from us or through a partner of ours:
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<S> <C>
Ibis 1000 Customers
IBM
Mitsubishi Materials Silicon
Wafer Customers of Ours Wafer Customers of Our Partners
Advanced Micro Devices Fujitsu
Allied Signal Matsushita
Bookham Technology Mitsubishi Electric
Honeywell/Allied Signal NEC
Infineon Oki Electric
Intel Sony
IBM Toshiba
Motorola
Philips Semiconductor
Samsung
Sandia
Sharp
Texas Instruments
TSMC
UMC
</TABLE>
Customers of Ibis that purchase wafers for military applications are reliant
in part on government funding, primarily from the Department of Defense. During
the fiscal years 1997, 1998 and 1999 approximately 10%, 15%, and 4%,
respectively, of our product sales were generated by product sales to such
customers.
Sales to overseas customers in 1997, 1998 and 1999 were 13%, 32% and 17% of
total revenue, respectively. In 1999, sales to Japan were 10% of total revenue,
all of which was attributable to Mitsubishi.
STRATEGIC ALLIANCES
Ibis has entered into a number of strategic relationships which we believe
enable us to better address our target market, to advance our technology more
effectively, and to match our technical developments and production expansion to
the needs of our key customers.
In September 1995, Ibis and Motorola entered into a strategic business
development agreement whereby Motorola advanced to Ibis the required funding to
build an Ibis 1000 implanter. Under this agreement, the SIMOX-SOI wafer
manufacturing capacity of this implanter is first dedicated to serving
Motorola's production requirements until at least December 31, 2000, with cash
price concessions to Motorola reflecting the amortization of the funding. Ibis
has granted to Motorola a security interest in the implanter to secure Ibis'
obligations to Motorola. This implanter became operational in September 1996,
and Ibis is currently shipping wafers to Motorola under the terms of this
agreement. In connection with this agreement, the two companies continue to work
closely to advance Ibis' processing and testing technology in conjunction with
Motorola's rigorous quality standards.
In July 1994, Ibis entered into a business development agreement with
Mitsubishi Materials under which Mitsubishi markets and sells Ibis manufactured
SIMOX-SOI wafers in Japan and the Pacific Rim. The two companies are also
collaborating on joint research and development focused on optimizing SIMOX-SOI
process technology for high-volume commercial applications. The agreement can be
terminated by either party with 120 days written notice.
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In July 1999, Ibis completed an agreement to license our standard and
Advantox-Registered Trademark- SIMOX-SOI wafer fabrication process to Mitsubishi
Materials Silicon Corporation. The agreement consists of an initial royalty fee
and future royalties based on a percentage of Mitsubishi's SIMOX-SOI wafer
sales.
In January 2000, Ibis, Samsung Electronics and Mitsubishi Materials entered
into a joint development agreement to optimize Ibis'
Advantox-Registered Trademark- SIMOX-SOI material for use in high performance
CMOS SOI devices. Under the terms of the agreement, Samsung will build CMOS
devices using Advantox-Registered Trademark- material to verify that
enhancements made to the material result in improved reliability, device
performance and other manufacturing benefits. Mitsubishi will certify the
Advantox-Registered Trademark-/SIMOX material parameters, supply silicon
substrates, and work closely with Samsung on material characterization. Ibis
will supply the Advantox-Registered Trademark- material.
In April 1998, Ibis entered into a strategic alliance with Okmetic of
Finland, a key European silicon supplier. Under the terms of this agreement,
Okmetic will market our SIMOX-SOI wafers in Europe, excluding the United
Kingdom.
RESEARCH AND DEVELOPMENT
Ibis has active research and development programs in both equipment and
process technology. Ibis' equipment engineers continually seek to refine and
enhance the capabilities of the Ibis 1000. Current development projects are
aimed at improving wafer quality with machine improvements, increasing the level
of systems automation and throughput capacity of the machine, thereby lowering
the per wafer production cost. Our process engineers are attempting to enhance
the range of potential commercial applications for Ibis' SIMOX-SOI wafers by
(i) refining techniques to produce SIMOX-SOI wafers of higher quality,
(ii) developing new processes to produce SIMOX-SOI wafers with thinner buried
oxide layers at lower cost and (iii) responding to specific customer
requirements.
During 1999, Ibis commenced a program to design and develop the
next-generation oxygen implanter, the Ibis 2000. The proprietary Ibis 2000 is
being designed to support the volume production of high quality SIMOX-SOI 200 mm
and 300 mm wafers for the global semiconductor industry. We believe that the
Ibis 2000 oxygen implanter will be ready for shipping in the first quarter of
2002. Extending the capabilities of the production-proven Ibis 1000, the
advanced Ibis 2000 should substantially increase available capacity, advance
process technology, increase throughput and reduce costs. The oxygen implanter
will utilize next-generation beamline design to reduce the number of beamline
components and improve beam transport. The modular construction of the system
will enable improved serviceability and diagnostics, while simplifying the
assembly and shipping of the machine. The Ibis 2000 will be bulkhead mounted in
the cleanroom and will offer front-opening unified pod (FOUP) capability. In
addition, the improved automation and operator-friendly controls will raise the
overall productivity and afford ease-of-use. The Ibis 2000 will also offer
extensive low-dose and low-energy capabilities, facilitating the use of the
Advantox-Registered Trademark- product portfolio introduced last year by Ibis
Technology. The portfolio significantly expands the range of commercial
applications for Ibis SIMOX-SOI wafers.
During the fiscal years ended 1997, 1998 and 1999, Ibis' internally funded
research and development expenses were approximately $1,435,000, $1,972,000 and
$1,774,000, or 22%, 13% and 11% of the Company's revenues, respectively.
Government sponsored research and development activities also comprise a
part of our research and development effort. SIMOX-SOI technology is important
to various government agencies in large part due to its utility in constructing
high performance, radiation-tolerant and high temperature defense and space-
based systems. As a result of this government sponsored research and
development, radiation-tolerant integrated circuits on Ibis-produced SIMOX-SOI
wafers are now in production for commercial, military and space applications at
Honeywell and Allied-Signal Aerospace. During the fiscal years ended 1997, 1998
and 1999 revenues from government sponsored research and development contracts
were approximately $1,235,000, $836,000, and $374,000, or 19%, 5% and 2% of
Ibis' revenues, respectively. Research and
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development expenses attributable to research contracts are expensed as incurred
and included in the cost of contract revenue.
Government-sponsored research and development has focused on improving
SIMOX-SOI manufacturing and characterization methods and developing new
processes to ensure the availability of high quality SIMOX-SOI wafers which meet
the requirements for commercial and military applications. The SBIR program,
which is the largest source of direct government support to Ibis, has funded
development of advanced methods of SIMOX-SOI processing, resulting in improved
fabrication and characterization of SIMOX-SOI materials, and has been supportive
in developing a fundamental understanding of new processes which has been useful
in new product development. Ibis has received SBIR contracts from ARPA, the
Ballistic Missile Defense Organization, the Defense Special Weapons Agency, U.S.
Army, the U.S. Air Force, the Department of Energy, National Science Foundation,
National Aeronautical and Space Administration and the Strategic Defense
Initiative Organization. Similarly, Ibis expects its cooperative research
efforts with entities including the Naval Research Laboratory, the
Microelectronics Research Laboratory, the National Institute of Standards, the
Massachusetts Institute of Technology, University of Florida, University of
Arizona and Arizona State University to yield benefits to our ongoing
commercialization activities.
Contracts with government agencies require compliance with applicable
government regulations and are generally subject to competitive bidding,
extensive regulation and cancellation at the government's sole discretion.
Pursuant to the terms of such government contracts, Ibis will be required to
grant to the U.S. government a royalty-free nonexclusive worldwide license to
any inventions claimed by Ibis which were funded by the U.S. government.
Additionally, these agreements are subject to negotiated overhead rates, and
work performed under government contracts is subject to audit and retroactive
adjustments of amounts paid to Ibis.
COMPETITION
We believe we face three general sources of competition: direct SIMOX-SOI
competition, competing SOI technologies, and competing non-SOI technologies.
Among direct SIMOX-SOI competitors, Ibis is presently the only U.S.
manufacturer of SIMOX-SOI wafers. The first generation oxygen implanter, the
NV-200, was produced in limited quantities by Eaton Corporation and just six are
in operation worldwide. Ibis believes that Eaton has no plans to manufacture
additional NV-200's. Of these six implanters, Ibis owned two which were removed
from production in 1997. All Ibis SIMOX-SOI wafers are currently manufactured by
Ibis on our proprietary second generation oxygen implanter, the Ibis 1000. We
believe that the remaining four Eaton NV-200's are owned by Nippon Telephone and
Telegraph ("NTT"), the Fraunhofer Institute, Nippon Steel, and SOITEC, and that
only Nippon Steel and SOITEC use these machines for commercial production, as
opposed to research. To date, SOITEC, a French-based company that spun off from
LETI, a French government research lab, has been the primary source of wafer
product competition for Ibis. In 1995, Hitachi began marketing its oxygen
implanter and, Ibis believes, has sold two to date, to Komatsu and Nippon Steel.
Both Komatsu and Nippon Steel are marketing SIMOX-SOI material. We believe that,
at this stage of the market's development, the availability of alternate sources
of SIMOX-SOI wafers will help address customer concerns about the lack of
available alternate sources of supply.
The second source of competition for Ibis is the development of alternative
SOI materials. The approach that competes with SIMOX is thin-film bonded SOI
wafers. In this approach, two silicon wafers, one or both having a
thermally-grown oxide layer, are first bonded together to form the
silicon/silicon dioxide/silicon structure. A majority of one of the wafers is
removed or separated from the double-wafer structure, and the remaining portion
serves as the device layer of the SOI wafer. The most popular method is to
transfer the thin layer using wafer splitting techniques, allowing the rest of
the wafer to be reclaimed and reused. Regions of stress are first created using
implantation and/or epitaxial growth. The wafer is split
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along the stress interface by the application of heat (Soitec's
Smartcut-Registered Trademark- process), a gas jet (Silicon Genesis' process),
or a water jet (Canon's ELTRAN-Registered Trademark- process). Evidence to date
suggests that both SIMOX and bonded wafers can perform equally well. Ibis
believes that the SIMOX process results in a lower manufacturing cost and that
multiple SOI technologies will supply wafers to the growing SOI market.
The third source of competition is derived from alternative non-SOI
technologies designed to obtain benefits similar to those of SOI, including
improvements to existing technologies. Significant resources are continually
expended to improve epitaxial and conventional silicon wafers. The semiconductor
industry has demonstrated its resourcefulness in improving these materials
through creative circuit design and manufacturing techniques, thereby extending
the useful life of conventional substrates, and we cannot be sure that it will
not continue to do so. The relatively lower cost of these substrates provides an
incentive to the semiconductor industry to continuously improve existing
material without moving to new, more advanced substrates. In addition, complex
variations of more conventional approaches, such as elaborate circuit structures
built on conventional silicon substrates, and compound materials
(silicon-germanium, gallium-arsenide, indium phosphide, etc.), are other
alternative substrate choices.
BACKLOG
Ibis' backlog consists of written orders for SIMOX-SOI wafers to be
delivered during 2000, equipment revenue to be recognized during 2000 and other
contracts to be performed during 2000. As of February 29, 2000, the backlog was
$2,172,000 in wafer orders, $1,288,000 in equipment related orders and
approximately $774,000 in other contracts. This is compared with a backlog of
approximately $3,191,000 in wafer orders, $9,777,000 in equipment orders and
$1,021,000 in other contracts at February 28, 1999. Approximately 19% of the
wafer backlog is for four-inch wafers, 12% is for six-inch wafers, and 69% is
for eight-inch wafers. As customers of Ibis move from development and pilot
production into volume production, we expect much of the increased demand will
be for eight-inch wafers. Approximately 78% of the wafer backlog is comprised of
orders from three customers of Ibis. All customer orders are subject to
modification or cancellation by the customers.
Backlog can fluctuate greatly based upon, among other matters, the timing of
receipt of orders. Therefore, variations in backlog may not represent a fair
indication of future business trends.
PATENTS AND PROPRIETARY RIGHTS
Ibis has an exclusive worldwide sublicense to the proprietary beam scanning
system developed and patented by a consultant to Ibis during the development of
the Ibis 1000. The sublicense agreement obligated us to pay a royalty of 1% of
all revenue derived from the sale and servicing of products incorporating or
produced with the sublicensed technology, including oxygen implantation machines
and oxygen-implanted wafers, up to a maximum aggregate payment of $160,000. This
maximum was reached during 1999.
Ibis' beam scanning system sublicense agreement also grants us certain
rights to further sublicense the beam scanning system for certain applications
other than oxygen implantation. Pursuant to these rights, we have entered into
four non-exclusive sublicense agreements that permit the respective sublicensees
to manufacture, use and sell implantation machines incorporating the beam
scanning system so long as such machines are not designed for the production of
oxygen implanted wafers. Each sublicensee has paid to Ibis a non-refundable
option fee upon signing an agreement and an initial license fee when it
exercised its option to use the licensed technology. In addition, each
sublicensee will pay a royalty fee with respect to each implantation machine
manufactured, used or sold after its option fee and initial license fee has been
applied. License fees received by Ibis from sublicenses are to be shared on a
substantially equal basis with the Company's sublicensor of the beam scanning
system. As of December 31, 1999, Ibis has received approximately $968,000 in net
license fees, after deducting amounts paid to the sublicensor.
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One of these non-exclusive license agreements (the "License Agreement") was
entered into in June 1996 with Orion Equipment, Inc. ("Orion"). In April 1997,
Ibis entered into a Consulting Services Agreement (the "Consulting Agreement")
with Orion, under which Ibis provided consulting services to Orion in order to
assist Orion in its product development using the beam scanning sublicense. The
Consulting Agreement provided that while Orion retains ownership of any
information, know-how, inventions and discoveries produced by or as a result of
the consulting services provided by Ibis to Orion, Ibis has a perpetual,
non-exclusive, royalty free, worldwide license to utilize such information and
discoveries in connection with the commercial production of SIMOX-SOI wafers and
machines. During 1997, 1998 and 1999 revenues under the Consulting Agreement
were approximately 26%, 1% and 0% respectively, of Ibis' total revenues.
Ibis also obtained an exclusive license to technology that facilitates the
presentation of wafers to ion beams developed by Superion Limited, a United
Kingdom corporation. Ibis has paid $240,000 for license fees at the rate of
$30,000 per implantation machine that has been manufactured by us. Under the
terms of this agreement, Superion Limited has retained the right to utilize the
technology for uses not involving oxygen implantation of silicon or other
semiconductor materials.
During 1998, we entered into an equipment licensing and development
agreement which gives the customer the right to a royalty-bearing, non-exclusive
license to supplement our equipment manufacturing capacity. Ibis has received no
royalties under this agreement.
During 1999, Ibis completed an agreement to license its standard and
Advantox-Registered Trademark- SIMOX-SOI wafer fabrication process to Mitsubishi
Materials Silicon Corporation. The agreement consists of an initial royalty fee
and future royalties based on a percentage of Mitsubishi's SIMOX-SOI wafer
sales.
Although Ibis owns or has exclusive rights to several patents and several
pending applications, and we diligently monitor the research and development
process to identify inventions which warrant pursuing patent protection, we rely
largely upon trade secret protection to safeguard our proprietary technology.
All of our employees are currently required to execute confidentiality
agreements pursuant to which they agree to assign to Ibis all patent rights and
technical or other information developed by the employees during their
employment with us, and agree not to disclose any trade secret or confidential
information without the prior written consent of Ibis. Notwithstanding these
confidentiality agreements, we cannot be sure that other companies will not
acquire information which we consider to be proprietary. Moreover, we cannot be
sure that our patent rights will be enforceable or provide us with meaningful
protection from competitors or that patent applications will be allowed. Even if
a competitor's products were to infringe patents owned by Ibis, it would be very
costly for us to enforce our rights in an enforcement action, which would also
divert funds and resources which otherwise could be used in our operations. We
cannot be sure that Ibis would be successful in enforcing such rights, that our
products or processes do not infringe the patent or intellectual property rights
of a third party, or that if we are not successful in a suit involving patents
or other intellectual property rights of a third party, that a license for such
technology would be available, if at all, on commercially reasonable terms.
Pursuant to the terms of its government contracts, Ibis will be required to
grant to the U.S. government a royalty-free non-exclusive worldwide license to
any inventions claimed by us which were funded by the U.S. government.
GOVERNMENT REGULATION
Ibis has entered into certain research and development contracts with
agencies of the United States government which require compliance with
applicable government regulations. These contracts are generally subject to
competitive bidding and extensive regulation and are generally subject to
cancellation at the U.S. government's sole discretion. See "Business--Research
and Development."
9
<PAGE>
Ibis is subject to a variety of federal, state and local environmental
regulations related to the storage, treatment, discharge or disposal of
chemicals used in its operations and exposure of its personnel to occupational
hazards. Although we believe that we have all permits necessary to conduct our
business, the failure to comply with present or future regulations could result
in fines being imposed on us, suspension of production or a cessation of
operations. Ibis' future activities may result in our being subject to
additional regulation. Such regulations could require us to acquire significant
equipment or to incur other substantial expenses to comply with regulations. Any
failure by us to control the use or to restrict adequately the discharge of,
hazardous substances or to properly control other occupational hazards could
subject it to substantial financial liabilities.
MANUFACTURING AND SUPPLIES
Ibis manufactures its Ibis 1000 oxygen implanters from standard components
and from components manufactured in-house or by other vendors according to our
design specifications. Most raw materials and components not produced by Ibis
are available from more than one supplier. However, certain raw materials,
components and subassemblies are obtained from a limited group of suppliers.
Although we seek to reduce our dependence on these limited source suppliers and
we have not experienced significant production delays due to unavailability or
delay in procurement of component parts or raw materials to date, disruption or
termination of certain of these sources could occur and such disruptions could
have a material adverse effect on our business and results of operations.
We manufacture our SIMOX-SOI wafers using conventional silicon wafers and a
variety of chemicals and gases, all of which are available from multiple
sources. We order the wafers, chemicals and gases pursuant to blanket purchase
orders which generally may be modified or cancelled by us upon 60 days' prior
notice to the vendor. Ibis is currently able to purchase its required supply of
silicon wafers from its normal sources. In the periods of increasing demand in
the semiconductor industry for silicon wafers, we cannot be sure that we will be
able to purchase an adequate supply of such silicon wafers for manufacture of
our products at or near current prices, if at all. Any shortages in the
availability of silicon wafers or a significant increase in the price of silicon
wafers could have a material adverse effect on our business and results of
operations.
EMPLOYEES
As of February 29, 2000, Ibis employed 94 persons on a full-time basis, 4
people on a permanent part-time basis and 7 people on a contract or temporary
basis. None of our employees is represented by a labor union and we believe our
relations with our employees are good.
BUSINESS OUTLOOK
The Form 10-K contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Such statements are based on our current expectations and are subject to a
number of factors and uncertainties which could cause actual results to differ
materially from those described in the forward-looking statements. Such factors
and uncertainties include, but are not limited to, the uncertainty that the
performance advantages of SIMOX-SOI wafers will continue to be realized
commercially or that a commercial market for SIMOX-SOI wafers will continue to
develop; the dependence by Ibis on key customers (during 1997, 1998 and 1999,
revenues from two customers averaged in the aggregate between 39% and 81% of our
revenues, so that the loss of one or more of these major customers and the
failure of the Ibis to obtain other sources of revenue could have a material
adverse impact on us); the loss of the services of one or more of our key
individuals, which could have a material adverse impact on Ibis; the dependence
by Ibis on key suppliers, so that the loss of services of one or more suppliers
could have a material adverse impact on us; the development of competing or
superior technologies and products from manufacturers, many of which have
substantially greater financial, technical and other resources than us; Ibis'
lack of experience in producing
10
<PAGE>
commercial quantities of our products at acceptable costs; our ability to
successfully complete the manufacture of our implanters and that these
implanters will be accepted by our customers; Ibis' ability to develop and
maintain strategic alliances for the manufacturing, marketing and distribution
of our products and sale of equipment; the cyclical nature of the semiconductor
industry, which has negatively affected our sales of SIMOX-SOI wafers during
industry downturns and which could continue to do so in the future; the limited
availability of critical materials and components for wafer products and
implanters, as a shortage of such materials and components or a significant
increase in the price thereof could have a material adverse effect on our
business and results of operations; the availability of additional capital to
fund expansion on acceptable terms, if at all; and general economic conditions.
ITEM 2. DESCRIPTION OF PROPERTY
Ibis' corporate office and manufacturing facilities are located at a leased
facility in Danvers, Massachusetts. The facility, which has approximately 37,000
square feet of space, includes over 2,500 square feet of cleanroom, which is
designed to accommodate a total of four Ibis 1000 implanters. All activity
related to manufacturing and services for our three industry segments are
performed at this one location. Ibis' current lease expires on December 31, 2003
and contains an option to renew for five years. We are currently expanding our
cleanroom facility, which will consist of bays for three implanters, and
negotiating a lease for additional space.
ITEM 3. LEGAL PROCEEDINGS
Ibis is not a party to any material pending legal proceedings, and
management is not aware of any contemplated proceeding by any governmental
authority against us of a material nature.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to stockholders during the fourth quarter of the
year ended December 31, 1999.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Ibis' Common Stock began trading on May 20, 1994 on the Nasdaq SmallCap
Market and on the Boston Stock Exchange. Prior to May 20, 1994, there was no
public market for the Common Stock or any other securities of Ibis. On April 4,
1996, Ibis commenced trading on the Nasdaq National Market System. Our Common
Stock is traded under the symbol "IBIS". The following tables set forth, for
1998 and 1999, the high and low closing prices for the Common Stock as reported
by the Nasdaq National Market System.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
1998:
First Quarter............................................. $11.88 $ 7.25
Second Quarter............................................ $13.56 $ 9.38
Third Quarter............................................. $13.75 $ 7.69
Fourth Quarter............................................ $11.69 $ 9.13
1999:
First Quarter............................................. $19.63 $ 9.88
Second Quarter............................................ $33.50 $17.25
Third Quarter............................................. $37.13 $25.13
Fourth Quarter............................................ $55.63 $35.38
</TABLE>
11
<PAGE>
STOCKHOLDERS
As of March 10, 2000, there were approximately 120 stockholders of record of
the 8,259,477 outstanding shares of Common Stock and approximately 5,525
beneficial owners of the Common Stock.
DIVIDENDS
Ibis has never declared or paid any dividends and does not anticipate paying
such dividends on its Common Stock in the foreseeable future. Ibis currently
intends to retain any future earnings for use in its business. The payment of
any future dividends will be determined by the Board of Directors in light of
conditions then existing, including our financial condition and requirements,
future prospects, restrictions in financing agreements, business conditions and
other factors deemed relevant by the Board of Directors.
RECENT SALES OF UNREGISTERED SECURITIES
During the fiscal year ended December 31, 1999, there were no sales of
securities that were required to be registered under the Securities Act of 1933.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" for, and as of the end of each of the
years in the five-year period ended December 31, 1999, are derived from the
financial statements of Ibis, which financial statements have been audited by
KPMG LLP, independent certified public accountants. The audited balance sheets
at December 31, 1999 and 1998 and the related statements of operations and cash
flows for each of the years in the three-year period ended December 31, 1999 and
the report thereon, are included elsewhere in this Annual Report on Form 10-K.
The data set forth below should be read in conjunction with Ibis' financial
statements, related notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product sales.................................. $ 3,822 $ 4,766 $ 3,389 $ 3,149 $ 5,282
Contract and other revenue..................... 811 887 2,831 1,087 1,257
Equipment revenue.............................. -- 3,800 454 11,230 10,064
------- ------- ------- ------- -------
Total revenue................................ 4,633 9,453 6,674 15,466 16,603
------- ------- ------- ------- -------
Cost of product sales.......................... 4,071 4,042 4,827 4,581 4,644
Cost of contract and other revenue............. 349 320 2,143 976 443
Cost of equipment revenue...................... -- 2,625 311 7,347 7,242
------- ------- ------- ------- -------
Total cost of revenue........................ 4,420 6,987 7,281 12,904 12,329
------- ------- ------- ------- -------
Gross profit (loss).......................... 213 2,466 (607) 2,562 4,274
------- ------- ------- ------- -------
Operating expenses:
General and administrative................... 1,299 1,423 1,724 1,823 1,787
Marketing and selling........................ 495 515 466 470 1,016
Research and development..................... 1,582 1,477 1,435 1,972 1,774
Write off of prototype Ibis 1000............. 724 -- -- -- --
------- ------- ------- ------- -------
Total operating expenses..................... 4,100 3,415 3,625 4,265 4,577
------- ------- ------- ------- -------
Loss from operations......................... (3,887) (949) (4,232) (1,703) (303)
------- ------- ------- ------- -------
Total other income (expense)................... (105) 110 296 538 1,140
Income (loss) before income taxes.............. (3,992) (839) (3,936) (1,165) 837
Income tax expense............................. (1) (1) (1) (1) (10)
------- ------- ------- ------- -------
Net income (loss).............................. $(3,993) $ (840) $(3,937) $(1,166) $ 827
======= ======= ======= ======= =======
Net income (loss) per common share(1).......... $ (1.17) $ (.18) $ (.69) $ (.17) $ .11
======= ======= ======= ======= =======
Weighted average common shares Outstanding..... 3,424 4,722 5,710 6,760 7,404
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................ $ 3,463 $ 8,068 $17,249 $16,831 $43,309
Total assets................................... 10,958 19,542 24,918 24,307 53,728
Long-term debt, less current portion........... 2,104 973 499 40 30
Total liabilities.............................. 6,149 5,178 4,161 3,698 5,347
Stockholders' equity........................... 4,809 14,364 20,757 20,609 48,381
</TABLE>
- ------------------------
(1) Computed on the basis described for net earnings (loss) per common share in
Note 2(g) of Notes to Financial Statements.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements of Ibis (including Notes thereto) and Selected Financial Data
included elsewhere in this Annual Report on Form 10-K.
OVERVIEW
Ibis Technology Corporation ("Ibis") was formed in October 1987 and
commenced operations in January 1988. Ibis' initial activities consisted of
producing and selling SIMOX-SOI wafers and conducting research and development
activities. This research led to the development of a proprietary second
generation implanter, the Ibis 1000 which we began selling in 1996, and to other
proprietary process technology.
Initially, much of our revenue was derived from research and development
contracts and sales of wafers for military applications. Over the years, there
has been a shift in revenue to sales of SIMOX-SOI wafers for commercial
applications and sales of Ibis 1000 implanters. In 1999, substantially all of
our wafer sales were for commercial applications. To date, most of our customers
that have purchased wafers for commercial applications have done so solely for
the purpose of characterizing and evaluating the wafers or for pilot production.
Thus, historical sales are not necessarily indicative of future operations
because such sales would not be considered of a recurring nature. However, three
of our customers have indicated their intentions to adopt SIMOX-SOI technology
in commercial products.
During 1997, 1998 and 1999, Ibis experienced quarterly fluctuations due to
the timing of receipt of equipment orders, use of the implanters for SIMOX-SOI
development, and dependence on a limited number of customers. We may continue to
experience fluctuations in revenue due to equipment sales, shifts in customer
demands during various stages of the SIMOX-SOI sales cycle and until we have a
sufficient number of Ibis 1000's on-line to support the various product lines,
wafer sizes and continued research and development efforts.
Ibis currently has three Ibis 1000 oxygen implanters producing wafers, one
of which was funded by Motorola Corporation and must first be used to serve
Motorola's production requirements. For the fiscal years ending December 31,
1998 and December 31, 1999, Ibis recognized revenue on the sale of three and two
implanters, respectively, using the percentage-of-completion method.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1998
PRODUCT SALES. Wafer product sales increased to $5,282,165 for the fiscal
year ended December 31, 1999, an increase of $2,133,382 or 68% from $3,148,783
for the fiscal year ended December 31, 1998. The increase in product sales is
attributable to increased wafer sales by Ibis in the United States and Europe.
Sales by Ibis in Japan decreased overall during this twelve-month period.
CONTRACT AND OTHER REVENUE. Contract and other revenue includes revenue
derived from government contracts, license agreements, characterization services
and other services. Contract and other revenue increased for the fiscal year
ended December 31, 1999 to $1,257,235 from $1,087,434 for the fiscal year ended
December 31, 1998, an increase of $169,801 or 16%. This increase is attributable
to an increase in license revenue related to an agreement to license its
standard and Advantox-Registered Trademark- SIMOX-SOI wafer fabrication process.
This was offset by a decrease in government contract revenue.
EQUIPMENT REVENUE. Equipment revenue represents revenue recognized from the
sale of Ibis 1000 implanters, sales of spare parts and field service revenue.
Equipment revenue decreased to $10,063,622 for the fiscal year ended
December 31, 1999 from $11,229,852 for the fiscal year ended December 31, 1998,
a
14
<PAGE>
decrease of $1,166,230 or 10%. This decrease is attributable to a decrease in
revenue recognized on equipment which was partially offset by an increase in
field service revenue and the sale of spare parts. Field service revenue
accounted for $171,108 or 2% of equipment revenue for the fiscal year ended
December 31, 1999 as compared to no revenue for the fiscal year ended
December 31, 1998. Sales of spare parts accounted for $1,057,514 or 11% of
equipment revenue for the fiscal year ended December 31, 1999 as compared to
$196,396 or 2% of equipment revenue for the fiscal year ended December 31, 1998.
TOTAL REVENUE. Total revenue for the fiscal year ended December 31, 1999
was $16,603,022, an increase of $1,136,953 or 7% from $15,466,069 for the fiscal
year ended December 31, 1998. The increase is due to increases in product sales
and contract and other revenue which were partially offset by a decrease in
equipment revenue.
COST OF PRODUCT SALES. Cost of product sales for the fiscal year ended
December 31, 1999 was $4,643,421, as compared to $4,581,140 for the fiscal year
ended December 31, 1998, an increase of $62,281 or 1%. The increase in cost of
product sales primarily resulted from an increase in the volume of wafers sold
which was offset by a decrease in depreciation. The gross margin from product
sales for the fiscal year ended December 31, 1999 was 12%, as compared with a
negative gross margin of 45% for the fiscal year ended December 31, 1998.
COST OF CONTRACT AND OTHER REVENUE. The cost of contract and other revenue
for the fiscal year ended December 31, 1999 was $443,078, as compared to
$976,082 for the fiscal year ended December 31, 1998, a decrease of $533,004 or
55%. The decrease is a result of a decrease in costs associated with contract
and other revenue. Cost of contract and other revenue consists of labor and
materials expended in performing contract services. There are no costs
associated with the license revenue recognized.
COST OF EQUIPMENT REVENUE. The cost of equipment revenue for the fiscal
year ended December 31, 1999 was $7,242,126, as compared to $7,346,592 for the
fiscal year ended December 31, 1998, a decrease of $104,466 or 1%. The cost of
equipment revenue represents all costs related to the equipment revenue that was
recognized in 1999 on a percentage-of-completion basis for two Ibis 1000
implanters, the cost of spare parts and the cost to provide field service.
TOTAL COST OF REVENUE. Total cost of revenue for the fiscal year ended
December 31, 1999 was $12,328,625, as compared to $12,903,814 for the fiscal
year ended December 31, 1998, a decrease of $575,189 or 5%. This decrease is due
to decreases in the cost of equipment revenue and contract and other revenue,
which were partially offset by an increase in cost of product sales.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the fiscal year ended December 31, 1999 were $1,787,821 (11% of total
revenue) as compared to $1,823,001 (12% of total revenue) for the fiscal year
ended December 31, 1998, a decrease of $35,180 or 2%. This is primarily a result
of a decrease in professional service fees.
MARKETING AND SELLING EXPENSES. Marketing and selling expenses for the
fiscal year ended December 31, 1999 were $1,015,843 (6% of total revenue) as
compared to $470,288 (3% of total revenue) for the fiscal year ended
December 31, 1998, an increase of $545,555 or 116%. The increase in marketing
and sales expenses is primarily a result of an increase in the number of
customer support personnel.
RESEARCH AND DEVELOPMENT EXPENSES. Internally funded research and
development expenses decreased by $197,723 or 10% to $1,774,011 (11% of total
revenue) for the fiscal year ended December 31, 1999 from $1,971,734 (13% of
total revenue) for the fiscal year ended December 31, 1998. This decrease is
primarily due to decreases in material expenses. Last year the Company
introduced a new wafer product line, Advantox-Registered Trademark- which
resulted in increased material expenses for the year.
LOSS FROM OPERATIONS. The loss from operations for the fiscal year ended
December 31, 1999 was $303,278, as compared to a loss from operations of
$1,702,768 for the fiscal year ended December 31, 1998.
15
<PAGE>
The decrease in the loss from operations of $1,399,490 or 82% is a result of
increases in product sales and contract and other revenue which were partially
offset by a decrease in equipment revenue and an increase in operating expenses.
OTHER INCOME (EXPENSE). Total other income for the fiscal year ended
December 31, 1999 was $1,140,663 as compared to $538,064 for the fiscal year
ended December 31, 1998. The increase in total other income of $602,599 or 112%
is primarily attributable to increased interest income earned primarily on the
proceeds from the August 1999 public stock offering and reduced interest expense
on capitalized leases.
INCOME (LOSS) BEFORE INCOME TAXES. The income before income taxes was
$837,385 for the fiscal year ended December 31, 1999, as compared to a loss of
$1,164,704 for the fiscal year ended December 31, 1998. The decrease in the loss
before income taxes of $2,002,089 or 172% is a result of increases in product
sales, contract and other revenue and other income which were partially offset
by a decrease in equipment revenue and an increase in operating expenses.
As of December 31, 1999, the Company had net operating loss and general
business credit carryforwards of approximately $20,390,000 and $507,000,
respectively, for tax purposes expiring through 2019. As a result of the public
stock offering that closed in April 1996 of 1,600,000 shares at $7.25 per share,
a change of ownership within the meaning of Sec. 382(g) of the Internal Revenue
Code occurred. As a result of this ownership change, the net operating loss
carryforward utilization is limited to approximately $1,500,000 per year, which
limitation, if not utilized, can be carried forward to future years.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997
PRODUCT SALES. Product sales decreased to $3,148,783 for the fiscal year
ended December 31, 1998, a decrease of $240,345 or 7% from $3,389,128 for the
fiscal year ended December 31, 1997. The decrease in product sales is
attributable to decreased wafer sales by Ibis in the United States and Europe.
Sales by Ibis in Japan increased overall during this twelve-month period.
CONTRACT AND OTHER REVENUE. Contract and other revenue decreased for the
fiscal year ended December 31, 1998 to $1,087,434 from $2,831,004 for the fiscal
year ended December 31, 1997, a decrease of $1,743,570 or 62%. This decrease is
attributable to revenues derived from a contract for consulting services for
Orion, as well as a decrease in government contract revenue over the same period
in 1997. Revenue from the Orion contract and government contracts amounted to
approximately $161,000, and $775,000, respectively, during 1998 as compared to
approximately $1,749,000 and $952,000 respectively, during 1997.
EQUIPMENT REVENUE. Equipment revenue of $11,229,852 in 1998 represents the
recognition on a percentage-of-completion basis for the sales of the Ibis 1000
implanters and the sale of spare parts which amounted to $11,033,456 and
$196,396, respectively. There were no equipment sales in 1997 and sales of spare
parts totaled $453,691 during this period.
TOTAL REVENUE. Total revenue for the fiscal year ended December 31, 1998
was $15,466,069, an increase of $8,792,246 or 132% from total revenue of
$6,673,823 for the fiscal year ended December 31, 1997. The increase is due to
the recognition of equipment revenue of $11,229,852 in 1998 which accounted for
73% of total revenue in 1998. This increase was partially offset by decreased
product sales and contract and other revenue.
COST OF PRODUCT SALES. Cost of product sales for the fiscal year ended
December 31, 1998 was $4,581,140, as compared to $4,826,794 for the fiscal year
ended December 31, 1997, a decrease of $245,654 or 5%. The decrease in cost of
product sales primarily resulted from a decrease in depreciation expense and
inventory write-offs. During 1998, the Company changed depreciable lives for
some of its equipment from five years to eight years due to new information
becoming available. As a result, depreciation for the year was reduced by
approximately $319,000. During 1997 the Company wrote off approximately $300,000
16
<PAGE>
in obsolete inventory which did not meet the Company's quality standards based
on the Ibis 1000 implanter capability. The negative gross margin from product
sales for the fiscal year ended December 31, 1998 was 45%, as compared with a
negative gross margin of 42% for the fiscal year ended December 31, 1997.
COST OF CONTRACT AND OTHER REVENUE. The cost of contract and other revenue
for the fiscal year ended December 31, 1998 was $976,082, as compared to
$2,142,937 for the fiscal year ended December 31, 1997, a decrease of $1,166,855
or 54%. The decrease is a result of a decrease in costs associated with contract
and other revenue. Cost of contract and other revenue consist of labor and
materials expended in performing contract services.
COST OF EQUIPMENT REVENUE. The cost of equipment revenue of $7,346,592
represents costs related to the equipment revenue that was recognized in 1998 on
a percentage-of-completion basis for three Ibis 1000 implanters and the cost of
spare parts. This compares to $311,447 for the fiscal year ended December 31,
1997, an increase of $7,035,145. There was no equipment revenue in 1997.
TOTAL COST OF REVENUE. Total cost of revenue for the fiscal year ended
December 31, 1998 was $12,903,814, as compared to $7,281,178 for the fiscal year
ended December 31, 1997 an increase of $5,622,636 or 77%. This increase is due
to the cost of equipment revenue which was partially offset by decreases in cost
of product sales and contract and other revenue.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the fiscal year ended December 31, 1998 were $1,823,001 (12% of total
revenue) as compared to $1,723,852 (26% of total revenue) for the fiscal year
ended December 31, 1997, an increase of $99,149 or 6%. This is a result of
increases in professional service fees.
MARKETING AND SELLING EXPENSES. Marketing and selling expenses for the
fiscal year ended December 31, 1998 were $470,288 (3% of total revenue) as
compared to $466,269 (7% of total revenue) for the fiscal year ended
December 31, 1997, an increase of $4,019 or 1%. The increase in marketing and
sales expenses is primarily a result of an increase in payroll and payroll
related expenses.
RESEARCH AND DEVELOPMENT EXPENSES. Internally funded research and
development expenses increased by $537,191 or 37% to $1,971,734 (13% of total
revenue) for the fiscal year ended December 31, 1998 from $1,434,543 (21% of
total revenue) for the fiscal year ended December 31, 1997. This increase is
primarily due to increases in payroll and materials. In the prior twelve month
period, a greater percentage of personnel was devoted to funded projects,
including the Orion contract such that payroll related expenses for these
personnel were included in the cost of contract and other revenue.
LOSS FROM OPERATIONS. The loss from operations for the fiscal year ended
December 31, 1998 was $1,702,768, as compared to a loss from operations of
$4,232,019 for the fiscal year ended December 31, 1997. The decrease in the loss
from operations of $2,529,251 is a result of the recognition of equipment
revenue which was partially offset by decreases in product sales and contract
and other revenue along with the increase in operating expenses.
OTHER INCOME (EXPENSE). Total other income for the fiscal year ended
December 31, 1998 was $538,064 as compared to $295,819 for the fiscal year ended
December 31, 1997. The increase in total other income is attributable to
interest income earned on the proceeds from the August, 1997 exercise of the
company's public warrants as well as reduced interest expense on capital leases
in 1998.
LOSS BEFORE INCOME TAXES. The loss before income taxes was $1,164,704 for
the fiscal year ended December 31, 1998, as compared to $3,936,200 for the
fiscal year ended December 31, 1997. The decrease in the loss before income
taxes of $2,771,496 is a result of the existence of equipment revenue in 1998,
(as compared to no equipment revenue recognized in 1997) which was partially
offset by decreases in product sales and contract and other revenue and the
increase in operating expenses.
17
<PAGE>
IMPACT OF THE YEAR 2000 ISSUE
THE YEAR 2000 ISSUE
The Year 2000 Issue refers to potential problems with computer systems or
any equipment with computer chips or software that use dates where the date has
been stored as just two digits (e.g., 98 for 1998). On January 1, 2000, any
clock or date recording mechanism incorporating date sensitive software which
was using only two digits to represent the year could have recognized a date
using 00 as the year 1900 rather than the year 2000. This could have resulted in
a system failure or miscalculations causing disruption of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar business activities.
COSTS ASSOCIATED WITH THE YEAR 2000 ISSUE
The costs incurred by Ibis to conduct the review of our internal information
systems and to identify the impact of the Year 2000 issue on our major suppliers
and customers were immaterial. The costs to implement our common software system
were not considered Year 2000 costs as they were included in our software
integration plan and were not accelerated due to Year 2000 issues. The costs to
perform upgrades to correct the Year 2000 Issues that we identified were
approximately $30,000.
The Year 2000 Issue did not have a material effect on Ibis' internal
information systems. We cannot be sure, however, that we will not in the future
identify non-compliant systems or other problems related to the Year 2000 issue
which may have a material adverse effect on our future operating results or
financial condition. In addition, we cannot be sure that the failure to ensure
Year 2000 capability by a supplier or another third party would not have a
material adverse effect on Ibis.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, Ibis had cash and cash equivalents of $36,361,621,
reflecting in large part our receipt of approximately $25 million in net
proceeds from the August 1999 public sale of 1,000,000 shares of Common Stock.
During the fiscal year ended December 31, 1999, Ibis used $1,700,668 in cash
from operating activities as compared to cash generated from operations in the
amount of $500,367 for the same period in 1998. Depreciation and amortization
expense for the fiscal years ended December 31, 1999 and 1998 was $1,310,896 and
$1,671,413, respectively. This accounted for 8% and 11% of total revenue,
respectively. Due to the capital intensive nature of Ibis' business and the
anticipated expansion of its facilities and production capacity, management
expects that depreciation and amortization will continue to be a significant
portion of its expenses. To date, Ibis' working capital requirements have been
funded primarily through debt and equity financings. The principal uses of cash
during the fiscal year ended December 31, 1999 were to fund Ibis' operations and
additions to property and equipment which totaled approximately $1.2 million. As
of December 31, 1999, we had invested $16,120,613 in property and equipment. At
December 31, 1999, Ibis had commitments to purchase approximately $4,825,749 in
material or subassemblies to be used for manufacturing Ibis 1000 implanters and
approximately $1,683,000 in capital equipment purchases.
On August 6, 1999, Ibis completed the public offering of 1,000,000 shares of
common stock in an offering underwritten by SoundView Technology Group. The
shares were included in a shelf registration statement filed with the Securities
and Exchange Commission on July 8, 1999 and declared effective on July 26, 1999.
Net proceeds from the offering were approximately $25 million and Ibis intends
to use the proceeds to fund research and development, capital expenditures,
working capital and for other general corporate purposes.
We anticipate that we may be required to raise substantial additional
capital in the future in order to finance further expansion of our manufacturing
capacity and our research and development programs. Our existing cash resources
together with funds generated from operations are believed to be sufficient to
18
<PAGE>
support Ibis' operations on our anticipated scale for at least the next eighteen
months. Management of Ibis currently believes that this anticipated scale of
operations will include the addition of Ibis 1000 oxygen implanters (in addition
to our oxygen implanters currently on-line), the purchase of support equipment,
the expansion of Ibis' facilities and the design and development of the next
generation oxygen implanter, the Ibis 2000. Additional implanters are expected
to be transferred to production at various times as additional capacity is
needed to meet demand.
EFFECTS OF INFLATION
Ibis believes that over the past three years inflation has not had a
significant impact on our sales or operating results.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") that
establishes accounting and reporting requirements for derivative instruments and
for hedging activities. SFAS 133 requires companies to recognize all derivatives
as either assets or liabilities in the statement of financial position at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge of the exposures to changes in fair value of recognized
assets or liabilities or unrecognized firm commitments, a hedge of the exposure
to variable cash flows of a forecasted transaction, or a hedge of the foreign
currency exposure of a net investment in a foreign operation, unrecognized firm
commitments, an available-for-sale security or a foreign-currency denominated
forecasted transaction. The accounting for changes in fair value under SFAS 133
depends on the intended use of the derivative and the resulting designation. In
June 1999, the FASB decided that the effective date for adopting the
requirements of SFAS 133 should be delayed to fiscal years beginning after
June 15, 2000. This delay, published as SFAS 137, applies to quarterly and
annual financial statements. The Company is currently evaluating the effect
SFAS 133 will have on the results of its operations and its financial position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No. 101"), "Revenue Recognition in Financial
Statements". SAB No. 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. Management believes the Company has complied with the provisions of
SAB No. 101.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The exposure of market risk associated with risk-sensitive instruments is
not material to Ibis, as we do not transact our sales denominated in other than
United States dollars, invest primarily in short-term commercial paper, hold our
investments until maturity and have not entered into hedging transactions.
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
IBIS TECHNOLOGY CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
NUMBER
--------
<S> <C>
Financial Statements:
Independent Auditors' Report.............................. 21
Balance Sheets as of December 31, 1998 and 1999........... 22
Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999..................................... 23
Statements of Stockholders' Equity for the Years Ended
December 31, 1997, 1998 and 1999........................ 24
Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999..................................... 25
Notes to Financial Statements............................. 26
Schedule:
Schedule II--Valuation and Qualifying Accounts............ S-1
</TABLE>
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Ibis Technology Corporation:
We have audited the accompanying balance sheets of Ibis Technology
Corporation as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ibis Technology Corporation
at December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
February 4, 2000
21
<PAGE>
IBIS TECHNOLOGY CORPORATION
BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 12,819,366 $ 36,361,621
Accounts receivable, trade, net (notes 4 and 14).......... 403,811 3,585,824
Unbilled revenue.......................................... 2,448,327 1,469,215
Inventories (note 5)...................................... 3,121,084 6,876,002
Prepaid expenses and other current assets................. 294,230 333,742
------------ ------------
Total current assets.................................. 19,086,818 48,626,404
------------ ------------
Property and equipment (notes 3, 6 and 7)................... 14,948,862 14,346,200
Less: Accumulated depreciation and amortization........... (9,872,843) (9,370,156)
------------ ------------
Net property and equipment............................ 5,076,019 4,976,044
Patents and other assets, net (note 7)...................... 144,481 125,056
------------ ------------
Total assets.......................................... $ 24,307,318 $ 53,727,504
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Capital lease obligation, current (note 7)................ $ 507,258 $ 9,557
Accounts payable.......................................... 411,065 1,624,451
Accrued liabilities (note 8).............................. 1,199,220 2,148,755
Deferred revenue, current portion (note 9)................ 137,500 1,534,369
------------ ------------
Total current liabilities............................. 2,255,043 5,317,132
Capital lease obligation, noncurrent (note 7)............... 39,630 30,073
Deferred revenue (note 9)................................... 1,403,702 --
------------ ------------
Total liabilities..................................... 3,698,375 5,347,205
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES 6, 7 AND 14)
STOCKHOLDERS' EQUITY (NOTES 12 AND 13):
Undesignated preferred stock, $.01 par value.
Authorized 2,000,000 shares; none issued................ -- --
Common stock, $.008 par value.
Authorized 20,000,000 shares; issued 6,858,556 shares
and 8,172,800 shares in 1998 and 1999, respectively... 54,868 65,382
Additional paid-in capital................................ 36,610,064 63,543,777
Accumulated deficit....................................... (16,055,989) (15,228,860)
------------ ------------
Total stockholders' equity............................ 20,608,943 48,380,299
------------ ------------
Total liabilities and stockholders' equity............ $ 24,307,318 $ 53,727,504
============ ============
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
IBIS TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Product sales.......................................... $ 3,389,128 $ 3,148,783 $ 5,282,165
Contract and other revenue............................. 2,831,004 1,087,434 1,257,235
Equipment revenue...................................... 453,691 11,229,852 10,063,622
----------- ----------- -----------
Total sales and revenue (note 14).................. 6,673,823 15,466,069 16,603,022
----------- ----------- -----------
Cost of product sales.................................. 4,826,794 4,581,140 4,643,421
Cost of contract and other revenue..................... 2,142,937 976,082 443,078
Cost of equipment revenue.............................. 311,447 7,346,592 7,242,126
----------- ----------- -----------
Total cost of sales and revenue.................... 7,281,178 12,903,814 12,328,625
----------- ----------- -----------
Gross profit (loss)................................ (607,355) 2,562,255 4,274,397
----------- ----------- -----------
Operating expenses:
General and administrative........................... 1,723,852 1,823,001 1,787,821
Marketing and selling................................ 466,269 470,288 1,015,843
Research and development............................. 1,434,543 1,971,734 1,774,011
----------- ----------- -----------
Total operating expenses........................... 3,624,664 4,265,023 4,577,675
----------- ----------- -----------
Loss from operations............................... (4,232,019) (1,702,768) (303,278)
----------- ----------- -----------
Other income (expense):
Interest income...................................... 471,590 652,305 1,154,598
Interest expense..................................... (176,027) (114,241) (43,280)
Other................................................ 256 -- 29,345
----------- ----------- -----------
Total other income................................. 295,819 538,064 1,140,663
----------- ----------- -----------
Income (loss) before income taxes.................. (3,936,200) (1,164,704) 837,385
Income tax expense (note 11)........................... 1,256 1,256 10,256
----------- ----------- -----------
Net income (loss).................................. $(3,937,456) $(1,165,960) $ 827,129
=========== =========== ===========
Net income (loss) per common share:
Basic.................................................. $ (0.69) $ (0.17) $ 0.11
=========== =========== ===========
Diluted................................................ $ (0.69) $ (0.17) $ 0.11
=========== =========== ===========
Weighted average number of common shares Outstanding:
Basic.................................................. 5,709,931 6,759,870 7,403,803
=========== =========== ===========
Diluted................................................ 5,709,931 6,759,870 7,818,151
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
IBIS TECHNOLOGY CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
ADDITIONAL NOTES TOTAL
COMMON PAID-IN ACCUMULATED RECEIVABLE FROM STOCKHOLDERS'
STOCK CAPITAL DEFICIT STOCKHOLDERS EQUITY
-------- ----------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31,
1996......................... $41,457 $25,292,217 $(10,952,573) $(17,150) $14,363,951
Exercise of underwriter
Redeemable warrants........ -- 1,080 -- -- 1,080
Exercise of underwriter non-
Redeemable warrants........ 38 37,781 -- -- 37,819
Exercise of redeemable public
warrants................... 10,614 10,057,238 -- -- 10,067,852
Surrender of warrants........ -- (48,300) -- -- (48,300)
Exercise of stock options.... 921 237,600 -- -- 238,521
Compensation expense related
to Acceleration of stock
option vesting............. -- 16,383 -- -- 16,383
Repayment of stockholder
notes Receivable........... -- -- -- 17,150 17,150
Net loss..................... -- -- (3,937,456) -- (3,937,456)
------- ----------- ------------ -------- -----------
BALANCES AT DECEMBER 31,
1997......................... 53,030 35,593,999 (14,890,029) -- 20,757,000
Exercise of stock options.... 1,334 1,002,691 -- -- 1,004,025
Exercise of warrants......... 504 13,374 -- -- 13,878
Net loss..................... -- -- (1,165,960) -- (1,165,960)
------- ----------- ------------ -------- -----------
BALANCES AT DECEMBER 31,
1998......................... 54,868 36,610,064 (16,055,989) -- 20,608,943
Exercise of stock options...... 2,386 1,401,877 -- -- 1,404,263
Exercise of warrants........... 128 1,837 -- -- 1,965
Common stock issued, net of
issuance costs............... 8,000 25,529,999 -- -- 25,537,999
Net income..................... -- -- 827,129 -- 827,129
------- ----------- ------------ -------- -----------
BALANCES AT DECEMBER 31,
1999......................... $65,382 $63,543,777 $(15,228,860) $ -- $48,380,299
======= =========== ============ ======== ===========
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
IBIS TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................... $(3,937,456) $(1,165,960) $ 827,129
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization..................... 2,063,018 1,671,413 1,310,896
Loss on sale of equipment......................... -- -- 2,550
Changes in operating assets and liabilities:
Accounts receivable, trade...................... (144,219) 374,548 (3,182,013)
Unbilled revenue................................ (152,630) (2,217,837) 979,112
Inventories..................................... (1,285,779) 1,758,003 (3,754,918)
Prepaid expenses and other current assets....... (79,251) 116,729 (39,512)
Accounts payable................................ (264,456) (280,260) 1,213,386
Accrued liabilities and deferred revenue........ (95,538) 243,731 942,702
----------- ----------- -----------
Net cash provided by (used in) operating
activities.................................. (3,896,311) 500,367 (1,700,668)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net............ (1,770,746) (1,645,607) (1,171,192)
Other assets........................................ 102,556 63,216 (22,854)
----------- ----------- -----------
Net cash used in investing activities......... (1,668,190) (1,582,391) (1,194,046)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital lease obligations............... (657,197) (426,336) (507,258)
Proceeds from sales of common stock, net of issuance
costs............................................. -- -- 25,537,999
Exercise of stock options and exercise of
warrants.......................................... 293,803 1,017,903 1,406,228
Proceeds from stockholders' notes receivable........ 17,150 -- --
Proceeds from warrant redemption, net of redemption
costs............................................. 10,019,552 -- --
----------- ----------- -----------
Net cash provided by financing activities..... 9,673,308 591,567 26,436,969
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents................................. 4,108,807 (490,457) 23,542,255
Cash and cash equivalents, beginning of year.......... 9,201,016 13,309,823 12,819,366
----------- ----------- -----------
Cash and cash equivalents, end of year................ $13,309,823 $12,819,366 $36,361,621
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest.............. $ 199,563 $ 364,241 $ 43,280
=========== =========== ===========
Supplemental disclosures of noncash investing and
financing activities:
Capital lease obligations incurred.................. $ -- $ 66,447 $ --
=========== =========== ===========
Acceleration of stock options....................... $ 16,383 $ -- $ --
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(1) NATURE OF BUSINESS AND ORGANIZATION
Ibis Technology Corporation (the "Company") was incorporated in
October 1987 for the purpose of supplying silicon-on-insulator (SOI) wafers
formed by the SIMOX (Separation by Implantation of Oxygen) technology. SIMOX-SOI
wafers are manufactured using a specialized oxygen ion implanter, which was
developed and manufactured by the Company and is integrated with other
specialized processes and characterization equipment. The Company is the leading
manufacturer of high current oxygen implanters and began selling these oxygen
implanters in 1996.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND CASH EQUIVALENTS
Cash equivalents represent highly liquid investments with original
maturities of three months or less.
(b) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) cost method.
(c) PROPERTY AND EQUIPMENT AND IMPAIRMENT OF LONG-LIVED ASSETS
Property and equipment is stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the respective assets,
ranging from three to eight years. Amortization is provided using the
straight-line method over the life of the lease, ranging from three and one-half
to five years.
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If it is determined that the carrying amount of an asset cannot
be fully recovered, an impairment loss is recognized.
(d) PATENTS AND OTHER ASSETS
Other assets consist principally of accrued interest receivable, deposits
and prepaid royalties. Patents and prepaid royalties are amortized over five
years using the straight-line method; deferred financing costs are being
amortized over the period of loan or lease commitment.
(e) REVENUE RECOGNITION
Product sales are recognized upon shipment. Revenue derived from services is
recognized upon performance. Contract and equipment revenue is recognized on the
percentage-of-completion method. Provisions for anticipated losses are made in
the period in which such losses become determinable. Unbilled revenue under
customer contracts represents revenue earned under the percentage-of-completion
method but not yet billable under the terms of the contract. These amounts are
billable based on the terms of the contract, which include shipment of the
product, achievement of milestones or completion of the contract.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No. 101"), "Revenue Recognition in Financial
Statements". SAB No. 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. Management believes the Company has complied with the provisions of
SAB No. 101.
26
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Government contracts are performed under negotiated overhead rates and are
subject to audit and retroactive adjustments of amounts paid to the Company.
(f) RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred. Research
and development costs funded by contracts are included as a component of
contract revenue.
(g) NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share of common stock is computed based upon the
weighted average number of shares outstanding during each period and including
the dilutive effect, if any, of stock options and warrants. SFAS 128 requires
the presentation of basic and diluted earnings (loss) per share for all periods
presented. As the Company was in a net loss position for 1997 and 1998, common
stock equivalents of 305,605 and 246,537 for the years ended December 31, 1997,
and 1998, respectively, were excluded from the diluted loss per share
calculation as they would be antidilutive. As a result, diluted loss per share
is the same as basic loss per share for 1997 and 1998.
The reconciliation of the denominators of the basic and diluted net income
(loss) per common share for the Company's net income (loss) is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
----------- ----------- ----------
<S> <C> <C> <C>
Basic net income (loss)................................. $(3,937,456) $(1,165,960) $ 827,129
=========== =========== ==========
Weighted average common shares outstanding-basic........ 5,709,931 6,759,870 7,403,803
Net additional common shares upon assumed exercise of
stock options and warrants............................ -- -- 414,348
----------- ----------- ----------
Weighted average commons shares outstanding-diluted..... 5,709,931 6,759,870 7,818,151
=========== =========== ==========
Net income (loss) per common share
Basic................................................. $ (0.69) $ (0.17) $ 0.11
=========== =========== ==========
Diluted............................................... $ (0.69) $ (0.17) $ 0.11
=========== =========== ==========
</TABLE>
(h) ISSUANCE COSTS
Issuance costs of common stock are netted against additional paid-in
capital.
(i) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results may differ from these estimates.
(j) FAIR VALUE OF FINANCIAL INSTRUMENTS
27
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments of the Company consist of cash and cash equivalents,
accounts receivable, accounts payable, accrued liabilities and capital lease
obligations. The carrying amount of these financial instruments approximates
fair value.
(k) RECLASSIFICATION
Certain reclassifications were made to the 1997 and 1998 financial
statements to conform to the 1999 presentation (see note 15).
(l) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") that
establishes accounting and reporting requirements for derivative instruments and
for hedging activities. SFAS 133 requires companies to recognize all derivatives
as either assets or liabilities in the statement of financial position at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge of the exposures to changes in fair value of recognized
assets or liabilities or unrecognized firm commitments, a hedge of the exposure
to variable cash flows of a forecasted transaction, or a hedge of the foreign
currency exposure of a net investment in a foreign operation, unrecognized firm
commitments, an available-for-sale security or a foreign-currency denominated
forecasted transaction. The accounting for changes in fair value under SFAS 133
depends on the intended use of the derivative and the resulting designation. In
June 1999, the FASB decided that the effective date for adopting the
requirements of SFAS 133 should be delayed to fiscal years beginning after
June 15, 2000. This delay, published as SFAS 137, applies to quarterly and
annual financial statements. The Company is currently evaluating the effect
SFAS 133 will have on the results of its operations and its financial position.
(3) CHANGE IN ESTIMATE
During the third quarter of 1998 the Company changed depreciable lives for
some of its equipment from five years to eight years due to new information
becoming available. As a result, depreciation was reduced by approximately
$319,000 in 1998.
(4) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Accounts receivable, trade........................... $ 468,811 $3,650,824
Less: Allowance for doubtful accounts................ (65,000) (65,000)
---------- ----------
$ 403,811 $3,585,824
========== ==========
</TABLE>
28
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(5) INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Raw materials........................................ $ 197,734 $ 129,786
Work in process...................................... 76,343 46,639
Finished goods....................................... 191,762 28,685
---------- ----------
Subtotal wafer inventory........................... 465,839 205,110
Equipment inventory.................................. 2,655,245 6,670,892
---------- ----------
Total inventories.................................. $3,121,084 $6,876,002
========== ==========
</TABLE>
(6) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Machinery and equipment............................ $13,595,208 $12,373,162
Furniture and fixtures............................. 316,619 357,416
Leasehold improvements............................. 768,790 1,534,637
Construction in progress........................... 268,245 80,985
----------- -----------
$14,948,862 $14,346,200
=========== ===========
</TABLE>
In 1999, machinery and equipment decreased because the Company wrote-off
equipment that was disposed of during the year.
Fixed assets subject to capital leases at December 31, 1998 and 1999 was
$2,106,447. Accumulated depreciation for fixed assets subject to capital leases
was $1,559,559 and $2,066,818 in 1998 and 1999, respectively.
Construction in progress at December 31, 1999 includes the cost for
expansion of a Class 10 cleanroom. At December 31, 1998 construction in progress
included the cost to expand into an additional 9,000 square feet of space which
the Company began leasing in July 1998.
At December 31, 1999, the Company had commitments to purchase approximately
$4,826,000 in material or subassemblies to be used in normal operations and
approximately $1,683,000 in capital equipment purchase commitments.
(7) LEASE COMMITMENTS
In November 1995, the Company sold an Ibis 1000 production implanter for
$2,040,000 and leased it back under a capital lease. A security reserve paid by
the Company in the amount of $250,000 was applied to the principal portion of
the lease obligation. Warrants to purchase 35,478 shares of common stock at
$5.75 per share were issued in connection with this lease. The warrants, which
were valued at $106,434 at the time of issuance, have been recorded in other
assets as deferred financing costs and are being
29
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(7) LEASE COMMITMENTS (CONTINUED)
amortized over 48 months, the initial term of the lease. This capital lease
terminated in 1999 with the Company exercising the lease buyout option and
purchasing the implanter for approximately $241,000.
In January 1997, the Company entered into a noncancelable operating lease
for its office and manufacturing facility expiring in 2003 with a five-year
renewal option. The Company also leases certain equipment under noncancelable
operating leases expiring through 2002, as well as equipment used in operations
under noncancelable capital leases expiring through 2003. Future minimum lease
payments under noncancelable leases at December 31, 1999, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ----------
<S> <C> <C>
Year ending:
2000................................................. $13,284 $ 371,650
2001................................................. 13,284 341,134
2002................................................. 13,284 333,780
2003................................................. 7,749 331,680
------- ----------
Total minimum lease payments....................... 47,601 $1,378,244
==========
Less amount representing interest...................... (7,971)
Less current maturities................................ (9,557)
=======
Capital lease obligations, less current maturities..... $30,073
=======
</TABLE>
Interest was calculated using an imputed interest rate of 14%.
Rent expense was approximately $255,000, $302,000 and $332,000 for the years
ended December 31, 1997, 1998 and 1999, respectively.
(8) ACCRUED LIABILITIES
Current accrued liabilities were as follows at December 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Billings in excess of costs on contracts............. $ 321,411 $ 347,919
Accrued vacation..................................... 131,723 197,819
Accrued warranty..................................... 354,546 751,260
Accrued payroll...................................... 171,912 487,228
Accrued expenses..................................... 219,628 364,529
---------- ----------
Total.............................................. $1,199,220 $2,148,755
========== ==========
</TABLE>
(9) DEFERRED REVENUE
During September 1995, the Company entered into a strategic business
development agreement with a customer whereby the customer advanced to the
Company the required funding to build an Ibis 1000 implanter, whose SIMOX-SOI
wafer manufacturing capacity would be dedicated to serving this customer's
production requirements over a multi-year period, with wafer prices being
reduced to repay this funding.
30
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1999
(9) DEFERRED REVENUE (CONTINUED)
Revenue is being recognized as wafers are shipped and discounts are earned by
the customer. Amounts billed for which revenue has not been earned are included
in deferred revenue.
(10) LICENSE AGREEMENTS
The Company obtained an exclusive sublicense to the proprietary beam
scanning system developed by a consultant to the Company during the development
of the first Ibis 1000 implanter in the field of oxygen implantation. The beam
scanning system sublicense agreement also grants the Company certain rights to
further sublicense the technology for certain applications. The Company received
$75,000, $72,000 and $181,522 in 1997, 1998 and 1999, respectively, for
non-refundable option fees or royalty fees in accordance with non-exclusive
sublicense agreements.
During 1999, Ibis completed an agreement to license its standard and
Advantox-Registered Trademark- SIMOX-SOI wafer fabrication process. The
agreement consists of an initial royalty fee and future royalties based on a
percentage of SIMOX-SOI wafer sales. In 1999, the Company recognized royalty fee
income of $630,000 from this agreement.
(11) INCOME TAXES
Income tax expense consists of state income taxes for each year and federal
alternative minimum taxes for 1999. No federal tax benefit was recorded in 1997,
1998 or 1999 due to the existence of unused net operating loss carryforwards.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are presented below at
December 31:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................. $ 7,017,000 $ 7,418,000
Accruals not currently deductible for tax
purposes....................................... 71,000 100,000
General business tax credit carryforwards........ 420,000 507,000
Other............................................ 404,000 496,000
Less: Valuation allowance........................ (7,781,000) (8,440,000)
----------- -----------
Net deferred tax assets........................ 131,000 81,000
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation.................... (131,000) (81,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
As a result of the losses incurred to date by the Company, a 100% valuation
allowance has been applied against the Company's deferred tax assets. The amount
recorded as net deferred tax assets as of December 31, 1998 and 1999 represents
the tax benefits of existing deductible temporary differences or carryforwards
that are more likely than not to be realized through the generation of
sufficient future taxable income within the carryforward period. The net change
in the total valuation allowance was an increase of $319,000 and $659,000 for
the years ended December 31, 1998 and 1999, respectively.
31
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(11) INCOME TAXES (CONTINUED)
The Company had federal net operating loss and general business credit
carryovers of approximately $20,390,000 and $507,000, respectively, at
December 31, 1999, that may be used to offset future taxable income, if any,
through 2019. Deferred tax assets and related valuation allowance of $1,458,000
related to the net operating loss carryforward results from the exercise of
employee stock options, the tax benefit of which, when recognized, will be
accounted for as a credit to additional paid-in capital rather than a reduction
of income tax expense. Net operating loss carryforwards and other tax attributes
may be limited in the event of certain changes in ownership interests.
(12) CAPITALIZATION
The Company has 20,000,000 shares of common stock and 2,000,000 shares of
preferred stock ("Undesignated Preferred Stock") authorized. At December 31,
1999, 2,500, 228,309, 715,810 and 39,655 common shares were reserved for
issuance upon exercise of options outstanding or available for grant under the
Company's 1988 Stock Option Plan, the 1993 Employee, Director and Consultant
Stock Option Plan and 1997 Employee, Director and Consultant Stock Option Plan
and for exercises of warrants, respectively.
On August 6, 1999, the Company completed on a public offering of 1,000,000
shares of common stock in an offering underwritten by SoundView Technology
Group. The shares were included in a shelf registration statement filed with the
Securities and Exchange Commission on July 8, 1999 and declared effective on
July 26, 1999. Net proceeds from the offering were approximately $25,538,000
after deducting approximately $1,462,000 for underwriting discounts, commissions
and other associated expenses.
(13) STOCK OPTIONS AND WARRANTS
(a) STOCK OPTION PLANS
In March 1988, the Board of Directors and stockholders of the Company
approved the 1988 Stock Option Plan (the "Plan"). The Plan permits the Company
to grant incentive stock options to its key employees and nonqualified options
to any employees, consultants, directors or officers that the Board deems
appropriate. The incentive stock options must be granted at a price not less
than the fair market value of the common stock at the time of grant or, in the
case of certain optionees, 110% of such fair market value in order to qualify
for certain tax advantages under Section 422A of the Internal Revenue Code. The
purchase price of nonqualified options granted is determined at the discretion
of the Board of Directors.
In December 1993, the Board of Directors and stockholders approved the
adoption of the Company's 1993 Employee, Director and Consultant Stock Option
Plan which provided for the issuance of options to purchase up to 250,000 shares
of common stock of the Company to employees, consultants and non-employee
directors. In May 1996, the stockholders increased to 750,000 shares the
aggregate number of shares that may be granted under this plan.
In October 1997, the Board of Directors approved the adoption of the
Company's 1997 Employee, Director and Consultant Stock Option Plan which
provides for the issuance of options to purchase up to 750,000 shares of common
stock of the Company to employees, consultants and non-employee directors. The
stockholders approved the Plan at the May 1998 Annual Stockholders Meeting.
32
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(13) STOCK OPTIONS AND WARRANTS (CONTINUED)
A summary of stock option activity under the plans is as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVERAGE
OF EXERCISE PRICE
SHARES OF SHARES
-------- ----------------
<S> <C> <C>
Options outstanding at December 31, 1996........... 666,042 $ 5.76
Granted.......................................... 290,750 7.84
Exercised........................................ (133,266) 3.38
Cancelled........................................ (40,997) 5.14
-------- ------
Options outstanding at December 31, 1997........... 782,529 6.84
Granted.......................................... 306,950 8.72
Exercised........................................ (190,247) 6.42
Cancelled........................................ (115,109) 6.46
-------- ------
Options outstanding at December 31, 1998........... 784,123 7.73
Granted.......................................... 225,750 17.50
Exercised........................................ (323,602) 6.71
Cancelled........................................ (32,404) 7.13
-------- ------
Options outstanding at December 31, 1999........... 653,867 $11.64
======== ======
Options exercisable at December 31, 1999........... 201,126 $ 8.43
======== ======
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED
REMAINING OUTSTANDING AVERAGE
RANGE OF NUMBER CONTRACTUAL OPTION NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- --------------------- ----------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ .08- 6.00 36,587 6.9 $ 5.35 18,250 $4.70
$6.01- 7.50 38,438 6.2 $ 6.80 38,438 $6.80
$7.51-49.63 578,842 8.5 $12.35 144,438 $9.34
------- -------
653,867 201,126
======= =======
</TABLE>
The Company accounts for its stock option plan in accordance with APB
No. 25 and related interpretations. Had compensation costs for the stock option
plans been determined based on the fair value at the grant dates for awards in
1997, 1998 and 1999 consistent with the provisions of SFAS No. 123,
33
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(13) STOCK OPTIONS AND WARRANTS (CONTINUED)
the Company's net income (loss) and net income (loss) per common share would
have been increased or decreased to the following pro forma amounts at
December 31:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ---------
<S> <C> <C> <C> <C>
Net income (loss)........................... As reported $(3,937,456) $(1,165,960) $ 827,129
Pro forma $(5,228,007) $(2,684,413) $(726,423)
Net income (loss) per share................. As reported $ (0.69) $ (0.17) $ 0.11
Pro forma $ (0.92) $ (0.40) $ (0.09)
</TABLE>
The per share weighted-average fair value of each option granted during
1997, 1998 and 1999 was $5.07, $5.78 and $9.95, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions: 1997--expected volatility of 98.55%, risk-free interest
rate of 5.50%, and an expected life of 3 years; 1998--expected volatility of
98.55%, risk-free interest rate of 5.50%, and an expected life of 3 years;
1999--expected volatility of 79.47%, risk-free interest rate of 5.50%, and an
expected life of 3 years. The expected dividend yield rate for 1997, 1998 and
1999 is zero.
Pro forma net loss reflects only options granted in 1995 through 1999.
Therefore, the full impact of calculating compensation costs for stock options
under SFAS No. 123 is not reflected because compensation costs for options
granted prior to January 1, 1995 are not considered.
(b) WARRANTS
During 1999, 14,077 Underwriters Non-Redeemable Warrants were exercised.
Since some of these Warrants were exercised on a cashless basis, 8,201 shares of
Common Stock were issued. At December 31, 1999, there were no Underwriter
Non-Redeemable Warrants outstanding.
During 1999, 9,375 Warrants were exercised. Since these Warrants were
exercised on a cashless basis, 7,795 shares of Common Stock were issued. At
December 31, 1999, there were additional warrants outstanding to purchase 35,478
and 4,177 shares of common stock at $5.75 and $8.40 per share, respectively.
(14) SIGNIFICANT CUSTOMERS AND CONCENTRATION OF BUSINESS RISK
The Company sells its products to a limited number of semiconductor
manufacturers primarily in the United States.
Government sales and other significant customers are shown in dollar amounts
and as a percentage of total revenue as follows:
<TABLE>
<CAPTION>
GOVERNMENT OTHER TOTAL
--------------------- ------------------------------------ ----------------------
SIGNIFICANT
YEAR ENDED AMOUNT % CUSTOMERS AMOUNT % AMOUNT %
- ---------- ---------- -------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997... $1,235,000 18% 2 $ 2,605,000 39% $ 3,840,000 58%
December 31, 1998... $1,268,000 8% 2 $12,324,000 80% $13,592,000 88%
December 31, 1999... $ 608,000 4% 2 $13,438,000 81% $14,046,000 85%
</TABLE>
Accounts receivable from government sales amounted to approximately $77,000
and $2,000 at December 31, 1998 and 1999, respectively. Accounts receivable from
IBM Corporation and Mitsubishi Materials Corporation amounted to $62,000, and
$3,473,000 at December 31, 1998 and 1999, respectively.
34
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(14) SIGNIFICANT CUSTOMERS AND CONCENTRATION OF BUSINESS RISK (CONTINUED)
Export sales to unaffiliated customers in 1997, 1998 and 1999 were 13%, 32%
and 17% of total revenues, respectively.
During 1997, 1998 and 1999, the Company purchased substantially all of its
conventional bulk silicon wafers from two suppliers. An interruption in the
delivery of these wafers could have a material adverse effect on the Company's
results of operations.
(15) INDUSTRY SEGMENTS
The Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information during the fourth quarter of 1998. SFAS
No. 131 established the standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports issued to stockholders.
The Company's reportable segments are SIMOX Wafer Products, SIMOX Equipment
and Other Products or Services. For purposes of segment reporting, equipment
spares and field service revenue are combined and reported as SIMOX equipment.
Government contracts, other services and license revenue are combined and
reported as other products or services. In previous financial statements spares
and field service revenue were included in the Other Products or Services
segment. This reclassification was made in the third quarter of 1999 and all
prior periods presented reflect this reclassification.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies. The Company
generally evaluates operating performance based on income or loss before
interest and taxes.
35
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(15) INDUSTRY SEGMENTS (CONTINUED)
The table below provides information for the years ended December 31, 1997,
1998 and 1999 pertaining to the Company's three industry segments.
<TABLE>
<CAPTION>
SIMOX
WAFER SIMOX OTHER PRODUCTS
PRODUCTS EQUIPMENT OR SERVICES TOTAL
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
NET REVENUES
Year Ended December 31, 1997............. $ 3,389,128 $ 453,691 $2,831,004 $ 6,673,823
Year Ended December 31, 1998............. 3,148,783 11,229,852 1,087,434 15,466,069
Year Ended December 31, 1999............. 5,282,165 10,063,622 1,257,235 16,603,022
OPERATING INCOME (LOSS)
Year Ended December 31, 1997............. (2,342,543) (995,935) 830,311 (2,508,167)
Year Ended December 31, 1998............. (2,023,241) 1,939,025 204,449 120,233
Year Ended December 31, 1999............. 252,874 417,512 814,157 1,484,543
ASSETS
December 31, 1997........................ 6,089,714 4,674,592 502,529 11,266,835
December 31, 1998........................ 5,411,282 5,296,619 319,200 11,027,101
December 31, 1999........................ 5,145,320 10,912,431 645,291 16,703,042
CAPITAL EXPENDITURES
Year Ended December 31, 1997............. 1,653,540 76,977 -- 1,730,517
Year Ended December 31, 1998............. 1,251,522 293,280 -- 1,544,802
Year Ended December 31, 1999............. 834,385 38,375 -- 872,760
DEPRECIATION AND AMORTIZATION OF PROPERTY
AND EQUIPMENT
Year Ended December 31, 1997............. 1,782,079 115,044 53,583 1,950,706
Year Ended December 31, 1998............. 1,451,810 106,460 21,036 1,579,306
Year Ended December 31, 1999............. 1,104,052 62,145 5,503 1,171,700
</TABLE>
36
<PAGE>
IBIS TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(15) INDUSTRY SEGMENTS (CONTINUED)
The table below provides the reconciliation of reportable segment operating
income (loss), assets, capital expenditures, and depreciation and amortization
to the Company's totals.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
SEGMENT RECONCILIATION 1997 1998 1999
- ---------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Loss Before Income Taxes:
Total operating income (loss) for reportable
segments........................................... $(2,508,167) $ 120,233 $ 1,484,543
Corporate general & administrative expenses.......... (1,723,852) (1,823,001) (1,787,821)
Net other income..................................... 295,819 538,064 1,140,663
----------- ----------- -----------
Loss before income taxes............................. (3,936,200) (1,164,704) 837,385
=========== =========== ===========
Assets:
Total assets for reportable segments................. 11,266,835 11,027,101 16,703,042
Cash & cash equivalents not allocated to segments.... 13,309,823 12,819,366 36,361,621
Other unallocated assets............................. 341,582 460,851 662,841
----------- ----------- -----------
Total assets......................................... 24,918,240 24,307,318 53,727,504
=========== =========== ===========
Capital Expenditures:
Total capital expenditures for reportable segments... 1,730,517 1,544,802 872,760
Corporate capital expenditures....................... 40,229 100,805 298,432
----------- ----------- -----------
Total capital expenditures........................... 1,770,746 1,645,607 1,171,192
=========== =========== ===========
Depreciation and Amortization:
Total depreciation & amortization for reportable
segments........................................... 1,950,706 1,579,306 1,171,700
Corporate depreciation & amortization................ 112,312 92,107 139,196
----------- ----------- -----------
Total depreciation & amortization.................... 2,063,018 1,671,413 1,310,896
=========== =========== ===========
</TABLE>
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The Response to this item is incorporated by reference from the discussion
responsive thereto under the captions "Management" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement for the 2000
Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Executive Compensation" in the Company's
Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Share Ownership" in the Company's Proxy
Statement for the 2000 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is incorporated by reference from the discussion
responsive thereto under the captions "Certain Transactions" and "Executive
Compensation--Employment Contracts and Change of Control Arrangements" in the
Company's Proxy Statement for the 2000 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
ITEM 14(A).
The following documents are filed as part of this annual report on
Form 10-K.
ITEM 14(A)(1) AND (2)
See "Index to Financial Statements and Financial Statement Schedule" at Item
8 to this Annual Report on Form 10-K. Other financial statement schedules have
not been included because they are not applicable or the information is included
in the financial statements or notes thereto.
38
<PAGE>
ITEM 14(A)(3) EXHIBITS
The following is a list of exhibits filed as part of this Annual Report on
Form 10-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S> <C>
*3.1 - Restated Articles of Organization of Registrant (Filed as
Exhibit 3.1)
3.1.1 - Articles of Amendment to the Restated Articles of
Organization of the Registrant
*3.2 - Restated By-Laws of the Registrant, as amended (Filed as
Exhibit 3.2)
*4.1 - Article 4 of Restated Articles of Organization (Filed as
Exhibit 4.1)
*4.2 - Form of Common Stock Certificate (Filed as Exhibit 4.2)
*4.3 - Form of Redeemable Warrant Certificate (Filed as Exhibit
4.3)
*4.4 - Amended and Restated Shareholders Agreement dated as of
August 17, 1989, as amended, among the Registrant and
certain holders of Common Stock (Filed as Exhibit 4.4)
*10.1 - Master Agreement, dated as of August 7, 1992, among the
Registrant, Dr. Hilton Glavish, and Zimec, Inc. (Filed as
Exhibit 10.1)
*10.2 - Sublicense Agreement, dated December 21, 1993, among the
Registrant, Dr. Hilton Glavish, and Zimec, Inc. (Filed as
Exhibit 10.2)
*+10.3 - Business Development Agreement, dated as of July 15, 1994,
between the Registrant and Mitsubishi Materials Corporation
(Filed as Exhibit 10.3)
*10.4 - Lease Agreement, dated December 22, 1987, as amended,
between the Registrant and Thomas J. Flatley d/b/a The
Flatley Company ("Flatley") (Filed as Exhibit 10.4)
10.4A - Fifth Amendment to Lease Agreement, dated February 4, 1997
between the Registrant and Flatley (Filed as Exhibit 10.4 to
the Registrant's Quarterly Report on Form 10-Q for the
Quarter ended March 31, 1997 and Incorporated herein by
reference).
*10.5 - Master Lease Agreement, dated September 14, 1993, between
the Registrant and Comdisco, Inc. ("Comdisco") (Filed as
Exhibit 10.5)
*10.6 - Warrant Agreement, dated as of October 26, 1993, as amended,
between the Registrant and Comdisco (Filed as Exhibit 10.6)
*10.7 - Warrant, dated November 15, 1990, as amended, issued by the
Registrant to Phoenix Venture Incorporated (Filed as Exhibit
10.7)
*10.8 - Master Equipment Lease Agreement, dated as of September 22,
1993, as amended, between the Registrant and Financing for
Science International, Inc. ("FSI"), as assigned to General
Electric Capital Corporation as of April 29, 1994 (Filed as
Exhibit 10.8)
*10.9 - Warrant, dated October 1, 1993, issued by the Registrant to
FSI (Filed as Exhibit 10.9)
*10.10 - Warrant, dated January 2, 1991, as amended, issued by the
Registrant to Venlease Associates (Filed as Exhibit 10.10)
*10.11 - Form of Noncompetition, Nondisclosure and Assignment of
Inventions Agreement between the Registrant and each current
employee of the Registrant (Filed as Exhibit 10.11)
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S> <C>
+*10.12 - Employment Agreement, dated December 20, 1993, as amended,
between the Registrant and Geoffrey Ryding (Filed as Exhibit
10.12)
+*10.13 - Ibis Technology Corporation 1988 Stock Option Plan (Filed as
Exhibit 10.13)
+*10.14 - Form of Stock Option Agreement under 1988 Stock Option Plan
(Filed as Exhibit 10.14)
+*10.15 - Ibis Technology Corporation 1993 Employee, Director and
Consultant Stock Option Plan as amended (Filed as Exhibit
10.15 to the Company's Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 1996 and Incorporated herein by
reference)
+*10.16 - Form of Stock Option Agreement under 1993 Employee, Director
and Consultant Stock Option Plan (Filed as Exhibit 10.16)
+*10.17 - 1995/1996 Incentive Compensation Plan of the Registrant
(Filed as Exhibit 10.17)
*++10.18 - Capacity Option Agreement, dated September 21, 1995, between
Registrant and Motorola Corporation (Filed as Exhibit 10.18)
*10.19 - Letter Agreement, dated March 4, 1994, as amended, between
the Registrant and Fleet Bank of Massachusetts, N.A.
("Fleet") (Filed as Exhibit 10.19)
*10.19A - Amendment to Letter Agreement, dated February 2, 1996,
between the Registrant and Fleet (Filed as Exhibit 10.19A)
*10.20 - Master Equipment Lease Agreement, dated November 1, 1995,
between Registrant and FSI (Filed as Exhibit 10.20)
*10.21 - Bill of Sale dated November 22, 1995 between the Registrant
and FSI (Filed as Exhibit 10.21)
*10.22 - Sale and Leaseback Agreement dated as of November 1, 1995
between the Registrant and FSI (Filed as Exhibit 10.22)
*10.23 - Reserve Pledge and Security Agreement dated as of November
1, 1995 between FSI and Registrant (Filed as Exhibit 10.23)
*10.24 - Warrant issued by Registrant in favor of FSI dated November
22, 1995 for the Purchase of shares of Common Stock of the
Registrant (Filed as Exhibit 10.24)
*10.25 - Sales Representative Agreement, dated February 17, 1995,
between the Registrant and Young Woo High Tech (Filed as
Exhibit 10.25)
*10.26 - Exclusive Patent License Agreement, dated November 1, 1994,
between the Registrant and Superion Limited (Filed as
Exhibit 10.26)
*10.27 - License Agreement, dated as of September 1, 1994, between
the Registrant and Nissin Electric Co., Ltd. (Filed as
Exhibit 10.27)
*10.28 - Underwriter's Warrant Agreement, dated May 27, 1994, between
the Registrant and Josephthal Lyon & Ross Incorporated
("Josephthal") (Filed as Exhibit 10.28)
*10.29 - Underwriting Agreement, dated May 20, 1994, between, the
Registrant and Josephthal (Filed as Exhibit 10.29)
*10.30 - Warrant Agreement, dated as of May 20, 1994, between the
Registrant and Continental Stock Transfer & Trust Company
(Filed as Exhibit 10.30)
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S> <C>
10.31 - Contract, as amended, dated May 25, 1994, between the
Registrant and the Defense Nuclear Agency (Filed as Exhibit
10.31 to the Company's Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1996 and incorporated herein by
reference).
10.32 - Equipment Purchase Master Agreement, dated as of May 22,
1996, between Registrant, and IBM (Filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K/A (File No.0-13078)
filed on September 12, 1996 and incorporated herein by
reference).
10.33 - Description of Fees Paid to Ted R. Dintersmith, Ph.D. (Filed
as Exhibit 10.33 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996).
+10.34 - Employment Agreement, dated October 23, 1997 between the
Registrant and Martin J. Reid. (Filed as Exhibit 10.34 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
+10.35 - Ibis Technology Corporation 1997 Employee, Director and
Consultant Stock Option Plan (Filed as Exhibit 99.1 to the
Company's Form S-8 File No. (333-45247) filed on January 30,
1998 and incorporated herein by reference).
10.36 - License Agreement, dated June 27, 1996, between the
Registrant and Orion Equipment, Inc. ("Orion"). (Filed as
Exhibit 10.36 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997).
10.37 - Modification to License Agreement, dated August 28, 1997,
between the Registrant and Orion. (Filed as Exhibit 10.37 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.38 - Consulting Services Agreement, dated as of April 22, 1997,
between the Registrant and Orion. (Filed as Exhibit 10.38 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
+++10.39 - Purchase Order, dated April 14, 1998, from Mitsubishi
Silicon Corporation (Filed as Exhibit 10.39 to the Company's
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1998 and incorporated herein by reference).
+++10.40 - Task Order dated April 10, 1998, between the Registrant and
International Business Machines Corporation ("IBM") (Filed
as Exhibit 10.40 to the Company's Quarterly Report on Form
10-Q for the Quarter Ended June 30, 1998 and incorporated
herein by reference).
+++10.41 - Licensing and Development Agreement, dated June 9, 1998,
between the Registrant and IBM (Filed as Exhibit 10.41 to
the Company's Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1998 and incorporated herein by reference).
10.42 - Sixth Amendment to Lease dated July 16, 1998, amending Lease
Agreement dated December 22, 1987 between the Company and
Thomas J. Flatley d/b/a the Flatley Company (Filed as
Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 1998).
+10.43 - Change of Control Agreement, dated September 20, 1999,
between the Registrant and Martin J. Reid
+10.44 - Change of Control Agreement, dated September 20, 1999,
between the Registrant and Debra L. Nelson
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S> <C>
++++10.45 - License Agreement dated July 1, 1999, between the Registrant
and Mitsubishi Materials Silicon Corporation
11 - Statement regarding computation of per share income (loss)
23 - Consent and Report on Financial Statement Schedule of KPMG
LLP
27 - Financial Data Schedule
</TABLE>
- ------------------------
* Previously filed with the Commission as Exhibits to, and incorporated herein
by reference from, the Company's Registration Statement filed on Form S-1,
File No. 333-1174, effective April 2, 1996.
+ Confidential treatment previously obtained from the Securities and Exchange
Commission; filed as Exhibit No. 10.26 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994. Request for extension
of confidential treatment filed on November 12, 1997 with the Securities and
Exchange Commission. The portions of the document for which confidential
treatment has been granted are marked "Confidential" and such confidential
portions have been filed separately with the Securities and Exchange
Commission.
++ Confidential treatment previously obtained from the Securities and Exchange
Commission; filed as Exhibit No. 10.32 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995. The portions of the
document for which confidential treatment has been granted are marked
"Confidential" and such confidential portions have been filed separately
with the Securities and Exchange Commission.
+++Confidential treatment previously obtained from the Securities and Exchange
Commission; filed as Exhibit Numbers 10.39, 10.40 and 10.41 to the
Registrant's Quarterly on Form 10-Q for the quarter ended June 30, 1998. The
portions of the document for which confidential treatment has been granted
are marked "Confidential" and such confidential portions have been filed
separately with the Securities and Exchange Commission.
++++Confidential treatment requested from the Securities and Exchange
Commission. The portions of the document for which confidential treatment
has been requested are marked "Confidential" and such confidential portions
have been filed separately with the Securities and Exchange Commission.
+ Management contract or compensatory plan, contract or arrangement.
Where a document is incorporated by reference from a previous filing, the
Exhibit number of the document in that previous filing is indicated in
parentheses after the description of such document.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts
ITEM 14(B) REPORTS ON FORM 8-K
The Company filed with the Commission on October 1, 1999, a Current Report
on Form 8-K for the September 29, 1999, event reporting the public dissemination
of a press release announcing its planned expansion of its SIMOX wafers
production capacity, personnel, and facilities.
The Company filed with the Commission on October 29, 1999, a Current Report
on Form 8-K for the October 27, 1999, event reporting the public dissemination
of a press release announcing its financial results for the third quarter and
nine months ended September 30, 1999.
42
<PAGE>
The Company filed with the Commission on November 10, 1999, a Current Report
on Form 8-K for the November 8, 1999, event reporting the public dissemination
of a press release announcing its plans to develop the next-generation Ibis 2000
implanter.
The Company filed with the Commission on December 2, 1999, a Current Report
on Form 8-K for the November 30, 1999, event reporting the public dissemination
of a press release announcing the completion of a licensing agreement with
Mitsubishi Materials Silicon Corporation.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Danvers,
Massachusetts on March 24, 2000.
<TABLE>
<S> <C> <C>
IBIS TECHNOLOGY CORPORATION
BY: /S/ MARTIN J. REID
-----------------------------------------
Martin J. Reid
PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
By: /s/ MARTIN J. REID President, Chief Executive
------------------------------------------- Officer (principal executive March 24, 2000
Martin J. Reid officer) and Director
Chief Financial Officer,
By: /s/ DEBRA L. NELSON Treasurer, Clerk, (principal
------------------------------------------- financial and accounting March 24, 2000
Debra L. Nelson officer)
By: /s/ DIMITRI A. ANTONIADIS, PH.D. Director
------------------------------------------- March 24, 2000
Dimitri A. Antoniadis, Ph.d.
By: /s/ ROBERT L. GABLE Director
------------------------------------------- March 24, 2000
Robert L. Gable
By: /s/ LESLIE B. LEWIS Director
------------------------------------------- March 24, 2000
Leslie B. Lewis
By: /s/ DONALD MCGUINNESS Director
------------------------------------------- March 24, 2000
Donald Mcguinness
By: /s/ LAMBERTO RAFFAELLI Director
------------------------------------------- March 24, 2000
Lamberto Raffaelli
By: /s/ PETER H. ROSE, PH.D. Director
------------------------------------------- March 24, 2000
Peter H. Rose, Ph.d.
By: /s/ GEOFFREY RYDING, PH.D. Director
------------------------------------------- March 24, 2000
Geoffrey Ryding, Ph.d.
</TABLE>
44
<PAGE>
SCHEDULE II
IBIS TECHNOLOGY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF CHARGED AMOUNTS END OF
DESCRIPTION PERIOD TO EXPENSE WRITTEN OFF PERIOD
- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
December 31, 1997.................................. 7,550 33,000 -- 40,550
December 31, 1998.................................. 40,550 24,450 -- 65,000
December 31, 1999.................................. 65,000 -- -- 65,000
Reserve for Inventory Obsolescence
December 31, 1997.................................. 167,000 213,000 302,000 78,000
December 31, 1998.................................. 78,000 82,000 -- 160,000
December 31, 1999.................................. 160,000 517,000 189,000 488,000
</TABLE>
S-1
<PAGE>
EXHIBIT 3.1.1
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, MARTIN J. REID , President
----------------------------------------------------------------
and DEBRA L. NELSON , Clerk
--------------------------------------------------------------------
of IBIS TECHNOLOGY CORPORATION ,
---------------------------------------------------------------------------
(EXACT NAME OF CORPORATION)
located at 32 CHERRY HILL DRIVE, DANVERS, MA 01923 ,
--------------------------------------------------------------------
(STREET ADDRESS OF CORPORATION IN MASSACHUSETTS)
certify that these Articles of Amendment affecting articles numbered:
3
- --------------------------------------------------------------------------------
(NUMBER THOSE ARTICLES 1, 2, 3, 4, 5 AND/OR 6 BEING AMENDED)
of the Articles of Organization were duly adopted at a meeting held on May 14,
1998 , by vote of: 5,700,999 shares of COMMON of 6,705,340 shares
outstanding
being at least a majority of each type, class or series outstanding and entitled
to vote thereon:
<PAGE>
To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total PRESENTLY authorized is:
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
<S> <C> <C> <C> <C>
Common: Common: 10,000,000 $.008
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
Preferred: Preferred: 2,000,000 $ .01
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
</TABLE>
CHANGE the total authorized to:
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
<S> <C> <C> <C> <C>
Common: Common: 20,000,000 $.008
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
Preferred: Preferred: 2,000,000 $ .01
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
- ------------------------- -------------------------------- -------------- ------------------------------ ------------------------
</TABLE>
<PAGE>
The foregoing amendment(s) will become effective when these Article of
Amendments are filed in accordance with General Laws, Chapter 156B, Section 6
unless the articles specify, in accordance with the vote adopting the amendment,
a LATER effective date not more than THIRTY DAYS after such filing, in which
event the amendment will become effective on such later date.
Later effective date: ____________________________________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 14th day of May, 1998,
/S/ MARTIN J. REID, President
. /S/ DEBRA L. NELSON, Clerk
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
----------
I hereby approve the within Articles of Amendment and, the
filing fee in the amount of $10,000.00 having been paid, said
articles are deemed to have been filed with me this 21st day
of May 1998.
EFFECTIVE DATE
-------------------------------
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
SECRETARY OF THE COMMONWEALTH
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
ANNE T. LELAND, LEGAL ASSISTANT
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
ONE FINANCIAL CENTER, BOSTON, MA 02111
617 542-6000
<PAGE>
EXHIBIT 10.43
AGREEMENT
This Agreement is entered into as of the 20th day of September, 1999 by
and between Ibis Technology Corporation, a Massachusetts corporation (the
"Company") and Martin J. Reid (the "Executive").
WHEREAS the Executive is the President and Chief Executive Officer of
the Company and has been employed in such capacity since December 1, 1997;
WHEREAS because of the skills and experience of the Executive and his
knowledge of the Company, his service to the Company is very important to the
future success of the Company;
WHEREAS the Executive desires to enter into this Agreement to provide
him with certain financial protection in the event that his employment
terminates for certain reasons in connection with or within a period of time
after a change of control of the Company; and
WHEREAS the Board of Directors of the Company has determined that it is
in the best interests of the Company to enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive
agree as follows:
1. DEFINITIONS.
(a) CAUSE. As used herein, "Cause" shall mean a termination for one or
more of the following reasons, as determined by a majority vote of the Board:
(i) Executive's continuing failure to render services to the Company in
accordance with his assigned duties consistent with Section 1 of the employment
letter agreement by and between the Executive and the Company dated October 23,
1997 ("Employment Agreement") and such failure of performance continues for a
period of more than 120 days after notice thereof has been provided to the
Executive by the Board; (ii) the Executive's willful misconduct or gross
negligence; (iii) the Executive is convicted of a felony, either in connection
with the performance of his obligations to the Company or which conviction
materially adversely affects his ability to perform such obligations, or
materially adversely affects the business activities, reputation, goodwill or
image of the Company; (iv) willful disloyalty, deliberate dishonesty, breach of
fiduciary duty or breach of the terms of the Employment Agreement; (v) the
commission by the Executive of an act of fraud, embezzlement or deliberate
disregard of the rules or policies of the Company which results in significant
loss, damage or injury to the Company; (vi) the Executive's willful unauthorized
disclosure of any trade secret or confidential information of the Company; or
(vii) Executive's willful commission of an act which constitutes unfair
competition with the Company or which induces any employee or customer of the
Company to break a contract with the Company.
In making any determination under this Section 1(a), the Board shall
act fairly and in utmost good faith and shall give the Executive an opportunity
to appear and be heard at a meeting of the Board or any committee thereof and
present evidence on his behalf. For purposes of this Section, no act, or failure
to act, by the Executive shall be considered "willful" unless done, or admitted
to be done, by the Executive in bad faith and without reasonable belief that
such action or omission was in the best interest of the Company.
(b) CHANGE OF CONTROL. As used herein, a "Change of Control" shall be
deemed to have occurred if (i) there is a sale or transfer of all or
substantially all of the assets of the Company in one or a series of
transactions; (ii) any "person," as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended (or any successor provision) (the
"Exchange Act"), together with all "affiliates" and "associates" (as such terms
are defined in Rule 12b-2 under the Exchange Act or any successor provision) of
such person, shall become the "beneficial owner" or "beneficial owners" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act or any successor
provision), directly or indirectly, of securities of the Company representing in
the aggregate thirty percent (30%) or more of either (1) the then outstanding
shares of common stock of the Company or (2) the combined voting power of all
then outstanding securities
1
<PAGE>
EXHIBIT 10.43
of the Company having the right under ordinary circumstances to vote in an
election of the Board of Directors of the Company (hereafter referred to as an
"Acquisition"); PROVIDED, that, notwithstanding the foregoing, an Acquisition
shall not be deemed to have occurred for purposes of this clause (ii) solely as
the result of an acquisition of securities by the Company which, by reducing the
number of shares of common stock or other voting securities outstanding,
increases (x) the proportionate number of shares of common stock beneficially
owned by any person to thirty percent (30%) or more of the common stock then
outstanding or (y) the proportionate voting power represented by the voting
securities beneficially owned by any person to thirty percent (30%) or more of
the combined voting power of all then outstanding voting securities; or (iii)
there is a merger or consolidation between the Company and a entity other than a
subsidiary of the Company in which the Company is not the continuing or
surviving corporation and pursuant to which the holders of the Company's voting
stock immediately prior to such merger or consolidation would not be the holders
immediately after such merger or consolidation of at least 50% of the voting
stock of the continuing or surviving corporation.
(c) GOOD REASON. As used herein, a "Good Reason" shall mean either a
good faith determination by the Executive following a Change of Control that he
can no longer fulfill his duties as specified in the Employment Agreement or a
material change in the Executive's authority, functions, duties or
responsibilities as President and Chief Executive Officer of the Company
(including, without limitation, material changes in the control or managerial
structure of the Company) which would cause his position with the Company to
become of less dignity, responsibility, importance or scope than his position on
the date hereof or as of any subsequent date prior to the Change of Control, a
reduction in the Executive's salary or a material reduction in benefits from the
amount of salary paid or the value of the benefits available on the date hereof
or as of any subsequent date prior to the Change of Control, a transfer of the
principal location of the place of performance of the Executive's duties from
the Danvers, Massachusetts area without the Executive's consent, or the failure
of the Board of Directors of the Company to elect the Executive as President and
Chief Executive Officer of the Company at any time such elections are made, or
removal from such office of the Company, PROVIDED that such material change is
not in connection with a termination of the Executive's employment for Cause,
and, PROVIDED, FURTHER, that any notice of termination by the Executive for Good
Reason shall be given by him within ninety (90) days of when he becomes aware of
such change, of such failure or removal.
2. SEVERANCE COMPENSATION. In the event that at or near the time of, in
connection with, or within a period of two (2) years after, a Change of Control,
the Executive's employment with the Company is terminated either (i) by the
Company other than for Cause or (ii) by the Executive for a Good Reason, then
the Company, within ten (10) days of the applicable termination date, shall pay
to the Executive, in addition to any amounts due to Executive for services
rendered prior to the termination date, a lump sum amount equal to two (2) times
the Executive's highest Annual Salary during the preceding three year period,
including the year of such termination. Annual Salary shall mean Executive's
annual base salary and bonus, excluding reimbursements and amounts attributable
to stock options and other non-cash compensation.
3. CONTINUATION OF BENEFITS. In the event that at the time of, in connection
with, or within a period of (2) two years after a Change in Control, the
Executive's employment with the Company is terminated either (i) by the Company
other than for Cause or (ii) by the Executive for a Good Reason, then the
Company shall arrange to provide the Executive with life, disability, group
dental and health insurance benefits substantially similar to those the
Executive was receiving, immediately prior to the termination, until the earlier
of (a) two (2) years following his termination date, or (b) the date upon which
he becomes eligible for such coverage offered by a subsequent employer.
Executive's termination date shall be the date of any qualifying event under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the COBRA
coverage that may be available to Executive, if any, shall be offset by any
period of coverage provided hereunder.
4. NO DUPLICATION OF COMPENSATION OR BENEFITS. The Executive's severance
compensation and benefits set forth in Sections 2 and 3 above shall replace, and
be provided in lieu of, any severance compensation and benefits that may be
provided to Executive under any other agreement, including but not limited to
those provided under Section 3(b) of the Employment Agreement; PROVIDED, that
this prohibition against duplication shall not be construed to otherwise limit
Executive's rights as to payments or benefits provided under any pension plan
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended), deferred compensation, stock, stock option or similar plan
sponsored by the Company; and FURTHER PROVIDED, that notwithstanding the
foregoing, all other rights and obligations set forth in the Employment
Agreement shall continue as provided for therein.
2
<PAGE>
EXHIBIT 10.43
5. ENFORCEABILITY; REDUCTION.
(a) If any provision of this Agreement shall be deemed invalid or
unenforceable as written, this Agreement shall be construed, to the greatest
extent possible, or modified, to the extent allowable by law, in a manner which
shall render it valid and enforceable and any limitation on the scope or
duration of any provision necessary to make it valid and enforceable shall be
deemed to be a part thereof. No invalidity or unenforceability of any provision
contained herein shall affect any other portion of this Agreement.
(b) Notwithstanding anything provided herein, if the Executive is a
"disqualified individual" (as defined in Section 280G of the Internal Revenue
Code ("Code"), and the severance compensation and continuation of benefits
provided for in Sections 2 and 3 hereof (collectively "Severance Compensation")
together with any other payments which the Executive has the right to receive
from the Company (or its affiliates and subsidiaries), would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the Code), the
Severance Compensation shall be reduced. The reduction shall be in an amount so
that the present value of the total amount received by the Executive from the
Company (or its affiliates and subsidiaries) will be one dollar ($1.00) less
than three (3) times the Executive's Base Amount (as defined in Section 280G of
the Code) so that no portion of the amounts received by the Executive shall be
subject to the excise tax imposed by Section 4999 of the Code (excise tax).
The determination as to whether any reduction in Severance Compensation
is necessary and the amount of any such reduction shall be made by the Company's
independent public accountants (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and to the Executive within
fifteen (15) business days of the Executive's termination date. Any such
determination by the Accounting Firm shall be conclusive and binding upon the
Executive and the Company. The Executive shall determine which part of the
Severance Compensation shall be eliminated or reduced consistent with the
requirements of this Section 5 and shall notify the Company promptly in writing;
PROVIDED, that if the Executive does not make such determination within ten (10)
business days of the receipt of the calculations made by the Accounting Firm,
the Company shall determine which part of the Severance Compensation shall be
eliminated or reduced consistent with the requirements of this Section 5 and
shall notify the Executive promptly in writing of such election.
If through error or otherwise the Executive should receive payments
under this Agreement, together with other payments the Executive has the right
to receive from the Company (or its affiliates and subsidiaries), in excess of
one dollar ($1.00) less than three times his Base Amount, the Executive shall
immediately repay the excess to the Company upon notification that an
overpayment has been made.
6. MITIGATION. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for herein be reduced by any
compensation earned by the Executive as the result of employment by another
employer or by retirement benefits after the termination date or otherwise.
7. NOTICES. All notices, requests, consents and other communications hereunder
shall be in writing, shall be addressed to the receiving party's address set
forth below or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered or certified mail, return receipt requested, postage prepaid.
If to the Company:
Ibis Technology Corporation
32 Cherry Hill Drive
Danvers, MA 01923
Attn: Board of Directors
3
<PAGE>
EXHIBIT 10.43
If to the Executive:
Martin J. Reid
7 Wainwright Road, Unit 59
Winchester, MA 01890
In each case with a copy to:
Andrew J. Merken, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the 5th business day following the day such mailing is
made.
8. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
9. MODIFICATIONS AND AMENDMENTS. The terms and provisions of this Agreement may
be modified or amended only by written agreement executed by all parties hereto.
10. WAIVERS AND CONSENTS. The terms and provisions of this Agreement may be
waived, or consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall constitute a waiver or
consent with respect to any other terms or provisions of this Agreement, whether
or not similar. Each such waiver or consent shall be effective only in the
specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent.
11. ASSIGNMENT. The rights and obligations under this Agreement may not be
assigned by either party hereto without the prior written consent of the other
party.
12. BENEFIT. All statements, representations, warranties, covenants and
agreements in this Agreement shall be binding on the parties hereto and shall
inure to the benefit of the respective successors and permitted assigns of each
party hereto. Nothing in this Agreement shall be construed to create any rights
or obligations except among the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
13. GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the law of the
Commonwealth of Massachusetts, without giving effect to the conflict of law
principles thereof.
14. JURISDICTION AND SERVICE OF PROCESS. Any legal action or proceeding with
respect to this Agreement may be brought in the courts of the Commonwealth of
Massachusetts or of the United States of America for the District of
Massachusetts. By execution and delivery of this Agreement, each of the parties
hereto accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of the parties
hereto irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by certified mail, postage prepaid, to the party at its address set
forth in Section 7 hereof.
4
<PAGE>
EXHIBIT 10.43
15. NO WAIVER OF RIGHTS, POWERS AND REMEDIES. No failure or delay by a party
hereto in exercising any right, power or remedy under this Agreement, and no
course of dealing between the parties hereto, shall operate as a waiver of any
such right, power or remedy of the party. No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, shall preclude such party from any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The election of any
remedy by a party hereto shall not constitute a waiver of the right of such
party to pursue other available remedies. No notice to or demand on a party not
expressly required under this Agreement shall entitle the party receiving such
notice or demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.
16. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and by different parties hereto on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY:
IBIS TECHNOLOGY CORPORATION
By: /S/ RICHARD HODGSON
--------------------------------
Richard Hodgson
Chairman of the Board of Directors
EXECUTIVE:
/S/ MARTIN J. REID
-----------------------------------
MARTIN J. REID
5
<PAGE>
EXHIBIT 10.44
AGREEMENT
This Agreement is entered into as of the 20th day of September, 1999 by
and between Ibis Technology Corporation, a Massachusetts corporation (the
"Company") and Debra L. Nelson (the "Executive").
WHEREAS the Executive is Chief Financial Officer of the Company and has
been employed in such capacity since February 2, 1998;
WHEREAS because of the skills and experience of the Executive and her
knowledge of the Company, her service to the Company is very important to the
future success of the Company;
WHEREAS the Executive desires to enter into this Agreement to provide
her with certain financial protection in the event that her employment
terminates for certain reasons in connection with or within a period of time
after a change of control of the Company; and
WHEREAS the Board of Directors of the Company has determined that it is
in the best interests of the Company to enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Executive
agree as follows:
1. DEFINITIONS.
(a) CAUSE. As used herein, "Cause" shall mean a termination for one or
more of the following reasons, as determined by a majority vote of the Board:
(i) Executive's continuing failure to render services to the Company in
accordance with her assigned duties and such failure of performance continues
for a period of more than 120 days after notice thereof has been provided to the
Executive by the Board; (ii) the Executive's willful misconduct or gross
negligence; (iii) the Executive is convicted of a felony, either in connection
with the performance of her obligations to the Company or which conviction
materially adversely affects her ability to perform such obligations, or
materially adversely affects the business activities, reputation, goodwill or
image of the Company; (iv) willful disloyalty, deliberate dishonesty, breach of
fiduciary duty or breach of the terms of the Employment Agreement; (v) the
commission by the Executive of an act of fraud, embezzlement or deliberate
disregard of the rules or policies of the Company which results in significant
loss, damage or injury to the Company; (vi) the Executive's willful unauthorized
disclosure of any trade secret or confidential information of the Company; or
(vii) Executive's willful commission of an act which constitutes unfair
competition with the Company or which induces any employee or customer of the
Company to break a contract with the Company.
In making any determination under this Section 1(a), the Board shall
act fairly and in utmost good faith and shall give the Executive an opportunity
to appear and be heard at a meeting of the Board or any committee thereof and
present evidence on her behalf. For purposes of this Section, no act, or failure
to act, by the Executive shall be considered "willful" unless done, or admitted
to be done, by the Executive in bad faith and without reasonable belief that
such action or omission was in the best interest of the Company.
(b) CHANGE OF CONTROL. As used herein, a "Change of Control" shall be
deemed to have occurred if (i) there is a sale or transfer of all or
substantially all of the assets of the Company in one or a series of
transactions; (ii) any "person," as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended (or any successor provision) (the
"Exchange Act"), together with all "affiliates" and "associates" (as such terms
are defined in Rule 12b-2 under the Exchange Act or any successor provision) of
such person, shall become the "beneficial owner" or "beneficial owners" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act or any successor
provision), directly or indirectly, of securities of the Company representing in
the aggregate thirty percent (30%) or more of either (1) the then outstanding
shares of common stock of the Company or (2) the combined voting power of all
then outstanding securities
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EXHIBIT 10.44
of the Company having the right under ordinary circumstances to vote in an
election of the Board of Directors of the Company (hereafter referred to as an
"Acquisition"); PROVIDED, that, notwithstanding the foregoing, an Acquisition
shall not be deemed to have occurred for purposes of this clause (ii) solely as
the result of an acquisition of securities by the Company which, by reducing the
number of shares of common stock or other voting securities outstanding,
increases (x) the proportionate number of shares of common stock beneficially
owned by any person to thirty percent (30%) or more of the common stock then
outstanding or (y) the proportionate voting power represented by the voting
securities beneficially owned by any person to thirty percent (30%) or more of
the combined voting power of all then outstanding voting securities; or (iii)
there is a merger or consolidation between the Company and a entity other than a
subsidiary of the Company in which the Company is not the continuing or
surviving corporation and pursuant to which the holders of the Company's voting
stock immediately prior to such merger or consolidation would not be the holders
immediately after such merger or consolidation of at least 50% of the voting
stock of the continuing or surviving corporation.
(c) GOOD REASON. As used herein, a "Good Reason" shall mean a material
change in the Executive's authority, functions, duties or responsibilities as
Chief Financial Officer of the Company (including, without limitation, material
changes in the control or managerial structure of the Company) which would cause
her position with the Company to become of less dignity, responsibility,
importance or scope than her position on the date hereof or as of any subsequent
date prior to the Change of Control, a reduction in the Executive's salary or a
material reduction in benefits from the amount of salary paid or the value of
the benefits available on the date hereof or as of any subsequent date prior to
the Change of Control, a transfer of the principal location of the place of
performance of the Executive's duties from the Danvers, Massachusetts area
without the Executive's consent, or the failure of the Board of Directors of the
Company to elect the Executive as Chief Financial Officer of the Company at any
time such elections are made, or removal from such office of the Company,
PROVIDED that such material change is not in connection with a termination of
the Executive's employment for Cause, and, PROVIDED, FURTHER, that any notice of
termination by the Executive for Good Reason shall be given by her within ninety
(90) days of when she becomes aware of such change, of such failure or removal.
2. SEVERANCE COMPENSATION. In the event that at or near the time of, in
connection with, or within a period of two (2) years after, a Change of Control,
the Executive's employment with the Company is terminated either (i) by the
Company other than for Cause or (ii) by the Executive for a Good Reason, then
the Company, within ten (10) days of the applicable termination date, shall pay
to the Executive, in addition to any amounts due to Executive for services
rendered prior to the termination date, a lump sum amount equal to one (1) times
the Executive's highest Annual Salary during the preceding three year period,
including the year of such termination. Annual Salary shall mean Executive's
annual base salary and bonus, excluding reimbursements and amounts attributable
to stock options and other non-cash compensation.
3. CONTINUATION OF BENEFITS. In the event that at the time of, in connection
with, or within a period of (2) two years after a Change in Control, the
Executive's employment with the Company is terminated either (i) by the Company
other than for Cause or (ii) by the Executive for a Good Reason, then the
Company shall arrange to provide the Executive with life, disability, group
dental and health insurance benefits substantially similar to those the
Executive was receiving, immediately prior to the termination, until the earlier
of (a) one (1) years following his termination date, or (b) the date upon which
she becomes eligible for such coverage offered by a subsequent employer.
Executive's termination date shall be the date of any qualifying event under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the COBRA
coverage that may be available to Executive, if any, shall be offset by any
period of coverage provided hereunder.
4. NO DUPLICATION OF COMPENSATION OR BENEFITS. The Executive's severance
compensation and benefits set forth in Sections 2 and 3 above shall replace, and
be provided in lieu of, any severance compensation and benefits that may be
provided to Executive under any other agreement, PROVIDED, that this prohibition
against duplication shall not be construed to otherwise limit Executive's rights
as to payments or benefits provided under any pension plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended), deferred compensation, stock, stock option or similar plan sponsored
by the Company; and FURTHER PROVIDED, that notwithstanding the foregoing, all
other rights and obligations set forth in the Employment Agreement shall
continue as provided for therein.
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EXHIBIT 10.44
5. ENFORCEABILITY; REDUCTION.
(a) If any provision of this Agreement shall be deemed invalid or
unenforceable as written, this Agreement shall be construed, to the greatest
extent possible, or modified, to the extent allowable by law, in a manner which
shall render it valid and enforceable and any limitation on the scope or
duration of any provision necessary to make it valid and enforceable shall be
deemed to be a part thereof. No invalidity or unenforceability of any provision
contained herein shall affect any other portion of this Agreement.
(b) Notwithstanding anything provided herein, if the Executive is a
"disqualified individual" (as defined in Section 280G of the Internal Revenue
Code ("Code"), and the severance compensation and continuation of benefits
provided for in Sections 2 and 3 hereof (collectively "Severance Compensation")
together with any other payments which the Executive has the right to receive
from the Company (or its affiliates and subsidiaries), would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the Code), the
Severance Compensation shall be reduced. The reduction shall be in an amount so
that the present value of the total amount received by the Executive from the
Company (or its affiliates and subsidiaries) will be one dollar ($1.00) less
than three (3) times the Executive's Base Amount (as defined in Section 280G of
the Code) so that no portion of the amounts received by the Executive shall be
subject to the excise tax imposed by Section 4999 of the Code (excise tax).
The determination as to whether any reduction in Severance Compensation
is necessary and the amount of any such reduction shall be made by the Company's
independent public accountants (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and to the Executive within
fifteen (15) business days of the Executive's termination date. Any such
determination by the Accounting Firm shall be conclusive and binding upon the
Executive and the Company. The Executive shall determine which part of the
Severance Compensation shall be eliminated or reduced consistent with the
requirements of this Section 5 and shall notify the Company promptly in writing;
PROVIDED, that if the Executive does not make such determination within ten (10)
business days of the receipt of the calculations made by the Accounting Firm,
the Company shall determine which part of the Severance Compensation shall be
eliminated or reduced consistent with the requirements of this Section 5 and
shall notify the Executive promptly in writing of such election.
If through error or otherwise the Executive should receive payments
under this Agreement, together with other payments the Executive has the right
to receive from the Company (or its affiliates and subsidiaries), in excess of
one dollar ($1.00) less than three times his Base Amount, the Executive shall
immediately repay the excess to the Company upon notification that an
overpayment has been made.
6. MITIGATION. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for herein be reduced by any
compensation earned by the Executive as the result of employment by another
employer or by retirement benefits after the termination date or otherwise.
7. NOTICES. All notices, requests, consents and other communications hereunder
shall be in writing, shall be addressed to the receiving party's address set
forth below or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered or certified mail, return receipt requested, postage prepaid.
If to the Company:
Ibis Technology Corporation
32 Cherry Hill Drive
Danvers, MA 01923
Attn: Board of Directors
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EXHIBIT 10.44
If to the Executive:
Debra L. Nelson
121 Standley Street
Beverly, MA 01915
In each case with a copy to:
Andrew J. Merken, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the 5th business day following the day such mailing is
made.
8. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
9. MODIFICATIONS AND AMENDMENTS. The terms and provisions of this Agreement may
be modified or amended only by written agreement executed by all parties hereto.
10. WAIVERS AND CONSENTS. The terms and provisions of this Agreement may be
waived, or consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall constitute a waiver or
consent with respect to any other terms or provisions of this Agreement, whether
or not similar. Each such waiver or consent shall be effective only in the
specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent.
11. ASSIGNMENT. The rights and obligations under this Agreement may not be
assigned by either party hereto without the prior written consent of the other
party.
12. BENEFIT. All statements, representations, warranties, covenants and
agreements in this Agreement shall be binding on the parties hereto and shall
inure to the benefit of the respective successors and permitted assigns of each
party hereto. Nothing in this Agreement shall be construed to create any rights
or obligations except among the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
13. GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the law of the
Commonwealth of Massachusetts, without giving effect to the conflict of law
principles thereof.
14. JURISDICTION AND SERVICE OF PROCESS. Any legal action or proceeding with
respect to this Agreement may be brought in the courts of the Commonwealth of
Massachusetts or of the United States of America for the District of
Massachusetts. By execution and delivery of this Agreement, each of the parties
hereto accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of the parties
hereto irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by certified mail, postage prepaid, to the party at its address set
forth in Section 7 hereof.
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EXHIBIT 10.44
15. NO WAIVER OF RIGHTS, POWERS AND REMEDIES. No failure or delay by a party
hereto in exercising any right, power or remedy under this Agreement, and no
course of dealing between the parties hereto, shall operate as a waiver of any
such right, power or remedy of the party. No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, shall preclude such party from any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The election of any
remedy by a party hereto shall not constitute a waiver of the right of such
party to pursue other available remedies. No notice to or demand on a party not
expressly required under this Agreement shall entitle the party receiving such
notice or demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.
16. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and by different parties hereto on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
COMPANY:
IBIS TECHNOLOGY CORPORATION
By: /S/ RICHARD HODGSON
-----------------------------------
Richard Hodgson
Chairman of the Board of Directors
EXECUTIVE:
/S/ DEBRA L. NELSON
--------------------------------------
DEBRA L. NELSON
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EXHIBIT 10.45
[*]= CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS WITH ASTERISKS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
LICENSE AGREEMENT
This License Agreement (this "Agreement"), dated as of July 1, 1999,
between IBIS TECHNOLOGY CORPORATION, a Massachusetts, USA corporation having its
principal place of business at 32 Cherry Hill Drive, Danvers, Massachusetts
01923, USA ("IBIS") and MITSUBISHI MATERIALS SILICON CORPORATION, a Japanese
corporation having its principal place of business at 314 Nishisangao, Noda-shi,
Chiba-ken, 278, JAPAN ("MSIL").
WITNESSETH:
WHEREAS, IBIS and Mitsubishi Materials Corporation, the parent company
of MSIL, are parties to a Business Development Agreement dated July 15, 1994
(the "Business Development Agreement") concerning the development, manufacture,
distribution and sale of Separated by Implanted Oxygen Wafers ("SIMOX"); and
WHEREAS, consistent with Phase II of the Business Development
Agreement, MSIL is purchasing from IBIS an Ibis 1000 SIMOX Implanter; and
WHEREAS, MSIL wishes to acquire from IBIS, and IBIS is willing to grant
to MSIL, an irrevocable license (except as otherwise provided herein) for
certain know-how and process technology to be utilized by MSIL in connection
with its operation of the Ibis 1000 SIMOX Implanter.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, the parties
hereto mutually agree as follows:
<PAGE>
EXHIBIT 10.45
ARTICLE I - DEFINITIONS
1.1 "AFFILIATE" shall mean, with respect to a party to this Agreement,
any corporation, company, partnership and/or firm which controls or is
controlled by or is under common control with such party. For the purposes of
this Paragraph, control shall mean: (a) in the case of corporate entities,
direct or indirect ownership of at least fifty percent (50%) of the stock or
participating shares entitled to vote for the election of directors; and (b) in
the case of non-corporate entities, direct or indirect ownership of at least
fifty percent (50%) of the equity interest or the power to direct the management
and policies of such entity.
1.2 "NET SALES" shall mean, with respect to any quantity of SIMOX
Wafers subject to royalty under this Agreement that are sold by MSIL or any of
its Affiliates, the gross invoice selling price for that quantity of such SIMOX
Wafers, less: (a) discounts and allowances to customers and (b) credits for
returned goods. In the event that SIMOX Wafers subject to this Agreement are
sold in combination with any other product sold by MSIL or any of its
Affiliates, then "Net Sales," for purposes of determining royalty payments on
the combination, shall be calculated using one of the following methods:
(a) By multiplying the Net Sales of the combination by the
fraction A/A+B, where A is the gross selling price, during the
royalty paying period in question, of the SIMOX Wafers sold
separately, and B is the gross selling price, during the
royalty period in question, of the other product(s) sold
separately; or
(b) In the event that no such separate sales are made of SIMOX
Wafers or any of such other product(s) in such combination
package during the royalty paying period in question, Net
Sales, for the purposes of determining royalty payments, shall
be calculated on a fair and equitable basis.
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<PAGE>
EXHIBIT 10.45
1.3 "PATENT RIGHTS" shall mean rights owned or controlled by IBIS which
arise under any United States or foreign patent applications or any patents
issuing from said applications, including any divisions, continuations,
continuations-in-part, re-examinations, extensions, or reissues thereof and
patents of addition thereto, and which claim any Technology (as hereinafter
defined). Presently existing Patent Rights are listed in Appendix A hereto.
1.4 "SIMOX IMPLANTER" shall mean the [*] Ibis 1000 Implanter with fill
automated cassette load lock purchased by MSIL from IBIS pursuant to a letter
from Mr. Yuichi Furukawa to IBIS dated April 14, 1998.
1.5 "SIMOX WAFERS" shall mean polished, single-crystalline silicon
wafers into which oxygen ions are implanted by the SIMOX Implanter or any
additional IBIS oxygen implanter purchased or leased by MSIL utilizing the
Standard SIMOX and/or Advantox-TM- processes referred to in Appendix A.
1.6 "TECHNOLOGY" shall mean all production recipes, process technology,
know-how, inventions, improvements, discoveries or Patent Rights which are
listed on Appendix A.
1.7 "TERRITORY" shall mean [*].
ARTICLE II- ESTABLISHMENT OF PROPRIETARY POSITION
2.1 IBIS will promptly inform MSIL of any improvements to the
Technology developed or acquired by IBIS and any patent applications and patents
thereon shall be owned by IBIS. MSIL will promptly inform IBIS of any
improvements to the Technology developed or acquired by MSIL, and any patent
applications and patents thereon shall be owned by MSIL; provided, however, if
IBIS desires to utilize such improvements, whether patented or unpatented, MSIL
shall grant a non exclusive license to IBIS to utilize any such improvement(s)
subject to a royalty fee to be paid by
3
<PAGE>
EXHIBIT 10.45
IBIS to MSIL in an amount to be negotiated, but shall not in any event exceed
[*] of IBIS' net sales of products utilizing any such improvements.
2.2 IBIS shall be responsible for filing and prosecuting United States
and foreign patent applications on the Technology developed or acquired by IBIS
to the extent deemed desirable by IBIS in its sole discretion. While IBIS shall
be responsible for making decisions regarding the scope and content of any such
applications and prosecution thereof, MSIL shall have an opportunity to review
and provide input thereto. The expenses in connection with filing and
prosecution of any such patent applications, United States and/or foreign, and
the maintenance of issued patents thereon shall be borne by IBIS.
2.3 In the event that IBIS elects not to file a patent application on
any invention referred to in Paragraph 2.2 of this Article or decides to
discontinue prosecution or maintenance of any such application or maintenance of
any patent issued thereon, MSIL may at its own expense file, prosecute, and/or
maintain any such patent application or patent as the case may be, on behalf of,
and in the name of IBIS and IBIS agrees to cooperate with any such efforts.
2.4 MSIL shall be responsible for filing and prosecuting Japanese and
foreign patent applications within the Territory on any improvements to the
Technology developed or acquired by MSIL to the extent deemed desirable by MSIL
in its sole discretion. While MSIL shall be responsible for making decisions
regarding the scope and content of any such applications and prosecution
thereof. IBIS shall have an opportunity to review and provide input thereto. The
expenses in connection with filing and prosecution of any such patent
applications, and the maintenance of issued patents thereon shall be borne by
MSIL.
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EXHIBIT 10.45
2.5 In the event that MSIL elects not to file a patent application on
any invention referred to in Paragraph 2.4 of this Article or decides to
discontinue prosecution or maintenance of any such application or maintenance of
any patent issued thereof. IBIS may at its own expense file, prosecute, and/or
maintain any such patent application or patent as the case may be on behalf of,
and in the name of MSIL and MSIL agrees to cooperate with any such efforts.
ARTICLE III - LICENSE TO MSIL
3.1 Upon the terms and conditions set forth herein, IBIS hereby grants
to MSIL and its Affiliates an irrevocable (except as otherwise provided herein)
license to utilize the Technology in connection with MSIL's and its Affiliates'
use of the SIMOX Implanter and any additional IBIS oxygen implanters purchased
or leased by MSIL for the purpose of manufacturing SIMOX Wafers.
3.2 The license granted by IBIS to MSIL and its Affiliates under
Paragraph 3.1 of this Article shall be exclusive within the Territory. MSIL and
its affiliates shall not have any right, other than the right to sell SIMOX
Wafers on a non-exclusive basis, under such license to utilize the Technology
for or in connection with the manufacture of SIMOX Wafers outside the Territory.
Such license does not include any right to grant sublicenses.
3.3 During the term of this Agreement and so long as MSIL is not in
default with respect to any payment due to IBIS hereunder, IBIS will not assert
Patent Rights to prevent MSIL from using or selling any quantity of SIMOX Wafers
manufactured or sold in accordance with this Agreement.
ARTICLE IV - ROYALTIES AND OTHER CONSIDERATION
4.1 Within 60 days following the execution of this agreement, MSIL
shall pay to IBIS a non-refundable initial royalty fee in the amount of U.S.
[*].
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EXHIBIT 10.45
4.2 In addition to the royalty fee set forth in Paragraph 4.1, MSIL
shall pay IBIS a royalty of [*] of Net Sales from time to time of SIMOX Wafers
up to [*]. The initial royalty fee paid pursuant to Paragraph 4.1 shall not be
credited against royalties payable to IBIS pursuant to this Paragraph 4.2.
4.3 Royalty fees for SIIMOX Wafers with a buried oxide layer of greater
than [*] thick will expire on [*]. Royalty fees for SIMOX Wafers with a buried
oxide of less than [*] thick are subject to renegotiation of the parties after
[*], provided, however, that the royalty shall not be more than [*] of Net Sales
of such SIMOX Wafers and shall be valid until the date mutually agreed upon,
which shall be no later than the expiration date of the Patent Rights listed in
Appendix A. If parties are unable to agree on the royalty fee applicable after
[*], the license granted hereunder for SIMOX Wafers with buried oxide of less
than [*] thick shall terminate.
ARTICLE V - REPORTS PAYMENTS AND ACCOUNTING
5.1 Beginning with the calendar quarter in which MSIL or an Affiliate
makes a first commercial sale of SIMOX Wafers, MSIL shall provide to IBIS,
within thirty (30) days following the end of such quarter, a written report
setting forth the total Net Sales and the royalty due and payable to IBIS for
such quarter, and MSIL shall remit to IBIS with such report the amount of
royalty payments shown thereby to be due. Royalties shall be remitted in United
States dollars. For converting any royalty that accrued in another currency into
United States dollars, there shall
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EXHIBIT 10.45
be used the closing buying rates quoted by the WALL STREET JOURNAL for the last
business day of the month in which the royalties were earned.
5.2 MSIL shall keep complete and accurate records for the latest three
(3) years showing the Net Sales by MSIL of SIMOX Wafers subject to royalty under
this Agreement. Such records shall be in sufficient detail to enable the
royalties payable hereunder by MSIL to be determined. MSIL agrees to permit such
books and records to be examined, but not more often than twice in any calendar
year. The examination shall be by an independent certified public accounting
firm designated by IBIS and reasonably acceptable to and approved by MSIL. Any
such audit shall be conducted during business hours of MSIL upon reasonable
notice to MSIL. The purpose of any such audit shall solely be for verifying the
royalties payable as provided for in this Agreement and said accounting firm
shall only disclose to IBIS Net Sales and royalties on SIMOX Wafers sales and
royalties due and payable thereon to IBIS. Any such audit shall be at the
expense of IBIS unless any such audit reveals that MSIL has underpaid or
understated royalties due to IBIS by more than five percent (5%), in which case
MSIL shall reimburse IBIS for the cost of any such audit.
5.3 Any tax required to be paid under the laws or governmental
regulations of any country with respect to royalties payable to IBIS shall be
promptly paid by MSIL provided, however, that any payments from MSIL to IBIS may
be reduced by whatever taxes or charges, if any, which MSIL is required by law
to withhold from such payments. MSIL shall furnish IBIS with proof of payment of
such withholding taxes or charges to the appropriate governmental authority.
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EXHIBIT 10.45
ARTICLE VI- TERM AND TERMINATION
6.1 This Agreement shall become effective upon the date first written
above and shall expire on June 30, 2008, unless earlier terminated as herein
provided, and unless further extended for an additional period as may be
mutually agreed upon. After expiration of this Agreement, MSIL may freely use
all rights, the Technology and other information which MSIL is granted by IBIS
hereunder for SIMOX Wafers with a buried oxide layer of greater than [*] thick.
6.2 If any of the terms or conditions of this Agreement are breached by
IBIS and such breach is not corrected with thirty (30) days after written notice
thereof is given by MSIL to IBIS, then MSIL shall have the option to terminate
this Agreement by giving written notice thereof to IBIS. In such case, MSIL,
after termination of this Agreement, shall continue to have the right to freely
use all rights, the Technology and other information which MSIL is granted by
IBIS under this Agreement.
6.3 If any of the terms or conditions of this Agreement are breached by
MSIL and such breach is not corrected within thirty (30) days after written
notice thereof is given to MSIL by IBIS, then IBIS shall have the option to
terminate this Agreement by giving written notice thereof to MSIL whereupon MSIL
shall immediately cease and desist from any further utilization of the
Technology and the license granted hereunder shall be of no further force and
effect.
ARTICLE VII - DISCLAIMER OF WARRANTIES
7.1 IBIS hereby warrants to MSIL that to its best knowledge and belief
and to that of its Officers there are at the date hereof no rights of third
parties which could be infringed by the performance of this Agreement by MSIL
and which might detract from the value to MSIL of this Agreement. In the event
that any third party claims against MSIL that the Patent Rights or the
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<PAGE>
EXHIBIT 10.45
Technology is infringing such party's corresponding rights and IBIS or MSIL
fails to defend against such claims, IBIS shall reimburse and be liable to MSIL
for any charge, costs, damages or royalties for which MSIL may incur or be
compelled to pay, provided, however, that IBIS shall have no reimbursement or
other liability to MSIL in respect of any alleged infringement of rights held by
Lucent Technologies, Inc or any affiliate or assignee there of; and provided
further that such reimbursement or liability of IBIS shall not exceed the total
royalties paid under Article IV of this Agreement to IBIS by MSIL;
alternatively, IBIS may procure for MSIL the right to use the Technology or
modify the Technology to avoid the alleged infringement without material
impairment of its functionality.
7.2 IBIS hereby warrants to MSIL that there is no pending claim or
litigation challenging the validity of the Technology.
7.3 EXCEPT FOR THE CONFIRMATION AND WARRANTIES AS PROVIDED IN PARAGRAPH 7.1
AND 7.2 OF THIS ARTICLE HEREOF, IBIS MAKES NO WARRANTY OR REPRESENTATION THAT
ANYTHING MADE, USED OR SOLD OR OTHERWISE DISPOSED OF UNDER THE LICENSE GRANTED
IN THIS AGREEMENT IS OR BE FREE FROM INFRINGEMENT OF PATENTS, COPYRIGHTS OR
TRADEMARKS OF THIRD PARTIES. IBIS HAS NOT CONDUCTED ANY STUDY OF PATENTABILITY
OF THE TECHNOLOGY AND MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WITH
RESPECT TO THE LIKELIHOOD OF THE ISSUANCE OF ANY PATENTS OR THE VALIDITY OF ANY
PATENTS WHICH HAVE ISSUED OR MAY ISSUE IN RESPECT TO OR IN CONNECTION WITH THE
TECHNOLOGY. FURTHER, THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE VIII - ASSIGNABILITY
Either party may, without the prior written consent of the other,
assign this Agreement of its rights or obligations hereunder to an Affiliate or
to a party with which it may merger or to which it may sell or transfer all or
substantially all of its assets in the line of business to which this Agreement
relates. Except as set forth in this paragraph, neither this Agreement nor any
of the rights or obligations of either party hereunder shall be assignable or
otherwise transferable by such party without the prior written consent of the
other party.
ARTICLE IX - STATUS OF THE PARTIES
For purposes of this Agreement, the parties shall at all times be
independent contractors and not employees or agents of the other. No partnership
or joint venture is created hereby and neither party is authorized or empowered
to act as agent for the other for any purpose or to make
9
<PAGE>
EXHIBIT 10.45
any statement, contract, warranty, representation or commitment on behalf of
the other. MSIL and its employees' activities in connection with this
Agreement will be conducted by MSIL at its own risk.
ARTICLE X - CONFIDENTIALITY
10.1 The Technology shall be received by MSIL (including all
appropriate employees, agents and independent contractors) in strictest
confidence and used solely in furtherance of the activities contemplated by
this Agreement, and shall be accorded at least the same degree of
confidentiality and secrecy with which MSIL holds its own most confidential
information of a similar nature but in no event less than reasonable care.
The Technology shall not be disclosed in whole or in part to any persons
other than: (i) employees or agents of MSIL or independent contractors
employed by MSIL who have reasonable need for access to such information in
connection with MSIL's performance under this Agreement and who are bound to
MSIL by a written agreement of confidentiality containing terms consistent
with those contained in this Paragraph; and (ii) governmental authorities, as
required, to obtain necessary regulatory clearances. The foregoing
restrictions shall not apply to any such information: (a) which is, or
subsequently may become, within the knowledge of the general public, without
the fault of MSIL, (b) which is or was known to MSIL prior to the time of
receipt thereof from IBIS, as shown by competent written records, or (c)
which is subsequently rightfully obtained from sources other than IBIS and
without confidential restriction in favor of MSIL. In the event that MSIL
becomes legally required to disclose any aspect of the Technology, MSIL shall
provide IBIS with prompt notice so that IBIS may, at its election, seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. In the event that such protective order or
other remedy is not obtained, or that IBIS waives compliance with the
provisions of this
10
<PAGE>
EXHIBIT 10.45
Agreement, MSIL shall furnish only that portion of the Technology which is
legally required in the opinion of MSIL's counsel.
10.2 The confidentiality obligations in Paragraph 10.1 above shall be
applied to any Affiliate of MSIL which has access to the Technology.
10.3 The same confidentiality obligations as those set forth in the
Paragraph 10.1 above shall be applied to IBIS with respect to any information
received by IBIS from MSIL under this Agreement, including, but not limited to,
any improvements to the Technology.
ARTICLE XI- ABATEMENT OF INFRINGEMENT
If at any time any third party shall infringe any unexpired Patent
Rights licensed hereunder and MSIL shall give notice in writing to IBIS of the
existence of such infringement, then MSIL may at its election bring suit in its
own name or in the name of IBIS against such infringer. IBIS shall execute such
legal papers necessary for the prosecution of such suit as may be requested by
MSIL, and MSIL shall be liable for all costs and expenses of such litigation and
shall be entitled to receive and retain all recoveries therefrom. IBIS will at
all times fully cooperate with MSIL in the enforcement of the Patent Rights and
shall furnish MSIL all information and records requested by MSIL in connection
therewith. The foregoing shall in no manner preclude IBIS from taking any action
in its own behalf against any infringer.
ARTICLE XII - NOTICE
Any notice required under this Agreement shall be considered given upon
the earlier of: (i) when actually received at the address set forth below; or
(ii) two business days after such notice, properly addressed and shipped by
overnight service providing evidence of delivery or by
11
<PAGE>
EXHIBIT 10.45
certified mail, return receipt requested, is sent by either party to the other.
The proper addresses for notice are as follows:
If to IBIS: IBIS Technology Corporation
32 Cherry Hill Drive
Danvers, Massachusetts
- USA
Attention: President
If to MSIL: Mitsubishi Materials Silicon Corporation
314 Nishisangao
Noda-shi, Chiba-ken 278
JAPAN
Attention: General Manager, SIMOX PROJECT
ARTICLE XIII- MISCELLANEOUS
13.1 The formation, validity, construction and performance of this
Agreement are governed by the laws of Japan. Any disputes arising out of or
relating to this Agreement or breach thereof shall be finally settled by
arbitration in Danvers, MA USA in accordance with the Rules of the American
Arbitration Association if MSIL demands arbitration and in Tokyo, Japan in
accordance with the Rules of the Japan Commercial Arbitration Association if
IBIS demands arbitration.
13.2 This Agreement constitutes the entire Agreement between the
parties hereto with respect to the subject matter hereof and as such supersedes
all previous written and oral negotiations, agreements, contracts,
representations, letters of intent, understandings and commitments with respect
thereto. This Agreement may be modified, discharged, amended, or extended only
by a writing signed by a duly authorized representative of the parties.
13.3 Should any court of competent jurisdiction later consider any
portion of this Agreement to be invalid, illegal or unenforceable, it shall be
considered severed from this Agreement. All other provisions, rights or
obligations shall continue without regard to the
12
<PAGE>
EXHIBIT 10.45
severed provision that the remaining provisions of this Agreement are in
accordance with the intention of the parties.
13.4 Neither MSIL nor IBIS shall make any news release or other public
statement, whether to the press, stockholders or otherwise, disclosing the terms
of this Agreement or of any amendment hereto, or the performance hereunder or
the existence of the arrangement between the parties without the prior written
approval of the other party except as required by applicable law or regulation.
MSIL shall not use IBIS' name or any IBIS' trademark without the prior written
consent of IBIS.
IN WITNESS WHEREOF, and intending to be bound hereby, the parties have
caused this agreement to be signed by their duly authorized representatives.
IBIS TECHNOLOGY CORPORATION
By: /S/ MARTIN J. REID
------------------------------
Name: MARTIN J. REID
------------------------------
Title: PRESIDENT & CEO
------------------------------
Date: SEPTEMBER 21, 1999
------------------------------
MITSUBISHI MATERIALS SILICON CORPORATION
By: /S/ MINORU MIZUKOSHI
------------------------------
Name: MINORU MIZUKOSHI
------------------------------
Title: PRESIDENT
------------------------------
Date: SEPT. 13, 1999
------------------------------
13
<PAGE>
EXHIBIT 10.45
APPENDIX A
TECHNOLOGY
IBIS 1000 Oxygen Implanter energy and dose requirements, process flow and
annneal conditions to replicate "Standard" SIMOX, Advantox-TM- 120 and
Advantox-TM- 170 & 190.
Advantox-TM- product line based on IBIS Technology Corporation energy contouring
[*].
14
<PAGE>
EXHIBIT 11
IBIS TECHNOLOGY CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE INCOME (LOSS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Basic net income (loss) .................... $(3,937,456) $(1,165,960) $ 827,129
=========== =========== ===========
Weighted average common shares outstanding-
basic .................................... 5,709,931 6,759,870 7,403,803
Net additional common shares upon assumed
exercise of stock options and warrants ... -- -- 414,348
----------- ----------- -----------
Weighted average commons shares outstanding-
diluted .................................. 5,709,931 6,759,870 7,818,151
=========== ----------- -----------
Net income (loss) per common share
Basic .................................... $ (0.69) $ (0.17) $ 0.11
=========== =========== ===========
Diluted .................................. $ (0.69) $ (0.17) $ 0.11
=========== =========== ===========
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Ibis Technology Corporation:
The audits referred to in our report dated February 4, 2000, included
the related financial statement schedule for each of the years in the three-year
period ended December 31, 1999, included in the annual report on Form 10-K. The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We consent to incorporation by reference in the registration
statements (No. 333-1174) on Form S-1, (No. 33-78440) on Form S-3, (No.
333-9237) on Form S-3, (No. 333-82497) on Form S-3, (No. 333-9239) on Form
S-8, (No. 33-81452) on Form S-8, and (No. 333-45247) on Form S-8 of Ibis
Technology Corporation of our report dated February 4, 2000, relating to the
balance sheets of Ibis Technology Corporation as of December 31, 1998 and
1999, and the related statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ending December 31,
1999, which report appears in the December 31, 1999 annual report on 10-K of
Ibis Technology Corporation.
KPMG LLP
Boston, Massachusetts
March 24, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 36,361,621
<SECURITIES> 0
<RECEIVABLES> 3,585,824
<ALLOWANCES> 65,000
<INVENTORY> 6,876,002
<CURRENT-ASSETS> 48,626,404
<PP&E> 14,346,200
<DEPRECIATION> 9,370,156
<TOTAL-ASSETS> 53,727,504
<CURRENT-LIABILITIES> 5,317,132
<BONDS> 0
65,382
0
<COMMON> 0
<OTHER-SE> 48,380,299
<TOTAL-LIABILITY-AND-EQUITY> 53,787,504
<SALES> 15,345,787
<TOTAL-REVENUES> 16,603,022
<CGS> 11,885,547
<TOTAL-COSTS> 12,328,625
<OTHER-EXPENSES> 3,437,012
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,280
<INCOME-PRETAX> 837,385
<INCOME-TAX> 10,256
<INCOME-CONTINUING> 827,129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 827,129
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>
