<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADEPT TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 3559 94-2900635
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
150 ROSE ORCHARD WAY, SAN JOSE, CALIFORNIA 95134
(408) 432-0888
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
BRIAN R. CARLISLE
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
ADEPT TECHNOLOGY, INC.
150 ROSE ORCHARD WAY,
SAN JOSE, CALIFORNIA 95134
(408) 432-0888
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
KENNETH R. LAMB, ESQ. JOHN L. SAVVA, ESQ.
MEG L. FITZPATRICK, ESQ. DAVID A. RIVERA, ESQ.
GIBSON, DUNN & CRUTCHER LLP SULLIVAN & CROMWELL
ONE MONTGOMERY STREET 1870 EMBARCADERO ROAD
SAN FRANCISCO, CALIFORNIA 95104 PALO ALTO, CALIFORNIA 94303
(415) 393-8200 (650) 461-5600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM AGGREGATE OFFERING
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE(1)
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<S> <C> <C> <C> <C>
Common Stock, no par value per
share............................ 2,454,968 $37.81 $92,822,340 $24,505.10
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(c) of the Securities Act of 1933 based on the average
of the high and low sales prices of the common stock, as reported on the
Nasdaq National Market on October 20, 2000.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 26, 2000
PROSPECTUS
2,134,755 SHARES
ADEPT TECHNOLOGY, INC. LOGO
COMMON STOCK
----------------------
Adept is selling 2,000,000 shares and the selling shareholders identified
in this prospectus are selling 134,755 shares. Adept will not receive any
proceeds from the sale of the shares being sold by the selling shareholders.
The shares are quoted on the Nasdaq National Market under the symbol
"ADTK." On October 24, 2000, the last sale price of the shares as reported on
the Nasdaq National Market was $39.75 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
----------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price...................................... $ $
Underwriting discount...................................... $ $
Proceeds, before expenses, to Adept........................ $ $
Proceeds, before expenses, to the selling shareholders..... $ $
</TABLE>
The underwriters may also purchase up to an additional 320,213 shares from
Adept at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares will be ready for delivery on or about , 2000.
----------------------
MERRILL LYNCH & CO. LEHMAN BROTHERS
CIBC WORLD MARKETS
----------------------
The date of this prospectus is , 2000
<PAGE> 3
[DESCRIPTION OF INSIDE FRONT COVER GRAPHIC
GRAPHICS IDENTIFYING THREE AREAS OF ADEPT'S BUSINESS WITH A PICTURE OF A ROBOT
RELATING TO EACH AREA, INCLUDING:
AUTOMATION EQUIPMENT FOR: FIBER OPTIC ASSEMBLY -- PHOTONICS
TELECOM AUTOMATION -- TELECOMMUNICATIONS
WAFER PROCESSING -- SEMICONDUCTOR]
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 5
Special Note Regarding Forward-Looking Statements........... 19
Use of Proceeds............................................. 20
Dividend Policy............................................. 20
Price Range of Our Common Stock............................. 20
Capitalization.............................................. 21
Selected Consolidated Financial Data........................ 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 31
Management.................................................. 44
Certain Transactions........................................ 50
Principal and Selling Shareholders.......................... 51
Description of Capital Stock................................ 54
Shares Eligible For Future Sale............................. 56
Underwriting................................................ 58
Validity of Common Stock.................................... 60
Experts..................................................... 60
Where You Can Find More Information About Us................ 60
Index To Consolidated Financial Statements.................. F-1
</TABLE>
------------------------
You should rely only on the information contained in this prospectus. We
have not, and the selling shareholders and the underwriters have not, authorized
any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. We
are not, and the selling shareholders and the underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in this
prospectus is accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.
------------------------
Adept's registered trademarks include Adept and SILMA. This prospectus
contains other trademarks and trade names of Adept and other companies.
i
<PAGE> 5
PROSPECTUS SUMMARY
The following summary highlights information that we more fully describe
elsewhere in this prospectus. You should read this entire prospectus carefully,
including the section entitled "Risk Factors."
ADEPT TECHNOLOGY, INC.
We provide intelligent automation systems that meet our customers'
increasingly complex manufacturing requirements. Over our 17 year history, we
have become a market leader in intelligent automation systems and have an
installed base of approximately 19,000 systems worldwide. We utilize our
portfolio of high precision assembly components, material handling robotics and
application development software to deliver a comprehensive approach to
intelligent automation that we call Rapid Deployment Automation, or RDA. Our
simplified approach to the design and implementation of intelligent automation
reduces the time and cost to design, engineer and launch products into
high-volume production.
Intelligent automation technology is composed of computer-based motion
control machinery, machine vision for alignment and positioning and high-level
software programming. These technologies perform material handling, precision
assembly and packaging functions within manufacturing environments. This
technology has been adopted by many industries including semiconductors,
electronics, automotive, food processing, life sciences and pharmaceuticals with
increasing adoption in high growth industries such as wireless communications
and photonics, which include optical components, sensors and modules.
Implementing production automation systems has become a key factor in the
successful commercialization of products and technologies. This strategy is
apparent in both mature and high technology industries as more companies
implement automation into their production environments to cost-effectively meet
product demand and reduce the time to market between product design and full
volume production. In addition to meeting the challenges of capacity constraints
and short product life cycles, our customers also face increasing component
miniaturization in a variety of industries. As a result, manual assembly and
handling in the manufacturing process has become increasingly infeasible,
requiring high precision manufacturing automation. Underlying all of these
manufacturing goals is our customers' need to maintain high levels of production
quality. Intelligent automation solutions have the ability to improve our
customers' profitability by reducing costs and increasing production throughput
while maintaining high product quality.
We believe significant opportunities exist for intelligent automation
systems in several key high growth industries including fiber optic components,
wireless communications and semiconductor equipment. In particular, we believe
there is substantial opportunity in fiber optic component manufacturing as a
majority of these components are manually produced today without standardized
production processes. In addition, many of the companies in the photonics
industry are start-ups who often lack the resources and expertise to develop
automation solutions in-house. In the wireless communications industry, growth
in subscribers and wireless applications has resulted in the need to use
automated systems to meet mobile phone demand and to respond to short product
life cycles. Manufacturers of semiconductor capital equipment continue to turn
to third party suppliers to provide value-added subsystems that increase
automation capabilities and efficiencies in their core processes. We believe
that the transition to 300 mm wafers in the semiconductor industry will further
contribute to the demand for automation.
We have leveraged our automation experience across multiple industries
including semiconductor, electronics, automotive, food processing, life
sciences, and pharmaceuticals. We have also successfully introduced automation
systems to the high growth industries of photonics and wireless communications.
We believe our automation solutions will reduce manufacturing times while
improving quality, yield and throughput in the photonics industry. Using our RDA
methodology, our customers can configure standardized platforms by utilizing a
combination of automation components from our portfolio that provide both a
flexible and an integrated manufacturing solution. Our customers also benefit
from increased flexibility via efficient production line changeovers during
product life cycles, less customized engineering, reduced dependence on
manufacturing engineers and overall shorter implementation cycles.
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<PAGE> 6
Our goal is to be the leading provider of precision automation systems to
the markets we serve. Key elements of our strategy include:
- Enhance RDA capabilities by providing integrated platforms;
- Leverage key technologies and automation knowledge to further penetrate
the photonics industry;
- Provide differentiated, value added automation systems to further
penetrate high growth markets;
- Continue strategic acquisitions to complement existing product portfolio;
and
- Enhance customer relationships.
We have developed a diverse customer base by marketing and selling our
products worldwide through more than 300 system integrators, our direct sales
force and original equipment manufacturers, or OEMs. We have leveraged these
relationships into a worldwide presence with the ability to deliver
comprehensive turnkey solutions to our customers across multiple industries and
applications. No customer accounted for more than 10% of our revenues in any of
the past three years. During fiscal 2000, our top three OEM customers by revenue
were Staubli Faverges SCA, KLA-Tencor Corporation and PMJ Automec USA, Inc.; our
top three system integrator customers by revenue were ATS Ohio; RTS Wright
Industries Inc. and Balda AG; and our top three corporate customers by revenue
were Ford Motor Company, Motorola, Inc. and Corning, Inc.
RECENT DEVELOPMENTS
Net revenues for the quarter ended September 30, 2000 were $27.6 million,
an increase of 34% over net revenues of $20.6 million for the quarter ended
October 2, 1999. Net income, before amortization of goodwill, other intangibles
and merger-related charges, or amortization expense, was $0.7 million, or $0.06
per fully diluted share, for the quarter ended September 30, 2000, versus net
loss of $1.5 million, or $0.15 per fully diluted share, for the quarter ended
October 2, 1999. Including amortization expense of $1.4 million, net loss was
$0.7 million, or $0.07 per fully diluted share, for the quarter ended September
30, 2000.
Operating income for the quarter ended September 30, 2000 was $0.1 million
before amortization expense, or a loss of $1.3 million including amortization
expense, as compared to operating loss of $3.8 million for the quarter ended
October 2, 1999. Gross margin for the quarter ended September 30, 2000 was 46.5%
versus 38.2% in the quarter ended October 2, 1999. Operating expenses excluding
amortization expense for the quarter ended September 30, 2000 were $12.7
million, or $14.1 million including amortization expense, compared to $11.7
million in operating expenses for the quarter ended October 2, 1999.
Our principal executive offices are located at 150 Rose Orchard Way, San
Jose, California 95134, and our telephone number at that location is (408)
432-0888.
2
<PAGE> 7
THE OFFERING
Common stock offered by
Adept......................... 2,000,000 shares
Common stock offered by the
selling shareholders.......... 134,755 shares
Shares outstanding after the
offering...................... 12,851,540 shares
Use of proceeds............... We estimate that our net proceeds from this
offering without exercise of the over-allotment
option will be approximately $74,108,250. We
intend to use the net proceeds of this offering
for general corporate purposes, including
working capital and capital expenditures. We
may also use a portion of the proceeds to
pursue acquisitions of complementary products,
technologies or businesses. We will not receive
any proceeds from the sale of shares by the
selling shareholders.
Risk factors.................. See "Risk Factors" and other information
included in this prospectus for a discussion of
factors you should carefully consider before
deciding to invest in our shares of common
stock.
Nasdaq National Market
symbol........................ ADTK
Unless otherwise indicated, the information in this prospectus assumes no
exercise of the underwriters' over allotment option.
The number of shares of common stock outstanding after this offering is
based on 10,851,540 shares outstanding as of October 19, 2000. The number of
shares outstanding after this offering excludes:
- 2,534,771 shares reserved for issuance under our stock option plans, of
which options to purchase 1,991,604 shares at an average option price of
$11.55 have been issued;
- 862,016 shares reserved for issuance under our stock purchase plan; and
- shares of our common stock valued at $1.1 million that may be issuable to
the former shareholders of HexaVision Technologies Inc. in connection
with our acquisition of HexaVision.
This number assumes that the underwriters' over-allotment option to
purchase additional shares is not exercised. If the over-allotment option is
exercised in full, we will issue and sell an additional 320,213 shares.
3
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Please read this table together with the sections of this prospectus
entitled "Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and the notes to those statements appearing elsewhere in this
prospectus.
On July 14, 1999, we completed the acquisition of BYE/OASIS Engineering,
Inc. in a pooling of interests transaction. The summary consolidated financial
data prior to June 30, 2000 has been restated to include the historical results
of BYE/OASIS. Fiscal 2000 results also include the financial results of
Pensar-Tucson, Inc. subsequent to its acquisition on April 28, 2000 and
NanoMotion Incorporated subsequent to its acquisition on May 31, 2000.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
2000 1999 1998 1997 1996
------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net revenues............................ $99,212 $87,374 $105,440 $88,511 $85,098
Gross margin.......................... 43,039 39,472 44,599 36,494 36,160
Total operating expenses................ 45,805 36,267 41,490 32,496 29,316
Operating income (loss)................. (2,766) 3,205 3,109 3,998 6,844
Interest income, net.................... 746 926 971 693 490
Net income (loss)....................... $(1,427) $ 2,511 $ 2,261 $ 3,157 $ 6,030
Net income (loss) per share:(1)
Basic................................. $ (0.15) $ 0.27 $ 0.25 $ 0.36 $ 0.79
Diluted............................... $ (0.15) $ 0.26 $ 0.23 $ 0.34 $ 0.72
Number of shares used in computing per
share amounts:(1)
Basic................................. 9,774 9,302 9,154 8,739 7,659
Diluted............................... 9,774 9,484 9,689 9,159 8,404
</TABLE>
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(1) See notes 1 and 8 of the notes to our consolidated financial statements for
a discussion of the computation of net income (loss) per share.
The as adjusted balance sheet data below reflects the application of the
estimated net proceeds to Adept from the sale of our common stock in this
offering based on an assumed public offering price of $39.75 per share, after
deducting an assumed underwriting discount and estimated offering expenses.
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
----------------------
ACTUAL AS ADJUSTED
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(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $20,437 $ 94,545
Working capital............................................. 46,593 120,701
Total assets................................................ 93,523 167,631
Long-term liabilities....................................... 1,222 1,222
Total shareholders' equity.................................. 70,728 144,836
</TABLE>
4
<PAGE> 9
RISK FACTORS
You should carefully consider the risks described below, as well as other
information contained in this prospectus, before making a decision to buy our
common stock. Investing in our common stock involves a high degree of risk. The
risks and uncertainties described below are not the only ones facing our
company. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business operations.
RISKS RELATED TO OUR BUSINESS
YOU SHOULD NOT RELY ON OUR PAST RESULTS TO PREDICT OUR FUTURE PERFORMANCE
BECAUSE OUR OPERATING RESULTS FLUCTUATE DUE TO FACTORS WHICH ARE DIFFICULT TO
FORECAST.
Our past revenue and other operating results may not be accurate indicators
of our future performance. Our operating results have been subject to
significant fluctuations in the past, and we expect this to continue in the
future. The factors that may contribute to these fluctuations include:
- fluctuations in capital spending, cyclicality and other economic
conditions domestically and internationally in one or more industries in
which we sell our products;
- new product introductions by us or by our competitors;
- changes in product mix and pricing by us, our suppliers or our
competitors;
- availability of components and raw materials for our products;
- our failure to manufacture a sufficient volume of products in a timely
and cost-effective manner;
- our failure to anticipate the changing product requirements of our
customers;
- a change in market acceptance of our products or a shift in demand for
our products;
- changes in the mix of sales by distribution channels;
- exchange rate fluctuations; and
- extraordinary events such as litigation or acquisitions.
Our gross margins may vary greatly depending on the mix of sales of lower
margin hardware products, particularly mechanical subsystems purchased from
third party vendors, and higher margin software products.
Our operating results may also be affected by general economic and other
conditions affecting the timing of customer orders and capital spending. For
example, our operations during the third and fourth quarters of fiscal 1998, the
first three quarters of fiscal 1999 and the first quarter of fiscal 2000 were
adversely affected by a continuing downturn in hardware purchases by customers
in the electronics industry, particularly disk-drive manufacturers and to a
lesser extent communication manufacturers. We cannot estimate when or if a
sustained revival in these key hardware markets will occur.
We generally recognize product revenue upon shipment or, for certain
international sales, upon receipt by the customers. As a result, our net
revenues and results of operations for a fiscal period will be affected by the
timing of orders received and orders shipped during the period. A delay in
shipments near the end of a fiscal period, for example, due to product
development delays or delays in obtaining materials may cause sales to fall
below expectations and harm our operating results for the period.
In addition, our continued investments in research and development, capital
equipment and ongoing customer service and support capabilities result in
significant fixed costs that we cannot reduce rapidly. As a result, if our sales
for a particular fiscal period are below expected levels, our operating results
for the period could be materially adversely affected.
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<PAGE> 10
In the event that in some future fiscal quarter our net revenues or
operating results fall below the expectations of public market analysts and
investors, the price of our common stock may fall. We may not be able to
increase or sustain our profitability on a quarterly or annual basis in the
future.
SALES OF OUR PRODUCTS DEPEND ON THE CAPITAL SPENDING HABITS OF OUR CUSTOMERS,
WHICH TEND TO BE CYCLICAL.
Intelligent automation systems using our products can range in price from
$75,000 to several million dollars. Accordingly, our success is directly
dependent upon the capital expenditure budgets of our customers. Our future
operations may be subject to substantial fluctuations as a consequence of
domestic and foreign economic conditions, industry patterns and other factors
affecting capital spending. Although the majority of our international customers
are not in the Asia-Pacific region, we believe that any instability in the
Asia-Pacific economies could also have a material adverse effect on the results
of our operations as a result of a reduction in sales by our customers to those
markets. Domestic or international recessions or a downturn in one or more of
our major markets, such as the electronics, wireless communications,
semiconductor, appliances, pharmaceutical, food processing or automotive
components industries, and resulting cutbacks in capital spending would have a
direct, negative impact on our business.
We sell some of our products to the semiconductor industry, which is
subject to sudden, extreme, cyclical variations in product supply and demand.
The timing, length and severity of these cycles are difficult to predict. In
some cases, these cycles have lasted more than a year. Semiconductor
manufacturers may contribute to these cycles by misinterpreting the conditions
in the industry and over or under-investing in semiconductor manufacturing
capacity and equipment. We may not be able to respond effectively to these
industry cycles.
Downturns in the semiconductor industry often occur in connection with, or
anticipation of, maturing product cycles for both semiconductor companies and
their customers and declines in general economic conditions. Industry downturns
have been characterized by reduced demand for semiconductor devices and
equipment, production over-capacity and accelerated decline in average selling
prices. During a period of declining demand, we must be able to quickly and
effectively reduce expenses and motivate and retain key employees. Our ability
to reduce expenses in response to any downturn in the semiconductor industry is
limited by our need for continued investment in engineering and research and
development and extensive ongoing customer service and support requirements. The
long lead time for production and delivery of some of our products creates a
risk that we may incur expenditures or purchase inventories for products which
we cannot sell. A downturn in the semiconductor industry could therefore harm
our revenues and gross margin if demand drops or average selling prices decline.
Industry upturns have been characterized by abrupt increases in demand for
semiconductor devices and equipment and production under-capacity. During a
period of increasing demand and rapid growth, we must be able to quickly
increase manufacturing capacity to meet customer demand and hire and assimilate
a sufficient number of qualified personnel. Our inability to ramp-up in times of
increased demand could harm our reputation and cause some of our existing or
potential customers to place orders with our competitors.
MANY OF THE KEY COMPONENTS AND MATERIALS OF OUR PRODUCTS COME FROM SINGLE SOURCE
SUPPLIERS AND THEIR PROCUREMENT REQUIRES LENGTHY LEAD TIMES.
We obtain many key components and materials and some significant mechanical
subsystems from sole or single source suppliers with whom we have no guaranteed
supply arrangements. In addition, some of our sole or single sourced components
and mechanical subsystems incorporated into our products have long procurement
lead times. Our reliance on sole or single source suppliers involves certain
significant risks including:
- loss of control over the manufacturing process;
- potential absence of adequate supplier capacity;
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<PAGE> 11
- potential inability to obtain an adequate supply of required components,
materials or mechanical subsystems; and
- reduced control over manufacturing yields, costs, timely delivery,
reliability and quality of components, materials and mechanical
subsystems.
We depend on Sanmina Corporation for the supply of our circuit boards, NSK
Corporation for the supply of our linear modules, which are mechanical devices
powered by an electric motor that move in a straight line, and which can be
combined as building blocks to form simple robotic systems, Yaskawa Electric
Corp. for the supply of our 6-axis robots, Samsung Electronics Co., Ltd. for the
supply of semiconductor robots, Hirata Corporation for the supply of our Adept
Cobra 600 robot mechanism and Imaging Technology Incorporated and Matrox
Electronic Systems Ltd. for the supply of our computer vision processors, which
are used to digitize images from a camera and perform measurements and analysis.
If any one of these significant sole or single source supplier were unable or
unwilling to manufacture the components, materials or mechanical subsystems we
need in the volumes we require, we would have to identify and qualify acceptable
replacements. The process of qualifying suppliers may be lengthy, and additional
sources may not be available to us on a timely basis, on acceptable terms or at
all. If supplies of these items were not available from our existing suppliers
and a relationship with an alternative vendor could not be developed in a timely
manner, shipments of our products could be interrupted and reengineering of
these products could be required. In the past, we have experienced quality
control or specification problems with certain key components provided by sole
source suppliers, and have had to design around the particular flawed item. We
have also experienced delays in filling customer orders due to the failure of
certain suppliers to meet our volume and schedule requirements. Some of our
suppliers have also ceased manufacturing components that we require for our
products, and we have been required to purchase sufficient supplies for the
estimated life of our product line. Problems of this nature with our suppliers
may occur in the future.
Disruption or termination of our supply sources could require us to seek
alternative sources of supply, and could delay our product shipments and damage
relationships with current and prospective customers, any of which could have a
material adverse effect on our business. If we incorrectly forecast product mix
for a particular period and we are unable to obtain sufficient supplies of any
components or mechanical subsystems on a timely basis due to long procurement
lead times, our business, financial condition and results of operations could be
substantially impaired. Moreover, if demand for a product for which we have
purchased a substantial amount of components fails to meet our expectations, we
would be required to write off the excess inventory. A prolonged inability to
obtain adequate timely deliveries of key components could have a material
adverse effect on our business, financial condition and results of operations.
BECAUSE OUR PRODUCT SALES ARE SEASONAL, WE MAY NOT BE ABLE TO MAINTAIN A STEADY
REVENUE STREAM.
Our product sales are seasonal. We have historically had higher bookings
for our products during the June quarter of each fiscal year and lower bookings
during the September quarter of each fiscal year, due primarily to the slowdown
in sales to European markets and summer vacations. In the event bookings for our
products in the June fiscal quarter are lower than anticipated and our backlog
at the end of the June fiscal quarter is insufficient to compensate for lower
bookings in the September fiscal quarter, our results of operations for the
September fiscal quarter and future quarters will suffer. For example, our net
revenues decreased as a result of reduced product bookings in each of the two
previous fiscal quarters ending December 1999. As a whole, our revenues were
adversely affected by a decline in orders from customers primarily in the
disk-drive industry during fiscal 2000 and fiscal 1999 and to a lesser extent
the communications markets in fiscal 1999.
A significant percentage of our product shipments occur in the last month
of each fiscal quarter. Historically, this has been due in part, at times, to
our inability to forecast the level of demand for our products or of the product
mix for a particular fiscal quarter. To address this problem we periodically
stock inventory levels of completed robots, machine controllers and certain
strategic components. If shipments of
7
<PAGE> 12
our products fail to meet forecasted levels, the increased inventory levels and
increased operating expenses in anticipation of sales that do not materialize
could adversely affect our business.
ORDERS CONSTITUTING OUR BACKLOG ARE SUBJECT TO CHANGES IN DELIVERY SCHEDULES AND
CUSTOMER CANCELLATIONS RESULTING IN LOWER THAN EXPECTED REVENUES.
Backlog should not be relied on as a measure of anticipated activity or
future revenues, because the orders constituting our backlog are subject to
changes in delivery schedules and in certain instances are subject to
cancellation without significant penalty to the customer. We have in the past
experienced changes in delivery schedules and customer cancellations that
resulted in our revenues in a given quarter being materially less than would
have been anticipated based on backlog at the beginning of the quarter. Similar
delivery schedule changes and order cancellations may adversely affect our
operating results in the future.
BECAUSE WE DO NOT HAVE LONG-TERM CONTRACTS WITH OUR CUSTOMERS, THEY MAY CEASE
PURCHASING OUR PRODUCTS AT ANY TIME.
We generally do not have long-term contracts with our customers. As a
result, our agreements with our customers do not provide any assurance of future
sales. Accordingly our customers are not required to make minimum purchases and
may cease purchasing our products at any time without penalty. Because our
customers are free to purchase products from our competitors, we are exposed to
competitive price pressure on each order. Any reductions, cancellations or
deferrals in customer orders could have a negative impact on our financial
condition and results of operations.
WE ARE EXPANDING DEVELOPMENT OF INTELLIGENT AUTOMATION SOLUTIONS FOR THE
PHOTONICS INDUSTRY, AND OUR ENTRY INTO THIS INDUSTRY WILL REQUIRE US TO DEVELOP
SIGNIFICANT NEW CAPABILITIES AND MAY NOT BE SUCCESSFUL.
We are expanding development of our intelligent automation solutions
targeted at the photonics industry. We expect to devote significant financial,
engineering and management resources to expand our development and marketing of
these solutions. Our success in the photonics industry depends upon our ability
to, among other things:
- accurately determine the features and functionality that our photonics
customers require or prefer;
- successfully design and implement intelligent automation solutions that
include these features and functionality;
- enter into agreements with system integrators, manufacturers and
distributors; and
- achieve market acceptance for our photonics solutions.
Our photonics solutions may not achieve broad market acceptance for a
variety of reasons including:
- photonics companies may continue their current production methods and may
not adopt our intelligent automation solutions;
- photonics companies may determine that the costs and resources required
to switch to our intelligent automation solutions are unacceptable to
them;
- system integrators, manufacturers and original equipment manufacturers,
or OEMs, may not enter into agreements with us; and
- competition from traditional, well-established photonics manufacturing
methods.
We have limited experience in developing and marketing products for the
photonics industry. If we do not successfully develop and achieve market
acceptance of products for the photonics industry, our ability to increase our
revenue may be limited and our business and our results of operations will
suffer.
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WE CHARGE A FIXED PRICE FOR CERTAIN PRODUCTS WHICH MAY MAKE US VULNERABLE TO
COST OVERRUNS.
Our operating results fluctuate when our gross margins vary. Our gross
margins vary for a number of reasons, including:
- the mix of products we sell;
- the average selling prices of products we sell;
- the costs to manufacture, market, service and support our new products
and enhancements;
- the costs to customize our systems; and
- our efforts to enter new markets.
We charge a fixed price for certain of our products, including the products
that we added as a result of our acquisition of Pensar. If the costs we incur in
completing a customer order for these products exceed our expectations, we
generally cannot pass those costs on to our customer.
WE HAVE SIGNIFICANT FIXED COSTS WHICH ARE NOT EASILY REDUCED DURING A DOWNTURN.
We continue to invest in research and development, capital equipment and
extensive ongoing customer service and support capability worldwide. These
investments create significant fixed costs that we may be unable to reduce
rapidly if we do not meet our sales goals. Moreover, if we fail to obtain a
significant volume of customer orders for an extended period of time, we may
have difficulty planning our future production and inventory levels, which could
also cause fluctuations in our operating results.
IF OUR TARGETED PHOTONICS MARKET DEVELOPS MORE SLOWLY THAN WE EXPECT, OUR
REVENUE WILL NOT GROW AS FAST AS ANTICIPATED, IF AT ALL.
Segments of the photonics market that we target as an element of our growth
strategy are either emerging or rapidly changing and the potential size of these
market segments and the timing of their development are difficult to predict. If
our targeted segments of this market develop more slowly than we expect, our
ability to increase our revenue may be limited. We depend, in part, upon the
broad acceptance by photonics manufacturers of our material handling and
component assembly solutions, as well as our simulation software and robot
vision and motion control technology.
WE RELY ON SYSTEMS INTEGRATORS AND OEMS TO SELL OUR PRODUCTS.
We believe that our ability to sell products to system integrators and OEMs
will continue to be important to our success. Our relationships with system
integrators and OEMs are generally not exclusive, and some of our system
integrators and OEMs may expend a significant amount of effort or give higher
priority to selling products of our competitors. In the future, any of our
system integrators or our OEMs may discontinue their relationships with us or
form additional competing arrangements with our competitors. The loss of, or a
significant reduction in revenues from, system integrators or OEMs to which we
sell a significant amount of our product could negatively impact our business,
financial condition or results of operations.
As we enter new geographic and applications markets, we must locate system
integrators and OEMs to assist us in building sales in those markets. We may not
be successful in obtaining effective new system integrators or OEMs or in
maintaining sales relationships with them. In the event a number of our system
integrators and/or OEMs experience financial problems, terminate their
relationships with us or substantially reduce the amount of our products they
sell, or in the event we fail to build an effective systems integrator or OEM
channel in any new markets, our business, financial condition and results of
operations could be adversely affected.
In addition, a substantial portion of our sales are to system integrators
that specialize in designing and building production lines for manufacturers.
Many of these companies are small operations with limited financial resources,
and we have from time to time experienced difficulty in collecting payments from
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certain of these companies. As a result, we perform ongoing credit evaluations
of our customers. To the extent we are unable to mitigate this risk of
collections from system integrators, our results of operations may be harmed.
OUR PRODUCTS GENERALLY HAVE LONG SALES CYCLES AND IMPLEMENTATION PERIODS, WHICH
INCREASE OUR COSTS IN OBTAINING ORDERS AND REDUCES THE PREDICTABILITY OF OUR
EARNINGS.
Our products are technologically complex. Prospective customers generally
must commit significant resources to test and evaluate our products and to
install and integrate them into larger systems. Orders expected in one quarter
may shift to another quarter or be cancelled as a result of the customers'
budgetary constraints, internal acceptance reviews, and other factors affecting
the timing of customers' purchase decisions. In addition, customers often
require a significant number of product presentations and demonstrations, in
some instances evaluating equipment on site, before reaching a sufficient level
of confidence in the product's performance and compatibility with the customer's
requirements to place an order. As a result, our sales process is often subject
to delays associated with lengthy approval processes that typically accompany
the design and testing of new products. The sales cycles of our products often
last for many months or even years. In addition, the time required for our
customers to incorporate our products into their systems can vary significantly
with the needs of our customers and generally exceeds several months, which
further complicates our planning processes and reduces the predictability of our
operating results. Longer sales cycles require us to invest significant
resources in attempting to make sales, which may not be realized, and delay the
generation of revenue.
OUR INTERNATIONAL OPERATIONS MAY SUBJECT US TO DIVERGENT REGULATORY REQUIREMENTS
AND OTHER RISKS THAT MAY HARM OUR OPERATING RESULTS.
International sales were $44.9 million for the fiscal year ended June 30,
2000, $41.2 million for the fiscal year ended June 30, 1999 and $39.8 million
for the fiscal year ended June 30, 1998. This represented 45.2%, 47.2%, and
37.8% of net revenues for the respective periods. We also purchase some
components and mechanical subsystems from foreign suppliers. As a result, our
operating results are subject to the risks inherent in international sales and
purchases, which include the following:
- unexpected changes in regulatory requirements;
- political and economic changes and disruptions;
- transportation costs and delays;
- foreign currency fluctuations;
- export/import controls;
- tariff regulations and other trade barriers;
- higher freight rates;
- difficulties in staffing and managing foreign sales operations;
- greater difficulty in accounts receivable collection in foreign
jurisdictions; and
- potentially adverse tax consequences.
Foreign exchange fluctuations may render our products less competitive
relative to locally manufactured product offerings, or could result in foreign
exchange losses. In calendar 2000, the value of major European currencies has
dropped against the U.S. dollar. To date, we have not reflected that change in
currency value in our selling prices. In order to maintain a competitive price
for our products in Europe, we may have to provide discounts or otherwise
effectively reduce our prices, resulting in a lower margin on products sold in
Europe. Continued change in the values of European currencies or changes in the
values of other foreign currencies could have a negative impact on our business,
financial condition and results of operations.
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In addition, duty, tariff and freight costs can materially increase the
cost of crucial components for our products. We anticipate that past turmoil in
Asian financial markets and the deterioration of the underlying economic
conditions in certain Asian countries may continue to have an impact on our
sales to customers located in, or whose projects are based in, those countries
due to the impact of restrictions on government spending imposed by the
International Monetary Fund on those countries receiving the International
Monetary Fund's assistance. In addition, customers in those countries may face
reduced access to working capital to fund component purchases, such as our
products, due to higher interest rates, reduced bank lending due to contractions
in the money supply or the deterioration in the customer's or our bank's
financial condition or the inability to access local equity financing.
Maintaining operations in different countries requires us to expend
significant resources to keep our operations coordinated and subjects us to
differing laws and regulatory regimes that may affect our service offerings and
revenue.
WE MAY INCUR CURRENCY EXCHANGE-RELATED LOSSES IN CONNECTION WITH OUR RELIANCE ON
OUR SINGLE OR SOLE SOURCE FOREIGN SUPPLIERS.
We make yen-denominated purchases of certain components and mechanical
subsystems from certain of our sole or single source Japanese suppliers.
Depending on the amount of yen-denominated purchases, we may engage in hedging
transactions in the future. However, notwithstanding these precautions, we
remain subject to the transaction exposures that arise from foreign exchange
movements between the dates foreign currency export sales or purchase
transactions are recorded and the dates cash is received or payments are made in
foreign currencies. Our current or any future currency exchange strategy may not
be successful in avoiding exchange-related losses. Any exchange-related losses
or exposure may negatively effect our business, financial condition or results
of operations.
IF OUR HARDWARE PRODUCTS DO NOT COMPLY WITH STANDARDS SET FORTH BY THE EUROPEAN
UNION, WE WILL NOT BE ABLE TO SELL THEM IN EUROPE.
Our hardware products are required to comply with European Union Low
Voltage, Electro-Magnetic Compatibility, and Machinery Safety Directives. The
European Union mandates that our products carry the CE mark denoting that these
products are manufactured in strict accordance to design guidelines in support
of these directives. These guidelines are subject to change and to varying
interpretation. New guidelines impacting machinery design go into effect each
year. To date, we have retained TUV Rheinland to help certify that our
controller-based products, including some of our robots, meet applicable
European Union directives and guidelines. Although our existing certified
products meet the requirements of the applicable European Union directives, we
cannot assure that future products can be designed, within market window
constraints, to meet the future requirements. If any of our robot products or
any other major hardware products do not meet the requirements of the European
Union directives, we would be unable to legally sell these products in Europe.
Thus, our business, financial condition and results of operations could be
harmed.
OUR HARDWARE AND SOFTWARE PRODUCTS MAY CONTAIN DEFECTS THAT COULD INCREASE OUR
EXPENSES, EXPOSURE TO LIABILITIES AND HARM OUR REPUTATION AND FUTURE BUSINESS
PROSPECTS.
Our hardware and software products are complex and, despite extensive
testing, our new or existing products or enhancements may contain defects,
errors or performance problems when first introduced, when new versions or
enhancements are released or even after these products or enhancements have been
used in the marketplace for a period of time. We may discover product defects
only after a product has been installed and used by customers. We may discover
defects, errors or performance problems in future shipments of our products.
These problems could result in expensive and time consuming design modifications
or large warranty charges, expose us to liability for damages, damage customer
relationships and result in loss of market share, any of which could harm our
reputation and future business prospects. In addition, increased development and
warranty costs could reduce our operating profits and could result in losses.
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The existence of any defects, errors or failures in our products could also
lead to product liability claims or lawsuits against us or against our
customers. A successful product liability claim could result in substantial cost
and divert management's attention and resources, which could have a negative
impact on our business, financial condition and results of operations. Although
we are not aware of any product liability claims to date, the sale and support
of our products entail the risk of these claims.
THE SUCCESS OF OUR BUSINESS DEPENDS ON OUR KEY EMPLOYEES.
We are highly dependent upon the continuing contributions of our key
management, sales, and product development personnel. In particular, we would be
adversely affected if we were to lose the services of Brian Carlisle, Chief
Executive Officer and Chairman of the Board, who has provided significant
leadership to us since our inception, or Bruce Shimano, Vice President, Research
and Development and a director, who has guided our research and development
programs since inception. In addition, the loss of the services of any of our
senior managerial, technical or sales personnel could impair our business,
financial condition, and results of operations. We do not have employment
contracts with any of our executive officers and do not maintain key man life
insurance on the lives of any of our key personnel.
OUR FUTURE SUCCESS DEPENDS ON OUR CONTINUING ABILITY TO ATTRACT, RETAIN AND
MOTIVATE HIGHLY-QUALIFIED MANAGERIAL, TECHNICAL AND SALES PERSONNEL.
Competition for qualified technical personnel in the intelligent automation
industry is intense. Our inability to recruit and train adequate numbers of
qualified personnel on a timely basis would adversely affect our ability to
design, manufacture, market and support our products.
In addition, our success will depend on our ability to hire additional
experienced engineers, senior management and sales and marketing personnel. The
robust economy and opportunities available in other high technology companies
has made and could continue to make recruiting and retaining employees,
especially design engineers, more difficult for us. Competition for these
personnel is intense, particularly in geographic areas recognized as high
technology centers such as the Silicon Valley area, where our principal offices
are located, and other locations where we maintain design sites. To attract and
retain individuals with the requisite expertise, we may be required to grant
large option or other stock-based incentive awards, which may be dilutive to
shareholders. We may also be required to pay significant base salaries and cash
bonuses, which could harm our operating results. If we do not succeed in hiring
and retaining candidates with appropriate qualifications, we will not be able to
grow our business and our operation results will be harmed.
IF WE BECOME SUBJECT TO UNFAIR HIRING CLAIMS, WE COULD BE PREVENTED FROM HIRING
NEEDED PERSONNEL, INCUR LIABILITY FOR DAMAGES AND INCUR SUBSTANTIAL COSTS IN
DEFENDING OURSELVES.
Companies in our industry whose employees accept positions with competitors
frequently claim that these competitors have engaged in unfair hiring practices
or that the employment of these persons would involve the disclosure or use of
trade secrets. These claims could prevent us from hiring personnel or cause us
to incur liability for damages. We could also incur substantial costs in
defending ourselves or our employees against these claims, regardless of their
merits. Defending ourselves from these claims could divert the attention of our
management away from our operations.
IF WE ARE UNABLE TO IDENTIFY AND MAKE ACQUISITIONS, OUR ABILITY TO EXPAND OUR
OPERATIONS AND INCREASE OUR REVENUE MAY SUFFER.
In the latter half of fiscal 2000, a significant portion of our growth was
attributable to acquisitions of other businesses and technologies. Although we
have no specific commitments or understandings with respect to any acquisitions
currently, we expect that acquisitions of complementary companies, products and
technologies in the future will play an important role in our ability to expand
our operations, hire additional personnel and increase our revenue. If we are
unable to identify suitable targets for acquisition
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or complete acquisitions on acceptable terms, our ability to expand our service
offerings and increase our revenue may be impaired. Even if we are able to
identify and acquire acquisition candidates, we may be unable to realize the
benefits anticipated as a result of these acquisitions.
ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS, INCREASE OUR EXPENSES AND
ADVERSELY AFFECT OUR FINANCIAL CONDITION OR OPERATIONS.
During fiscal 2000, we acquired Pensar, NanoMotion, and BYE/OASIS. In July
2000, we acquired HexaVision. These acquisitions introduced us to industries and
technologies in which we have limited previous experience. In the future we may
make material acquisitions of, or large investments in, other businesses that
offer products, services, and technologies that management believes will further
our strategic objectives. We cannot be certain that we would successfully
integrate any businesses, technologies or personnel that we might acquire, and
any acquisitions might divert our management's attention away from our core
business. Any future acquisitions or investments we might make would present
risks commonly associated with these types of transactions, including:
- difficulty in combining the product offerings, operations or work force
of an acquired business;
- potential loss of key personnel of an acquired business;
- adverse effects on existing relationships with suppliers and customers;
- disruptions of our on-going businesses;
- difficulties in realizing our potential financial and strategic position
through the successful integration of the acquired business;
- difficulty in maintaining uniform standards, controls, procedures and
policies;
- potential negative impact on results of operation due to amortization of
goodwill, other intangible assets acquired or assumption of anticipated
liabilities;
- risks associated with entering markets in which we have limited previous
experience; and
- the diversion of management attention.
The risks described above, either individually or in the aggregate, could
significantly harm our business, financial condition and results of operations.
We expect that future acquisitions, if any, could provide for consideration to
be paid in cash, shares of our common stock, or a combination of cash and common
stock. In addition, we may issue additional equity in connection with future
acquisitions, which could result in dilution of our shareholders' equity
interest. Fluctuations in our stock price may make acquisitions more expensive
or prevent us from being able to complete on terms that are acceptable to us.
OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY MAY
SIGNIFICANTLY IMPAIR OUR COMPETITIVE ADVANTAGE.
Our success and ability to compete depend in large part upon protecting our
proprietary technology. We rely on a combination of patent, trademark and trade
secret protection and nondisclosure agreements to protect our proprietary
rights. The steps we have taken may not be sufficient to prevent the
misappropriation of our intellectual property, particularly in foreign countries
where the laws may not protect our proprietary rights as fully as in the United
States. The patent and trademark law and trade secret protection may not be
adequate to deter third party infringement or misappropriation of our patents,
trademarks and similar proprietary rights.
In addition, patents issued to Adept may be challenged, invalidated or
circumvented. Our rights granted under those patents may not provide competitive
advantages to us, and the claims under our patent applications may not be
allowed. We may be subject to or may initiate interference proceedings in the
United States Patent and Trademark Office, which can demand significant
financial and management resources. The process of seeking patent protection can
be time consuming and expensive and patents may
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not be issued from currently pending or future applications. Moreover, our
existing patents or any new patents that may be issued may not be sufficient in
scope or strength to provide meaningful protection or any commercial advantage
to us.
We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights in order to determine the scope and
validity of our proprietary rights or the proprietary rights of our competitors.
These claims could result in costly litigation and the diversion of our
technical and management personnel.
WE MAY FACE COSTLY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS.
We have from time to time received communications from third parties
asserting that we are infringing certain patents and other intellectual property
rights of others or seeking indemnification against these alleged infringement.
For example, some end users of our products have notified us that they have
received a claim of patent infringement from the Jerome H. Lemelson Foundation,
alleging that their use of our machine vision products infringes certain patents
issued to Mr. Lemelson. In addition, we have been notified that other end users
of our AdeptVision VME line and the predecessor line of Multibus machine vision
products have received letters from the Lemelson Foundation which refer to Mr.
Lemelson's patent portfolio and offer the end user a license to the particular
patents. As claims arise, we evaluate their merits. Any claims of infringement
brought of third parties could result in protracted and costly litigation, that
damages for infringement, and the necessity of obtaining a license relating to
one or more of our products or current or future technologies, which may not be
available on commercially reasonable terms or at all. Litigation, which could
result in substantial cost to us and diversion of our resources, may be
necessary to enforce our patents or other intellectual property rights or to
defend us against claimed infringement of the rights of others. Any intellectual
property litigation and the failure to obtain necessary licenses or other rights
could have a material adverse effect on our business, financial condition and
results of operations. Some of our end users have notified us that they may seek
indemnification from us for damages or expenses resulting from any claims made
by the Jerome H. Lemelson Foundation. We cannot predict the outcome of this or
any similar litigation which may arise in the future. Litigation of this kind
may have a material adverse effect on our business, financial condition or
results of operations.
NEW ACCOUNTING GUIDANCE COULD RESULT IN DELAYED RECOGNITION OF OUR REVENUES.
In December 1999, the Securities and Exchange Commission, or SEC, issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. In recent actions, the SEC has
further delayed the required implementation date which, for us, will be the
fourth quarter of fiscal 2001, retroactive to the beginning of the fiscal year.
The Company is still assessing the impact of SAB 101 on our consolidated results
of operations, financial position, and cash flows based upon the most current
information. In certain situations, application of the new accounting could
delay the recognition of revenue that might otherwise have been recognized in
earlier periods. As a result, our reported revenue may fluctuate more widely
among fiscal periods in the future, and reported revenue for a particular fiscal
period may not meet expectations.
RISKS RELATED TO OUR INDUSTRY
WE FACE INTENSE COMPETITION IN THE MARKET FOR INTELLIGENT AUTOMATION PRODUCTS.
The market for intelligent automation products is highly competitive. We
believe that the principal competitive factors affecting the market for our
products are:
- product functionality and reliability;
- customer service;
- price;
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- delivery; and
- product features such as flexibility, programmability and ease of use.
We compete with a number of robot companies, motion control companies,
machine vision companies and simulation software companies. Many of our
competitors have substantially greater financial, technical and marketing
resources than us. In addition, we may in the future face competition from new
entrants in one or more of our markets.
Many of our competitors in the robot market are integrated manufacturers of
products that produce robotics equipment internally for their own use and may
also compete with our products for sales to other customers. Some of these large
manufacturing companies have greater flexibility in pricing because they
generate substantial unit volumes of robots for internal demand and may have
access through their parent companies to large amounts of capital. Any of our
competitors may seek to expand their presence in other markets in which we
compete.
Our current or potential competitors may develop products comparable or
superior in terms of price and performance features to those developed by us or
adapt more quickly than we can to new or emerging technologies and changes in
customer requirements. We may be required to make substantial additional
investments in connection with our research, development, engineering, marketing
and customer service efforts in order to meet any competitive threat, so that we
will be able to compete successfully in the future. We expect that in the event
the intelligent automation market expands, competition in the industry will
intensify, as additional competitors enter our markets and current competitors
expand their product lines. Increased competitive pressure could result in a
loss of sales or market share, or cause us to lower prices for our products, any
of which could harm our business.
WE MAY NOT BE ABLE TO KEEP UP WITH THE RAPID PACE OF TECHNOLOGICAL CHANGE AND
NEW PRODUCT DEVELOPMENT THAT CHARACTERIZE THE INTELLIGENT AUTOMATION INDUSTRY.
The intelligent automation industry is characterized by rapid technological
change and new product introductions and enhancements. Our ability to remain
competitive depends greatly upon the technological quality of our products and
processes compared to those of our competitors and our ability both to continue
to develop new and enhanced products and to introduce those products at
competitive prices and on a timely and cost-effective basis. We may not be
successful in selecting, developing and manufacturing new products or in
enhancing our existing products on a timely basis or at all. Our new or enhanced
products may not achieve market acceptance. Our failure to successfully select,
develop and manufacture new products, or to timely enhance existing technologies
and meet customers' technical specifications for any new products or
enhancements on a timely basis, or to successfully market new products, could
harm our business. If we cannot successfully develop and manufacture new
products or meet specifications, our products could lose market share, our
revenues and profits could decline, or we could experience operating losses. New
technology or product introductions by our competitors could also cause a
decline in sales or loss of market acceptance for our existing products or force
us to significantly reduce the prices of our existing products.
From time to time we have experienced delays in the introduction of, and
certain technical and manufacturing difficulties with, some of our products, and
we may experience technical and manufacturing difficulties and delays in future
introductions of new products and enhancements. Our failure to develop,
manufacture and sell new products in quantities sufficient to offset a decline
in revenues from existing products or to successfully manage product and related
inventory transitions could harm our business.
Our success in developing, introducing, selling and supporting new and
enhanced products depends upon a variety of factors, including timely and
efficient completion of hardware and software design and development,
implementation of manufacturing processes and effective sales, marketing and
customer service. Because of the complexity of our products, significant delays
may occur between a product's initial introduction and commencement of volume
production.
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The development and commercialization of new products involve many
difficulties, including:
- the identification of new product opportunities;
- the retention and hiring of appropriate research and development
personnel;
- the determination of the product's technical specifications;
- the successful completion of the development process;
- the successful marketing of the product and the risk of having customers
embrace new technological advances; and
- additional customer service costs associated with supporting new product
introductions or required for field upgrades.
For example, we are currently in the process of releasing our new micro and
nano positioning mechanisms, NanoMotion process modules, Smart Modules, Standard
Platforms and Semiconductor front-ends. These products include significant new
networking, hardware and software technology. The development of these products
may not be completed in a timely manner, and these products may not achieve
acceptance in the market. The development of these products has required, and
will require, that we expend significant financial and management resources. If
we are unable to continue to successfully develop these or other new products in
response to customer requirements or technological changes, our business may be
harmed.
IF WE FAIL TO ADEQUATELY INVEST IN RESEARCH AND DEVELOPMENT, WE MAY BE UNABLE TO
COMPETE EFFECTIVELY.
We have limited resources to allocate to research and development and must
allocate our resources among a wide variety of projects. Because of intense
competition in our industry, the cost of failing to invest in strategic products
is high. If we fail to adequately invest in research and development, we may be
unable to compete effectively in the intelligent automation markets in which we
operate.
IF WE DO NOT COMPLY WITH ENVIRONMENTAL REGULATIONS, OUR BUSINESS MAY BE HARMED.
We are subject to a variety of environmental regulations relating to the
use, storage, handling, and disposal of certain hazardous substances used in the
manufacturing and assembly of our products. We believe that we are currently in
compliance with all material environmental regulations in connection with our
manufacturing operations, and that we have obtained all necessary environmental
permits to conduct our business. However, our failure to comply with present or
future regulations could subject us to a variety of consequences that could harm
our business, including:
- the imposition of substantial fines;
- suspension of production; and
- alteration of manufacturing processes or cessation of operations.
Compliance with environmental regulations could require us to acquire
expensive remediation equipment or to incur substantial expenses. Our failure to
control the use, disposal, removal, storage, or to adequately restrict the
discharge of, or assist in the cleanup of, hazardous or toxic substances, could
subject us to significant liabilities, including joint and several liability
under certain statutes. The imposition of liabilities of this kind could harm
our financial condition.
FAILURE TO OBTAIN EXPORT LICENSES COULD HARM OUR BUSINESS.
We must comply with U.S. Department of Commerce regulations in shipping its
software products and other technologies outside the United States. Any
significant future difficulty in complying could harm our business, financial
condition and results of operations.
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RISKS RELATED TO OUR STOCK
OUR STOCK PRICE HAS FLUCTUATED AND MAY CONTINUE TO FLUCTUATE WIDELY.
The market price of our common stock has fluctuated substantially in the
past. Between June 30, 1999 and June 30, 2000, the price of our common stock, as
reported on the Nasdaq National Market, has ranged from a low of $5.44 to a high
of $47.50. The market price of our common stock will continue to be subject to
significant fluctuations in the future in response to a variety of factors,
including:
- future announcements concerning our business or that of our competitors
or customers;
- the introduction of new products or changes in product pricing policies
by us or our competitors;
- litigation regarding proprietary rights or other matters;
- change in analysts' earnings estimates;
- developments in the financial markets;
- quarterly fluctuations in operating results; and
- general conditions in the intelligent automation industry.
Furthermore, stock prices for many companies, and high technology companies
in particular, fluctuate widely for reasons that may be unrelated to their
operating results. Those fluctuations and general economic, political and market
conditions, such as recessions or international currency fluctuations, may
adversely affect the market price of our common stock.
WE MAY BE SUBJECT TO SECURITIES CLASS ACTION LITIGATION IF OUR STOCK PRICE IS
VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL COSTS, DISTRACT MANAGEMENT AND
DAMAGE OUR REPUTATION.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
securities. Companies, like us, that are involved in rapidly changing technology
markets are particularly subject to this risk. We may be the target of
litigation of this kind in the future. Any securities litigation could result in
substantial costs, divert management's attention and resources from our
operations and negatively affect our public image and reputation.
A SUBSTANTIAL NUMBER OF OUR SHARES OF COMMON STOCK ARE ELIGIBLE FOR FUTURE SALE,
AND THE SALE OF THESE SHARES MAY CAUSE OUR STOCK PRICE TO DECLINE, EVEN IF OUR
BUSINESS IS DOING WELL.
Additional sales of our common stock in the public market after this
offering, or the perception that sales could occur, could cause the market price
of our common stock to decline. Upon completion of the offering, we will have
approximately 12,851,540 shares of common stock outstanding, and approximately
13,171,753 shares outstanding if we issue shares upon exercise of the
underwriters' option to purchase additional shares, based on the number of
shares outstanding as of October 19, 2000. Upon completion of the offering,
approximately 12,158,340 shares will be freely tradable without restriction or
further registration under the federal securities laws or will be tradable
subject to the provisions of Rule 144. In addition, as of October 19, 2000,
there were outstanding options to purchase 1,991,604 shares of our common stock.
We have granted registration rights with respect to shares of our common stock
with a value of approximately $1.1 million that we expect to issue to the former
HexaVision shareholders. In the future, we may grant additional options or grant
additional registration rights with respect to our common stock.
Our executive officers, our directors and the selling shareholders have
entered into lock-up agreements with the underwriters that restrict their
ability to sell shares of our common stock for a period that will expire 90 days
after the date of this prospectus. Following this lock-up period, these shares
will be eligible for sale, in some cases without restriction. In addition,
Merrill Lynch and Lehman Brothers can waive the restrictions imposed by these
lock-up agreements at an earlier time without prior notice or consent. A sale
17
<PAGE> 22
of a substantial number of these shares, particularly by our directors and
officers, or the perception that these sales could occur, could cause the price
of our common stock to decline.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, AND IF WE ARE UNABLE TO
SECURE ADEQUATE FUNDS ON ACCEPTABLE TERMS, WE MAY BE UNABLE TO EXECUTE OUR
BUSINESS PLAN.
If our capital requirements vary significantly from those currently
planned, we may require additional financing sooner than anticipated. If the
proceeds of this offering, together with our existing cash balances and cash
flow expected from future operations, are not sufficient to meet our liquidity
needs, we will need to raise additional funds. If adequate funds are not
available on acceptable terms or at all, we may not be able to take advantage of
market opportunities, develop or enhance new products, pursue acquisitions that
would complement our existing product offerings or enhance our technical
capabilities, execute our business plan or otherwise respond to competitive
pressures or unanticipated requirements.
18
<PAGE> 23
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are contained principally in the sections entitled "Business," "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." These statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performances
or achievements expressed or implied by the forward-looking statements.
Forward-looking statements include, but are not limited to, statements about:
- marketing and commercialization of our products under development;
- our estimates regarding our capital requirements and our needs for
additional financing;
- plans for future products and services and for enhancements of existing
products and services;
- our ability to attract customers and market our products;
- our intellectual property;
- our ability to establish relationships with suppliers, systems
integrators and OEMs for the supply and distribution of our products;
- plans for future acquisitions and for the integration of recent
acquisitions; and
- sources of revenues and anticipated revenues, including the contribution
from the growth of new products and markets.
In some cases, you can identify forward-looking statements by terms such as
"may," "intend," "might," "will," "should," "could," "would," "expect,"
"believe," "estimate," "predict," "potential," or the negative of these terms,
and similar expressions intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and are based
on assumptions and subject to risks and uncertainties. Given these
uncertainties, you should not place undue reliance on these forward-looking
statements. We discuss many of these risks in this prospectus in greater detail
under the heading "Risk Factors." Also, these forward-looking statements
represent our estimates and assumptions only as of the date of this prospectus.
We undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information future events or otherwise. In
light of these risks, uncertainties and assumptions, the forward-looking events
discussed in this prospectus might not occur.
19
<PAGE> 24
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be
approximately $74.1 million, or $86.1 million if the underwriters exercise their
option in full to purchase additional shares, based on an assumed public
offering price per share of $39.75, and after deducting an assumed underwriting
discount and estimated offering expenses payable by us. We will not receive any
proceeds from the sale of shares by the selling shareholders.
We currently intend to use the net proceeds of this offering for general
corporate purposes, including working capital and capital expenditures. In
addition, we may also use a portion of the net proceeds of this offering for the
acquisition of complementary products, technologies or businesses. While we
evaluate these types of opportunities from time to time, we are not engaged in
negotiations with respect to any material acquisitions. Pending the uses
described above, we intend to invest the net proceeds in short-term, interest-
bearing, investment-grade securities.
DIVIDEND POLICY
To date, we have neither declared nor paid cash dividends on shares of our
common stock. We currently intend to retain all future earnings for our business
and do not anticipate paying cash dividends on our common stock in the
foreseeable future.
PRICE RANGE OF OUR COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"ADTK." The following table reflects the range of high and low sale prices as
reported on the Nasdaq National Market for the quarters identified below:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year ended June 30, 1999
First Quarter............................................ $ 8.00 $ 4.75
Second Quarter........................................... $ 8.50 $ 4.25
Third Quarter............................................ $ 8.50 $ 6.00
Fourth Quarter........................................... $10.50 $ 6.00
Fiscal Year ended June 30, 2000
First Quarter............................................ $11.25 $ 6.13
Second Quarter........................................... $ 7.97 $ 5.44
Third Quarter............................................ $16.69 $ 6.00
Fourth Quarter........................................... $47.50 $ 8.75
Fiscal Year ending June 30, 2001
First Quarter............................................ $58.19 $21.50
Second Quarter (through October 24, 2000)................ $53.25 $26.25
</TABLE>
On October 24, 2000, the last reported sale price of our common stock on
the Nasdaq National Market was $39.75 per share. At October 19, 2000, there were
approximately 276 shareholders of record.
20
<PAGE> 25
CAPITALIZATION
The following table describes our capitalization as of June 30, 2000:
- on an actual basis;
- on an as adjusted basis to give effect to the sale of 2,000,000 shares of
common stock offered by us in this offering at an assumed public offering
price of $39.75 per share, after deducting an assumed underwriting
discount and estimated offering expenses.
Please read this table together with the sections of this prospectus
entitled "Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and the notes to those statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term liabilities....................................... $ 1,222 $ 1,222
------- --------
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares
authorized, no shares issued and outstanding, actual
and as adjusted........................................ -- --
Common stock, no par value, 25,000,000 shares authorized
actual and as adjusted, 10,677,000 shares issued and
outstanding, actual; 12,677,000 shares issued and
outstanding, as adjusted............................... 67,184 141,292
------- --------
Retained Earnings......................................... 3,544 3,544
------- --------
Total shareholders' equity........................ 70,728 144,836
------- --------
Total capitalization.............................. $71,950 $146,058
======= ========
</TABLE>
The table excludes:
- 1,991,604 shares issuable upon the exercise of stock options outstanding
as of October 19, 2000, at a weighted average exercise price of $11.55
per share;
- 1,405,183 shares available for future issuance under our stock option
plans and employee stock purchase plan as of October 19, 2000; and
- shares of our common stock valued at $1.1 million that may be issuable to
the former shareholders of HexaVision in connection with our acquisition
of HexaVision.
21
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
Please read the following selected financial data in conjunction with the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
notes to those statements appearing elsewhere in this prospectus. Our historical
results are not necessarily indicative of future results. The consolidated
statement of operations data for the three years in the period ended June 30,
2000 and the consolidated balance sheet data as of June 30, 2000 and 1999 are
derived from our audited consolidated financial statements included elsewhere in
this prospectus. On July 14, 1999, we completed the acquisition of BYE/OASIS in
a pooling of interests transaction. The selected financial data prior to June
30, 2000 has been restated to include the historical results of BYE/OASIS.
Fiscal 2000 results also include the financial results of Pensar-Tucson, Inc.
subsequent to our acquisition on April 28, 2000 and NanoMotion Incorporated
subsequent to our acquisition on May 31, 2000.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
2000 1999 1998 1997 1996
------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net revenues.................................... $99,212 $87,374 $105,440 $88,511 $85,098
Cost of revenues................................ 56,173 47,902 60,841 52,017 48,938
------- ------- -------- ------- -------
Gross margin.................................. 43,039 39,472 44,599 36,494 36,160
Operating expenses:
Research, development and engineering......... 14,629 11,591 11,844 9,738 8,495
Selling, general and administrative........... 29,503 24,676 26,890 22,758 20,821
Merger-related charges(1)..................... 988 -- -- -- --
Restructuring and other non-recurring
charges.................................... -- -- 2,756 -- --
Amortization of goodwill and other
intangibles................................ 685 -- -- -- --
------- ------- -------- ------- -------
Total operating expenses........................ 45,805 36,267 41,490 32,496 29,316
------- ------- -------- ------- -------
Operating income (loss)......................... (2,766) 3,205 3,109 3,998 6,844
Interest income, net............................ 746 926 971 693 490
------- ------- -------- ------- -------
Income (loss) before provision for (benefit
from) income taxes............................ (2,020) 4,131 4,080 4,691 7,334
Provision for (benefit from) income taxes....... (593) 1,620 1,819 1,534 1,304
------- ------- -------- ------- -------
Net income (loss)............................... $(1,427) $ 2,511 $ 2,261 $ 3,157 $ 6,030
======= ======= ======== ======= =======
Net income (loss) per share:(2)
Basic......................................... $ (0.15) $ 0.27 $ 0.25 $ 0.36 $ 0.79
======= ======= ======== ======= =======
Diluted....................................... $ (0.15) $ 0.26 $ 0.23 $ 0.34 $ 0.72
======= ======= ======== ======= =======
Number of shares used in computing per share
amounts:(2)
Basic......................................... 9,774 9,302 9,154 8,739 7,659
Diluted....................................... 9,774 9,484 9,689 9,159 8,404
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
-----------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.................................... $20,437 $27,016 $20,939 $18,642 $11,141
Working capital.................................. 46,593 47,614 45,928 39,703 35,477
Total assets..................................... 93,523 71,677 70,310 61,480 57,599
Long-term liabilities............................ 1,222 -- 78 109 79
Total shareholders' equity....................... 70,728 55,186 53,399 48,114 43,225
</TABLE>
---------------
(1) In July 1999, we incurred charges of $988,000 relating to the acquisition of
BYE/OASIS.
(2) See notes 1 and 8 of the notes to our consolidated financial statements for
a discussion of the computation of net income (loss) per share.
22
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We provide intelligent production automation solutions to our customers in
many industries including the semiconductor, wireless communications, photonics,
food, automotive, life sciences and electronics industries. We utilize our
comprehensive portfolio of high precision mechanical components and application
development software to deliver automation solutions that meet our customer's
increasingly complex manufacturing requirements. We offer our customers a
comprehensive and tailored automation solution that we call Rapid Deployment
Automation, or RDA, that reduces the time and cost to design, engineer and
launch products into high-volume production. We market and sell our products
worldwide through more than 300 system integrators, our direct sales force and
OEMs.
This discussion summarizes the significant factors affecting our
consolidated operating results, financial condition, liquidity and cash flow
during the three-year period ended June 30, 2000, referred to as fiscal 2000,
1999 and 1998. Unless otherwise indicated, references to any year in this
Management's Discussion and Analysis of Financial Condition and Results of
Operation refer to our fiscal year ended June 30. This discussion should be read
with the consolidated financial statements and financial statement footnotes
included elsewhere in this prospectus.
RESULTS OF OPERATIONS
Comparison of 2000 to 1999
Net Revenues. Our net revenues increased by 13.5% to $99.2 million in 2000
from $87.4 million in 1999. The increase in net revenues for 2000 over 1999 was
primarily due to strong demand in the semiconductor and electronic industries.
Although we experienced some improvement in our targeted markets in fiscal 2000,
we cannot predict if this improvement will continue in the markets we currently
serve. International sales, including sales to Canada and export sales, were
$44.9 million or 45.2% of net revenues in 2000 as compared with $41.2 million,
or 47.2% of net revenues, in 1999. International revenue as a percentage of
total net revenues decreased due to the addition of our semiconductor business
whose revenue was derived primarily from domestic sources in 2000. Domestic
semiconductor revenue was greater than our international semiconductor revenue
causing the total international revenue as a percent of total revenue to
decline.
Gross Margin. Gross margin as a percentage of net revenue was 43.4% in 2000
compared to 45.2% in 1999. The decrease in gross margin percentage was primarily
attributable to the increase in operational and manufacturing overhead expenses
related to supplier changes during the first quarter of fiscal 2000 and general
increases in component costs. We expect to continue to experience fluctuations
in our gross margin percentage due to changes in availability of components,
changes in product configuration and changes in sales mix.
Research, Development and Engineering Expenses. Research, development and
engineering expenses increased by 26.2% to $14.6 million, or 14.7% of net
revenues in 2000, from $11.6 million, or 13.3% of net revenues in 1999. The
absolute dollar increase in expenses in 2000 was primarily due to increases in
payroll and related expenses of $2.0 million, increases in project and operating
expenses which were $1.1 million, partially offset by decreased spending in
outside services. We expect that project and operating expenses will continue to
increase as we continue to invest in new product development opportunities
available through our recent acquisitions. Research, development and engineering
expenses in 2000 were partially offset by approximately $309,000 of third party
development funding as compared with $681,000 of third party development funding
in 1999. We expect to continue to receive third party development funding from
the federal government as well as other third parties during 2001 but anticipate
a decrease in this funding as compared to funding received in 2000. There can be
no assurance that any funds budgeted by the government or other third parties
for our development projects will not be curtailed or eliminated at any time.
23
<PAGE> 28
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 19.6% to $29.5 million or 29.7% of net
revenues in 2000 from $24.7 million or 28.2% of net revenues in 1999. The
increased level of spending was primarily attributable to increases in corporate
administration expenses of $1.6 million related to the opening of new sales
offices, increases in payroll and related expenses of $4.0 million due to
increased headcount from acquisition activity, and increases in travel expenses
of $446,000 associated with increased sales activity. The increases were
partially offset by decreased spending in outside services of $162,000, and
reduced spending in project supplies. We expect that selling, general and
administrative expenses will continue to increase as we continue to invest in
new product marketing opportunities available through our recent acquisitions.
Merger-Related Charges. Merger-related charges were $988,000 in 2000
relating to the acquisition of BYE/OASIS and the closure of BYE/OASIS facilities
in Texas. Merger-related expenses were $558,000, expenses relating to the
closure of facilities in Texas were $195,000 and other non-recurring expenses
relating to the acquisition were $235,000.
Interest Income, Net. Interest income, net in 2000 was $746,000 compared
to $926,000 in 1999. The decrease was primarily as a result of a lower interest
yield rate on investments in 2000 compared to 1999.
Provision for (benefit from) Income Taxes. Our effective tax rate for 2000
was 29% as compared to 39% for 1999. Our tax rate for 2000 differs from the
federal statutory income tax rate of 34% primarily due to the utilization of
foreign tax and other federal and state credits in 2000. In 1999, our tax rate
differed from the federal statutory rate of 34% primarily due to future foreign
losses not utilized for U.S. federal and state tax purposes and foreign taxes,
partially offset by the benefits of federal and state tax credits.
Derivative Financial Instruments. Our product sales are predominantly
denominated in U.S. dollars. However, certain international operating expenses
are predominately paid in their respective local currency. During 2000, we began
a foreign currency hedging program to hedge our exposure to foreign currency
exchange risk on local international operational expenses and revenues. Realized
and unrealized gains and losses on forward currency contracts that are effective
as hedges of assets and liabilities, are recognized in income. We recognized
losses of $50,000 for the year ended June 30, 2000.
We make yen-denominated purchases of certain components and mechanical
subsystems from Japanese suppliers. Based on the amount of these purchases,
current exchange rate fluctuations would not typically be expected to result in
material unfavorable foreign exchange transactions included in cost of revenues.
From time to time, we manage the currency risk associated with the
yen-denominated purchases using forward rate currency contracts.
Comparison of 1999 to 1998
Net Revenues. Our net revenues decreased by 17.1% to $87.4 million in 1999
from $105.4 million in 1998. The decrease in net revenues for 1999 over 1998 was
primarily due to decreased product sales, including robot and motion controller
sales, decreased service and upgrade revenues, offset in part by increased
software revenue, primarily from our SILMA products. Revenue growth slowed
substantially starting in the second half of 1998 as a result of lower sales to
the customers in the computer disk-drive, wireless communications, semiconductor
and electronics industries. Additionally, while our direct sales into the
Asia-Pacific region have been relatively insignificant to date, the widely
reported economic instability in that region affected certain domestic and OEM
customers who experienced a decline in their Asia-Pacific revenues. The revenue
decline continued into fiscal 1999 and was seen throughout the markets and
industries we serve. International sales, including sales to Canada and export
sales, were $41.2 million, or 47.2% of net revenues, in 1999, as compared with
$39.8 million, or 37.8% of net revenues, in 1998. International sales as a
percentage of total net revenues increased due to the greater relative decline
in our domestic sales in 1999 as compared to the prior year. Because
international revenues constitute a significant portion of our net revenues,
adverse economic conditions or instability in foreign markets where we operate
directly can be expected to have an adverse effect on our revenues and results
of operations. In addition, fluctuations in economic conditions internationally
can also affect our revenues and operating
24
<PAGE> 29
results indirectly to the extent significant customers or industry segments on
which we are significantly dependent are affected by these international
fluctuations.
Gross Margin. Gross margin as a percentage of net revenue was 45.2% in
1999 compared to 42.3% in 1998. The increase in gross margin percentage was
primarily attributable to reduced sales of lower margin hardware products, and
to a lesser extent, to relatively higher margin software revenue and cost
reductions on our products. We expect that we will continue to experience
fluctuations in gross margin percentage due to changes in our sales and product
mix.
Research, Development and Engineering Expenses. Research, development and
engineering expenses decreased by 2.1% to $11.6 million or 13.3% of net revenues
in 1999 from $11.8 million or 11.2% of net revenues, in 1998. The absolute
dollar decrease in expenses in 1999 was primarily due to decreased project
material spending, and travel expenses. Research, development and engineering
expenses in 1999 were partially offset by $681,000 of third party development
funding as compared with $629,000 in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 8.2% to $24.7 million, or 28.2% of net
revenues, in 1999 from $26.9 million, or 25.5% of net revenues, in 1998. The
decreased level of spending was primarily attributable to the closure of our
Japanese office, lower compensation related expenses, including commissions of
$256,000, and to a lesser extent, to lower travel expenses of $108,000, reduced
foreign currency losses on balance sheet remeasurement of $230,000, partially
offset by an increase in outside consulting services of $410,000. The increase
in selling, general and administrative expenses as a percentage of total net
revenues was due to the relative decline in the level of net revenues.
Restructuring and Other Nonrecurring Charges. We did not incur any
restructuring or other nonrecurring charges in 1999. During 1998, we recorded
restructuring charges of approximately $1.0 million and other nonrecurring
charges of approximately $1.7 million. The restructuring charges of $1.0 million
included a write-off of certain assets and excess facilities equal to $651,000
in connection with the closing of our branch in Japan. We now operate in Japan
through a joint venture in which we have a minority interest. The remaining
$362,000 relates to severance for the termination of certain employees.
The nonrecurring charges of approximately $1.7 million included $675,000
for non-cash compensation expenses related to our employee stock purchase plan
(see Note 1 of Notes to Consolidated Financial Statements) and $383,000 related
to the write off of certain information system hardware and software which had
become obsolete. Additionally, $413,000 was related to the write off of the
remaining balance of capitalized purchased software associated with the
acquisition of SILMA. Due to technological changes in 1998 related to the SILMA
operating platform, we determined the net realizable value of the purchased
software was impaired.
We reported the charge of $675,000 in the second quarter of fiscal 1998 for
compensation expense related to the Emerging Issues Task Force, or EITF, Issue
No. 97-12, "Accounting for Increased Share Authorizations in an IRS Section 423
Employee Stock Purchase Plan under APB Opinion No. 25, Accounting for Stock
Issued to Employees" which was approved by the EITF in September 1997. This
nonrecurring, non-cash charge represented the difference between 85% of the fair
market value of common stock on the date of the beginning of the offering period
and the fair market value of common stock on the date the shareholders approved
the increase in shares authorized for issuance, multiplied by the number of
shares in the 1995 Employee Stock Purchase Plan, or 1995 ESPP, that had been
subscribed for purchase by employees, but not authorized by the shareholders,
prior to our 1998 Annual Meeting of Shareholders. Shareholder approval was
granted to make available for issuance an additional 500,000 shares under the
1995 ESPP on October 31, 1997.
Interest Income, Net. Interest income, net in 1999 was $926,000 compared
to $971,000 in 1998. The decrease was due to a higher concentration of tax
advantaged investments yielding lower gross interest income.
Provision for Income Taxes. Our effective tax rate for 1999 was 39% as
compared to 45% in 1998. Our tax rates for 1999 and 1998 differed from the
federal statutory rate of 34%, due to foreign losses not
25
<PAGE> 30
utilized for U.S. federal and state tax purposes and foreign taxes, partially
offset by the benefits of federal and state tax credits.
IMPACT OF INFLATION
The effect of inflation on our business and financial position has not been
significant to date.
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
We operate and report financial results ending on the last Saturday of a 13
week period for each of our first three fiscal quarters and at June 30 for our
fiscal year end. For convenience, we have indicated in this prospectus, our
fiscal quarters end on March 31, December 31 and September 30.
The following table presents our historical quarterly results of operations
for our most recent eight quarters. This data is derived from our annual and
quarterly financial statements. In the opinion of management, the quarterly
financial information has been prepared on the same basis as our annual
financial statements and includes all adjustments, consisting only of normal,
recurring adjustments, necessary to present fairly the financial results set
forth therein. Results of operations for any previous quarter are not
necessarily indicative of results for any future period. Amounts for the fiscal
quarters ended September 30, 1998, December 31, 1998, March 31, 1999 and June
30, 1999 have been restated to reflect the acquisition of BYE/OASIS which was
accounted for as a pooling of interests.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------
JUN. 30, MAR. 31, DEC. 31, SEP. 30, JUN. 30, MAR. 31, DEC. 31, SEP. 30,
2000 2000 1999 1999 1999 1999 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues...................... $28,058 $26,253 $24,267 $20,634 $24,283 $21,590 $20,508 $20,993
Cost of revenues.................. 15,389 14,327 13,710 12,747 13,273 11,603 11,083 11,943
------- ------- ------- ------- ------- ------- ------- -------
Gross margin...................... 12,669 11,926 10,557 7,887 11,010 9,987 9,425 9,050
Operating expenses:
Research, development and
engineering................... 4,346 3,708 3,116 3,459 3,284 2,937 2,786 2,584
Selling, general and
administrative................ 7,405 7,450 7,391 7,257 6,815 6,120 5,680 6,061
Merger-related charges(1)....... -- -- 988 -- -- -- --
Amortization of goodwill and
other intangibles............. 685 -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses...... 12,436 11,158 10,507 11,704 10,099 9,057 8,466 8,645
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)........... 233 768 50 (3,817) 911 930 959 405
Interest income, net.............. 115 80 242 309 268 230 224 204
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before provision for
income taxes.................... 348 848 292 (3,508) 1,179 1,160 1,183 609
Provision for (benefit from)
income taxes.................... 98 254 117 (1,062) 506 476 437 201
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................. $ 250 $ 594 $ 175 $(2,446) $ 673 $ 684 $ 746 $ 408
======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per share:
Basic........................... $ .02 $ .06 $ .02 $ (.26) $ .07 $ .07 $ .08 $ .04
======= ======= ======= ======= ======= ======= ======= =======
Diluted......................... $ .02 $ .06 $ .02 $ (.26) $ .07 $ .07 $ .08 $ .04
======= ======= ======= ======= ======= ======= ======= =======
Number of shares used in computing
per share amounts:
Basic........................... 10,677 9,788 9,583 9,491 9,352 9,230 9,266 9,360
Diluted......................... 11,395 10,460 9,752 9,491 9,594 9,438 9,421 9,484
</TABLE>
---------------
(1) In July 1999, we incurred charges of $988,000 relating to the acquisition of
BYE/OASIS.
26
<PAGE> 31
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------
JUN. 30, MAR. 31, DEC. 31, SEP. 30, JUN. 30, MAR. 31, DEC. 31, SEP. 30,
2000 2000 1999 1999 1999 1999 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF NET REVENUES:
Net revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................ 54.8 54.6 56.5 61.8 54.7 53.7 54.0 56.9
----- ----- ----- ----- ----- ----- ----- -----
Gross margin............................ 45.2 45.4 43.5 38.2 45.3 46.3 46.0 43.1
Operating expenses:
Research, development and engineering... 15.5 14.1 12.8 16.7 13.5 13.6 13.6 12.3
Selling, general and administrative..... 26.4 28.4 30.5 35.2 28.1 28.4 27.7 28.9
Merger-related charges(1)............... -- -- 4.8 -- -- -- --
Amortization of goodwill and other
intangibles........................... 2.5 -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses.............. 44.4 42.5 43.3 56.7 41.6 42.0 41.3 41.2
----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss)................... 0.8 2.9 0.2 (18.5) 3.8 4.3 4.7 1.9
Interest income, net...................... 0.4 0.3 1.0 1.5 1.1 1.1 1.1 1.0
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before provision for income
taxes................................... 1.2 3.2 1.2 (17.0) 4.9 5.4 5.8 2.9
Provision for (benefit from) income
taxes................................... 0.3 0.9 0.5 (5.1) 2.1 2.2 2.1 1.0
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)......................... 0.9% 2.3% 0.7% (11.9)% 2.8% 3.2% 3.7% 1.9%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
---------------
(1) In July 1999, we incurred charges of $988,000 relating to the acquisition of
BYE/OASIS.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, we had working capital of approximately $46.6 million,
including $13.5 million in cash and cash equivalents and $7.0 million in
short-term investments.
During the year ended June 30, 2000, cash and short-term investments
decreased by approximately $6.6 million. These funds were primarily used to
acquire Pensar and NanoMotion. Additionally, we made investments in inventories
for safety stock related to components with long lead times. Generally other
cash requirements during the year ended June 30, 2000 were met primarily through
cash provided by investing activities and financing activities partially offset
by cash used in operating activities. Specifically, cash and cash equivalents
increased $1.7 million from June 30, 1999 primarily as a result of $2.7 million
provided by investing activities and $2.6 million provided by financing
activities offset by $3.6 million used in operations.
Net cash used by operating activities was primarily attributable to the net
loss adjusted by depreciation and amortization and the increase in inventory and
accounts receivable. Cash provided by financing activities consisted of proceeds
from employee stock options and stock purchase plans. Cash provided by investing
activities was primarily attributable to the net sales of short-term investments
offset by business acquisitions and the purchase of property and equipment.
We believe that our existing cash and cash equivalent balances as well as
short-term investments, anticipated cash flow from operations and the net
proceeds from this offering will be sufficient to support our working capital
requirements for at least the next 12 months.
In fiscal 2001, we anticipate to incur approximately $6.0 million of
capital expenditures and approximately $9.0 million for obligations in
connection with prior acquisitions.
ACQUISITIONS
During the three-year period ended June 30, 2000, we acquired four
companies: NanoMotion Incorporated, Pensar-Tucson, Inc., BYE/OASIS and
RoboElektronik GmbH. In addition, we acquired a fifth company, HexaVision
Technologies Inc., in July 2000. These acquisitions are described below.
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<PAGE> 32
NanoMotion
On May 31, 2000, we completed the acquisition of NanoMotion Incorporated, a
California corporation. NanoMotion is a manufacturer of ultra-high precision
positioning and alignment devices. In connection with the acquisition, we issued
600,000 shares of our common stock to the shareholders of NanoMotion valued at
$21 per share which was the fair market value of our common stock at May 31,
2000. The acquisition was accounted for as a purchase. We believe that our
acquisition of NanoMotion will enhance our ability to offer intelligent
automation solutions to the microelectrical, fiber optic, semiconductor,
metrology, or precision machining, and photonics industries.
Pensar
On April 28, 2000, we completed the acquisition of Pensar-Tucson, Inc., an
Arizona corporation. Pensar is a design and engineering company which integrates
factory automation systems. In connection with the acquisition, we issued
100,000 shares of our common stock to the shareholders of Pensar valued at
$11.75 per share, which was the fair market value of our common stock at April
28, 2000. In addition, we paid $3,000,000 in cash, resulting in a total purchase
price of $4.2 million. The acquisition was accounted for as a purchase. We
believe that our acquisition of Pensar will enhance our ability to offer
standard solutions for microelectrical, fiber optic and photonics assembly
automation.
BYE/OASIS
On July 14, 1999, we completed the acquisition of BYE/OASIS Engineering,
Inc., a Texas corporation. BYE/OASIS is a manufacturer of environmental
filtering and control systems, which create a clean room environment inside a
semiconductor manufacturing machine or tool, and wafer cassette handling devices
for the microelectronics industry. In connection with the acquisition, we issued
720,008 shares of our common stock to the shareholders of BYE/OASIS. In
addition, we assumed outstanding options to acquire BYE/OASIS shares, which were
converted into options to acquire 185,361 shares of our common stock. The
acquisition constituted a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986. The acquisition was accounted for using the
pooling of interests method, and, accordingly, all prior period consolidated
financial statements have been restated to include the combined results of
operations, financial position and cash flows of BYE/OASIS. Prior to the merger,
BYE/ OASIS's fiscal year ended on September 30. In recording the business
combination, BYE/OASIS's prior period financial statements have been restated to
conform to our fiscal year. We believe this acquisition will broaden our factory
automation offerings in the wafer and microelectronic manufacturing industry and
enhance our experience and marketing and service infrastructure.
RoboElektronik
On February 13, 1998, we completed the acquisition of RoboElektronik GmbH
through the issuance of 24,252 shares of our common stock, which were exchanged
for all of the outstanding capital stock of RoboElektronik. RoboElektronik GmbH
was renamed Adept Technology, GmbH on June 26, 1998. The results of operations
of RoboElektronik have been consolidated with Adept's financial statements since
the acquisition. The acquisition was accounted for using the pooling of
interests method.
HexaVision
On July 21, 2000, we completed the acquisition of HexaVision Technologies
Inc., a Canadian corporation. HexaVision is a machine vision research and
development company. In connection with the acquisition, we paid $5.1 million in
cash and will be issuing shares of our common stock to the shareholders of
HexaVision with a value of $1.1 million, subject to certain conditions. In
addition, the terms of the acquisition provide that we will make two payments
totaling approximately $1.6 million to the shareholders of HexaVision contingent
upon the continued employment of selected HexaVision employees through July
2001. We deposited $1.6 million into an escrow account pending resolution of the
contingencies. These contingent cash payments and share issuances will be
accounted for as additional
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<PAGE> 33
purchase price when the contingencies have been resolved. If the payments are
made and the shares are issued these amounts will be allocated to goodwill. We
intend to account for the acquisition under the purchase method. We believe the
acquisition of HexaVision will enhance our machine vision products for all
markets and facilitate our entry into the PC-based machine vision market.
HexaVision's core technology incorporates techniques to achieve accuracies up to
1/40th of a pixel with machine vision measurement algorithms that can increase
our performance in critical and demanding applications such as vision servoing
for the microelectrical, fiber optic, semiconductor, metrology and photonics
industry.
NEW ACCOUNTING PRONOUNCEMENTS
Staff Accounting Bulletin No. 101 -- Revenue Recognition
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements." SAB 101 provides guidance on the
recognition, presentation and disclosure of revenue in financial statements. In
recent actions, the SEC has further delayed the required implementation date
which, for us, will be the fourth quarter of fiscal 2001, retroactive to the
beginning of the fiscal year. We are still in the process of assessing the
impact of SAB 101 on our consolidated results of operations, financial position,
and cash flows based upon the most current information.
Statement of Financial Accounting Standards No. 133 -- Accounting for
Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133, as amended by SFAS No. 137 and
138, establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. We will be required to implement SFAS No. 133 as of the beginning of
our fiscal year 2001. Our foreign currency exchange rate hedging activities have
been insignificant to date and we do not believe that SFAS No. 133 will have a
material impact on our financial position, results of operations or cash flows.
RECLASSIFICATION
Certain amounts presented in the financial statements of prior years have
been reclassified to conform to the current presentation for 2000.
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<PAGE> 34
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio. We maintain an investment policy which ensures the
safety and preservation of our invested funds by limiting default risk, market
risk and reinvestment risk. The table below presents principal cash flow amounts
and related weighted-average interest rates by year of maturity for our
investment portfolio.
<TABLE>
<CAPTION>
FAIR
2000 2001 2002 TOTAL VALUE
------- ---- ---- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash equivalents
Fixed rate.................................. $13,487 -- -- $13,487 $13,487
Average rate................................ 3.90% -- -- 3.90%
Auction rate securities
Fixed rate.................................. $ 3,500 -- -- $ 3,500 $ 3,500
Average rate................................ 4.49% -- -- 4.49%
Auction rate preferred
Variable rate............................... $ 3,450 -- -- $ 3,450 $ 3,450
Average rate................................ 4.64% -- -- 4.64%
Total Investment Securities................... $20,437 -- -- $20,437 $20,437
Average rate................................ 4.13% -- -- 4.13%
</TABLE>
We mitigate default risk by investing in high credit quality securities and
by positioning our portfolio to respond appropriately to a significant reduction
in a credit rating of any investment issuer or guarantor. Our portfolio includes
only marketable securities with active secondary or resale markets to ensure
portfolio liquidity and maintains a prudent amount of diversification. We
conduct business on a global basis. Consequently, we are exposed to adverse or
beneficial movements in foreign currency exchange rates. We enter into foreign
currency forward contracts to minimize the impact of exchange rate fluctuations
on certain foreign currency commitments and balance sheet positions and may
enter into foreign exchange forward contracts in the future. The realized gains
and losses on these contracts are deferred and offset against realized and
unrealized gains and losses when the transaction occurs.
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BUSINESS
We provide intelligent production automation systems to our customers in
many industries including the semiconductor, wireless communications, photonics,
food, automotive, life sciences and electronics industries. We utilize our
comprehensive portfolio to provide automation solutions consisting of high
precision mechanical components and application development software to meet our
customer's increasingly complex manufacturing requirements.
We offer our customers a comprehensive approach to automation that we call
Rapid Deployment Automation, or RDA, that reduces the time and cost to design,
engineer and launch products into high-volume production. Other benefits of our
RDA solution include increased manufacturing flexibility for future product
generations, less customized engineering and reduced dependence on production
engineers. We intend to continue to enhance our RDA capabilities by providing
differentiated, value added integrated systems to further penetrate high growth
markets.
We market and sell our products worldwide through more than 300 system
integrators, our direct sales force and original equipment manufacturers. This
global presence, when combined with our extensive service and support
infrastructure, enables us to effectively understand our customers' current and
future technological automation requirements.
INDUSTRY OVERVIEW
Intelligent automation technology is composed of computer-based motion
control machinery that utilizes advanced software programming and high-precision
sensor products, or machine vision, to perform material handling, assembly and
packaging functions within manufacturing environments. This technology began to
evolve in the 1970's with the commercialization of microprocessors and advances
in the PC. As computing power continued to increase and its associated costs
fell, software also matured from simple operating systems to high-level
programming languages. These computing advances provided greater functionality
and the ability to apply intelligent automation solutions across a broad range
of production environments. This technology has been adopted by many industries
including semiconductors, electronics, automotive, food, life sciences and
pharmaceuticals with increasing adoption in high growth industries such as
photonics and wireless communications.
Outsourcing production solutions, including intelligent automation, has
become a requirement to the successful commercialization of products and
technologies in a wide variety of industries. This strategy is apparent as more
high technology industries implement intelligent automation solutions in their
production environments to more cost-effectively meet product demand. We believe
significant opportunities exist in several key high growth industries for
intelligent automation systems:
- Fiber Optic Components -- The potential opportunity for automated
solutions in this segment of the photonics industry is significant given
that the majority of these components are manually produced today without
standardized manufacturing processes. In addition, many of the companies
in this industry are start-ups who usually lack the resources and
expertise to develop these solutions in-house. According to RHK, Inc., a
market research firm, worldwide demand for fiber optic components is
expected to exceed $23 billion in 2003, up from $6.6 billion in 1999, a
compound annual growth rate of approximately 36%.
- Wireless Communications -- In the wireless communications industry, high
growth in mobile phones has resulted in the need to use automated systems
to meet demand. According to International Data Corporation, worldwide
wireless subscribers are expected to reach approximately 1.1 billion by
2003 from 303 million in 1998, a compound annual growth rate of
approximately 29%.
- Semiconductor -- Manufacturers of semiconductor capital equipment
continue to turn to third party suppliers to provide value added
subsystems that increase capabilities and efficiencies of their products.
According to VLSI Research, the semiconductor manufacturing equipment
market was
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$33 billion in 1999, and is expected to grow to $84 billion in 2002, a
compound annual growth rate of approximately 37%.
Both mature and high growth industries increasingly require automated
solutions for their production environments due to the following growth drivers:
- Miniaturization -- Component parts in a variety of industries have
undergone increasing miniaturization. Manual assembly and handling in
manufacturing processes become increasingly infeasible as parts are
reduced in size. The transition to 300 mm wafers will nearly double the
density of integrated circuits on an individual wafer, requiring more
precise handling and placement systems. Even greater precision is needed
to align optical fibers within approximately one hundred nanometers, or
four millionths of an inch, to allow laser light pulses to be transmitted
efficiently and accurately.
- Capacity -- Suppliers in several rapidly growing segments of the
technology industry, particularly communication products such as mobile
phones and photonics products, are demanding automated production
solutions in order to address capacity constraints. These industries are
rapidly replacing manual assembly with automated solutions.
- Short Product Life Cycles -- Products such as mobile phones, PC's,
printers, disk drives, and even automobiles are experiencing shorter life
cycles. As a result, manufacturers require faster time to market between
product design and full volume production. Additionally, many next
generation products incorporate enhancements that require flexible
adjustment to the production environment rather than a complete
re-tooling of the production lines. This flexibility is one of the
advantages provided by intelligent automation production environments.
- Quality -- Production quality is one of the primary determinants of
manufacturing profitability. While manufacturers strive for greater
miniaturization and higher levels of capacity, these goals cannot
economically be reached without maintaining high levels of quality.
Intelligent automation reduces human error and costs associated with
manufacturing processes that incorporate human intervention. Intelligent
automation solutions have the ability to reduce these costs and increase
production throughput, while maintaining high product quality.
ADEPT'S SOLUTION
Comprehensive Product Line
We have developed a comprehensive line of intelligent automation products,
including over 20 industrial robotic platforms, a common integrated
architecture, intelligent peripherals, and a full range of simulation, control
and application software. Our robotic platforms include a wide range of models
suited for assembly, handling, and packaging at various levels of precision,
speed and payload. Our common industrial control architecture integrates the
industrial robotics, linear modules, motion control and machine vision
seamlessly. We also provide a comprehensive suite of software for application
development which includes V+, an advanced factory automation programming
language, AIM for task level application programming, and simulation software
products. The integration of the recently acquired NanoLine product portfolio
increases our precision motion capabilities by a factor of 1,000, to 25
nanometers. Through the acquisition of HexSight machine vision software, we
obtained high precision machine vision tools to locate objects for guidance and
orientation. This level of precision is required for assembly of fiber optic
components, and has additional applications in semiconductor manufacturing and
other precision electro mechanical processes.
Extensive Automation Experience in Precision Assembly and Material Handling
Over our 17 year history, we have become a market leader in precision
assembly and material handling and have an installed base of approximately
19,000 systems worldwide. We have successfully leveraged our automation
experience across multiple industries including semiconductor, electronics,
automotive, food processing, life sciences, and pharmaceuticals. We have also
successfully introduced
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automation systems to the high growth industries of photonics and wireless
communications as these industries try to solve issues of shorter product life
cycles and capacity constraints.
Rapid Deployment Automation
Our approach to simplifying the design and implementation of intelligent
automation solutions is called Rapid Deployment Automation, or RDA. This
approach reduces our customers' total time and cost required to design, build
and implement volume production. RDA uses sophisticated simulation models to
evaluate the throughput and performance of the manufacturing process to design
production environments for efficient manufacturability. Using the RDA
methodology, our customers can configure standardized platforms utilizing
various automation components that provide both flexibility and an integrated
manufacturing solution. With RDA, our customers benefit from increased
flexibility via efficient production line changeovers during product life
cycles, less customized engineering, reduced dependence on manufacturing
engineers and overall shorter implementation cycles.
Extensive Integration Channel
We utilize a worldwide network of more than 300 system integrators to sell
and market our intelligent automation solutions. We have leveraged these
relationships into a worldwide presence with the reputation to deliver
comprehensive turnkey solutions to our customers across multiple industries and
applications. We have devoted significant time and resources to ensure our
system integrators are highly trained in our products and provide the global
service and support expected by our customers.
Global Customer Sales, Service and Support
We support our worldwide customer base with direct sales, service and
engineering capabilities. We have six direct sales offices in North America and
eight international locations covering Europe and the Pacific Rim. Our staff of
experienced engineers provides our customers with application consulting,
systems troubleshooting and product maintenance assistance including on-site
support for our key customers. We provide a toll-free technical support hotline
24 hours a day, 7 days a week for North America, Europe, and major Asian
markets. We also provide product training courses for systems installation,
programming, operation, and maintenance targeted to specific audiences. These
global sales, service and support functions enhance our customer relationships
and provide continual feedback to enable us to better understand our customers'
current and future technological requirements.
ADEPT'S STRATEGY
Our goal is to be the leading provider of precision automation systems to
the markets we serve. Key elements of our strategy include:
Enhance RDA Capabilities by Providing Integrated Platforms
We intend to further enhance our RDA capabilities that reduce the time
between product design and the launch into full volume production. This will
include extending our development efforts to standardize applications for
manually intensive, high-growth markets. We plan to expand our flexible
automation product offerings in the photonics, semiconductor and wireless
industries, providing our customers with automation platforms. We will continue
to develop and refine our simulation capabilities based on these automation
platforms.
Leverage Key Technologies and Automation Knowledge To Further Penetrate
Photonics Industry
Through our recent acquisitions, we have added to our product and process
knowledge key technologies required to develop automation products for the
photonics industry. Our NanoLine product family provides advanced nanometer
positioning and alignment capabilities that are fundamental to high precision,
fiber optic component assembly. We will integrate NanoLine products with our
precision robots, machine vision for parts location and guidance, vision
servoing, and other advanced search and control
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software for continuous component alignment. Vision servoing is an advanced
technique that involves continuous machine vision feedback, which provides
extremely precise motion guidance. We believe our automation solutions will
significantly reduce manufacturing times while improving quality, yield and
throughput in the photonics industry. Given the rapid growth of this industry,
we believe there will be significant demand for automation systems.
Provide Differentiated, Value Added Automation Systems to Further Penetrate
Other High Growth Markets
We intend to continue leveraging our automation knowledge with key
technologies gained through recent acquisitions to provide differentiated, value
added offerings to the semiconductor and wireless communications industries. We
believe the transition to 300 mm semiconductor wafer fabrication plants in the
semiconductor industry provides us an opportunity to expand our wafer handling
product offerings to include integrated systems based on our RDA approach. In
the wireless communications industry, mobile phone life cycles continue to
shorten as wireless technologies advance. We will continue to use our simulation
technology to sell high value-added automated mobile phone assembly, test and
packaging systems that utilize our modular approach to automation.
Continue Strategic Acquisitions to Complement Existing Product Portfolio
We have completed and integrated four acquisitions since July 1, 1999. We
will continue to evaluate product and technology opportunities that complement
our existing product portfolio, thereby enhancing our technological leadership
and RDA capabilities while further increasing the barriers to entry in our
industry. Currently, no material acquisitions are planned.
Enhance Customer Relationships
We have developed considerable market presence and brand recognition in the
small parts assembly and material handling markets. Many end users, integrators
and OEMs have standardized aspects of their manufacturing processes or products
based on our comprehensive product line. We have maintained relationships with a
number of our customers for over 15 years. We have built a global direct sales
and support network to maintain key customer relationships. We are investing in
technology and staff to strengthen our customer relationships, including
programs that impact all phases of an automation project:
Conceptual Phase. We use simulation software from our SILMA division to
assist customers in the earliest conceptual stages of a project. Simulation
allows engineers and designers to evaluate various approaches and
automation strategies to optimize their manufacturing process.
Implementation Stage. We offer consulting engineering to assist our
customers and integrators during the implementation stage of a project. Our
experienced automation engineers and programmers assists in identifying
efficient means to accelerate projects to meet demanding time to market
goals.
Operating Stage. We are currently building a global networked knowledge
base called ServiceExpert 2000. This knowledge base will be available to
our customers via a website, providing advanced support and information to
configure, program, troubleshoot, and service our products.
PRODUCTS AND TECHNOLOGY
Our vision of making automation easy to install is called Rapid Deployment
Automation. We have developed a product strategy to enable RDA. This product
strategy includes simulation tools to help design automation systems,
application software packages which contain automation process knowledge, very
powerful software and hardware for real-time motion control and integrated
sensing, and a family of mechanisms for different applications.
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[DESCRIPTION OF RDA GRAPHIC
GRAPHICS DEPICTING RDA LAYERS INCLUDING SYSTEM DESIGN LAYER, PROCESS KNOWLEDGE
LAYER, REAL-TIME CONTROL LAYER, AND MECHANICAL COMPONENT LAYER AND SHOWING ADEPT
PRODUCTS GROUPED BY APPLICABLE RDA LAYER]
Mechanical Components
We provide a large number of automation mechanisms to address different
application needs. All of these mechanisms are controlled by the software and
hardware control architecture described below. This broad product line of
mechanisms allows system integrators and end users to develop automation
solutions for many industries and applications.
- Robot Mechanism. We offer two floor standing Selective Compliance
Assembly Robot Arm, or SCARA, style robot mechanisms called the
AdeptOne-XL and the AdeptThree-XL, as well as two table top robot
mechanisms called the Adept Cobra 600 and 800, all of which are designed
for assembly and material handling tasks. SCARA robots utilize a
combination of rotary and linear joints for high speed, high precision
material handling, assembly and packaging. The Adept-XL robots use
direct-drive technology. Direct-drive technology eliminates gears and
linkages from the drive train of the mechanism, thereby significantly
increasing robot speed and precision and improving the robot's product
life, reliability and accuracy. The Adept Cobra series robots are light-
duty SCARA mechanisms that can be table mounted and offer an efficient
range of motions in limited space.
We also offer a line of linear modules, called AdeptModules, which we
purchase from NSK Ltd. These single axis devices can be coupled together
by the user to form a custom robot mechanism for applications requiring a
robot with fewer than four axes. In addition, we offer these linear
modules in combination with our own Z-Theta module to provide customers
with a line of configurable linear robots.
During fiscal 2000, we introduced SmartModules, which is a new family of
precision linear modules utilizing Adept SmartAmps. Adept SmartAmps
utilize the industry standard IEEE 1394 Firewire protocol to combine
motion control signals and input/output signals for transmission over a
single high-speed cable. Adept SmartModules lowers costs and installation
time by reducing the amount of software programming and cabling required
in a workcell, or a robotic system that performs a specific automation
function. SmartModules will also come in single-axis standalone versions,
which can operate without any additional controllers, saving cost and
space for simple applications.
We also offer a line of flat panel and semiconductor wafer handling
robots. These mechanisms are sourced from Samsung Corporation. The
AdeptAtlas series is designed for flat panel display transfer
applications and consists of two models: the Adept Atlas 720S (single
arm) and 720D (dual arm) are designed to handle large-scale substrates up
to 600mm by 720 mm. The AdeptVicron series is designed for semiconductor
wafer handling applications and consists of two models: the AdeptVicron
300S (single arm) and 300D (dual arm) models handle up to 300mm wafers.
- High Precision Micro Positioners. With the acquisition of NanoMotion in
the fourth quarter of fiscal 2000, we gained the ability to design and
manufacture advanced nanometer positioning and alignment systems. We
recently introduced the NanoLine L3 series of precision micro positioners
for applications in fiber optic assembly and other high precision
applications. These devices increase the resolution of our mechanisms by
a factor of 1000, from 25 microns for our standard robots to 25
nanometers for our standard micro positioners. Unlike many micro
positioners which were developed for laboratory environments, these
products are durable, production-ready devices intended for integration
into continuous production factory environments. We are developing
versions of these micro positioners for fiber optic component assembly,
fiber alignment, laser welding, and semiconductor OEM applications.
- Programmable Parts Feeder. Part feeding has historically been
accomplished by designing custom devices that could only accommodate a
single part or class of parts. The Adept Flex Feeder 250
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can be rapidly reconfigured through software to accommodate new products
and a wide variety of parts ranging from simple rectangular objects to
complex molded or machined parts, thus preserving the flexibility of the
workcell or production line. The Adept Flex Feeder 250 integrates machine
vision, software and motion control technology with a simple mechanical
device for separating parts from bulk. The Adept Flex Feeder 250
recirculates the parts and separates them, relying on vision to identify
individual parts.
- Environmental Control Products. We offer front end wafer handling
solutions for both semiconductor OEMs and end users. These offerings
include both standard and customized products for contamination control
including robotics for wafer handling and transport. The Adept Flexible
Front End Systems, including the Adept FFE 200 and the Adept FFE 300,
combine wafer sorting and wafer cassette handling load functions into one
compact integrated front-end system; reducing cycle times, process
complexity and cost. The Adept FFE 200/300 units combine wafer value
added operations such as wafer orientation, optical character
recognition, or OCR, sort and merge into a compact front-end system,
eliminating the need for wafer sorters in the factory.
Real Time Control Products
- Machine Control Software. Our V+ real-time programming language allows
software developers to create automation software systems and is the key
enabling technology for our intelligent automation approach. This
programming environment provides a high-level language coupled with a
multitasking operating system and built-in capability for integrating
robots, machine vision, sensors, workcell control and general
communications. These capabilities enable the development of
sophisticated application software that can adaptively control mechanical
systems based upon real-time sensory input while simultaneously
maintaining communication with other factory equipment.
V+ offers the user approximately 300 instructions for programming an
intelligent automation workcell. It includes a trajectory generator and
continuous path planner, which compute the path of the robot's tool in
real-time based upon predefined data or sensory input. V+ also includes a
number of network communication facilities and supports a variety of
standard communication protocols. In addition, this software includes an
operating system specifically designed for factory automation and robot
control. This operating system allows V+ to execute dozens of tasks
concurrently and permits control to pass between tasks in a predictable
manner, often several times per millisecond. The V+ operating system also
allows the installation of additional processors into the controller and
automatically reassigns tasks to optimize overall system performance,
providing a key scalability feature not found in other controllers. An
optional development environment for V+ is Windows 95, 98 and NT based
and allows the customer to utilize industry standard personal computers.
- Servo Software. The most basic level of our software architecture is the
servo software which directs individual motors to follow motion commands
generated from the higher V+ software level. This software has been
designed to control Adept robots, standard robots manufactured by other
companies, and many custom robotic mechanisms built for special
application. The servo software layer includes advanced control, safety
and diagnostic features.
- Guidance and Inspection Vision Products. AdeptVision is a line of
machine vision products that are used for robot guidance and inspection
applications. For guidance applications, AdeptVision is added into the
controller by inserting a printed circuit board and enabling the vision
system software. The integration of our controller and vision systems
software enables high speed vision applications such as vision servoing.
For inspection applications such as gauging and dimensioning, the
AdeptVision product is sold as an integrated inspection vision system
comprised of a controller with the vision board and software.
AdeptVision quickly recognizes parts that are randomly positioned and
have an unknown orientation ranging up to 360 degrees, as compared with
other solutions which simply locate translated images with very limited
rotation. Our vision servoing ability is critical for precision processes
such as the
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assembly of electronic or fiber optic components. Our machine vision
software can also measure part dimensions for inspection purposes.
Machine vision can be used to acquire parts from stationary locations or
from conveyors. Cameras can be fixed in the workcell or attached to a
robot.
With the addition of HexaVision products, we now offer a shrink-wrapped
library of machine vision software tools for OEMs. These tools run
directly in a PC environment and can be adapted to run in an OEM's custom
software solution.
- Machine Controllers. Our controller products are currently based on the
VersaModule Eurocard, or VME, bus architecture standard, but are
migrating to a distributed control architecture which depends on
high-speed networks such as Firewire, Ethernet, and DeviceNet, to link
processors and sensors which may be distributed around a workcell. A
large array of controller configurations are possible depending on the
features selected by the customer. Our VME controllers are configured in
four, five, or ten slot chassis. All controllers include a system
processor module. Additional functionality can be incorporated by adding
printed circuit boards and additional software. For example, motion
control is added by inserting a motion control board. Printed circuit
boards can be added for machine vision, graphical user interface
capability and additional communication inputs and outputs. The
controller products are sold independently for machine control and
inspection vision applications and are also sold as a component of the
robot systems. The heart of our machine controllers is the AdeptWindows
Controller board, or AWC, a single slot central processing unit board
based on Motorola 68040/060 processors. All AWC boards include
solid-state, mass storage, direct ethernet connectivity, DeviceNet
industrial data network connectivity and international safety circuitry.
Our AWC controller offers plug-and-play integration of personal computer
hardware and software for users of the Windows platform. Specifically,
this new technology allows customers to do all development work,
including vision applications, on personal computers using Windows 95,
98, 2000 and NT operating systems. This open architecture product allows
customers to combine the features of our AIM and V+ software products
with other personal computer-based software products using industry
standard software tools such as Active X, Visual Basic, and Visual C++.
Finally, all of our controller products support the same Windows NT-based
graphical user interface and can execute the same application programs,
thereby allowing software development investments to be leveraged across
a number of applications.
The controller includes a number of technologically advanced capabilities
designed specifically to address the intelligent automation market. These
capabilities include special application specific integrated circuit
reading encoders for controlling direct-drive motors, reading encoders,
or sensors, and controlling power up sequencing of complex high power
systems. The controller also includes safety circuits that meet domestic
and international specifications and technology to protect the controller
from voltage spikes, electrical noise and power brownouts. Additionally
the controller features high wattage switching power amplifiers, and
networking circuitry for local area network and industrial data networks.
Process Knowledge Products
Assembly Information Manager, or AIM software, simplifies the integration,
programming and operation of automation workcells and lines. AIM accomplishes
this goal by providing a formal method for capturing application specific
process knowledge and then allowing users lacking advanced programming expertise
to use this embedded knowledge to accomplish a specific task.
AIM simplifies the implementation of intelligent automation workcells by
combining a point and click graphical user interface with an icon-based
programming method that does not require advanced computer programming skills.
This method combines task-level statements with a high performance, real-time
database and a structure for representing process knowledge.
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The AIM task level statements allow the developer to specify at a very high
level what operations the workcell is to perform, such as "insert a component
into a socket using vision to correct for part irregularities". This command is
automatically coupled with data contained in the real-time database that
specifies the physical aspects of the workcell, such as the location of a part.
The information contained in the databases can be created or downloaded from a
computer or simulation system at any time. Finally, the AIM system automatically
invokes the routines that contain the process knowledge and dictate how the
specified operation will be performed. In this way, an AIM workcell can be
programmed by a person who understands as few as ten process actions rather than
hundreds of programming instructions or thousands of lines of conventional code.
We sell several application specific versions of AIM, including MotionWare,
which addresses motion applications such as those requiring sophisticated
conveyor tracking, and VisionWare, which simplifies the use of vision in both
guidance and inspection applications, as well as other packages which address
dispensing, packaging, flexible part feeding, and semiconductor wafer handling.
In addition, end users and system integrators, many of whom have developed their
own AIM application-specific packages, can add process knowledge. AIM can be
accessed via the Windows 95, 98 and NT environments. AIM programs are written in
the V+ language.
System Design Software
Adept provides simulation tools to help system integrators and end users
both design automation systems and evaluate product designs for ease of
manufacture. These tools are developed by our SILMA division, a developer of
simulation software. SILMA's products allow machines to be modeled with 3D
graphics and then animated in response to software control programs. Mechanisms
can be defined graphically and the mathematics necessary to animate them, known
as kinematic models, are generated automatically. Dynamics of mechanisms can
also be modeled, which enables machine cycle times to be accurately predicted.
SILMA products can either create new computer aided design, or CAD, geometry for
simulations, import CAD models from standard libraries of machines and
peripheral devices, or import models directly from common CAD systems. SILMA
products are available on both PC and several workstation platforms.
SILMA's newest product, Production PILOT, consists of three modules for
assembly automation process design, simulation, and analysis, built into an
easy-to-use, yet powerful, 3-D graphical simulation environment.
PILOT Yield allows assembly sequences to be analyzed for interferences and
to be scored for ease of automation. Pursuant to a sublicense agreement with
Adept Japan, which had entered into an agreement with Sony Corporation on March
24, 2000, we acquired the right to embed Sony Corporation's design for
assembly/disassembly capability, or DAC, product in PILOT Yield. DAC is an
assembly/disassembly and cost-effectiveness rating methodology or scoring system
used by designers to measure and analyze the effectiveness of their factory
assembly designs. It includes a scoring system that rates product designs for
ease of assembly.
PILOT Cell allows the detailed animation of a workcell, checks for
collisions, and predicts actual production cycle times to an accuracy better
than 5%. End user programs can be developed at a high level of abstraction in
PILOT Cell using our AIM software and later optimized at a detailed level using
Adept Digital Workcell.
PILOT Line allows multiple cells on an assembly line to be linked together
and provides discrete event simulation tools for analyzing how material flows
through the line based on the cycle times of individual workcells. This allows
production lines to be balanced to optimize throughput and eliminate
bottlenecks. We have found that balancing lines which have not been optimized
can increase throughput by 20% to 30%, increasing return on investment by this
amount.
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The CimStation Inspection product simulates the operation of coordinate
measurement machines and generates programs that would be tedious to program
manually given the complex inspection tasks these machines perform.
Adept Digital Workcell allows engineers to program a workcell with actual
production software without the physical robot or cell hardware. Adept Digital
Workcell increases productivity by allowing the user to anticipate cycle times,
program logic errors, location errors, collision errors and motor overload
errors far earlier in the development process. In addition, Adept Digital
Workcell allows users to quickly generate alternative conceptual layouts and
cycletime estimates for project proposals.
Platforms
In response to end customer and integrator needs, we acquired Pensar in the
fourth quarter of fiscal 2000. We believe Pensar's experience in delivering
standard high precision automated platforms, combined with our automation
component products, enables us to deliver a more unified offering in selected
markets. We currently are developing manufacturing automation platforms for the
semiconductor and photonics markets. In the fiber/fiber optic assembly market we
are in the process of building a unified product, consisting of SmartModules, MV
Controller, AdeptVision VXL, Adept NanoLine stages and AIM software. We also are
pursuing a similar strategy in the semiconductor front-end market, where we are
developing a standard wafer handling platform, combining robots, contamination
control, machine vision and control software.
Our OEMs, integrators and end users can quickly configure these standard
platforms to add specific manufacturing processes. Platform products represent a
further extension of our RDA strategy. For industries where high volumes of a
similar basic machine are needed, an integrated platform eliminates the time and
cost of designing equipment frames, assembling control and mechanism products
and developing generic control software.
CUSTOMERS
We sell our products to system integrators, end users and OEMs. End users
of our products include a broad range of manufacturing companies in the
semiconductor, wireless communications, photonics, food, automotive, appliances,
life sciences and electronics industries. These companies use our products to
perform a wide variety of functions in assembly, material handling and precision
process applications, including mechanical assembly, printed circuit board
assembly, dispensing and inspection. No customer accounted for more than 10% of
our revenues in any of the past three years. During fiscal 2000, our top three
OEM customers by revenue were Staubli Faverges SCA, KLA-Tencor Corporation and
PMJ Automec USA, Inc.; our top three system integrator customers by revenue were
ATS Ohio; RTS Wright Industries Inc. and Balda AG; and our top three corporate
customers by revenue were Ford Motor Company, Motorola, Inc. and Corning, Inc.
SALES, DISTRIBUTION AND MARKETING
Sales and Distribution
We market our products through system integrators, our direct sales force
and OEMs.
System Integrators. We ship a substantial portion of our products through
system integrators, and we view our relationships with these organizations as
important to our success. We have established relationships with over 300 system
integrators worldwide that provide expertise and process knowledge for a wide
range of specific applications. These relationships are generally not regional
and are mutually nonexclusive. In certain international markets, the system
integrators perform marketing and support functions directly.
Direct Sales Force. We employ a direct sales force which directs its sales
efforts to end users to communicate the capabilities of our products and support
services and obtain up-to-date information regarding market requirements. Our
sales force possesses specific expertise in automation solutions and
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advises end users on alternative production line designs, special application
techniques, equipment sources and system integrator selection. Our sales force
works closely with system integrators and OEMs to integrate our product line
into their systems, provide sales leads to certain system integrators and obtain
intelligent automation system quotes from system integrators for end users. As
of September 30, 2000, our North American sales organization included
approximately 26 individuals. We have six North American sales and customer
support offices located in San Jose, California; Southbury, Connecticut;
Southfield, Michigan; Charlotte, North Carolina; Cincinnati, Ohio; and Dallas,
Texas. As of September 30, 2000, our international sales organization included
approximately 12 persons covering Europe, Singapore, and South Korea. We have
eight international sales and customer support offices located in Europe and the
Pacific Rim.
Some of our larger manufacturing end user customers have in-house
engineering departments that are comparable to a captive system integrator.
These captive engineering groups can establish a corporate integrator
relationship with us that offers benefits similar to those provided to our
system integrators.
OEMs. Our OEM customers typically purchase one standard product
configuration, which the OEM integrates with additional hardware and software
and sells under the OEM's label to other resellers and end users.
Marketing
Our marketing organization, which consisted of 48 persons as of September
30, 2000, supports our system integrators, direct sales force and OEM customers
in a variety of ways. Our product management group works with end users, system
integrators, corporate integrators and our sales engineers to continually gather
input on product performance and end user needs. This information is used to
enhance existing products and to develop new products. Our marketing programs
group generates and qualifies new business through industry trade shows, various
direct marketing programs such as direct mail and telemarketing, public
relations efforts, internet marketing and advertising in industry periodicals.
This marketing team is responsible for tracking customers and prospects through
our marketing database. Our marketing group also publishes a document called the
MV Partner catalog, which lists software and hardware components that we have
certified as compatible with our product line. We also expend considerable
effort on the development of thorough technical documentation and user manuals
for our product line, and we view well-designed manuals as critical to
simplifying the installation, programming, use and maintenance of our products.
Services and Support
Our service and support organization, which consisted of approximately 113
full-time employees as of September 30, 2000, is designed to support our
customers from the design of our automation line through ongoing support of the
installed system. This organization included approximately 52 consulting and
application engineers/programmers based in a number of our sales offices in the
U.S., Europe and Asia. This team is experienced in applying our product line to
solve a wide array of application issues and operates toll-free telephone
support lines to provide advice on issues such as software programming
structure, layout problems and system installation. End users and system
integrators can also hire these experts on a consulting basis to help resolve
new or difficult application issues.
We also maintain a team of instructors, consisting of eight instructors as
of September 30, 2000, who develop training courses on subjects ranging from
basic system maintenance to advanced programming. These courses are geared both
for manufacturing engineers who design and implement automation lines and for
operators who operate and maintain equipment once it is in production, and are
taught in Adept offices and customer sites throughout the world.
Our field service organization, which consisted of 53 persons as of
September 30, 2000, is based in eight service centers located in San Jose,
California; Cincinnati, Ohio; Massy, France; Dortmund, Germany; Arezzo, Italy;
Kobe, Japan; Seoul, South Korea and Singapore. In addition, we have service
resources located inside some key customers' facilities. Our field-based service
engineers maintain and
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repair our products at the end user's facilities. Personnel based at these
service centers also provide advice to customers on spare parts, product
upgrades and preventative maintenance.
BACKLOG
Our backlog at June 30, 2000 was approximately $20.9 million, as compared
with approximately $21.2 million at June 30, 1999.
Our business is characterized by short-term order and shipment schedules.
Because orders constituting our current backlog are subject to changes in
delivery schedules and in certain instances may be subject to cancellation
without significant penalty to the customer, our backlog at any date may not be
indicative of demand for our products or actual net revenues for any period in
the future.
RESEARCH AND DEVELOPMENT
Our research and development efforts are focused on the design of
intelligent automation products, which address the challenges of designing,
implementing, installing, operating and modifying automated production lines. We
intend to focus our research and development efforts on the development of an
integrated product line which further implements our RDA approach and which
reduces cost, enhances performance and improves ease of use.
We have devoted, and intend to devote in the future, a significant portion
of our resources to research and development programs. As of September 30, 2000,
we had 118 persons engaged in research, development and engineering. Our
research, development and engineering expenses were approximately $14.6 million
for 2000, $11.6 million for 1999 and $11.8 million for 1998 and represented
14.7% of net revenues for 2000, 13.3% for 1999 and 11.2% for 1998.
MANUFACTURING
Our manufacturing activities include the assembly, testing and
configuration of our products. We believe that by performing these operations,
we can better ensure the quality and performance of our products. We outsource
low value-added manufacturing operations, including standard and build-to-print
fabricated parts such as machinery, sheet metal fabrication and assembled
printed circuit boards. We also outsource some robot mechanisms. The purchased
robot mechanisms are tested to meet defined quality standards and then
configured into complete products which are tested again before shipment to the
customer. This strategy enables us to leverage product development,
manufacturing and management resources while retaining greater control over
product delivery, final product configuration and the timing of new product
introductions, all of which are critical to meeting customer expectations.
Our manufacturing organization has expertise in mechanical, electrical, and
software assembly and testing. Because outstanding quality and reliability over
the life of our products are key to customer satisfaction and customers' repeat
purchases of automation products, we believe our quality plans and organization
are a key part of our business strategy. Our manufacturing engineering
organization develops detailed instructions for all manufacturing and test
operations. These instructions are established in writing, implemented through
training of the manufacturing work force and monitored to assure compliance. In
addition, our manufacturing organization works closely with vendors to develop
instructions and to remedy quality problems if they arise.
In February 2000, we were awarded ISO 9002 certification for our corporate
San Jose location from TUV Rheinland of North America, Inc. The ISO 9000 series
standards are internationally recognized quality management standards developed
by the International Organization for Standardization (ISO). ISO 9002
registration focuses on quality system requirements for a company's production,
delivery and servicing of products and services around the world.
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COMPETITION
Our principal competition in the photonics industry for high precision
micro positioners are Newport Corporation, Melles Griot Inc. and Polytec PI,
Inc. Historically, these companies have primarily marketed to the research
community to supply these positioners for use in laboratory environments. We
also compete with Newport Corporation and various automation solution providers
to deliver semi-automatic and fully automatic manufacturing platforms for fiber
optic component assembly. This market is in its early stages of development and
is changing rapidly; therefore, new competitors could emerge with alternative
processes and solutions.
The market for intelligent automation products is highly competitive. We
compete with a number of robot companies, motion control companies, machine
vision companies and simulation software companies. Many of our competitors in
the robot market are integrated manufacturers of products that produce robotics
equipment internally for their own use and may also compete with our products
for sales to other customers.
Our principal competitors in the assembly robot and linear modules markets
include subsidiaries of Japanese companies, including Fanuc Ltd, Seiko
Instruments, Yamaha Corporation, Sony Corporation, Denso, Panasonic, and
Intelligent Actuator. We also compete with a narrow group of European companies,
principally Robert Bosch GmbH, and some divisions of Parker Hannifin. In the
material handling robot market, we compete with the above companies, as well as
manufacturers of 6-axis robots including Motoman, Kawasaki, Reis, Kuka, CRS and
Asea Brown Boveri.
Our principal competition in the semiconductor atmospheric wafer handling
and contamination control market comes from Asyst Technologies, Inc. The
majority of Asyst's revenue comes from adaptive wafer handling and transfer
devices sold to end users. They have been the leader in wafer handling and
transfer and isolation technology in the semiconductor industry. Additional
competitors in the semiconductor robot market are Brooks Automation, Inc. and
Equip, a division of PRI Automation, Inc.
Our principal competitors in the market for motion control system include
Allen-Bradley Co., a subsidiary of Rockwell International Corporation, in the
United States, and Siemens AG in Europe. In addition, we face motion control
competition from two major suppliers of motion control boards, Galil Motion
Control, Inc. and Delta Tau Data Systems, Inc. These motion control boards are
purchased by end users which engineer their own custom motion control systems.
In the simulation software market, our competitors include Tecnomatix
Technologies, Inc., an Israel-based company which sells mostly to major
automotive manufacturers, and Deneb Robotics, Inc., a subsidiary of Dassault
Systemes. In the machine vision market, we face competition from Cognex
Corporation and Robotic Vision Systems Inc.
INTELLECTUAL PROPERTY
We primarily pursue patent, trademark and copyright protection for our
technology and products. We currently hold eight patents and one pending patent
application in the United States and two patents and one pending patent
application outside of the United States. There can be no assurance that patents
will be issued from any of these pending applications or that any claims in
existing patents, or allowed from pending patent applications, will be
sufficiently broad to protect our technology.
FACILITIES
Our headquarters and principal research and development and manufacturing
facilities are located in a 92,000 square foot building we lease in San Jose,
California. The lease expires in December 2003 and provides for annual lease
payments of approximately $1.2 million in calendar year 2000 and $2.0 million in
calendar year 2001. We lease an additional 31,000 square feet in an adjacent
building in San Jose for our SILMA division. The lease expires in December 2003
and provides for annual lease payments of approximately $320,000 in calendar
year 2000 and $224,000 in calendar year 2001. We lease a 12,000 square foot
facility in Santa Barbara, California for our NanoMotion operations, which
commenced on June 1, 2000. The lease expires in May 2005 and provides for annual
lease payments of approximately
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$121,000 in calendar year 2000 and $211,000 in calendar year 2001. We lease a
17,000 square foot facility in Tucson, Arizona, which commenced in April 28,
2000. The lease expires in April 2005 and provides for annual lease payments of
approximately $93,000 in calendar year 2000. We lease a 5,000 square foot
facility in City of Industry, California at which our software development group
is based. The lease expires in September 2001 and provides for annual lease
payments of approximately $115,000 in calendar year 2000 and $89,000 in calendar
year 2001. We also lease a facility in Livermore, California consisting of
13,000 square feet that houses certain research and development activities and
exercised our option to lease an additional 13,000 square feet adjacent to the
current facility in January 2000. This lease expires in October 2003 and
provides for annual lease payments of approximately $290,000 in calendar year
2000 and $306,000 in calendar year 2001. We also lease facilities for sales and
customer training in Southbury, Connecticut; Southfield, Michigan; Charlotte,
North Carolina; Cincinnati, Ohio; Dallas, Texas; Massy, France; Dortmund and
Munich, Germany; Arezzo, Italy; Kobe, Japan (through our joint venture);
Kenilworth, the United Kingdom; Seoul, South Korea; and Singapore.
LEGAL PROCEEDINGS
From time to time, we are party to various legal proceedings or claims,
either asserted or unasserted, which arise in the ordinary course of our
business. Management has reviewed pending legal matters and believes that the
resolution of these matters will not have a material adverse effect on our
business, financial condition, or results of operations.
Some end users of our products have notified us that they have received a
claim of patent infringement from the Jerome H. Lemelson Foundation, alleging
that their use of our machine vision products infringes certain patents issued
to Mr. Lemelson. In addition, we have been notified that other end users of our
AdeptVision VME line and the predecessor line of Multibus machine vision
products have received letters from Mr. Lemelson which refer to Mr. Lemelson's
patent portfolio and offer the end user a license to the particular patents.
Some of these end users have notified us that they may seek indemnification from
us for any damages or expenses resulting from this matter.
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MANAGEMENT
The following table shows information regarding our executive officers and
directors as of October 19, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Brian R. Carlisle...................... 49 Chairman of the Board of Directors and
Chief Executive Officer
Bruce E. Shimano....................... 51 Vice President, Research and
Development, Secretary and Director
Marcy R. Alstott....................... 43 Vice President, Operations
Richard J. Casler, Jr. ................ 48 Vice President, Engineering
Michael W. Overby...................... 43 Vice President, Finance and Chief
Financial Officer
Ronald E. F. Codd...................... 45 Director
Michael P. Kelly....................... 52 Director
Cary R. Mock........................... 57 Director
John E. Pomeroy........................ 59 Director
</TABLE>
Brian R. Carlisle has served as Adept's Chief Executive Officer and
Chairman of the Board of Directors since he co-founded Adept in June 1983. From
June 1980 to June 1983, he served as General Manager of the West Coast Division
of Unimation, Inc., where he was responsible for new product strategy and
development for Unimation's electric robots, control systems, sensing systems
and other robotics applications. Mr. Carlisle received B.S. and M.S. degrees in
Mechanical Engineering from Stanford University. Mr. Carlisle was President of
the U.S. Robotic Industries Association for 3 years, is currently a member of
the Board of Directors for the National Coalition for Manufacturing Sciences,
served as General Chair in May 2000 for the IEEE International Conference on
Robotics and Automation, and is on the Board of the National Coalition for
Advanced Manufacturing.
Bruce E. Shimano has served as our Vice President, Research and
Development, Secretary and a director since he co-founded Adept in June 1983.
Prior to that time, he was Director of Software Development at Unimation. Mr.
Shimano received B.S., M.S. and Ph.D. degrees in Mechanical Engineering from
Stanford University.
Marcy R. Alstott joined Adept in March 1998 as Vice President of
Operations. From August 1995 to March 1998, Ms. Alstott served as Program
Director responsible for switching product development at 3Com Corporation, a
networking company. Ms. Alstott has a B.S. in Mechanical Engineering from Purdue
University, an M.S. in Mechanical Engineering from Stanford University and an
M.B.A. from the University of Santa Clara.
Richard J. Casler, Jr. has served as our Vice President of Engineering
since March 1993 and from October 1992 to March 1993 served as our Director of
Robot Interface Development. In October 1986, Mr. Casler co-founded Genesis
Automation, Inc., a developer of robots and automation for the service industry,
and served as its president until October 1992. Mr. Casler received B.S. and
M.S. degrees in Mechanical Engineering from the Massachusetts Institute of
Technology.
Michael W. Overby has served as Adept's Vice President of Finance and Chief
Financial Officer since March 2000. From December 1999 to March 2000, Mr. Overby
held the position of Corporate Controller at Adept. Prior to joining Adept, Mr.
Overby was the financial executive for DG Systems, a leading provider of digital
distribution services to the broadcast advertising industry. From 1996 to 1998
he was Corporate Controller and Director of Information Systems at Inprise
Corporation formerly Borland, a public software company. Mr. Overby holds a B.S.
in Business Administration from California Polytechnic State University.
Ronald E. F. Codd has served as a director of Adept since February 1998.
Since January 1999, Mr. Codd has served as the Chief Executive Officer and
President of Momentum Business Applications,
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Inc. From September 1991 to December 1998, Mr. Codd served as Senior Vice
President of Finance and Administration, Chief Financial Officer and Secretary
of PeopleSoft, Inc. Mr. Codd is also a director of Interwoven, Inc., a leading
provider of software products for web content management for large enterprises,
and of Intraware, Inc., a leading provider of web-based IT management solutions.
Mr. Codd received a B.S. in Accounting from the University of California,
Berkeley and an M.M. from the J.L. Kellogg Graduate School of Management at
Northwestern University.
Michael P. Kelly has served as a director of Adept since April 1997. Since
1985, Mr. Kelly has served as a managing director of Broadview International,
LLC, a corporate finance advisory firm. Mr. Kelly received a B.A. degree in
Accounting from Western Illinois University and an M.B.A. from St. Louis
University. Mr. Kelly is also a Certified Public Accountant.
Cary R. Mock has served as a director of Adept since December 1990. Since
January 1996, Mr. Mock has served as a financial advisor specializing in
acquisitions and related corporate development activities. From January 1996 to
the present, Mr. Mock has served as President of C.R. Mock & Associates. From
October 1983 to December 1995, Mr. Mock served as Director of Acquisitions and
Divestitures for Westinghouse Electric Corporation, having served in other
positions since joining Westinghouse in 1964. Mr. Mock received a B.S. in
Electrical Engineering from the Massachusetts Institute of Technology and an
M.B.A. from the State University of New York at Buffalo.
John E. Pomeroy has served as a director of Adept since August 1994. Since
May 1987, Mr. Pomeroy has served as President and Chief Executive Officer of
Dover Technologies, a subsidiary of Dover Corporation and a manufacturer of
production equipment for printed circuit board assembly. Mr. Pomeroy was also a
director of Dover Corporation from May 1998 to April 2000 and HADCO Corporation,
a supplier of electronic interconnect products and services, from August 1996 to
July 2000. Mr. Pomeroy received a B.S. in Electrical Engineering from Purdue
University.
BOARD OF DIRECTORS AND COMMITTEES
Our board of directors currently consists of six members and has an audit
committee and a compensation committee.
The audit committee, which currently consists of Messrs. Codd, Kelly and
Mock, is responsible for overseeing actions taken by our independent auditors
and reviewing our internal financial procedures and controls.
The compensation committee, which consists of Messrs. Mock and Pomeroy, is
responsible for determining salaries, incentives and other forms of compensation
for our directors, officers and other employees and administering various
incentive compensation and benefit plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no interlocking relationships, as described by the SEC, between
the compensation committee members.
DIRECTOR COMPENSATION
No director currently receives any cash compensation for attendance at
board or committee meetings, except that directors are reimbursed for travel and
lodging expenses incurred in attending these meetings. Our 1995 Director Option
Plan provides that options will be granted to non-employee directors under an
automatic nondiscretionary grant mechanism. Upon joining our board of directors,
each new non-employee director is granted an option automatically for 15,000
shares. Each non-employee director is granted an option to purchase 3,000 shares
of common stock annually for so long as the individual remains a member of our
board. Messrs. Codd, Kelly, Mock and Pomeroy each received an annual grant of an
option to purchase 3,000 shares of our common stock on February 3, 2000 at an
exercise price of $9.938 per share. All the options were granted at the fair
market value of our common stock on the date of grant. The initial grants to
non-employee directors vest at a rate of 25% on the first anniversary date of
grant and at a
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rate of 1/48th of the shares per month thereafter, and the annual grants become
exercisable at a rate of 1/48th of the shares subject to the options on the
monthly anniversary of the date of grant. Directors are also eligible to
participate in our 1993 Stock Plan.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
regarding the compensation of our chief executive officer and our other four
most highly compensated executive officers or former executive officers of ours
for services rendered in all capacities to us for the fiscal year ended June 30,
2000, referred to as the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION(1) SECURITIES
FISCAL ---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS COMPENSATIONS
--------------------------- ------ --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Brian R. Carlisle.................. 2000 $312,440 $ -- 25,000 $14,314(5)
Chairman of the Board and Chief 1999 275,267 -- 25,000 12,580(6)
Executive Officer 1998 262,117 31,000 25,000 12,377(7)
Charles S. Duncheon................ 2000 205,379 36,410 -- 11,366(5)
Former Senior Vice President, 1999 191,049 61,448 120,000(4) 11,787(6)
Marketing and Sales 1998 186,439 59,437 20,000 12,468(7)
Bruce E. Shimano................... 2000 210,527 -- 20,000 12,247(5)
Vice President, Research and 1999 183,033 20,000 10,899(6)
Development, Secretary and
Director 1998 178,555 13,000 20,000 11,488(7)
Richard J. Casler.................. 2000 179,479 -- 10,000 11,119(5)
Vice President, Standard Platform 1999 161,894 -- 35,000(4) 10,541(6)
Engineering 1998 159,744 18,053 10,000 10,245(7)
Marcy R. Alstott(3)................ 2000 165,610 -- 15,000 69,886(5)
Vice President, Operations 1999 148,023 -- 50,000(4) 80,631(6)
1998 40,385 25,000 40,000 35,991(7)
</TABLE>
---------------
(1) Other than salary, bonus and all other compensation described in this table,
we did not pay the persons named in the Summary Compensation Table any
compensation, including incidental personal benefits that in the aggregate
constituted an excess of 10% of the executive officer's salary.
(2) Bonus compensation for fiscal 1998 consisted in part of bonuses earned in
fiscal 1998 but paid in fiscal 1999 of $31,000 for Mr. Carlisle, $13,000 for
Mr. Shimano and $18,053 for Mr. Casler. Bonus compensation for Mr. Duncheon
consists of (i) $36,410 in commission income earned in fiscal 2000 and to be
paid in fiscal 2001, (ii) $27,456 in commission income earned in fiscal 1999
and paid in fiscal 2000, (iii) $33,992 in commission income earned and paid
in fiscal 1999 and (iv) $59,437 in commission income earned in fiscal 1998
and paid in fiscal 1999.
(3) Ms. Alstott joined us in March 1998.
(4) Option grant figure includes options to purchase an aggregate of 20,000,
10,000 and 30,000 shares of common stock granted to Mr. Duncheon, Mr. Casler
and Ms. Alstott in connection with our option repricing program in exchange
for equivalent options that had a higher exercise price that were cancelled.
(5) Other compensation for fiscal 2000 consists of (i) group term life excess
premiums of $616 for Mr. Carlisle, $399 for Mr. Duncheon, $419 for Mr.
Shimano, $349 for Mr. Casler and $323 for Ms. Alstott; (ii) automobile
allowance of $10,736 for Mr. Carlisle, $8,736 for Mr. Duncheon, $8,736
46
<PAGE> 51
for Mr. Shimano, $9,782 for Mr. Casler and $8,736 for Ms. Alstott; (iii)
supplemental life insurance premiums of $1,962 for Mr. Carlisle, $1,231 for
Mr. Duncheon, $2,092 for Mr. Shimano, $998 for Mr. Casler and $564 for Ms.
Alstott; (iv) our matching contributions of $1,000 under our 401(k) Plan for
each of Messrs. Carlisle, Duncheon and Shimano and for Ms. Alstott; and (v)
loan forgiveness of $59,263 for Ms. Alstott per the terms of her April 1998
promissory note to us.
(6) Other compensation for fiscal 1999 consists of (i) group term life excess
premiums of $534 for Mr. Carlisle, $366 for Mr. Duncheon, $351 for Mr.
Shimano, $313 for Mr. Casler and $292 for Ms. Alstott; (ii) automobile
allowance of $9,784 for Mr. Carlisle, $9,768 for Mr. Duncheon, $8,736 for
Mr. Shimano, $9,268 for Mr. Casler and $9,055 for Ms. Alstott; (iii)
supplemental life insurance premiums of $1,762 for Mr. Carlisle, $1,153 for
Mr. Duncheon, $1,302 for Mr. Shimano, $960 for Mr. Casler and $538 for Ms.
Alstott; (iv) our matching contributions of $500 under our 401(k) Plan for
each of Messrs. Carlisle, Duncheon, Shimano and for Ms. Alstott; and (v)
loan forgiveness of $70,477 for Ms. Alstott per the terms of her April 1998
promissory note to us.
(7) Other compensation for fiscal 1998 consisted of (i) group term life excess
premiums of $1,008 for Mr. Carlisle, $1,116 for Mr. Duncheon, $686 for Mr.
Shimano, $601 for Mr. Casler and $118 for Ms. Alstott; (ii) automobile
allowances for $8,736 for Mr. Carlisle, $9,638 for Mr. Duncheon, $8,736 for
Mr. Shimano, $8,736 for Mr. Casler and $2,352 for Ms. Alstott; (iii)
supplemental life insurance premiums of $1,633 for Mr. Carlisle, $714 for
Mr. Duncheon, $1,066 for Mr. Shimano, $909 for Mr. Casler and $192 for Ms.
Alstott; (iv) our matching contributions of $1,000 under our 401(k) Plan for
each of Messrs. Carlisle, Duncheon and Shimano and $269 for Ms. Alstott; and
(v) relocation assistance of $33,060 for Ms. Alstott.
OPTION GRANTS IN FISCAL YEAR 2000
The following table sets forth certain information regarding the grant of
stock options to the Named Executive Officers during the fiscal year ended June
30, 2000.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------ POTENTIAL REALIZABLE VALUE
PERCENTAGE OF AT ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION
NUMBER OF SECURITIES GRANTED TO FOR OPTION TERM(1)
UNDERLYING EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------------
NAME OPTION GRANTED(2) FISCAL YEAR PER SHARE(3) DATE 5% 10%
---- -------------------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Brian R. Carlisle....... 25,000 3.0% $7.00 08/13/09 $110,065 $278,905
Charles S. Duncheon..... -- -- -- -- -- --
Bruce E. Shimano........ 20,000 2.4% 7.00 08/13/09 88,045 223,124
Richard J. Casler,
Jr. .................. 10,000 1.2% 7.00 08/13/09 44,023 111,562
Marcy R. Alstott........ 15,000 1.8% 7.00 08/13/09 66,034 167,343
</TABLE>
---------------
(1) Potential realizable value is based on the assumption that our common stock
appreciates at the annual rate shown, compounded annually, from the date of
grant until the expiration of the ten year option term. These numbers are
calculated based on the requirements of the SEC and do not reflect our
estimates of future stock price growth.
(2) Each of the options becomes exercisable as to 1/48th of the option shares
each month with full vesting occurring on the fourth anniversary of the date
of grant.
(3) Options were granted at an exercise price equal to the fair market value of
our common stock on the date of grant. Exercise price may be paid in cash,
promissory note, by delivery of already-owned shares subject to certain
conditions, or by a cashless exercise procedure under which the optionee
provides irrevocable instructions to a brokerage firm to sell the purchased
shares and to remit to us, out of the sale proceeds, an amount equal to the
exercise price plus all applicable withholding taxes.
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<PAGE> 52
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information regarding the exercise
of options in the last fiscal year by the Named Executive Officers and the value
of options held by these individuals as of June 30, 2000.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT JUNE 30, 2000 AT JUNE 30, 2000(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles S. Duncheon........ 1,250 $ 2,000 88,462 81,538 $3,596,518 $3,383,482
Richard J. Casler, Jr...... 6,250 62,109 24,998 30,002 1,010,075 1,220,550
Marcy R. Alstott........... 5,000 48,281 15,416 44,584 701,971 1,825,529
</TABLE>
---------------
(1) Market value of our common stock at June 30, 2000 minus the exercise price.
(2) Market value of our common stock at the exercise date minus the exercise
price.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
We currently have no employment contracts with any of the Named Executive
Officers and no compensatory plan or arrangement with the executive officers
that are activated upon resignation, termination or retirement of any executive
officer upon a change in control of Adept.
COMPENSATION PLANS
1993 Stock Plan
In April 1993, our board adopted the 1993 Stock Plan, or 1993 plan, which
was approved by our shareholders in June 1993. The 1993 plan provides for grants
of incentive stock options to our employees, including officers and employee
directors, and nonstatutory stock options to our employees, including officers
and employee directors, and consultants retained by us. The terms of options
granted under the 1993 plan generally may not exceed ten years. The term of all
incentive stock options granted to an optionee who, at the time of grant, owns
stock representing more than 10% of the voting power of all classes of our stock
or a parent or subsidiary of ours, or a 10% shareholder, may not exceed five
years, however. Generally, options granted under the 1993 plan vest and become
exercisable starting one year after the date of grant, with 25% of the shares
subject to the option becoming exercisable at that time and an additional 1/48th
of the shares subject to the option becoming exercisable each month thereafter.
The exercise price of incentive stock options granted under the 1993 plan must
be equal to at least the fair market value of the shares on the date of grant.
The exercise price of nonstatutory stock options granted under the 1993 plan is
determined by our board. The exercise price of any incentive stock option
granted to a 10% shareholder must equal at least 110% of the fair market value
on the grant date. The consideration for exercising any incentive stock option
or any nonstatutory stock option is determined by our board and may consist of
cash, check, promissory note, delivery of already-owned shares of our common
stock subject to certain conditions, delivery of a properly executed exercise
notice together with irrevocable instructions to a broker to promptly deliver to
us the amount of sale or loan proceeds required to pay the exercise price, a
reduction in the amount of any of our liability to an optionee, or any
combination of the foregoing methods of payment or other consideration or method
of payment to the extent permitted under applicable law. To the extent incentive
stock options granted to a participant, when aggregated with all other incentive
stock options granted to the participant, have an aggregate fair market value in
excess of $100,000 first becoming exercisable in any calendar year, the options
would be treated as nonstatutory stock options.
No option may be transferred by the optionee other than by will or the laws
of descent or distribution, and each option may be exercised, during the
lifetime of the optionee, only by the optionee. An optionee whose relationship
with us ceases for any reason, other than death or permanent and total
disability, may
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<PAGE> 53
exercise options in the 30-day period following cessation, unless these options
terminate or expire sooner by their terms, or in a longer period as is
determined by the board of directors. In the event of a merger of us with or
into another corporation, all outstanding options may either be assumed or an
equivalent option may be substituted by the surviving entity. If options are not
assumed or substituted, our board has discretion either to permit each optionee
to exercise options as to all of the shares subject to the option agreement,
including shares as to which the options would not otherwise be exercisable, or
to cause the options to terminate as of the date of closing of the merger with
respect to any unvested shares.
In August 2000, the 1993 plan was amended by our board, subject to
shareholder approval, to increase the number of shares authorized for issuance
under the 1993 plan by an additional 1,000,000 shares.
As of October 19, 2000, 1,900,604 shares subject to options were
outstanding and 492,167 shares remained available for issuance under the 1993
plan.
1995 Director Option Plan
In October 1995, our board adopted and our shareholders approved the 1995
Director Option Plan, or director plan. The option grants under the director
plan are automatic and nondiscretionary, and the exercise price of the options
is the fair market value of our common stock on the date of grant. Upon hiring,
each director is granted an option to purchase 15,000 shares of our common stock
which vest and become exercisable starting one year after the date of the grant,
with 25% of the shares subject to the option becoming exercisable at that time
and 1/48th of the shares subject to the option becoming exercisable each month
thereafter. Additionally, after a minimum of six months of service on our board,
each director is granted a separate annual option to purchase 3,000 shares of
our common stock which vest and become exercisable as to 1/48th of these shares
each month after the date of the grant.
A total of 150,000 shares of common stock has been reserved for issuance
under the director plan. As of October 19, 2000, 91,000 options were granted and
no options were exercised under the director plan. The options may be exercised
at the time or times determined by our board.
In August 1998, we offered all employees holding options the opportunity to
exchange their outstanding options for options with exercise prices equal to the
then fair market value of the company's common stock. Under the August 1998
offer, options to purchase 367,827 shares with exercise prices exceeding $7.00
per share were exchanged for similar options exercisable at $7.00 per share. The
vesting schedule of all exchanged options was delayed by 12 months and the
expiration date of the exchanged options will be August 2008.
1998 Employee Stock Purchase Plan
The 1998 Employee Stock Purchase plan has overlapping 12-month offering
periods that begin every six months, starting on the first trading day on or
after May 1 and November 1 of each year. Each 12-month offering period is
divided into two six-month purchase periods. The plan allows eligible employees,
through payroll deductions, to purchase shares of our common stock at 85% of
fair market value on either the first day of the offering period or the last day
of the purchase period, whichever is lower. The plan includes a provision for an
annual automatic increase in the number of shares reserved for issuance by the
lesser of
- 300,000
- 3% of common stock outstanding on the last day of the prior fiscal year,
or
- a lesser amount as may be determined by our board.
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<PAGE> 54
In May 2000, our board approved an amendment to the plan for 24-month
offering periods including four six-month purchase periods, effective May 1,
2001 and, subject to shareholder approval, approved an amendment to the plan to
provide for an annual automatic increase in the number of shares reserved for
issuance by the lesser of
- 600,000
- 3% of common stock outstanding on the last day of the prior fiscal year,
or
- a lesser amount as may be determined by our board.
As of October 19, 2000, 300,164 shares of our common stock were issued
under the 1998 Employee Stock Purchase plan and 862,016 shares remain unissued
under the plan.
401(k) Plan
We participate in a tax-qualified employee savings and retirement plan
which covers all of our full-time employees who are at least 21 years of age.
Pursuant to the 401(k) plan, our employees may elect to reduce their current
compensation by up to the lower of 15% or the statutorily prescribed annual
limit and have the amount of the reduction contributed to the 401(k) plan. The
401(k) plan permits additional discretionary matching contributions by us on
behalf of all participants in the 401(k) plan in such a percentage amount as may
be determined annually by our board. The 401(k) plan is intended to qualify
under Section 401 of the Internal Revenue Code of 1986, as amended, so that
contributions by our employees or by us to the 401(k) plan, and so that our
contributions, if any, will be deductible by us when made. The trustee under the
401(k) plan, at the direction of each participant, invests the assets of the
401(k) plan in any of a number of investment options.
CERTAIN TRANSACTIONS
Universal Instruments, a subsidiary of Dover Technologies, bought
approximately $320,000 worth of linear modules and controls from us in fiscal
2000. Mr. Pomeroy, one of our directors, is the president and chief executive
officer of Dover Technologies.
On April 27, 1998, we loaned Marcy Alstott the sum of $300,000 under a
promissory note due and payable within 180 days if Ms. Alstott terminates her
employment with us before March 23, 2002. The interest rate on the note was
initially set at 5.64% per annum and thereafter each May 1 and November 1 at the
applicable federal short-term rate. Except under specified conditions, we will
forgive the loan at a rate of 10% per year. As of June 30, 2000, the balance on
Ms. Alstott's loan is $240,000.
On May 7, 1999, the Company loaned Bruce Shimano, Vice President, Research
and Development, Secretary and Director, the sum of $165,000 pursuant to an
unsecured promissory note. Mr. Shimano paid off the note in its entirety on
August 16, 1999. The note was due and payable on May 7, 2004. The interest rate
on the note was set at the then-applicable Federal short-term rate on each
successive May 7. Interest payments were payable on an annual basis beginning on
May 7, 2000.
On May 7, 1999, the Company loaned Brian Carlisle, Chairman of the Board
and Chief Executive Officer, the sum of $165,000 pursuant to an unsecured
promissory note. Mr. Carlisle paid off the note in its entirety on August 16,
1999. The note was due and payable on May 7, 2004. The interest rate on the note
was set at the applicable Federal short-term rate on May 7, 1999, with the rate
to adjust to the then-applicable Federal short-term rate on each successive May
7. Interest payments were payable on an annual basis beginning on May 7, 2000.
All future transactions, including loans, between us and our officers,
directors, principal shareholders and our affiliates will be approved by the
compensation committee of the board of directors, which consists of independent
and disinterested outside directors.
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<PAGE> 55
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our outstanding shares of common stock as of October 19, 2000, and
as adjusted to reflect the sale of the shares in this offering, held by:
- each person known to us to own beneficially more than 5% of the
outstanding shares of our common stock;
- each of our directors;
- each of the executive officers or former executive officers named in the
Summary Compensation Table below;
- all of our directors and executive officers as a group; and
- all other selling shareholders.
The following table assumes that the underwriters do not exercise their
option to purchase additional shares in the offering. Beneficial ownership is
determined according to the rules of the SEC and includes voting and investment
power with respect to shares. Shares of common stock subject to options
currently exercisable or exercisable within 60 days after October 19, 2000 are
deemed outstanding for computing the percentage ownership of the person holding
the options, but are not deemed outstanding for computing the percentage of any
other person. Unless otherwise indicated, the principal address of each of the
following persons is c/o Adept Technology, Inc., 150 Rose Orchard Way, San Jose,
CA 95134.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED NUMBER BENEFICIALLY OWNED
PRIOR TO OFFERING OF SHARES AFTER THE OFFERING
FIVE PERCENT SHAREHOLDERS, ----------------------- BEING -----------------------
DIRECTORS AND NAMED EXECUTIVE OFFICERS NUMBER PERCENT(1) OFFERED NUMBER PERCENT(1)
-------------------------------------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Kopp Investment Advisors Inc.(2)..... 2,654,670 24.5% -- 2,654,670 20.7%
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Brian R. Carlisle(3)................. 402,368 3.7 25,000 377,368 2.9
Bruce E. Shimano(4).................. 353,466 3.3 22,000 331,466 2.6
John E. Pomeroy(5)................... 27,000 * -- 27,000 *
Cary R. Mock(6)...................... 22,000 * -- 22,000 *
Michael P. Kelly(7).................. 17,562 * -- 17,562 *
Ronald E. F. Codd(8)................. 9,625 * -- 9,625 *
Charles S. Duncheon(9)............... 150,902 1.4 29,000 121,902 *
Richard J. Casler, Jr.(10)........... 41,497 * 10,000 31,497 *
Marcy R. Alstott(11)................. 28,749 * 2,500 26,249 *
All directors and executive officers
as a group (10 persons)(12)........ 1,062,335 9.8 88,500 973,835 7.6
OTHER SELLING SHAREHOLDERS(13)
Daryush Agahi(14).................... 9,019 * 1,800 7,219 *
Andrew Gause(15)..................... 8,553 * 4,275 4,278 *
3409 Buck Race
Austin, Texas 78748
Adrian C. Goding(16)................. 60,000 * 5,000 55,000 *
Sue C. Lim(17)....................... 39,147 * 5,000 34,147 *
James J. Repko(18)................... 55,168 * 30,180 24,988 *
</TABLE>
---------------
* Less than 1%
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<PAGE> 56
(1) Applicable percentage ownership is based on 10,851,540 shares of common
stock outstanding as of October 19, 2000 together with applicable options
for the shareholder currently exercisable or exercisable within 60 days
after October 19, 2000.
(2) Reflects ownership as reported on Amendment No. 8 to Schedule 13D dated
September 26, 2000 filed with the Commission by Kopp Investment Advisors,
Inc., or KIA. As set forth in KIA's filing, represents shares beneficially
owned by (i) KIA, a registered investment advisor, (ii) Kopp Holding
Company, (iii) Kopp Emerging Growth Fund, a registered investment company,
and (iv) LeRoy C. Kopp individually and through his ownership of a
controlling interest in KIA and his control over Kopp Holdings and Kopp
Funds. KIA beneficially owns 2,329,670 shares of Adept's common stock, has
sole voting power over 1,005,000 shares, sole dispositive power over
780,000 shares and shared dispositive power over 1,549,670 shares. Kopp
Holding Company beneficially owns 2,329,670 shares of Adept's common stock.
Kopp Emerging Growth Fund beneficially owns 640,000 shares of Adept's
common stock. Mr. Kopp has beneficial ownership of 2,654,670 shares of
Adept's common stock and sole voting and dispositive power over 325,000
shares of Adept's common stock.
(3) Includes 120,832 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. Mr. Carlisle is Chairman of the Board
and Chief Executive Officer of Adept.
(4) Includes 86,664 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000 and 25,200 shares held by Mr. Shimano as
custodian for his children under the California Uniform Transfers to Minors
Act, 2,000 shares of which are being offered for sale in this offering. Mr.
Shimano is Vice President, Research and Development, Secretary and a
director of Adept.
(5) Includes 22,000 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. Mr. Pomeroy is a director of Adept.
(6) Includes 22,000 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. Mr. Mock is a director of Adept.
(7) Includes 17,562 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. Mr. Kelly is a director of Adept.
(8) Includes 4,625 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. Mr. Codd is a director of Adept.
(9) Includes 22,210 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000 and 1,000 shares held by Mr. Duncheon's
spouse. Mr. Duncheon served as Senior Vice President, Marketing and Sales
of Adept until May 19, 2000 and is currently being retained by Adept as a
part-time consultant.
(10) Includes 31,247 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. Mr. Casler is currently employed by
Adept in the position of Vice President, Engineering.
(11) Includes 23,749 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. All of the shares being offered by Ms.
Alstott are shares to be acquired by Ms. Alstott upon the exercise of
options. Ms. Alstott is currently employed by Adept in the position of Vice
President, Operations.
(12) Includes 360,055 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000.
(13) Unless otherwise noted, no selling shareholder holds any position or office
or has a material relationship with us or any of our affiliates, and no
selling shareholder has had a relationship of this
52
<PAGE> 57
nature with us within the past three years, other than as a result of the
ownership of our common stock.
(14) Mr. Agahi is currently employed by Adept in the position of Senior
Electrical Engineer and is a former shareholder of NanoMotion.
(15) Mr. Gause is a former shareholder of BYE/OASIS.
(16) Mr. Goding is currently employed by Adept in the position of Product
Marketing Manager and is a former shareholder of NanoMotion.
(17) Includes 10,165 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. Ms. Lim is currently employed by Adept
in the position of Director of Human Resources.
(18) Includes 32,159 shares of common stock which may be acquired upon exercise
of options which are presently exercisable or will become exercisable
within 60 days of October 19, 2000. All of the shares being offered by Mr.
Repko are shares to be acquired by Mr. Repko upon the exercise of options.
Mr. Repko is currently employed by Adept in the position of Vice President,
International.
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<PAGE> 58
DESCRIPTION OF CAPITAL STOCK
Upon completion of the offering, there will be 12,851,540 shares of Adept's
common stock, no par value, issued and outstanding. We are authorized to issue
30,000,000 shares of capital stock, consisting of 25,000,000 shares of common
stock, no par value, and 5,000,000 shares of preferred stock, no par value. Our
board of directors approved in August 2000, and is recommending to Adept's
shareholders for approval at the annual meeting of shareholders on November 10,
2000, an amendment to Adept's Restated Articles of Incorporation to increase the
number of shares of capital stock that we are authorized to issue from
30,000,000 to 75,000,000. The proposed amendment would increase from 25,000,000
to 70,000,000 the number of shares of common stock we are authorized to issue
and would not affect the number of shares of preferred stock we are authorized
to issue.
The following is a summary of the material terms of our capital stock. You
should refer to our Restated Articles of Incorporation and Bylaws and the
agreements described below for more detailed information.
COMMON STOCK
As of October 19, 2000, 10,851,540 shares of our common stock were issued
and outstanding. Each outstanding share, regardless of class, is entitled to one
vote on each matter submitted to a vote of the shareholders. If a quorum is
present, the affirmative vote of a majority of the shares represented and voting
at a duly held meeting will be the act of the shareholders, unless the vote of a
greater number or a vote by classes is required by the California Corporations
Code. At a shareholders' meeting at which directors are to be elected, a
shareholder will be entitled to cumulate votes if the candidates' names have
been placed in nomination prior to the commencement of the voting and the
shareholder has given notice prior to commencement of the voting of the
shareholder's intention to cumulate votes. Subject to preferences that may be
applicable to the holders of any outstanding preferred stock, if any, each
holder of our common stock is entitled to receive ratably the dividends, if any,
as may be declared by our board of directors out of funds legally available
therefor. Upon the liquidation, dissolution or winding up of Adept, the holders
of our common stock are entitled to share ratably in all assets of Adept which
are legally available for distribution, after payment of all debts and other
liabilities and the liquidation preference of any outstanding preferred stock.
Holders of our common stock have no preemptive, subscription, redemption or
conversion rights.
We have reserved approximately 1,405,183 shares of common stock for
issuance in connection with our stock plans and employee stock purchase plan and
a number of shares of common stock, equal in value to approximately $1.1
million, which may be issued upon fulfillment of certain conditions of the
HexaVision sellers in connection with the HexaVision acquisition.
PREFERRED STOCK
There are no shares of our preferred stock issued and outstanding. We may
issue preferred stock from time to time in one or more series. Our board of
directors is authorized to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of preferred stock, and, within the limitations or restrictions stated in
any resolution or resolutions of the board originally fixing the number of
shares constituting any series, to increase or decrease, not below the number of
shares of any series then outstanding, the number of shares of any series
subsequent to the issuance of shares of that series, to determine the
designation and par value of any series of preferred stock and to fix the number
of shares of any series. Our board may authorize and issue preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of our common stock. In addition, the issuance of
our preferred stock may have the effect of delaying, deferring or preventing a
change in control of Adept. We have no current plans to issue any shares of our
preferred stock.
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<PAGE> 59
REGISTRATION RIGHTS
We have granted to the former shareholders of NanoMotion and the former
shareholders of HexaVision registration rights relating to our common stock. In
connection with our acquisition of NanoMotion, we agreed to register under the
Securities Act of 1933, within 130 days after the effective date of the
acquisition, or October 8, 2000, 125,000 shares of our common stock issued to
the former shareholders of NanoMotion. All but three of the former Nanomotion
shareholders have either included their shares in this offering in satisfaction
of Adept's registration obligations or waived these obligations. In connection
with our acquisition of HexaVision, we agreed to register under the Securities
Act, within 60 days of the one year anniversary of the July 21, 2000 closing
date of the acquisition, or September 19, 2001, the shares of our common stock
that may be issued to the former shareholders of HexaVision. However, we may
defer registration for a period of up to 180 days after July 21, 2000 in the
event we are not eligible to use Form S-3 under the Securities Act to register
these shares at that time. The number of shares will be valued at $1.1 million
and based upon the average trading price of our common stock as quoted on the
Nasdaq National Market for the 30-day period ending on and including July 21,
2001.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Chase Mellon
Shareholder Services LLC.
55
<PAGE> 60
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial amount of our common stock, including shares
issued upon exercise of outstanding options, in the public market after this
offering could adversely affect the prevailing market price of our common stock.
Upon completion of this offering, we will have outstanding an aggregate of
12,851,540 shares of our common stock, based on shares of common stock
outstanding as of October 19, 2000. Of these shares, all of the 2,134,755 shares
of our common stock sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless the shares
are purchased by our affiliates as that term is defined in Rule 144 under the
Securities Act.
In connection with this offering, our executive officers and directors and
the selling shareholders have agreed, with exceptions, not to sell or transfer
any common stock for 90 days after the date of this prospectus without first
obtaining the written consent of Merrill Lynch and Lehman Brothers. Assuming
Merrill Lynch and Lehman Brothers do not release shareholders from these
agreements prior to the expiration of the lockup period, the following shares
will be eligible for sale in the public market at the following times:
- beginning 90 days following this offering, approximately 12,158,340
shares will be available for sale in the public market, some of which are
securities held by our affiliates; and
- the remaining 693,200 shares will be eligible for sale from time to time
thereafter, subject in some cases to compliance with Rule 144.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year from the later of the date those shares of
common stock were acquired from us or from an affiliate of ours would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
- one percent of the number of shares of common stock then outstanding,
which will equal approximately 128,515 shares immediately after this
offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to that sale.
The sales of any shares of common stock under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us. Affiliates may sell shares not constituting
restricted securities in accordance with the foregoing volume limitations and
other restrictions, but without regard to the one-year holding period.
RULE 144(k)
In addition, under Rule 144(k), a person who is not one of our affiliates
at any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years from the later of
the date the shares of common stock were acquired from us or from an affiliate
of ours is entitled to sell those shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted pursuant to the contractual 90-day lockup
restrictions with the underwriters or otherwise, those shares may be sold
immediately upon the completion of this offering.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or
56
<PAGE> 61
other written agreement is eligible to resell those shares in reliance on Rule
144, but without compliance with some of the restrictions, including the holding
period, contained in Rule 144.
REGISTRATION RIGHTS
In connection with our acquisition of HexaVision, we agreed to register
under the Securities Act, within 60 days of the one year anniversary of the July
21, 2000 closing date of the acquisition, or September 19, 2001, the shares of
our common stock that may be issued to the former shareholders of HexaVision.
However, we may defer registration for a period of up to 180 days after July 21,
2000 in the event we are not eligible to use Form S-3 under the Securities Act
to register these shares at that time. The number of shares will be valued at
$1.1 million and based upon the average trading price of our common stock as
quoted on the Nasdaq National Market for the 30-day period ending on and
including July 21, 2001.
STOCK PLANS
At October 19, 2000, options to purchase 1,991,604 shares of our common
stock were outstanding under our stock option plans. We have filed registration
statements under the Securities Act to register the 3,396,787 shares of common
stock issued or reserved for issuance under our stock option plans and employee
stock purchase plan. Shares of common stock issued under these plans will be
freely tradable in the public market, subject to the Rule 144 limitations
applicable to our affiliates, these agreements with the underwriters and vesting
restrictions imposed by us.
57
<PAGE> 62
UNDERWRITING
We and the selling shareholders intend to offer the shares through a number
of underwriters. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman
Brothers Inc. and CIBC World Markets Corp. are acting as representatives of the
underwriters named below. Subject to the terms and conditions of the purchase
agreement among us, the selling shareholders and the underwriters, we and the
selling shareholders have agreed to sell to the underwriters, and each
underwriter has severally agreed to purchase from us and the selling
shareholders, the number of shares listed opposite their names below.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
UNDERWRITER ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Lehman Brothers Inc.........................................
CIBC World Markets Corp.....................................
---------
Total.......................................... 2,134,755
=========
</TABLE>
The underwriters have agreed to purchase all of the shares being sold under
the purchase agreement if any of these shares are purchased. If an underwriter
defaults, the purchase agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.
We and the selling shareholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to make in respect of
those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreement, such as the receipt by the underwriters of
officers' certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify offers to the public and to reject orders in whole or
in part.
COMMISSIONS AND DISCOUNTS
The representatives have advised us and the selling shareholders that they
propose initially to offer the shares to the public at the public offering price
on the cover page of this prospectus and to dealers at that price less a
concession not in excess of $ per share. The underwriters may allow,
and the dealers may reallow, a discount not in excess of $ per share to
other dealers. After the public offering, the public offering price, concession
and discount may be changed.
The following table shows the public offering price, underwriting discount
and proceeds before expenses to Adept and the selling shareholders. The
information assumes either no exercise or full exercise by the underwriters of
their over-allotment options to purchase additional shares.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price...................................... $ $ $
Underwriting discount...................................... $ $ $
Proceeds, before expenses, to Adept........................ $ $ $
Proceeds, before expenses, to the selling shareholders..... $ $ $
</TABLE>
58
<PAGE> 63
The expenses of the offering, not including the underwriting discount, are
estimated at $900,000 and are payable by Adept.
OVER-ALLOTMENT OPTION
We have granted an option to the underwriters to purchase up to 320,213
additional shares at the public offering price less the underwriting discount.
The underwriters may exercise these options for 30 days from the date of this
prospectus solely to cover any over-allotments. If the underwriters exercise
these options, each will be obligated, subject to the conditions contained in
the purchase agreement, to purchase a number of additional shares proportionate
to that underwriter's initial amount reflected in the above table.
NO SALES OF SIMILAR SECURITIES
We and the selling shareholders and our executive officers and directors,
have agreed, with exceptions, not to sell or transfer any common stock for 90
days after the date of this prospectus without first obtaining the written
consent of Merrill Lynch and Lehman Brothers. Specifically, we and these other
individuals have agreed not to directly or indirectly:
- offer, pledge, sell or contract to sell any common stock;
- sell any option or contract to purchase any common stock;
- purchase any option or contract to sell any common stock;
- grant any option, right or warrant for the sale of any common stock;
- lend or otherwise dispose of or transfer any common stock;
- request or demand that we file a registration statement related to the
common stock; or
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequences of ownership of any common stock whether
any swap or transaction is to be settled by delivery of shares or other
securities, in cash or otherwise.
This lockup provision applies to our common stock and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock. It also applies to common stock owned now or acquired later by the person
executing the agreement or for which the person executing the agreement later
acquires the power of disposition.
PRICE STABILIZATION AND SHORT POSITIONS
Until the distribution of the shares is completed, SEC rules may limit the
underwriters and selling group members from bidding for or purchasing our common
stock. However, the representatives may engage in transactions that stabilize
the price of the common stock, such as bids or purchases that peg, fix or
maintain that price.
If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover page of this prospectus, the representatives may reduce that short
position by purchasing shares in the open market. The representatives may also
elect to reduce any short position by exercising all or part of the
over-allotment option described above. Purchases of the common stock to
stabilize its price or to reduce a short position may cause the price of the
common stock to be higher than it might be in the absence of these purchases.
Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters make any representation that the representatives
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.
59
<PAGE> 64
PASSIVE MARKET MAKING
In connection with this offering, underwriters and selling group members
may engage in passive market making transactions in the common stock on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934 during a period before the commencement of
offers or sales of common stock and extending through the completion of
distribution. A passive market maker must display its bid at a price not in
excess of the highest independent bid of the security. However, if all
independent bids are lowered below the passive market maker's bid, that bid must
then be lowered when specified purchase limits are exceeded.
VALIDITY OF COMMON STOCK
Certain legal matters with respect to the legality of the issuance of the
shares of common stock offered in this offering will be passed upon for us by
Gibson, Dunn & Crutcher LLP, San Francisco, California. The validity of the
shares of common stock offered in this offering will be passed upon for the
underwriters by Sullivan & Cromwell, Palo Alto, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule at June 30, 2000 and 1999, and for each of the
three years in the period ended June 30, 2000, as set forth in their report. We
have included our financial statements and schedule in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of HexaVision Technologies Inc. at January 31, 2000 and
1999 and for the two years in the period ended January 31, 2000 as set forth in
their report. We have included the financial statements of HexaVision
Technologies Inc. in the prospectus and elsewhere in the registration statement
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We have filed with the SEC a registration statement on Form S-1, including
exhibits and schedules, in connection with the common stock to be sold in this
offering. This prospectus is part of the registration statement and does not
contain all the information included in the registration statement. For further
information about us and the common stock to be sold in this offering, please
refer to the registration statement. When a reference is made in this prospectus
to any contract, agreement or other document, the reference may not be complete
and you should refer to the copy of that contract, agreement or other document
filed as an exhibit to the registration statement or to one of our previous SEC
filings.
We also file annual, quarterly and special reports, proxy statements, and
other information with the SEC. You may read and copy the registration statement
or any other document we file with the SEC at the SEC's public reference rooms
in Washington, D.C., New York, New York and Chicago, Illinois. You can request
copies of these documents by writing to the SEC and paying a fee for the copying
cost. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's web site at http://www.sec.gov.
60
<PAGE> 65
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ADEPT TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF ADEPT TECHNOLOGY, INC.
Report of Ernst & Young, LLP, Independent Auditors.......... F-2
Consolidated Balance Sheets at June 30, 2000 and June 30,
1999...................................................... F-3
Consolidated Statements of Operations for each of the three
years in the period ended
June 30, 2000............................................. F-4
Consolidated Statements of Cash Flows for each of the three
years in the period ended
June 30, 2000............................................. F-5
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended June 30, 2000......... F-6
Notes to Consolidated Financial Statements.................. F-7
CONSOLIDATED FINANCIAL STATEMENTS OF HEXAVISION TECHNOLOGIES
INC.
Report of Ernst & Young LLP, Independent Auditors........... F-26
Consolidated Balance Sheets................................. F-27
Consolidated Statements of Loss and Deficit................. F-28
Consolidated Statements of Cash Flows....................... F-29
Notes to Consolidated Financial Statements.................. F-30
ADEPT TECHNOLOGY, INC. UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
Unaudited Pro Forma Combined Condensed Statements of
Operations................................................ F-40
Unaudited Pro Forma Combined Condensed Balance Sheet........ F-41
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements................................................ F-42
</TABLE>
F-1
<PAGE> 66
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Shareholders and Board of Directors
Adept Technology, Inc.
We have audited the accompanying consolidated balance sheets of Adept
Technology, Inc. as of June 30, 2000 and 1999, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended June 30, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Adept Technology, Inc. at June 30, 2000 and 1999, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended June 30, 2000, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
San Jose, California
August 2, 2000
F-2
<PAGE> 67
ADEPT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $13,487 $11,816
Short-term investments.................................... 6,950 15,200
Accounts receivable, less allowance for doubtful accounts
of $637 in 2000 and $716 in 1999....................... 25,527 19,707
Inventories............................................... 15,153 11,781
Deferred tax and other current assets..................... 7,049 5,601
------- -------
Total current assets.............................. 68,166 64,105
Property and equipment at cost............................ 25,675 24,822
Less accumulated depreciation and amortization............ 20,092 18,940
------- -------
Property and equipment, net............................... 5,583 5,882
Goodwill and other intangibles, net....................... 16,963 --
Other assets.............................................. 2,811 1,690
------- -------
Total assets...................................... $93,523 $71,677
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $10,841 $ 6,838
Accrued payroll and related expenses...................... 4,727 3,336
Accrued warranty.......................................... 1,915 1,408
Deferred revenue.......................................... 1,511 1,274
Taxes payable and other accrued liabilities............... 2,579 3,635
------- -------
Total current liabilities......................... $21,573 $16,491
Long-term liabilities:
Deferred income tax....................................... 1,222 --
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
5,000 shares authorized, none issued and outstanding... -- --
Common stock, no par value:
25,000 shares authorized, 10,677 shares issued and
outstanding in 2000, and 9,459 shares in 1999......... 67,184 50,215
Retained earnings......................................... 3,544 4,971
------- -------
Total shareholders' equity........................ 70,728 55,186
------- -------
Total liabilities and shareholders' equity........ $93,523 $71,677
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 68
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------
2000 1999 1998
---------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues................................................ $99,212 $87,374 $105,440
Cost of revenues............................................ 56,173 47,902 60,841
------- ------- --------
Gross margin................................................ 43,039 39,472 44,599
Operating expenses:
Research, development and engineering..................... 14,629 11,591 11,844
Selling, general and administrative....................... 29,503 24,676 26,890
Merger-related charges.................................... 988 -- --
Restructuring and other nonrecurring charges.............. -- -- 2,756
Amortization of goodwill and other intangibles............ 685 -- --
------- ------- --------
Total operating expenses.................................... 45,805 36,267 41,490
------- ------- --------
Operating (loss) income..................................... (2,766) 3,205 3,109
Interest income............................................. 1,031 967 998
Interest and other expense.................................. 285 41 27
------- ------- --------
(Loss) income before (benefit from) provision for income
taxes..................................................... (2,020) 4,131 4,080
(Benefit from) provision for income taxes................... (593) 1,620 1,819
------- ------- --------
Net (loss) income........................................... $(1,427) $ 2,511 $ 2,261
======= ======= ========
Net (loss) income per share:
Basic..................................................... $ (0.15) $ 0.27 $ 0.25
======= ======= ========
Diluted................................................... $ (0.15) $ 0.26 $ 0.23
======= ======= ========
Number of shares used in computing per share amounts:
Basic..................................................... 9,774 9,302 9,154
======= ======= ========
Diluted................................................... 9,774 9,484 9,689
======= ======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 69
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net (loss) income........................................ $ (1,427) $ 2,511 $ 2,261
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation.......................................... 3,140 3,154 2,832
Amortization.......................................... 843 79 277
Deferred taxes........................................ (834) 300 (1,844)
Gain on disposal of property and equipment............ (50) (37) (278)
Compensation expense related to employee stock
purchase plan....................................... -- -- 675
Write-off of certain assets relating to restructuring
and nonrecurring charges............................ -- -- 1,062
Tax benefit from stock plans.......................... 591 164 544
Changes in operating assets and liabilities, net of
effects of acquisitions:
Accounts receivable................................. (5,581) 1,668 (2,692)
Inventories......................................... (3,590) 3,307 (2,771)
Other current assets................................ (152) (1,106) (405)
Other assets........................................ (1,279) (404) (172)
Accounts payable.................................... 3,695 762 1,421
Accrued expenses.................................... 2,071 (710) 1,360
Accrued restructuring and nonrecurring charges...... -- (1,019) 1,019
Taxes payable and other accrued liabilities......... (1,068) 1,048 (1,247)
-------- -------- --------
Total adjustments..................................... (2,214) 7,206 (219)
-------- -------- --------
Net cash (used in) provided by operating activities... (3,641) 9,717 2,042
-------- -------- --------
Investing activities
Business acquisitions.................................... (3,250) -- --
Purchase of property and equipment....................... (2,406) (2,469) (3,100)
Proceeds from the sale of property and equipment......... 116 187 470
Sales of long-term available-for-sale investments........ -- -- 1,000
Purchase of short-term available-for-sale investments.... (44,117) (31,206) (21,003)
Sales of short-term available-for-sale investments....... 52,367 27,306 17,069
-------- -------- --------
Net cash provided by (used in) investing activities...... 2,710 (6,182) (5,564)
-------- -------- --------
Financing activities
Proceeds from employee stock incentive program and
employee stock purchase plan, net of repurchase and
cancellations......................................... 2,602 2,306 1,995
Revolving bank line of credit............................ -- (470) (109)
Repurchase of common stock............................... -- (3,194) --
-------- -------- --------
Net cash provided by (used in) financing activities...... 2,602 (1,358) 1,886
-------- -------- --------
Increase (decrease) in cash and cash equivalents........... 1,671 2,177 (1,636)
Cash and cash equivalents, beginning of period............. 11,816 9,639 11,275
-------- -------- --------
Cash and cash equivalents, end of period................... $ 13,487 $ 11,816 $ 9,639
======== ======== ========
Supplemental disclosure of noncash activities:
Inventory capitalized into property and equipment
including related tax................................. $ 228 $ 561 $ 863
Addition to capital lease obligation..................... $ -- $ -- $ 13
Cash paid during the period for:
Interest................................................. $ -- $ 41 $ 54
Taxes paid (refunded).................................... $ 1,373 $ (189) $ 3,894
</TABLE>
See accompanying notes.
F-5
<PAGE> 70
ADEPT TECHNOLOGY, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------- -------- -------------
<S> <C> <C> <C> <C>
Balance at June 30, 1997.......................... 8,960 $46,951 $ 1,163 $48,114
Common stock issued under employee stock
incentive program and employee stock purchase
plan......................................... 458 1,995 -- 1,995
Table benefit from stock plans.................. -- 544 -- 544
Compensation charge............................. -- 675 -- 675
Acquisition of RoboElektronik GmbH.............. 25 114 (304) (190)
Net income...................................... -- -- 2,261 2,261
------ ------- ------- -------
Balance at June 30, 1998.......................... 9,443 50,279 3,120 53,399
Common stock issued under employee stock
incentive program and employee stock purchase
plan......................................... 466 2,306 -- 2,306
Repurchase of shares............................ (450) (2,534) (660) (3,194)
Tax benefit from stock plans.................... -- 164 -- 164
Net income...................................... -- -- 2,511 2,511
------ ------- ------- -------
Balance at June 30, 1999.......................... 9,459 50,215 4,971 55,186
Common stock issued under employee stock
incentive program and employee stock purchase
plan......................................... 518 2,602 -- 2,602
Tax benefit from stock plans.................... -- 591 -- 591
Common stock issued for acquisitions............ 700 13,776 -- 13,776
Net loss........................................ -- -- (1,427) (1,427)
------ ------- ------- -------
Balance at June 30, 2000.......................... 10,677 $67,184 $ 3,544 $70,728
====== ======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 71
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Adept Technology, Inc. ("Adept" or the "Company") was incorporated under
the laws of the state of California on June 14, 1983. The Company designs,
manufactures and sells factory automation components and systems for the fiber
optic, wireless communications and semiconductor industries throughout the
world.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Adept Technology GmbH (formerly
known as RoboElektronik GmbH, "RoboElektronik"), acquired by the Company on
February 13, 1998 (see Note 2), and SILMA Incorporated ("SILMA"), acquired by
the Company on June 28, 1995. All material intercompany accounts and
transactions have been eliminated.
As more fully described in Note 2, the Company merged with BYE/OASIS in
July 1999 in a pooling of interests transaction. The Company's consolidated
financial statements for prior periods have been restated to include the
financial position, results of operations and cash flows of BYE/OASIS. On April
28, 2000 and on May 31, 2000, respectively, the Company completed the
acquisitions of Pensar-Tucson, Inc. and NanoMotion Incorporated. Both
acquisitions were accounted for under the purchase method of accounting. The
financial results of these two companies are included in the financial results
of Adept subsequent to the acquisition date.
The notes to the Company's consolidated financial statements are for the
three year period ended June 30, 2000. Unless otherwise indicated, references to
any year in these Notes to Consolidated Financial Statements refer to the
Company's fiscal year ended June 30.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
The Company applies Financial Accounting Standards Board Statement No. 52
("SFAS 52"), "Foreign Currency Translation," with respect to its international
operations, which are sales and service entities. All monetary assets and
liabilities are remeasured at the current exchange rate at the end of the
period, nonmonetary assets and liabilities are remeasured at historical exchange
rates, and revenues and expenses are remeasured at average exchange rates in
effect during the period. Translation losses resulting from the process of
remeasuring foreign currency financial statements into U.S. dollars were
$394,000 in 2000, $87,000 in 1999 and $376,000 in 1998. Transaction losses were
$17,000 in 2000 and $52,000 in 1999. Transaction gains were $6,000 in 1998.
Cash, Cash Equivalents and Short-term Investments
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Short-term
investments in marketable securities consist principally
F-7
<PAGE> 72
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of debt instruments with maturities between three and 12 months. Investments are
classified as held-to-maturity, trading, or available-for-sale at the time of
purchase.
At June 30, 2000 and 1999, all of the Company's investments in marketable
securities were classified as available-for-sale and were carried at fair market
value, which approximated cost. Fair market value is based on quoted market
prices on the last day of the year. The cost of the securities is based upon the
specific identification method.
<TABLE>
<CAPTION>
JUNE 30,
------------------
2000 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents
Cash................................................... $ 9,096 $ 2,209
Money market funds..................................... 1,166 1,653
Commercial paper....................................... -- 2,554
Municipal notes and bonds.............................. 3,225 5,400
------- -------
Cash and cash equivalents................................ $13,487 $11,816
======= =======
Short-term investments
Auction rate securities................................ $ 3,500 $ 9,400
Market auction preferred stock......................... 3,450 5,800
------- -------
Short-term investments................................... $ 6,950 $15,200
======= =======
</TABLE>
Realized gains or losses, interest, and dividends are included in interest
income. Realized and unrealized gains or losses from available-for-sale
securities were not material in 2000, 1999 or 1998.
Comprehensive Income
For the three years in the period ended June 30, 2000, there were no
significant differences between the Company's comprehensive (loss) income and
its net (loss) income.
Loans to Employees
Loans to employees are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
----------------
2000 1999
------ ------
(IN THOUSANDS)
<S> <C> <C>
Short-term loans to employees.............................. $ 856 $ 904
Long-term loans to employees............................... 617 342
------ ------
$1,473 $1,246
====== ======
</TABLE>
Short-term loans to employees are included in other current assets.
Long-term loans to employees are included in other assets.
F-8
<PAGE> 73
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are stated at the lower of standard cost, which approximates
actual (first-in, first-out method) or market (estimated net realizable value).
The components of inventories are as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------
2000 1999
------- -------
<S> <C> <C>
Raw materials............................................ $ 6,097 $ 5,617
Work-in-process.......................................... 3,036 2,059
Finished goods........................................... 6,020 4,105
------- -------
$15,153 $11,781
======= =======
</TABLE>
Property and Equipment
Property and equipment are recorded at cost.
The components of property and equipment are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------
2000 1999
------- -------
<S> <C> <C>
Cost:
Machinery and equipment................................ $13,303 $13,558
Computer equipment..................................... 8,975 8,153
Office furniture and equipment......................... 3,397 3,111
------- -------
25,675 24,822
Accumulated depreciation and amortization................ 20,092 18,940
------- -------
Net property and equipment............................... $ 5,583 $ 5,882
======= =======
</TABLE>
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from three to five years.
Revenue Recognition
The Company generally recognizes revenue on products at the time of
shipment. For certain international sales where title and risk of loss are
transferred at the customer's site, revenue is recognized upon receipt of
product by the customer. A provision for the estimated cost to repair or replace
products under warranty at the time of sale are recorded in the same period as
the related revenues.
The Company recognizes software revenue, primarily related to its
simulation software products, in accordance with the American Institute of
Certified Public Accountants' Statement of Position 97-2 ("SOP 97-2") on
Software Revenue Recognition. License revenue is recognized on shipment of the
product provided that no significant vendor or post-contract support obligations
remain and that collection of the resulting receivable is deemed probable by
management. Insignificant vendor and post-contract support obligations are
accrued upon shipment. Service revenue includes training, consulting and
customer support. Revenues from training and consulting are recognized at the
time the service is performed.
Deferred revenue primarily relates to software support contracts sold. The
term of the software support contract is generally one year, and the Company
recognizes the associated revenue on a pro rata basis over the life of the
contract.
F-9
<PAGE> 74
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents, auction
rate securities and trade receivables. The Company places its cash equivalents
and short-term investments with high credit-quality financial institutions. The
Company invests its excess cash in commercial paper, readily marketable debt
instruments and collateralized funds of U.S., state and municipal government
entities. Adept has established guidelines relative to credit ratings,
diversification and maturities that seek to maintain safety and liquidity.
The Company manufactures and sells its products to system integrators, end
users and OEMs in diversified industries. The Company performs ongoing credit
evaluations of its customers and does not require collateral. However, the
Company may require customers to make payments in advance of shipment or to
provide a letter of credit. The Company provides reserves for potential credit
losses, and such losses have been within management's expectations.
Amounts charged to bad debt expense were $516,000, $389,000 and $346,000 in
2000, 1999 and 1998, respectively.
Research, Development and Engineering Costs
Research, development and engineering costs, other than purchased computer
software, are charged to expense when incurred. The Company has received third
party funding of $309,000 in 2000, $681,000 in 1999, and $629,000 in 1998. The
Company has offset research, development and engineering expenses by the third
party funding as the Company retains the rights to any technology that is
developed.
Goodwill and Other Intangible Assets
The excess of the purchase price over the fair value of identifiable net
assets of acquired companies is allocated to goodwill and amortized over three
to four years. Other intangible assets primarily represent developed technology
and assembled workforce. Goodwill and other intangible assets totaled $16.9
million and $0 at June 30, 2000 and June 30, 1999, respectively, and is
presented net of accumulated amortization of $0.7 million and $0 at June 30,
2000 and June 30, 1999. The recoverability of goodwill and other intangible
assets has been evaluated to determine whether current events or circumstances
warrant adjustments to the carrying value. Management believes that no
significant impairment of goodwill and other intangible assets was indicated.
Software Development Costs
The Company capitalizes software development costs incurred subsequent to
the time the product reaches technical feasibility. All capitalized
internally-developed software costs and purchased software costs are amortized
to the cost of revenues on a straight-line basis based on the estimated useful
lives of the products or the ratio of current revenue to the total of current
and anticipated future revenue, whichever is greater. Capitalized
internally-developed software and purchased software are stated at the lower of
amortized cost or net realizable value.
There are no unamortized software development and purchased software costs
at June 30, 2000 or 1999. In 1998, $359,000 of purchased software costs were
written off and included in the nonrecurring charges. Software amortization was
$180,000 in 1998. There were no software amortization costs for 2000 and 1999.
See "Restructuring and Other Nonrecurring Charges."
F-10
<PAGE> 75
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Advertising Costs
Advertising costs are expensed in the period incurred. Advertising costs
were $224,000 in 2000, $143,000 in 1999, and $212,000 in 1998. The Company does
not incur any direct response advertising costs.
Income Taxes
The liability method is used to account for income taxes. Deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Stock-Based Compensation
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation", which provides an alternative to APB Opinion No. 25 ("Opinion
25"), "Accounting for Stock Issued to Employees", in accounting for stock issued
to employees. The Company has elected to account for stock-based compensation to
employees in accordance with Opinion 25, providing only pro forma disclosure
required by SFAS 123.
Net Income (Loss) Per Share
SFAS No. 128, "Earnings Per Share" ("EPS"), requires the presentation of
basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing
net income (loss) available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then participates in the earnings of the Company.
Dilutive common equivalent shares consist of stock options calculated using the
treasury stock method.
Merger-Related Charges
In July 1999, the Company incurred charges of $988,000 relating to the
acquisition of BYE/OASIS and the closure of BYE/OASIS facilities in Texas.
Merger-related expenses were $558,000, expenses relating to the closure of
facilities in Texas were $195,000, and other expenses relating to the
acquisition were $235,000.
Restructuring and Other Nonrecurring Charges
During 1998, the Company recorded restructuring charges of approximately
$1.0 million and other nonrecurring charges of approximately $1.7 million. The
restructuring charges of $1.0 million included $651,000 for relinquishing
control of the Company's Japan branch, which resulted in the write-off of
certain assets and excess facilities. The remaining $362,000 relates to
severance for the termination of certain employees.
The nonrecurring charges of approximately $1.7 million included $675,000
for compensation expenses related to the Company's employee 1998 stock purchase
plan (see Note 5) and $383,000 related to the write-off of certain information
system hardware and software which had become obsolete as a result of decisions
related to the Company's information system implementation and upgrade made in
the fourth quarter of 1998. Additionally $413,000 related to the write-off of
the remaining balance of capitalized purchased software associated with the
acquisition of SILMA. Due to technological changes in 1998
F-11
<PAGE> 76
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
related to the SILMA operating platform, the Company determined that the net
realizable value of the purchased software was impaired.
The following table summarizes the Company's restructuring and other
nonrecurring charges and accrual activity for the years ended June 30, 2000,
1999 and 1998:
<TABLE>
<CAPTION>
SEVERANCE INTANGIBLE AND
AND JAPAN FIXED ASSETS AND
BENEFITS OPERATIONS OTHER CHARGES TOTAL
--------- ---------- ---------------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Restructuring charges in 1998............ $ 362 $ 651 $-- $1,013
Non-cash charges in 1998................. -- (266) -- (266)
----- ----- -- ------
Amounts included in accrued liabilities
as of June 30, 1998.................... 362 385 -- 747
===== ===== == ======
Cash paid during 1999.................... (362) (385) -- (747)
----- ----- -- ------
Amounts included in accrued liabilities
as of June 30, 1999 and June 30,
2000................................... $ -- $ -- $-- $ --
===== ===== == ======
</TABLE>
Nonrecurring Charges
<TABLE>
<CAPTION>
INTANGIBLE AND
COMPENSATION FIXED ASSETS AND
EXPENSE OTHER CHARGES TOTAL
------------ ---------------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Nonrecurring charges in 1998.................. $ 675 $1,068 $ 1,743
Non-cash charges in 1998...................... (675) (796) (1,471)
----- ------ -------
Accrued liabilities as of June 30, 1998....... -- 272 272
----- ------ -------
Cash paid or non-cash charges during 1999..... -- (272) (272)
----- ------ -------
Accrued liabilities as of June 30, 1999 and
June 30, 2000............................... $ -- $ -- $ --
===== ====== =======
</TABLE>
New Accounting Pronouncements
Staff Accounting Bulletin No. 101 -- Revenue Recognition
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" or SAB 101. SAB 101 provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements. In recent actions, the SEC has further delayed the required
implementation date which, for the Company, will be the fourth quarter of fiscal
2001, retroactive to the beginning of the fiscal year. The Company is still in
the process of assessing the impact of SAB 101 on its consolidated results of
operations, financial position, and cash flows based upon the most current
information.
Statement of Financial Accounting Standards No. 133 -- Accounting for
Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133, as amended by SFAS No. 137 and
138, establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. The Company will be required to implement SFAS No. 133 as of the
beginning of its fiscal year 2001. The
F-12
<PAGE> 77
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's foreign currency exchange rate hedging activities have been
insignificant to date and the Company does not believe that SFAS No. 133 will
have a material impact on its financial position, results of operations or cash
flows.
Reclassification
Certain amounts presented in the financial statements of prior years have
been reclassified to conform to the current presentation for 2000.
2. MERGERS AND ACQUISITIONS
During the three-year period ended June 30, 2000, Adept acquired four
companies, as described below. Adept's acquisitions of NanoMotion and Pensar
completed during 2000 have been accounted for as purchases, with the excess of
the purchase price over the estimated fair value of the net assets acquired
recorded as goodwill. The Company's mergers with BYE/OASIS in 1999 and
RoboElektronik in 1998 have been accounted for as a pooling of interests.
NanoMotion
On May 31, 2000, the Company completed the acquisition of NanoMotion
Incorporated, a California corporation. NanoMotion is a manufacturer of
ultra-high precision positioning and alignment devices for nanometer-scale
movement, positioning and alignment for the fiber optic, semiconductor and
metrology, or precision machining, markets. In connection with the acquisition,
the Company issued 600,000 shares of its common stock valued at $21 per share to
the shareholders of NanoMotion which was the fair market value of Adept's common
stock at May 31, 2000 and cash of $250,000. The financial results of NanoMotion
have been included in Adept's financial results since May 31, 2000.
Pensar
On April 28, 2000, the Company completed the acquisition of Pensar-Tucson,
Inc., an Arizona corporation. Pensar is a design and engineering company which
integrates factory automation systems. In connection with the acquisition, the
Company issued 100,000 shares of its common stock valued at $11.75 per share to
the shareholders of Pensar, which was the fair market value of Adept's common
stock at April 28, 2000. In addition, the Company paid $3,000,000 in cash. The
financial results of Pensar have been included in Adept's financial results
since April 28, 2000.
The purchase price of NanoMotion and Pensar was allocated, based on an
independent valuation, to goodwill and other intangible assets. Goodwill
represents the excess of the purchase price of the net tangible and intangible
assets acquired over their estimated fair value. Other intangible assets
primarily represent developed technology and assembled workforce.
F-13
<PAGE> 78
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For the NanoMotion and Pensar acquisitions below is a table of the
acquisition cost, purchase price allocation and annual amortization of the
intangible assets acquired, in thousands:
<TABLE>
<CAPTION>
ANNUAL
ACQUISITION AMORTIZATION AMORTIZATION
COST LIFE OF INTANGIBLES
----------- ------------ --------------
<S> <C> <C> <C>
Common stock.................................... $13,776
Cash............................................ 3,250
Transaction costs............................... 83
-------
Total acquisition cost..................... $17,109
=======
Purchase Price Allocation
Net tangible assets........................... $ 230
Developed and core technology................. 1,120 4 years $ 280
Non-compete covenant.......................... 380 4 years 95
Assembled workforce........................... 480 3-4 years 131
Goodwill...................................... 15,658 3-4 years 4,474
Deferred tax liability........................ (759)
------- ------
Total...................................... $17,109 $4,980
======= ======
</TABLE>
BYE/OASIS
On July 14, 1999, the Company completed the acquisition of BYE/OASIS
Engineering, Inc., a Texas corporation. BYE/OASIS is a leading manufacturer of
environmental filtering and control systems and wafer cassette handling devices
for the microelectronics industry. In connection with the acquisition, the
Company issued 720,008 shares of its common stock to the shareholders of
BYE/OASIS. In addition, the Company assumed outstanding options to acquire
BYE/OASIS shares, which were converted into options to acquire 185,361 shares of
Adept's common stock. The acquisition was intended to constitute a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986. The
acquisition was accounted for using the pooling of interests method and
accordingly all prior period consolidated financial statements have been
restated to include the combined results of operations, financial position and
cash flows of BYE/OASIS.
Prior to the merger, BYE/OASIS's fiscal year ended on September 30.
BYE/OASIS's prior period financial statements have been restated to conform to
Adept's year-end.
The following information presents certain income statement data of the
separate companies for the periods preceding the merger:
<TABLE>
<CAPTION>
1999 1998
------- --------
<S> <C> <C>
Net sales
Adept................................................. $82,027 $ 98,394
BYE/OASIS............................................. 5,347 7,046
------- --------
Total sales........................................ $87,374 $105,440
======= ========
Net sales
Adept................................................. $ 2,622 $ 2,551
BYE/OASIS............................................. (111) (290)
------- --------
Total net income (loss)............................ $ 2,511 $ 2,261
======= ========
</TABLE>
F-14
<PAGE> 79
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue generated for the period from July 1, 1999 through July 16, 1999
(date of acquisition) was not significant.
RoboElektronik
On February 13, 1998, the Company acquired RoboElektronik GmbH
("RoboElektronik") through the issuance of 24,252 shares of the Company's common
stock, which were exchanged for all of the outstanding capital stock of
RoboElektronik. The acquisition was accounted for as a pooling of interests.
RoboElektronik GmbH was renamed Adept Technology, GmbH on June 26, 1998. The
results of operations of RoboElektronik have been consolidated with Adept's
financial statements since the acquisition.
3. DERIVATIVE FINANCIAL INSTRUMENTS
From time to time, the Company may enter into forward foreign exchange
contracts primarily to hedge against the short-term impact of foreign currency
fluctuations of purchase commitments denominated in yen. The maturities of the
forward exchange contracts are short-term in nature, generally 90 days. Because
the impact of movements in currency exchange rates on forward foreign exchange
contracts offsets the related impact on the underlying items being hedged, these
financial instruments do not subject the Company to speculative risk that would
otherwise result from changes in currency exchange rates. Realized and
unrealized gains and losses on instruments that hedge firm commitments are
deferred and included in the measurement of the subsequent transaction; however,
losses are deferred only to the extent of expected gains on the future
commitment at June 30, 2000. The Company has deferred recognition of transaction
gains of $76,000, relating to foreign exchange contracts treated as accounting
hedges. The Company expects to realize these transaction gains in the first
quarter of 2001.
4. COMMITMENTS AND CONTINGENCIES
Commitments
The Company's lease on its major facility will expire in December 2003.
Future minimum lease payments under non-cancelable operating leases are as
follows:
<TABLE>
<CAPTION>
LEASES
--------------
(IN THOUSANDS)
<S> <C>
Fiscal Year
2001................................................. $ 3,386
2002................................................. 3,387
2003................................................. 3,283
2004................................................. 1,809
2005................................................. 85
Later years.......................................... 14
-------
Total minimum lease payments........................... $11,964
=======
</TABLE>
Rent expense net of sublease income of $18,480, $312,000 and $0 was
$3,019,000 in 2000, $2,507,000 in 1999 and $2,024,000 in 1998.
Contingencies
Some end users of the Company's products have notified the Company that
they have received a claim of patent infringement from the Jerome H. Lemelson
Foundation, alleging that their use of the Company's machine vision products
infringes certain patents issued to Mr. Lemelson. In addition, the
F-15
<PAGE> 80
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company has been notified that other end users of the Company's AdeptVision VME
line and the predecessor line of Multibus machine vision products have received
letters from Mr. Lemelson which refer to Mr. Lemelson's patent portfolio and
offer the end user a license to the particular patents. Certain end users have
notified the Company that they may seek indemnification from the Company for
damages or expenses resulting from this matter. The Company cannot predict the
outcome of this or any similar litigation, which may arise in the future.
However, the Company believes the ultimate resolution of these matters will not
have a material adverse effect on its financial position, results of operations
or cash flows.
The Company has from time to time received communications from third
parties asserting that the Company is infringing certain patents and other
intellectual property rights of others, or seeking indemnification against
alleged infringement. While it is not feasible to predict or determine the
outcome of the actions brought against it, the Company believes the ultimate
resolution of these matters will not have a material adverse effect on its
financial position, results of operations or cash flows.
5. SHAREHOLDERS' EQUITY
Preferred Stock
The Board of Directors has the authority to issue, without further action
by the shareholders, up to 5,000,000 shares of preferred stock in one or more
series and to fix the price, rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting a series or the designation of such series,
without any further vote or action by the Company's shareholders. The issuance
of preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the shareholders and may adversely affect the market price of,
and the voting and other rights of, the holders of common stock.
Stock Option Plans
The Company's 1983 Employee Stock Incentive Program (the "1983 Plan") was
adopted by the Board of Directors in August 1983. The 1983 Plan provided for the
grant of incentive stock options to employees (including officers and employee
directors) and nonstatutory stock options to employees (including officers and
employee directors) and consultants of the Company. In general, options and
common stock purchased pursuant to stock purchase rights granted under the 1983
Plan vest and become exercisable starting one year after the date of grant, with
25% of the shares subject to the option exercisable at that time and an
additional 1/48th of the shares subject to the option becoming exercisable each
month thereafter. Upon the voluntary or involuntary termination of employment
(including as a result of death or disability) by a holder of unvested shares of
the Company's common stock purchased pursuant to stock purchase rights granted
under the 1983 Plan, the Company may exercise an option to repurchase such
shares at their original issue price. The Board of Directors determines the
exercise price which must be at least equal to the fair market value of shares
on the date of grant. The 1983 Plan expired according to its terms in August
1993. Currently outstanding options under the 1983 Plan and common stock
purchased pursuant to stock purchase rights granted under the 1983 Plan continue
to be governed by the terms of the 1983 Plan and the respective option and stock
purchase and stock restriction agreements between the Company and the holders
thereof.
The Company's 1993 Stock Plan (the "1993 Plan") was adopted by the Board of
Directors in April 1993 and approved by the shareholders of the Company in June
1993. The 1993 Plan provides for grants of incentive stock options to employees
(including officers and employee directors) and nonstatutory stock options to
employees (including officers and employee directors) and consultants of the
Company. The terms of the 1993 Plan are similar to the 1983 Plan, and the terms
of the options granted under the
F-16
<PAGE> 81
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1993 Plan generally may not exceed ten years. The Board of Directors determines
the exercise price of the options which must be at least equal to the fair
market value of the common stock on the date of grant.
On August 12, 1999, the Board of Directors authorized the issuance of
1,000,000 additional shares to the 1993 Plan. In August 2000, the 1993 Plan was
amended by the Board of Directors, subject to shareholder approval, to increase
the number of shares authorized for issuance under the 1993 Plan by an
additional 1,000,000 shares.
The Company's 1995 Director Option Plan (the "Director Plan") was adopted
by the Board of Directors and approved by the shareholders of the Company in
October 1995. The option grants under the Director Plan are automatic and
nondiscretionary, and the exercise price of the options is at the fair market
value of the Company's common stock on the date of grant. A total of 150,000
shares of common stock has been reserved for issuance under the Director Plan.
During the year ended June 30, 2000 and 1999, 99,000 and 87,000 options,
respectively, were granted and no options were exercised.
The options may be exercised at the time or times determined by the Board
of Directors.
In August 1998, the Company offered all employees holding options the
opportunity to exchange their outstanding options for options with exercise
prices equal to the then fair market value of the company's common stock. Under
the August 1998 offer, options to purchase 367,827 shares with exercise prices
exceeding $7.00 per share were exchanged for similar options exercisable at
$7.00 per share. The vesting schedule of all exchanged options was delayed by 12
months and the expiration date of the exchanged options will be August 2008. The
effect of the exchange has been included in the table in 1999 activity for
options granted and canceled.
The following table summarizes option activities under the Company's stock
option plans:
<TABLE>
<CAPTION>
OPTIONS
-----------------------------------------------
WEIGHTED
AVERAGE
AVAILABLE NO OF SHARES AGGREGATE EXERCISE
FOR GRANT OUTSTANDING PRICE PRICE
--------- ------------ --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Balance at June 30, 1997....................... 443 1,096 $ 6,378 $ 5.82
Additional shares authorized................. 1,000 -- -- --
Granted...................................... (413) 413 4,908 11.87
Canceled..................................... 47 (47) (484) 10.27
Shares Expired............................... (1) -- -- --
Exercised.................................... -- (270) (706) 2.61
----- ----- -------
Balance at June 30, 1998....................... 1,076 1,192 10,096 8.47
Granted...................................... (913) 913 5,757 6.31
Canceled..................................... 451 (451) (5,156) 11.43
Exercised.................................... -- (250) (1,199) 4.80
----- ----- -------
Balance at June 30, 1999....................... 614 1,404 9,498 6.76
Additional shares authorized................. 1,000 -- -- --
Granted...................................... (845) 845 5,765 6.83
Canceled..................................... 197 (197) (1,268) 6.45
Exercised.................................... -- (308) (1,518) 4.92
----- ----- -------
Balance at June 30, 2000....................... 966 1,744 $12,477 $ 7.15
===== ===== =======
</TABLE>
F-17
<PAGE> 82
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information concerning outstanding and
exercisable options at June 30, 2000. Approximately 540,000 stock options were
exercisable at June 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
--------------- ----------- ----------- -------- ----------- --------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$0.16 - $ 5.56 396 8.48 $ 4.01 122 $2.66
$5.56 - $ 6.50 441 7.18 $ 6.20 288 $6.34
$6.63 - $ 6.63 104 8.15 $ 6.63 46 $6.63
$7.00 - $ 7.00 368 8.30 $ 7.00 133 $7.00
$7.03 - $24.00 435 8.65 $11.24 128 $9.98
----- ---- ------ --- -----
$0.16 - $24.00 1,744 8.14 $ 7.15 717 $6.50
===== ==== ====== === =====
</TABLE>
Employee Stock Purchase Plan
The 1998 Employee Stock Purchase Plan (the "1998 ESPP") has overlapping
12-month offering periods that begin every six months, starting on the first
trading day on or after May 1 and November 1 of each year. Each 12-month
offering period is divided into two six-month purchase periods. The plan allows
eligible employees, through payroll deductions, to purchase shares of the
Company's common stock at 85% of fair market value on either the first day of
the offering period or the last day of the purchase period, whichever is lower.
The plan includes a provision for an annual automatic increase in the number of
shares reserved for issuance by the lesser of (i) 300,000, (ii) 3% of common
stock outstanding on the last day of the prior fiscal year, or (iii) a lesser
amount as may be determined by the Board of Directors.
In May 2000, the Board approved an amendment to the 1998 ESPP for 24-month
offering periods including four six-month purchase periods, effective May 1,
2001 and, subject to shareholder approval, approved an amendment to the 1998
ESPP to provide for an annual automatic increase in the number of shares
reserved for issuance by the lesser of (i) 600,000, (ii) 3% of common stock
outstanding on the last day of the prior fiscal year, or (iii) a lesser amount
as may be determined by the Board of Directors.
As of June 30, 2000, 300,000 shares of the Company's common stock were
issued under the 1998 ESPP and 562,000 shares remain unissued under the 1998
ESPP.
Repurchase of Company's Stock
In August 1998, the Board of Directors authorized the Company to repurchase
up to 450,000 shares of the Company's common stock on the open market or in
privately negotiated transactions at prices not to exceed $8.50 per share and a
total purchase price not to exceed $3,825,000. During 1999, the Company
repurchased 450,000 shares at an average purchase price of $7.10 per share.
There were no repurchases of the Company's stock during 2000.
Stock Based Compensation
At June 30, 2000, the Company had three stock-based compensation plans as
described above. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its compensation plans. Accordingly, no
compensation cost has been recognized for its fixed stock option plans and its
ESPP. If compensation cost for the Company's stock-based compensation plans had
been determined consistent with Statement of Financial Accounting Standards No.
123 ("SFAS 123"), the Company's net
F-18
<PAGE> 83
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income (loss) and net income (loss) per share would have been adjusted to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------
2000 1999 1998
------- ------ ------
<S> <C> <C> <C>
Net (loss) income
As reported................................... $(1,427) $2,511 $2,261
Pro forma..................................... $(5,532) $ 190 $ 289
Basic net (loss) income per share
As reported................................... $ (.15) $ .27 $ .25
Pro forma..................................... $ (.57) $ .02 $ .03
Diluted net (loss) income per share
As reported................................... $ (.15) $ .26 $ .23
Pro forma..................................... $ (.57) $ .02 $ .03
</TABLE>
Because the method of accounting prescribed by SFAS 123 has not been
applied to options granted prior to July 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions for grants during the years ended June 30, 2000, 1999 and 1998:
risk-free interest rates of 6.04% for 2000, 4.84% for 1999, and 5.77% for 1998;
a dividend yield of 0% for all three years; a weighted-average expected life of
3.1 years for 2000, 3.5 years for 1999 and 3.4 years for 1998; and a volatility
factor of the expected market price of the Company's common stock of 1.02 for
2000, .99 for 1999 and .65 for 1998. The weighted average grant date fair value
of options was $6.65 for options granted in 2000, $3.83 in 1999 and $5.86 in
1998.
Compensation cost is estimated for the fair value of the employees'
purchase rights using the Black-Scholes model with the following assumptions for
rights granted in 2000, 1999 and 1998: a dividend yield of 0% for all three
years; expected life of 6 months for all three years; expected volatility of
1.02 for 2000, .99 for 1999 and .65 for 1998; and a risk-free interest rate of
5.81% for 2000, 4.78% for 1999 and 5.59% for 1998. The weighted average fair
market value of the purchase rights granted was $3.35 for rights granted in
2000, $3.11 for 1999 and $2.90 for 1998.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
6. EMPLOYEE SAVINGS AND INVESTMENT PLAN
In May 1988, the Company adopted a 401(k) savings and investment plan in
which employees are eligible to participate. During 1999, the Company's matching
contributions were suspended for part of the year to reduce costs. The Company's
matching contributions were $274,000 in 2000, $125,000 in 1999 and $252,000 in
1998.
F-19
<PAGE> 84
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The (benefit from) provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
2000 1999 1998
----- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................ $ 161 $ 285 $ 2,970
State.......................................... (86) 184 363
Foreign........................................ 166 851 330
Total current.................................... 241 1,320 3,663
Deferred:
Federal........................................ (515) 389 (1,580)
State.......................................... (319) (89) (264)
Total deferred................................... (834) 300 (1,844)
----- ------ -------
(Benefit from) provision for income taxes........ $(593) $1,620 $ 1,819
===== ====== =======
</TABLE>
The difference between the (benefit from) provision for income taxes and
the amount computed by applying the federal statutory income tax rate to (loss)
income before (benefit from) provision for income taxes is explained below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
2000 1999 1998
----- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax at federal statutory rate..................... $(687) $1,404 $1,387
State taxes, net of federal benefit............... (33) 63 33
Foreign taxes..................................... 441 562 218
Tax credits....................................... (791) (350) (180)
Merger and acquisition related expenses........... 255 -- --
Non-deductible meals, entertainment and exchange
losses.......................................... 125 81 185
Other............................................. 97 (140) 176
----- ------ ------
(Benefit from) provision for income taxes......... $(593) $1,620 $1,819
===== ====== ======
</TABLE>
F-20
<PAGE> 85
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
JUNE 30,
-----------------
2000 1999
------- ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 367 $ 459
Tax credit carryforwards................................ 1,626 553
Inventory valuation accounts............................ 1,238 1,146
Warranty reserves....................................... 734 785
Other accruals and reserves not currently deductible for
tax purposes......................................... 2,880 2,239
Other................................................... 237 202
------- ------
Total deferred tax assets............................... 7,082 5,384
Valuation allowance..................................... (888) (836)
------- ------
Net deferred tax assets................................. 6,194 4,548
------- ------
Deferred tax liabilities:
Purchased intangibles................................... (759) --
Foreign earnings........................................ (463) (410)
------- ------
Net deferred tax liabilities............................ (1,222) (410)
------- ------
Total net deferred tax assets............................. $ 4,972 $4,138
======= ======
</TABLE>
The change in the valuation allowance was a net increase of approximately
$52,000 for 2000 and a net decrease of approximately $91,000 for 1999.
At June 30, 2000, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $1.0 million which will begin to
expire in 2001 if unused. The Company also had credit carryforwards of
approximately $1.6 million which will begin to expire in 2000 if unused.
Utilization of the net operating loss carryforwards and a portion of the tax
credit carryforwards is limited to approximately $300,000 per year.
For financial reporting purposes, a valuation allowance of $888,000 has
been established primarily to offset the deferred tax assets related to certain
tax credits and net operating loss carryforwards.
Pretax income (losses) from foreign operations was approximately $267,000
in 2000, $1.5 million in 1999, and ($605,000) in 1998.
F-21
<PAGE> 86
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. NET INCOME (LOSS) PER SHARE
Net (loss) income per share is calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
2000 1999 1998
------- ------ ------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net (loss) income............................... $(1,427) $2,511 $2,261
======= ====== ======
Basic:
Weighted-average shares outstanding........... 9,774 9,302 9,154
======= ====== ======
Net (loss) income per share................... $ (0.15) $ 0.27 $ 0.25
======= ====== ======
Diluted:
Weighted-average shares outstanding........... 9,774 9,302 9,154
Effect of dilutive securities:
Stock options.............................. -- 182 535
------- ------ ------
Weighted-average shares outstanding........... 9,774 9,484 9,689
======= ====== ======
Net (loss) income per share................... $ (0.15) $ 0.26 $ 0.23
======= ====== ======
</TABLE>
Stock options to purchase 160,480 and 463,054 shares of common stock were
outstanding during the years ended June 30, 1999 and 1998, respectively, but
were not included in the calculations of diluted EPS because the option's
exercise price was greater than the average market price of the Company's common
stock during those years. If the Company had reported net income for the year
ended June 30, 2000, the calculation of diluted net income per share would have
included approximately 1,658,000 additional common equivalent shares relating to
outstanding employee stock options not included above (determined using the
treasury stock method).
9. SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards No. 131
(SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information," in 1999. SFAS 131 establishes standards for reporting information
about operating segments and related disclosures about products, geographic
information and major customers. The Company has three reportable business
segments, the Assembly and Material Handling ("AMH") operations segment, the
Semiconductor operations segment and the SILMA Software operations segment. The
AMH operations segment provides intelligent automation software and hardware
products for assembly, material handling and packaging applications.
The Semiconductor operations segment provides semiconductor contamination
control products, such as, standard and customized products for contamination
control (mini and micro environments), wafer integration and front-end wafer
handling and transport solutions for semiconductor OEMs. In addition, the
segment provides end users guidance and inspection vision products and robots to
end users.
The SILMA Software ("SILMA") operations segment provides 3-D graphical
simulation tools for assembly process design, simulation and analysis.
The reportable segments are each managed separately because they
manufacture and distribute distinct products with different production
processes.
The Company evaluates performance and allocates resources based on segment
revenues and segment operating income (loss). Segment operating income (loss)
comprises income before unallocated research
F-22
<PAGE> 87
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and development expenses, unallocated selling, general and administrative
expenses, amortization of intangibles, interest income, interest and other
expenses and income taxes.
Management does not fully allocate research and development expenses and
selling, general and administrative expenses when making capital spending
decisions, expense funding decisions or assessing segment performance. There
were no intersegment sales or transfers between segments.
Segment information for total assets and capital expenditures is not
presented as such information is not used in measuring segment performance or
allocating resources among segments.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
Assembly and Material Handling
operations............................ $ 81,454 $ 74,858 $ 94,308
Semiconductor operations................. 12,438 5,347 7,046
SILMA Software operations................ 5,320 7,169 4,086
-------- -------- --------
Total revenue......................... $ 99,212 $ 87,374 $105,440
======== ======== ========
Operating (loss) income:
Assembly and Material Handling
operations............................ $ 19,378 $ 18,803 $ 24,962
Semiconductor operations................. 1,674 (207) (145)
SILMA Software operations................ (548) 2,372 (501)
-------- -------- --------
Segment profit (loss).................... 20,504 20,968 24,316
Unallocated research, development and
engineering and selling, general and
administrative........................ (23,270) (17,763) (21,207)
Interest income.......................... 1,031 967 998
Interest expense......................... (285) (41) (27)
-------- -------- --------
(Loss) income before provision for
(benefit from) income taxes........... $ (2,020) $ 4,131 $ 4,080
======== ======== ========
</TABLE>
F-23
<PAGE> 88
ADEPT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Management also assesses the Company's performance, operations and assets
by geographic areas, and therefore revenue and long-lived assets are summarized
in the following table:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
2000 1999 1998
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
United States.............................. $54,320 $46,119 $ 65,630
Germany.................................... 12,865 12,701 10,088
France..................................... 12,665 10,991 11,834
Other European countries................... 13,575 12,955 12,815
All other countries........................ 5,787 4,608 5,073
------- ------- --------
$99,212 $87,374 $105,440
======= ======= ========
Long-lived assets:
United States.............................. $24,888 $ 7,099 $ 7,112
All other countries........................ 469 473 508
------- ------- --------
Total long-lived assets................. $25,357 $ 7,572 $ 7,620
======= ======= ========
Total long-lived assets.................... $25,357 $ 7,572 $ 7,620
Other assets including current............. 68,166 64,105 62,690
------- ------- --------
Total consolidated assets............... $93,523 $71,677 $ 70,310
======= ======= ========
</TABLE>
No single customer accounted for more than 10% of the Company's net revenue
in 2000, 1999 and 1998.
10. SUBSEQUENT EVENT
On July 21, 2000, the Company acquired HexaVision Technologies Inc.
("HexaVision"), a Canadian corporation. HexaVision is a machine vision research
and development company. Under the terms of the purchase agreement, the Company
paid $ 5.1 million in cash and agreed to issue shares of its common stock to the
shareholders of HexaVision with a value of $1.1 million subject to certain
conditions. In addition, two payments totaling approximately $1.6 million to the
shareholders of HexaVision contingent upon the continued employment of selected
HexaVision employees through July 2001. The Company deposited $1.6 million into
an escrow account pending resolution of the contingencies. These contingent cash
payments and share issuances will be accounted for as additional purchase price
when the contingencies have been resolved. If the payments are made and the
shares are issued, these amounts will be allocated to goodwill. The Company
intends to account for the acquisition under the purchase method and will
include the results of operations of HexaVision in Adept's results of operations
beginning July 21, 2000.
F-24
<PAGE> 89
CONSOLIDATED FINANCIAL STATEMENTS
HEXAVISION TECHNOLOGIES INC.
JANUARY 31, 2000
F-25
<PAGE> 90
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors of
HEXAVISION TECHNOLOGIES INC.:
We have audited the consolidated balance sheets of HEXAVISION TECHNOLOGIES
INC. as at January 31, 2000 and 1999 and the consolidated statements of loss and
deficit and cash flows for each of the years in the two year period ended
January 31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
an audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at January 31, 2000 and 1999
and the results of its operations and its cash flows for each of the years in
the two year period ended January 31, 2000 in accordance with accounting
principles generally accepted in Canada.
/s/ Ernst & Young LLP
Chartered Accountants
Quebec City, Canada,
March 24, 2000 [except for note 14
which is as at October 20, 2000].
F-26
<PAGE> 91
HEXAVISION TECHNOLOGIES INC.
[INCORPORATED UNDER THE CANADA BUSINESS CORPORATIONS ACT]
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS AT JANUARY 31,
-----------------------
2000 1999
---------- ----------
$ $
[IN CANADIAN DOLLARS]
<S> <C> <C>
ASSETS
Current Assets:
Cash........................................................ 8,011 9,574
Accounts receivable [note 4]................................ 127,018 308,761
Investment tax credits receivable........................... 337,000 553,000
Inventories................................................. 6,424 49,592
Prepaid expenses............................................ 16,169 55,997
---------- ----------
Total current assets........................................ 494,622 976,924
Capital assets [note 3]..................................... 500,525 607,798
Deferred financing charges.................................. 87,277 42,682
---------- ----------
1,082,424 1,627,404
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current Liabilities:
Bank loan [note 4].......................................... 14,000 357,850
Accounts payable and accrued liabilities.................... 306,683 604,523
Deferred revenue............................................ 54,062 50,000
Current portion of other long-term debt..................... 68,604 68,604
---------- ----------
Total current liabilities................................... 443,349 1,080,977
Convertible debentures [note 5]............................. 3,450,000 1,050,000
Other long-term debt [note 6]............................... 647,510 600,123
Accrued redemption premium on convertible debentures [note
5]........................................................ 929,527 367,414
---------- ----------
5,470,386 3,098,514
---------- ----------
SHAREHOLDERS' DEFICIENCY
Capital stock [note 7]...................................... 1,471,000 1,471,000
Deficit..................................................... (5,858,962) (2,942,110)
---------- ----------
(4,387,962) (1,471,110)
---------- ----------
1,082,424 1,627,404
========== ==========
</TABLE>
Commitments [note 13]
See accompanying notes
F-27
<PAGE> 92
HEXAVISION TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
------------------------
2000 1999
---------- ----------
$ $
[IN CANADIAN DOLLARS]
<S> <C> <C>
Revenues.................................................... 67,872 389,366
Cost of revenues............................................ 30,118 296,811
--------- ---------
Gross margin................................................ 37,754 92,555
--------- ---------
Research and development expenses........................... 959,884 1,134,933
Government assistance....................................... -- (217,108)
Investment tax credits...................................... (418,915) (651,260)
--------- ---------
540,969 266,565
Selling, general and administrative......................... 1,502,574 981,126
Amortization of capital assets.............................. 270,847 206,765
--------- ---------
2,314,390 1,454,456
--------- ---------
Operating loss.............................................. 2,276,636 1,361,901
Finance charges............................................. 658,108 285,577
Interest and other income................................... (17,892) (21,047)
--------- ---------
Net loss for the year....................................... 2,916,852 1,626,431
Deficit, beginning for the year............................. 2,942,110 1,315,679
--------- ---------
Deficit, end of year........................................ 5,858,962 2,942,110
========= =========
</TABLE>
See accompanying notes
F-28
<PAGE> 93
HEXAVISION TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
------------------------
2000 1999
---------- ----------
$ $
[IN CANADIAN DOLLARS]
<S> <C> <C>
Operating Activities
Net loss.................................................... (2,916,852) (1,626,431)
Adjustments for
Accrued redemption premium on convertible debentures...... 562,113 236,236
Amortization of capital assets............................ 270,847 206,765
Amortization of deferred financing charges................ 30,583 12,805
Gain on disposal of fixed assets.......................... (4,596) --
---------- ----------
(2,057,905) (1,170,625)
Net change in non-cash working capital items [note 8]....... 186,961 137,739
---------- ----------
Cash flows from operating activities........................ (1,870,944) (1,032,886)
---------- ----------
Investing Activities
Additions to capital assets................................. (163,978) (376,565)
Proceeds from disposal of capital assets.................... 5,000 --
---------- ----------
Cash flows used in investing activities..................... (158,978) (376,565)
---------- ----------
Financing Activities
Net increase (decrease) in bank loan........................ (343,850) 357,850
Increase in long-term debt.................................. 115,991 89,584
Repayment of long-term debt................................. (68,604) (52,596)
Issuance of convertible debentures.......................... 2,400,000 --
Increase in deferred financing charges...................... (75,178) --
---------- ----------
Cash flows from financing activities........................ 2,028,359 394,838
---------- ----------
Net decrease in cash........................................ (1,563) (1,014,613)
Cash, beginning of year..................................... 9,574 1,024,187
---------- ----------
Cash, end of year........................................... 8,011 9,574
========== ==========
Additional Information
Interest paid............................................... 57,282 26,117
---------- ----------
</TABLE>
See accompanying notes
F-29
<PAGE> 94
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
[IN CANADIAN DOLLARS]
1. INCORPORATION AND NATURE OF BUSINESS
The Company was incorporated under the Canada Business Corporations Act on
January 24, 1995 and specializes in the research, development and marketing of
artificial vision systems.
The Company intends to continue its research and development activities and
the marketing of its product in 2000. The Company's activities are subject to
all the inherent risks in establishing and maintaining a research and
development company; in particular, the successful completion of its research
and development activities, the marketing of its products and the securing of
the necessary financing.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada and using the Canadian dollar
as the functional currency. A reconciliation to United States generally accepted
accounting principles is disclosed in note 15.
Consolidated Statement of Cash Flows
As at February 1, 1999, the Company adopted the new recommendations of the
Canadian Institute of Chartered Accountants with respect to the presentation of
cash flow information.
According to the new recommendations, non-cash operations are excluded from
the statement of cash flows and are disclosed elsewhere in the financial
statements. Cash equivalents are limited to investments that can be easily
converted to a known amount of cash whose value is not likely to change
significantly and whose original maturity is no more than three months. Also,
changes in short-term loans, with the exception of overdrafts that are an
integral part of daily cash flow management, are recorded as financing
activities.
Principles of Consolidation
The consolidated financial statements include the Company's accounts and
those of its wholly owned United States subsidiary, HexaVision Inc. This foreign
operation is classified as an integrated operation.
Use of Estimates
The preparation of financial statements requires that management use
estimates and assumptions which have an impact on the amounts of the assets and
liabilities recorded and on the presentation of contingent assets and
liabilities at year-end as well as on the revenues and expenses recorded during
the period covered. Actual results could differ from those estimates and
assumptions.
Inventories
Inventories are valued at the lower of cost, determined on a first-in,
first-out basis, and net realizable value.
F-30
<PAGE> 95
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capital Assets
Capital assets are recorded at cost and amortized on a straight-line basis
according to the following estimated useful lives:
<TABLE>
<S> <C>
Furniture and office equipment........................ 5 years
Computer equipment.................................... 3 years
Software.............................................. 3 years
Equipment and tooling................................. 5 years
Telephone system...................................... 5 years
Leasehold improvements................................ Term of lease
Patents and trademarks................................ 10 years
</TABLE>
Government Assistance
The acquisition of capital assets is recorded at cost net of the related
government assistance.
Period expenses are recorded net of the related government assistance.
Deferred Financing Charges
Professional fees and charges incurred with respect to the securing of
financing are recorded as deferred charges and depreciated over the duration of
the financial instruments issued.
Stock Option Plan
The Company has a stock option plan, which is described in note 7. No
compensation expense is recognised when stock options are granted to employees.
Any consideration paid by employees on exercise of stock options is credited to
capital stock. If stock options are repurchased from employees, the excess of
the consideration paid over the carrying amount of the stock options cancelled
is charged to deficit.
Foreign Currency Translation
The integrated foreign operation and foreign currency accounts were
translated into Canadian dollars using the temporal method. Under this method,
monetary items on the balance sheet are translated at the exchange rates in
effect at year-end, while non-monetary items are translated at their original
exchange rates. Revenues and expenses [other than depreciation which is
translated at the rates that apply to corresponding capital assets] are
translated at exchange rates prevailing on the transaction date or at average
rates for the year. Gains or losses resulting from the translation are included
in the statement of loss, with the exception of those that result from the
translation of the long-term debt, which are deferred and amortized until the
maturity of the debt using the straight-line method.
Income Taxes
The Company follows the deferral method of tax allocation. Deferred income
taxes result from timing differences between the recognition of income tax and
financial statement purposes.
Financial Instruments
The Company has elected not to comply, as permitted, with certain
requirements of section 3860 "Financial Instruments, presentation and
disclosure" of the Canadian Institute of Chartered Accountants Handbook.
F-31
<PAGE> 96
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
2000 1999
------------------------- -------------------------
ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION
--------- ------------ --------- ------------
$ % $ $
<S> <C> <C> <C> <C>
Furniture and office equipment.............. 160,201 71,112 160,201 38,086
Computer equipment.......................... 446,102 318,052 374,548 191,328
Software.................................... 213,522 155,307 193,793 96,774
Equipment and tooling....................... 261,617 92,849 212,582 46,307
Telephone system............................ 34,398 16,310 33,710 9,032
Leasehold improvements...................... 20,700 5,150 20,700 1,700
Patents and trademarks...................... 61,352 10,887 47,345 5,452
--------- ------- --------- -------
1,197,892 669,667 1,042,879 388,679
Deduct
Government assistance..................... 87,661 59,961 82,073 35,671
--------- ------- --------- -------
1,110,231 609,706 960,806 353,008
Accumulated amortization.................... 609,706 353,008
--------- ---------
500,525 607,798
========= =========
</TABLE>
4. BANK LOAN
The Company has an operating credit facility for a maximum amount of
$25,000, which bears interest at prime rate plus 1%. A movable hypothec on all
current and future accounts receivable collateralizes the bank loan.
In 2000 and 1999, in accordance with an agreement with a government agency
and a financial institution, the Company can obtain financing with respect to
investment tax credits receivable. The maximum available financing is $350,000
[$580,000 in 1999], bearing interest at prime rate plus 1.25%.
5. CONVERTIBLE DEBENTURES
<TABLE>
<CAPTION>
2000 1999
--------- ---------
$ $
<S> <C> <C>
Debenture, bearing no interest, convertible no later than
the closing date of any public issue into a number of
Class A shares equal to an additional 5.625% of the
Company's issued and outstanding Class A capital stock.
The debenture is redeemable at the holder's option
starting June 13, 2002 for a price equal to the principal
plus the greater of 5.625% of the increase in market
value, between June 13, 1997 and the effective redemption
date, of all the Company's issued and outstanding Class A
shares and a redemption premium generating an annual
compound return of 20% per year on the principal.......... 450,000 450,000
Debenture, bearing no interest, convertible no later than
the closing date of any public issue into a number of
Class A shares equal to an additional 5% of the Company's
issued and outstanding Class A capital stock. The
debenture is redeemable at the holder's option starting
June 13, 2002 for a price equal to the principal plus the
greater of 5% of the increase in market value, between
June 13, 1997 and the effective redemption date, of all
the Company's issued and outstanding Class A shares and a
redemption premium generating an annual compound return of
20% per year on the principal............................. 400,000 400,000
--------- ---------
To carry forward............................................ 850,000 850,000
</TABLE>
F-32
<PAGE> 97
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
$ $
<S> <C> <C>
Carried forward............................................. 850,000 850,000
Debenture, bearing no interest, convertible no later than
the closing date of any public issue into a number of
Class A shares equal to an additional 2.5% of the
Company's issued and outstanding Class A capital stock.
The debenture is redeemable at the holder's option
starting June 13, 2002 for a price equal to the principal
plus the greater of 2.5% of the increase in market value,
between June 13, 1997 and the effective redemption date,
of all the Company's issued and outstanding Class A
shares, or a redemption premium generating an annual
compound return of 20% per year on the principal.......... 200,000 200,000
Debentures, bearing no interest, convertible at any time but
no later than the closing date of any public issue into
1,788,276 Class B shares. In the event of a public issue,
a default in respect of the shareholder agreement or an
agreement with investors, or a transaction that would give
control to a current or future shareholder, the debentures
will be convertible into 1,788,276 Class A shares. The
debentures are also redeemable at the holder's option
starting June 13, 2002 for a price equal to the principal
plus a redemption premium generating an annual compound
return of 20% per year on the principal................... 2,400,000 --
--------- ---------
3,450,000 1,050,000
========= =========
</TABLE>
All debentures are due to shareholders of the Company.
6. OTHER LONG-TERM DEBT
<TABLE>
<CAPTION>
2000 1999
------- -------
$ $
<S> <C> <C>
Repayable contribution from Canada Economic Development
(CED) bearing no interest, repayable as of March 31, 2000
in annual instalments, amounting to 4% of reported product
sales to a maximum of $612,500............................ 350,000 350,000
Term loan, bearing interest at prime rate plus 2.75%,
repayable in monthly instalments of $4,383 plus interest,
maturing in 2002. A movable hypothec on equipment,
furniture, computer equipment and software collateralizes
the loan.................................................. 96,547 149,143
Term loan, at prime rate plus 2.75%, repayable in monthly
instalments of $1,334 plus interest, maturing in 2004. A
movable hypothec on computer equipment and equipment
collateralizes the loan................................... 63,992 80,000
Advance from a shareholder, bearing interest at prime rate
plus 3%, subordinated to the repayable contribution of
$350,000.................................................. 80,000 80,000
Repayable contribution from CED, bearing no interest,
repayable in five consecutive and equal annual instalments
starting June 30, 2002. The maximum authorized
contribution is $200,000. [note 14]....................... 125,575 9,584
------- -------
716,114 668,727
Current portion of other long-term debt..................... 68,604 68,604
------- -------
647,510 600,123
======= =======
</TABLE>
The payments required on the other long-term debt for the next five years
are as follows, without taking into account the payments to be made with respect
to the repayable contribution of $350,000: 2001 -- $68,604; 2002 -- $59,959;
2003 -- $41,123; 2004 -- $41,083 and 2005 -- $25,115.
F-33
<PAGE> 98
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CAPITAL STOCK
Authorized
Authorized capital stock includes the following:
Unlimited number of shares, without par value --
Class A, voting and participating.
Class B, non-voting and participating.
Class C, non-voting, non-participating with a cumulative dividend of 10%
and redeemable at the option of the Company at the paid-up capital.
Class D, non-voting, non-participating with a cumulative dividend of 12%
and redeemable at the option of the Company at the paid-up capital.
Class E, non-voting, non-participating with a non-cumulative dividend at
a rate of 10% of the Company's net after-tax profits and redeemable at
the option of the Company at the paid-up capital.
Class F, issuable in series, voting or non-voting, participating.
Directors are authorized to determine the number and designation,
rights, privileges, restrictions and conditions associated with the
shares of each series of this category.
Class G, non-voting, non-participating and redeemable by the Company
upon the death of the holder.
Class H, non-voting, non-participating, with a cumulative dividend of 12%
based on the redemption price of shares of this class and redeemable at the
option of the holder for the paid-up capital plus a premium per share equal to
the difference between its share of the fair value of the property received in
exchange by the Company at the time each share in this category was issued and
the amount paid up for each share in this category.
<TABLE>
<CAPTION>
2000 1999
--------- ---------
$ $
<S> <C> <C>
ISSUED AND PAID
3,000,000 Class A shares.................................... 1,451,000 1,451,000
40,000 Class B shares.................................... 20,000 20,000
--------- ---------
1,471,000 1,471,000
========= =========
</TABLE>
Under a stock option plan approved on November 2, 1999, 95,000 options on
Class B shares were granted to 16 employees of the Company. The price at which
these options may be exercised was set at $1 per employee, for a total of $16.
At the time of issuance, 71,000 options were fully vested and 24,000 vest on the
third anniversary from the hiring date. The options expire on November 2, 2004
or one month following the date of any future change of control if earlier. In
the case of an initial public offering, the options would become fully vested
immediately prior the initial public offering. As at January 31, 2000, 71,000
options were fully vested.
F-34
<PAGE> 99
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. NET CHANGE IN NON-CASH WORKING CAPITAL ITEMS
<TABLE>
<CAPTION>
2000 1999
-------- --------
$ $
<S> <C> <C>
Decrease in accounts receivable............................. 181,743 54,473
Decrease (increase) in investment tax credits receivable.... 216,000 (211,000)
Decrease (increase) in inventories.......................... 43,168 (49,592)
Decrease in prepaid expenses................................ 39,828 63,582
Increase (decrease) in accounts payable and accrued
liabilities............................................... (297,840) 230,276
Increase in deferred revenue................................ 4,062 50,000
-------- --------
186,961 137,739
======== ========
</TABLE>
9. RESEARCH AND DEVELOPMENT EXPENSES
The amounts recorded as investment tax credits for research and development
pertain to tax returns that have not yet been reviewed by tax authorities. In
the event of differences between the amounts claimed by the Company and the
amounts granted by the tax authorities, the resulting adjustment, which could be
material, will be entered in the year in which the differences are reported.
10. CREDIT RISK
48% of the accounts receivable are from one client which is the federal
government [80% in 1999]. Revenues in 1999 were totally from the federal
government [considered third party].
Investment tax credits receivable were from the federal and provincial
governments.
11. UNREALIZED TAX BENEFITS
The amount of losses that the Company may carry forward for tax purposes
and the expiry date of the period when the Company may take advantage of such
losses are as follows:
<TABLE>
<CAPTION>
AMOUNT
---------------------- YEAR
YEAR OF LOSS FEDERAL QUEBEC OF EXPIRY
------------ --------- --------- ---------
$ $
<S> <C> <C> <C>
1996............................................... 39,031 -- 2003
1997............................................... 113,096 113,096 2004
1998............................................... 461,710 320,408 2005
1999............................................... 1,023,488 912,446 2006
2000............................................... 1,888,463 1,836,410 2007
</TABLE>
Unclaimed expense balances in respect of scientific research and
experimental development that may be used to reduce the Company's taxable income
in future years total approximately $1,235,000 and $2,085,000 at the federal and
Quebec levels respectively.
The non-refundable federal tax credits that may be used to reduce the
Company's taxable income in future years total $131,337 and expire starting in
2007.
Unrealized eligible tax benefits resulting from losses, non-refundable tax
credits and unclaimed expense balances in respect of scientific research and
experimental development have not been recorded in the Company's books.
The US subsidiary has approximately $191,000 US [$Cdn 283,000] of operating
losses that may be carry forward for tax purposes until 2019.
F-35
<PAGE> 100
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. RELATED PARTY TRANSACTIONS
In addition to the related party transactions disclosed elsewhere in these
financial statements, the Company paid $7,515 in interest on the advance granted
by a shareholder during 2000.
13. COMMITMENTS
As at January 31, 2000, the Company had committed to pay a total rent in
the amount of $794,213 under a lease terminating on May 31, 2009. However, the
lease may be canceled as of June 1, 2004 in consideration of $72,263 in
penalties. The rent payable over the next five years is as follows:
<TABLE>
<CAPTION>
$
-------
<S> <C>
2001..................................................... 72,440
2002..................................................... 75,247
2003..................................................... 75,247
2004..................................................... 82,263
2005..................................................... 85,771
-------
390,968
=======
</TABLE>
The lease also provides for the payment of operating expenses by the
Company.
14. SUBSEQUENT EVENTS
On February 3, 2000, the Company amended its incorporating statutes whereby
a new class of shares was added to its authorized capital stock, namely, an
unlimited number of Class I shares. The shares in this class will be non-voting
and non-participating, with a cumulative annual dividend of 20%, and ranking
ahead of all other classes of shares, subject to the rights associated with the
Class G shares. Class I shares will also be convertible into Class A shares and
will be redeemable at the option of the holder.
On the same date, certain shareholders agreed to invest $750,000 in the
Company by way of Class I shares. On that date, the shareholders subscribed for
$255,000 of Class I shares. The remaining balance was to be paid in two
installments of $247,500 in April and July 2000, with each installment subject
to compliance with certain conditions by the Company. On May 23, 2000, the
Company issued 125,000 Class I shares for a cash consideration of $125,000.
In March 2000, the Company received $29,463 from Canada Economic
Development as the fourth installment under the repayable contribution agreement
in connection with a maximum amount of $200,000.
In April 2000, the Company received $150,000 as financing for its
investment tax credits receivable.
On July 21, 2000, a subsidiary of Adept Technology, Inc. ("Adept"), a US
public company, purchased all of the issued and outstanding shares of the
Company. In respect of this change of control, on June 30, 2000, all the
debentures disclosed in note 5 were converted into 2,856,073 Class A shares. In
addition, on June 30, 2000, all issued and outstanding Class I shares were
converted into 405,378 Class A shares. The Company vested all unvested stock
options and employees exercised 95,000 stock options and the Company issued
95,000 Class B shares for a subscription of $16 under the stock option plan (see
note 7). On July 10, 2000, the Company was continued under the Nova Scotia
Companies Act. In addition, the Company paid bonuses to employees for a total
amount of $216,336 US (approximately $Cdn 317,000).
F-36
<PAGE> 101
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
To October 20, 2000, the Company received advances from Adept of
$1,528,000, bearing no interest, convertible at the option of the Company into a
number of Preferred Shares to be created and having a paid-up capital and a
redemption value equal the amount advanced. On July 2000, the Company reimbursed
the repayable contribution included in the long-term debt of $350,000 (see note
6) for an amount of $450,000. On July 2000, the Company reimbursed the advance
from a shareholder of $80,000 included on the long-term debt (see note 6). The
agreement to invest the remaining amount in Class I shares by certain
shareholders has been canceled as part of the acquisition by Adept.
15. RECONCILIATION OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN CANADA AND THE UNITED STATES
The financial statements are prepared in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). The following summary
sets out the material adjustments to the Company's reported net income, balance
sheet and cash flows to conform with accounting principles generally accepted in
the United States ("U.S. GAAP").
F-37
<PAGE> 102
HEXAVISION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A) NET INCOME
<TABLE>
<CAPTION>
2000 1999
---------- ----------
$ $
<S> <C> <C>
Net loss under Canadian GAAP................................ (2,916,852) (1,626,431)
Adjustment related to equipment used in research and
development(i)............................................ 80,186 36,905
Adjustment related to stock compensation(ii)................ (127,300) --
---------- ----------
NET LOSS AND COMPREHENSIVE LOSS UNDER U.S. GAAP............. (2,963,966) (1,589,526)
========== ==========
</TABLE>
B) BALANCE SHEET
<TABLE>
<CAPTION>
2000
------------------------------------------
ADDITIONAL
CAPITAL PAID IN CAPITAL --
ASSETS STOCK OPTIONS DEFICIT
------- ------------------ ---------
$ $ $
<S> <C> <C> <C>
Balance under Canadian GAAP........................... 500,525 -- 5,858,962
Adjustment related to equipment used in research and
development(i)...................................... (83,386) -- 83,386
Adjustment related to compensation expense(ii)........ -- 127,300 127,300
------- ------- ---------
BALANCE UNDER U.S. GAAP............................... 417,139 127,300 6,069,648
======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
1999
-------------------------------------------
ADDITIONAL
CAPITAL PAID IN CAPITAL --
ASSETS STOCK OPTIONS DEFICIT
-------- ------------------ ---------
$ $ $
<S> <C> <C> <C>
Balance under Canadian GAAP.......................... 607,798 -- 2,942,110
Adjustment related to equipment used in research and
development(i)..................................... (163,572) -- 163,572
Adjustment related to compensation expense(ii)....... -- -- --
-------- -- ---------
BALANCE UNDER U.S. GAAP.............................. 444,226 -- 3,105,682
======== == =========
</TABLE>
C) CASH FLOWS
There are no material adjustments to the statements of cash flows.
---------------
(i) Under Canadian GAAP, research and development equipment is capitalized and
amortized over its useful life. Under U.S. GAAP, costs to acquire such
equipment with no alternative use are charged to operations as incurred.
(ii) Under Canadian GAAP, no compensation expense is recorded when stock options
are issued. Under US GAAP, the Company has adopted accounting principles
board (APB) 25 to accounted for stock options. A compensation expense is
recorded when stock options that are issued with exercise price lower than
the fair value of the underlying shares.
F-38
<PAGE> 103
ADEPT TECHNOLOGY, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
consist of the Adept Technology, Inc. ("Adept" or the "Company") unaudited pro
forma combined condensed statement of operations for the year ended June 30,
2000 and the Adept unaudited pro forma combined condensed consolidated balance
sheet at June 30, 2000.
ACQUISITION OF HEXAVISION TECHNOLOGIES INC.
On July 21, 2000, the Company completed its acquisition of HexaVision
Technologies Inc. ("HexaVision"), a Canadian corporation. HexaVision is a
machine vision research and development company. Under the terms of the purchase
agreement, the Company paid $5.1 million in cash and agreed to issue shares of
its common stock to the shareholders of HexaVision with a value of $1.1 million
subject to certain conditions. In addition, two payments totaling approximately
$1.6 million in cash are contingent upon the achievement of certain operational
milestones by HexaVision. The Company intends to account for the acquisition
under the purchase method and will include the results of operations of
HexaVision in Adept's results of operations beginning July 21, 2000.
WHAT THESE PRO FORMA STATEMENTS SHOW
The Adept unaudited pro forma combined condensed financial statements give
effect to the acquisition of HexaVision accounted for using the purchase method
of accounting. The Adept pro forma combined condensed statement of operations
for the year ended June 30, 2000 assumes the acquisition of HexaVision took
place on July 1, 1999. The Adept unaudited pro forma combined condensed balance
sheet assumes the acquisition of HexaVision took place on June 30, 2000.
BASIS OF PRESENTATION
The Adept unaudited pro forma combined condensed financial statements
reflect the acquisition of HexaVision accounted for using the purchase method of
accounting and have been prepared on the basis of assumptions described in the
notes including assumptions relating to the allocation of the amount of
consideration paid to the assets and liabilities of HexaVision based upon
preliminary estimates of fair value and preliminary estimates of assets acquired
and liabilities assumed. The actual allocation of the total consideration may
differ from those assumptions reflected in the Adept unaudited pro forma
combined condensed financial statements after the valuation is completed,
transaction costs are finalized and the final assets acquired and liabilities
assumed are determined.
THESE PRO FORMA UNAUDITED COMBINED CONDENSED FINANCIAL STATEMENTS SHOULD BE READ
WITH EACH COMPANY'S FINANCIAL STATEMENTS.
The Adept unaudited pro forma combined condensed financial statements
should be read in conjunction with the related notes included in this document
and the audited financial statements of Adept and HexaVision, including the
notes to each, that are included elsewhere in this document. The Adept unaudited
pro forma combined condensed financial statements do not necessarily indicate
what the actual operating results or financial position would have been had the
acquisition of HexaVision taken place on July 1, 1999 or June 30, 2000. They
also do not purport to indicate Adept's future results of operations or
financial position.
F-39
<PAGE> 104
ADEPT TECHNOLOGY, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ADEPT HEXAVISION
TECHNOLOGY, INC. TECHNOLOGIES INC. PRO FORMA
YEAR ENDED YEAR ENDED PRO FORMA COMBINED
JUNE 30, 2000 APRIL 30, 2000 ADJUSTMENTS JUNE 30, 2000
----------------- ----------------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues........................ $99,212 $ 119 $ -- $99,331
Cost of revenues.................... 56,173 32 56(5) 56,261
------- ------- ------- -------
Gross margin........................ 43,039 87 (56) 43,070
Operating expenses:
Research, development and
engineering.................... 14,629 376 -- 15,005
Selling, general and
administrative................. 29,503 1,101 -- 30,604
Merger-related charges............ 988 -- -- 988
Amortization of goodwill and other
intangibles.................... 685 -- 2,207(5) 2,892
------- ------- ------- -------
Total operating expenses....... 45,805 1,477 2,207 49,489
------- ------- ------- -------
Operating loss...................... (2,766) (1,390) (2,263) (6,419)
Interest income..................... 1,031 12 -- 1,043
Interest and other expense.......... 285 434 -- 719
------- ------- ------- -------
Loss before benefit from income
taxes............................. (2,020) (1,812) (2,263) (6,095)
Benefit from income taxes........... (593) -- -- (593)
------- ------- ------- -------
Net loss............................ $(1,427) $(1,812) $(2,263) $(5,502)
======= ======= ======= =======
Net loss per share:
Basic............................. $ (0.15) $ (0.56)
Diluted........................... $ (0.15) $ (0.56)
Number of shares used in computing
per share amounts:
Basic............................. 9,774 9,774
Diluted........................... 9,774 9,774
</TABLE>
F-40
<PAGE> 105
ADEPT TECHNOLOGY, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
ADEPT HEXAVISION PRO FORMA
TECHNOLOGY, INC. TECHNOLOGIES INC. PRO FORMA COMBINED
JUNE 30, 2000 APRIL 30, 2000 ADJUSTMENTS JUNE 30, 2000
---------------- ----------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......... $13,487 $ 12 $(5,452)(1) $ 8,047
Short-term investments............ 6,950 -- -- 6,950
Accounts receivable............... 25,527 58 -- 25,585
Inventories....................... 15,153 5 -- 15,158
Deferred tax and other current
assets......................... 7,049 265 -- 7,314
------- ------- ------- -------
Total current assets........... 68,166 340 (5,452) 63,054
Property and equipment, net......... 5,583 262 -- 5,845
Goodwill and other intangibles,
net............................... 16,963 -- 5,636(2) 22,599
Other assets........................ 2,811 53 (53)(2) 2,811
------- ------- ------- -------
Total assets................... $93,523 $ 655 $ 131 $94,309
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................. $10,841 $ 191 $ -- $11,032
Accrued payroll and related
expenses....................... 4,727 -- -- 4,727
Accrued warranty.................. 1,915 -- -- 1,915
Deferred revenue.................. 1,511 -- -- 1,511
Taxes payable and other accrued
liabilities.................... 2,579 101 -- 2,680
------- ------- ------- -------
Total current liabilities...... 21,573 292 -- 21,865
Long term liabilities:
Deferred income tax............... 1,222 -- -- 1,222
Convertible debentures............ -- 3,103 (3,103)(3) --
Long-term debt.................... -- 494 -- 494
Commitments and contingencies
Redeemable common stock............. -- 176 (176)(4) --
Shareholders' Equity:
Preferred stock................... -- -- -- --
Common stock...................... 67,184 1,132 (1,132)(4) 67,184
Retained earnings................. 3,544 (4,542) 4,542(4) 3,544
------- ------- ------- -------
Total shareholders' equity..... 70,728 (3,410) 3,410 70,728
------- ------- ------- -------
Total liabilities and
shareholders' equity......... $93,523 $ 655 $ 131 $94,309
======= ======= ======= =======
</TABLE>
F-41
<PAGE> 106
NOTES TO ADEPT TECHNOLOGY
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRO FORMA PRESENTATION
On July 21, 2000, the Company acquired HexaVision Technologies Inc.
("HexaVision"), a Canadian corporation. HexaVision is a machine vision research
and development company. Under the terms of the purchase agreement, the Company
paid $5.1 million in cash and agreed to issue shares of its common stock to the
shareholders of HexaVision with a value of $1.1 million subject to certain
conditions. In addition, two payments totaling approximately $1.6 million in
cash are contingent upon the achievement of certain operational milestones by
HexaVision. The Company intends to account for the acquisition under the
purchase method and will include the results of operations of HexaVision in
Adept's results of operations beginning July 21, 2000.
Under the terms of the purchase agreement, Adept paid $5.5 million in cash
(including transaction costs of $0.4 million). In addition, the Company will be
issuing shares of its common stock with a value of $1.1 million and making two
cash payments totaling approximately $1.6 million to the shareholders of
HexaVision contingent upon the continued employment of more than fifty percent
of selected HexaVision employees through July 2001. The Company deposited $1.6
million into an escrow account pending resolution of the contingencies. These
contingent cash payments and share issuances will be accounted for as additional
purchase price when the contingencies have been resolved. If the payments are
made and the shares issued these amounts will be allocated to goodwill. The
acquisition of HexaVision is accounted for under the purchase method of
accounting.
The unaudited pro forma combined condensed financial statements have been
prepared on the basis of assumptions relating to the allocation of the amount of
consideration paid to the assets and liabilities of HexaVision based on
preliminary estimates of fair value as well as HexaVision's balance sheet as of
April 30, 2000. The actual allocation of the amount such consideration will
differ from that reflected in these unaudited pro forma combined condensed
financial statements since the actual allocation will be based on the assets
acquired and the liabilities assumed as of July 21, 2000. In addition, the
actual allocation may differ from that reflected in these unaudited pro forma
combined condensed financial statements after valuations have been completed and
final transaction costs have been determined. Below is a table of the estimated
acquisition cost, purchase price allocation and annual amortization of the
intangible assets acquired, in thousands:
<TABLE>
<CAPTION>
ANNUAL
ACQUISITION AMORTIZATION AMORTIZATION
COST LIFE OF INTANGIBLES
----------- ------------ --------------
<S> <C> <C> <C>
Cash.................................... $5,100
Transaction costs....................... 352
------
Total acquisition cost............. $5,452
======
Purchase Price Allocation
Net liabilities assumed............... $ (205)
Developed and core technology......... 140 30 months $ 56
Non-compete covenant.................. 130 30 months 52
Assembled workforce................... 254 30 months 102
Goodwill.............................. 5,133 30 months 2,053
------ ------
Total.............................. $5,452 $2,263
====== ======
</TABLE>
F-42
<PAGE> 107
NOTES TO ADEPT TECHNOLOGY
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
The acquired tangible assets of HexaVision principally include cash,
accounts receivable, and property and equipment. Liabilities assumed principally
include accounts payable, other accrued liabilities and long-term debt.
To determine the value of developed and core technology, the expected
future cash flows attributable to all existing technology was discounted, taking
into account the risks associated with the applications of the technology,
existing and future markets and the life cycle of the technology. The developed
and core technology is being amortized on the straight-line basis over the
estimated useful life of 30 months.
The values of the non-compete covenant and assembled workforce were derived
by estimating the cost of competition in the marketplace as well as the cost to
replace existing employees. The non-compete covenant and assembled workforce are
being amortized on the straight-line basis over the 30-month life of the
non-compete agreements.
Goodwill is determined based on the residual difference between the amount
paid and the values assigned to identified tangible and intangible assets.
Goodwill is being amortized on the straight-line basis over 30 months.
2. CONVERSION OF HEXAVISION FINANCIAL STATEMENTS TO ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES AND UNITED STATES DOLLARS
The financial statements for HexaVision which were prepared in accordance
with accounting principles generally accepted in Canada have been conformed to
accounting principles generally accepted in the United States for purposes of
including them in the Adept unaudited pro forma combined condensed financial
statements. The adjustments necessary to conform the HexaVision financial
statements to accounting principles generally accepted in the United States
consisted principally of stock compensation charges for certain employee
options, the write off of research and development equipment without alternative
uses.
The consolidated balance sheet and consolidated statement of operations for
HexaVision were translated to U.S. dollars using average exchange rates for the
Adept unaudited pro forma combined condensed statement of operations and period
end and historical exchange rates for the Adept unaudited pro forma combined
condensed balance sheet, as applicable.
3. PRO FORMA ADJUSTMENTS
The Adept unaudited pro forma combined condensed financial statements give
effect to the following pro forma adjustments:
(1) To reflect the cash paid for the purchase of HexaVision including
transaction costs.
(2) To state the assets and liabilities of HexaVision at their fair values.
(3) To reflect the elimination of HexaVision's convertible debentures of
$3.1 million not assumed in the purchase transaction.
(4) To reflect the elimination of HexaVision's redeemable common stock of
$0.2 million, common stock of $1.1 million and accumulated deficit of
$4.5 million.
(5) To reflect amortization of goodwill and other intangibles related to
the HexaVision acquisition.
F-43
<PAGE> 108
[DESCRIPTION OF INSIDE BACK COVER GRAPHIC
GRAPHICS DEPICTING ADEPT PRODUCTS BY ROBOTICS SYSTEM LAYER INCLUDING THE
FOLLOWING NAMES WITH A PHOTOGRAPH FOR EACH TYPE OF PRODUCT:
SIMULATION SOFTWARE
MOTION CONTROL
VISION
MECHANISMS
CONTROLLER
APPLICATIONS SOFTWARE
PC COMPATIBLE SOFTWARE]
<PAGE> 109
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2,134,755 SHARES
ADEPT TECHNOLOGY, INC.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
CIBC WORLD MARKETS
, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 110
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable in connection
with the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates,
except for the SEC registration fee, Nasdaq and NASD filing fees:
<TABLE>
<CAPTION>
AMOUNT TO
ITEM BE PAID
---- ---------
<S> <C>
SEC registration fee........................................ $ 24,506
Nasdaq filing fee........................................... 17,500
NASD filing fee............................................. 9,783
Accounting fees and expenses................................ 175,000
Legal fees and expenses..................................... 400,000
Printing and engraving expenses............................. 150,000
Blue Sky fees and expenses.................................. 20,000
Miscellaneous............................................... 103,211
--------
Total............................................. $900,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 204(a) of the California General Corporation Law,
our articles of incorporation eliminate a director's personal liability for
monetary damages to Adept and its shareholders arising from a breach or alleged
breach of the director's fiduciary duty, except for liability arising under
Sections 310 and 316 of the California General Corporation Law or liability for
(i) acts or omissions that involve intentional misconduct or knowing and
culpable violation of law, (ii) acts or omissions that a director believes to be
contrary to the best interests of Adept or its shareholders or that involve the
absence of good faith on the part of the director, (iii) any transaction from
which a director derived an improper personal benefit, (iv) acts or omissions
that show a reckless disregard for the director's duty to Adept or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to Adept or its shareholders and (v) acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to Adept or its shareholders. This provision does not
eliminate the directors' duty of care, and in appropriate circumstances
equitable remedies such as an injunction or other forms of nonmonetary relief
would remain available under California law.
Sections 204(a) and 317 of the California General Corporation Law authorize
a corporation to indemnify its directors, officers, employees and other agents
in terms sufficiently broad to permit indemnification (including reimbursement
for expenses) under certain circumstances for liabilities arising under the
Securities Act. Our articles of incorporation and bylaws contain provisions
covering indemnification of corporate directors, officers and other agents
against certain liabilities and expenses incurred as a result of proceedings
involving such persons in their capacities as directors, officers, employees or
agents, including proceedings under the Securities Act or the Securities
Exchange Act of 1934, as amended. We have entered into indemnification
agreements with our directors and executive officers.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of Adept in which indemnification is
being sought, nor are we aware of any threatened litigation that may result in a
claim for indemnification by any director, officer, employee or other agent of
us.
II-1
<PAGE> 111
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On April 28, 2000, we purchased all of the outstanding shares of capital
stock of Pensar Tucson, Inc., an Arizona corporation. In connection with the
acquisition, we issued 100,000 shares of our common stock to the shareholders of
Pensar valued at $11.75 per share which was the fair market value of our common
stock at April 28, 2000. In addition, we paid $3,000,000 in cash, resulting in a
total purchase price of $4.2 million. The shares were issued pursuant to
exemptions by reason of Section 4(2) and Regulation D under the Securities Act
of 1933. These sales were made in private transactions without general
solicitation or advertising.
On May 31, 2000, we completed the acquisition of NanoMotion Incorporated, a
California corporation, in a stock for stock merger. In connection with the
acquisition, we issued 600,000 shares of our common stock to the shareholders of
NanoMotion valued at $21 per share which was the fair market value of our common
stock at May 31, 2000. The shares were issued pursuant to exemptions by reason
of Section 4(2) and Regulation D under the Securities Act of 1933. These sales
were made in private transactions without general solicitation or advertising.
In July 1999, we issued 720,008 shares of our common stock in connection
with our acquisition of BYE/OASIS Engineering, Inc., a Texas corporation. We
issued these shares pursuant to exemptions by reason of Section 4(2) and
Regulation D under the Securities Act of 1933. These sales were made in private
transactions without solicitation or advertising.
On February 13, 1998, the Company acquired RoboElektronik GmbH through the
issuance of 24,252 shares of the Company's common stock, which were exchanged
for all of the outstanding capital stock of RoboElektronik. We issued these
shares pursuant to exemptions by reason of Regulation S under the Securities
Act. The Company obtained representations from the shareholders of
RoboElektronik to the effect that each holder was not a "U.S. person" within the
meaning of Regulation S. The offer of Company shares was made in an offshore
transaction, and neither the Company, any distributor, any of their respective
affiliates, or any person acting on behalf of any of the foregoing made any
directed selling efforts with respect to the Company shares in the United
States.
ITEM 16. EXHIBITS
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
-------- -------------
<C> <S>
1.1* Form of Purchase Agreement.
2.1 Share Purchase Agreement among Marc Tremblay, Alain Rivard,
Eric St-Pierre, Pierre Boivin, 9044-0108 Quebec Inc.,
Societe Innovatech Quebec et Chaudiere-Appalaches, Sofinov,
Societe Financiere d'Innovation Inc., Business Development
Bank of Canada, Christian Labbe, Patrick Murphy and certain
other shareholders named therein, Adept Technology Canada
Holding Co., and Registrant, dated July 21, 2000
(incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K/A filed with the
Securities and Exchange Commission on October 25, 2000).+
3.1 Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1 (No.
33-98816) (the "1995 Form S-1")).
3.2 Bylaws of the Registrant, as amended to date (incorporated
by reference to Exhibit 3.2 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 2000)
(the "2000 Form 10-K")).
4.1 Form of Stock Certificate (incorporated by reference to
Exhibit 4.2 to the 1995 Form S-1).
5.1* Opinion of Gibson, Dunn & Crutcher LLP.
</TABLE>
II-2
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
-------- -------------
<C> <S>
10.1** 1983 Stock Incentive Program, and form of agreements thereto
(incorporated by reference to Exhibit 10.1 to the 1995 Form
S-1).
10.2** 1993 Stock Plan as amended, and form of agreement thereto
(incorporated by reference to Exhibit 10.2 to the
Registrant's Form 10-K for the fiscal year ended June 30,
1997 (the "1997 Form 10-K")).
10.3** 1998 Employee Stock Purchase Plan as amended, and form of
agreements thereto (incorporated by reference to Exhibit
10.3 to the Registrant's Form 10-K for the fiscal year ended
June 30, 1999 (the "1999 Form 10-K")).
10.4** 1995 Director Option Plan as amended, and form of agreement
thereto (incorporated by reference to Exhibit 10.4 to the
1997 Form 10-K).
10.5 Form of Indemnification Agreement between the Registrant and
its officers and directors (incorporated by reference to
Exhibit 10.5 to the 1995 Form S-1).
10.6 Lease Agreement between the Registrant and Technology
Associates I dated July 18, 1986, as amended (incorporated
by reference to Exhibit 10.6.1 to the 1995 Form S-1).
10.7 Office Building Lease between Registrant and Puente Hills
Business Center II dated May 20, 1993, as amended
(incorporated by reference to Exhibit 10.6.2 to the 1995
Form S-1).
10.8 Standard Office Lease - Gross between SILMA Incorporated and
South Bay/Copley Joint Venture dated November 11, 1992
(incorporated by reference to Exhibit 10.6.3 to the 1995
Form S-1).
10.9 Fifth Amendment to Lease between Registrant and Metropolitan
Life Insurance Company dated as of December 5, 1996
(incorporated by reference to Exhibit 10.6.4 to the 1997
Form 10-K).
10.10** Loan Payoff Plan dated August 3, 1993 between Registrant and
Charles Duncheon (incorporated by reference to Exhibit 10.7
to the 1995 Form S-1).
10.11** Promissory Note between Registrant and Charles Duncheon
dated August 20, 1998 (incorporated by reference to Exhibit
10.7.1 to the 1999 Form 10-K).
10.12** Promissory Note between Registrant and Richard Casler dated
April 16, 1999 (incorporated by reference to Exhibit 10.7.2
to the 1999 Form 10-K).
10.13** Promissory Note between Registrant and Brian Carlisle dated
May 7, 1999 (incorporated by reference to Exhibit 10.7.3 to
the 1999 Form 10-K).
10.14** Promissory Note between Registrant and Bruce Shimano dated
May 7, 1999 (incorporated by reference to Exhibit 10.7.4 to
the 1999 Form 10-K).
10.15** Offer Letter between the Registrant and Marcy Alstott dated
February 19, 1998, as amended (incorporated by reference to
Exhibit 10.8 to the Registrant's Form 10-K for the fiscal
year ended June 30, 1998 (the "1998 Form 10-K")).
10.16** Promissory Note between Registrant and Marcy Alstott dated
April 27, 1998 (incorporated by reference to Exhibit 10.8.1
to the 1998 Form 10-K).
10.17** Offer Letter between the Registrant and Kathleen Fisher
dated July 16, 1999 (incorporated by reference to Exhibit
10.8.2 to the 1999 Form 10-K).
10.18** Promissory Note between Registrant and Kathleen Fisher dated
August 2, 1999 (incorporated by reference to Exhibit 10.8.3
to the 1999 Form 10-K).
10.19 Lease Agreement dated as of April 30, 1998 between the
Registrant and the Joseph and Eda Pell Revocable Trust dated
August 18, 1989 (incorporated by reference to Exhibit 10.9
to the 1998 Form 10-K).
</TABLE>
II-3
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
-------- -------------
<C> <S>
10.20 Lease Agreement dated June 1, 1998 between the Registrant
and Technology Centre Associates LLC for the premises
located at 180 Rose Orchard Way, San Jose, California
(incorporated by reference to Exhibit 10.10 to the 1998 Form
10-K).
10.21 First Amendment to Lease Agreement dated June 1, 1998
between the Registrant and Technology Centre Associates LLC
dated July 31, 1998 (incorporated by reference to Exhibit
10.10.1 to the 1998 Form 10-K).
10.22 Sublease between the Registrant and Ascent Logic Corporation
dated as of July 31, 1998 (incorporated by reference to
Exhibit 10.10.2 to the 1998 Form 10-K).
10.23 Second Amendment to Lease Agreement dated March 31, 2000
between Registrant and Technology Centre Associates LLC
dated July 31, 1998 (incorporated by reference to Exhibit
10.23 to the 2000 Form 10-K).
10.24 First Addendum to Lease Agreement dated August 18, 1999
between Registrant and Joseph and Eda Pell Revocable Trust
dated August 18, 1989 (incorporated by reference to Exhibit
10.24 to the 2000 Form 10-K).
10.25 Lease Agreement dated April 28, 2000 between Registrant and
Michael and Diane Edwards for premises located in Tucson,
Arizona (incorporated by reference to Exhibit 10.25 to the
2000 Form 10-K).
10.26 Lease Agreement dated May 19, 2000 between NanoMotion Inc.
and United Insurance Co. of America for premises located at
Santa Barbara, California (incorporated by reference to
Exhibit 10.26 to the 2000 Form 10-K).
10.27*** Agreement between Registrant and Altron Systems Corporation
(acquired by Sanmina Corporation) dated January 30, 1998
(incorporated by reference to Exhibit 10.27 to the 2000 Form
10-K).
10.28 Agreement between Registrant and Ramix Incorporated dated
October 27, 1998 (incorporated by reference to Exhibit 10.28
to the 2000 Form 10-K).
10.29 Robot Module Purchase and Service Agreement between
Registrant and NSK Corporation dated January 19, 1995
(incorporated by reference to Exhibit 10.29 to the 2000 Form
10-K).
10.30 Agreement between Registrant and Electronic Manufacturing
Systems, Inc. dated August 28, 1997 (incorporated by
reference to Exhibit 10.30 to the 2000 Form 10-K).
10.31*** Original Equipment Manufacturer Agreement between Registrant
and Hirata Corporation dated January 31, 1995 (incorporated
by reference to Exhibit 10.31 to the 2000 Form 10-K).
10.32*** Original Equipment Manufacturing Agreement between
Registrant and Samsung Electronics Co., LTD dated February
26, 1999 (incorporated by reference to Exhibit 10.32 to the
2000 Form 10-K).
10.33*** Sublicense Agreement between SILMA Division of Registrant
and Adept Japan Co., LTD dated September 26, 2000
(incorporated by reference to Exhibit 10.33 to the 2000 Form
10-K).
10.34*** Original Equipment Manufacturing Agreement between
Registrant and Yaskawa Electric Corp. dated August 29, 2000
(incorporated by reference to Exhibit 10.34 to the 2000 Form
10-K).
21.1 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21.1 to the 2000 Form 10-K).
23.1 Consent of Independent Auditors regarding Adept Technology,
Inc.
</TABLE>
II-4
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
-------- -------------
<C> <S>
23.2 Consent of Independent Auditors regarding HexaVision
Technologies Inc.
23.3 Consent of Gibson, Dunn & Crutcher LLP (included in their
opinion filed as Exhibit 5.1).
24.1 Power of Attorney (See Signature Page to this Registration
Statement).
</TABLE>
---------------
+ Schedules have been omitted and will be provided to the SEC upon request.
* To be filed by amendment.
** Management contract or compensatory plan or arrangement.
*** Confidential treatment has been requested as to certain portions of this
exhibit. An unredacted version of this exhibit has been filed separately
with the SEC.
(B) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is filed with Part II of herein:
Schedule II -- Valuation and Qualifying Accounts.
Additional schedules are not required under the related schedule
instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
A. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of
Adept pursuant to the foregoing provisions, or otherwise, Adept has been
advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Adept of expenses incurred
or paid by a director, officer, or controlling person of Adept in the
successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, Adept will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
B. Adept hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by Adept pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of the registration statement as of the time it was
declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-5
<PAGE> 115
ADEPT TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
----------- ---------- ---------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended June 30, 1998:
Allowance for doubtful accounts.......... $459 $346 $343 $462
Year ended June 30, 1999:
Allowance for doubtful accounts.......... 462 389 135 716
Year ended June 30, 2000:
Allowance for doubtful accounts.......... 716 516 595 637
</TABLE>
---------------
(1) Includes write offs net of recoveries.
II-6
<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of San Jose,
State of California on October 25, 2000.
ADEPT TECHNOLOGY, INC.
By: /s/ BRIAN R. CARLISLE
------------------------------------
Brian R. Carlisle
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Brian R. Carlisle and Michael W. Overby,
and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and any and all
Registration Statements filed pursuant to Section 462(b) of the Securities Act
of 1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-facts
and agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ BRIAN R. CARLISLE Chairman of the Board and Chief October 25, 2000
--------------------------------------------------- Executive Officer (Principal
Brian R. Carlisle Executive Officer)
/s/ MICHAEL W. OVERBY Vice President, Finance and October 25, 2000
--------------------------------------------------- Chief Financial Officer
Michael W. Overby (Principal Financial Officer
and Principal Accounting
Officer)
/s/ BRUCE E. SHIMANO Vice President, Research and October 25, 2000
--------------------------------------------------- Development, Secretary and
Bruce E. Shimano Director
/s/ RONALD E. F. CODD Director October 25, 2000
---------------------------------------------------
Ronald E. F. Codd
/s/ MICHAEL P. KELLY Director October 25, 2000
---------------------------------------------------
Michael P. Kelly
/s/ CARY R. MOCK Director October 25, 2000
---------------------------------------------------
Cary R. Mock
/s/ JOHN E. POMEROY Director October 25, 2000
---------------------------------------------------
John E. Pomeroy
</TABLE>
II-7
<PAGE> 117
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
-------- -------------
<C> <S>
1.1* Form of Purchase Agreement.
2.1 Share Purchase Agreement among Marc Tremblay, Alain Rivard,
Eric St-Pierre, Pierre Boivin, 9044-0108 Quebec Inc.,
Societe Innovatech Quebec et Chaudiere-Appalaches, Sofinov,
Societe Financiere d'Innovation Inc., Business Development
Bank of Canada, Christian Labbe, Patrick Murphy and certain
other shareholders named therein, Adept Technology Canada
Holding Co., and Registrant, dated July 21, 2000
(incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K/A filed with the
Securities and Exchange Commission on October 25, 2000).+
3.1 Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1 (No.
33-98816) (the "1995 Form S-1")).
3.2 Bylaws of the Registrant, as amended to date (incorporated
by reference to Exhibit 3.2 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 2000)
(the "2000 Form 10-K")).
4.1 Form of Stock Certificate (incorporated by reference to
Exhibit 4.2 to the 1995 Form S-1).
5.1* Opinion of Gibson, Dunn & Crutcher LLP.
10.1** 1983 Stock Incentive Program, and form of agreements thereto
(incorporated by reference to Exhibit 10.1 to the 1995 Form
S-1).
10.2** 1993 Stock Plan as amended, and form of agreement thereto
(incorporated by reference to Exhibit 10.2 to the
Registrant's Form 10-K for the fiscal year ended June 30,
1997 (the "1997 Form 10-K")).
10.3** 1998 Employee Stock Purchase Plan as amended, and form of
agreements thereto (incorporated by reference to Exhibit
10.3 to the Registrant's Form 10-K for the fiscal year ended
June 30, 1999 (the "1999 Form 10-K")).
10.4** 1995 Director Option Plan as amended, and form of agreement
thereto (incorporated by reference to Exhibit 10.4 to the
1997 Form 10-K).
10.5 Form of Indemnification Agreement between the Registrant and
its officers and directors (incorporated by reference to
Exhibit 10.5 to the 1995 Form S-1).
10.6 Lease Agreement between the Registrant and Technology
Associates I dated July 18, 1986, as amended (incorporated
by reference to Exhibit 10.6.1 to the 1995 Form S-1).
10.7 Office Building Lease between Registrant and Puente Hills
Business Center II dated May 20, 1993, as amended
(incorporated by reference to Exhibit 10.6.2 to the 1995
Form S-1).
10.8 Standard Office Lease - Gross between SILMA Incorporated and
South Bay/Copley Joint Venture dated November 11, 1992
(incorporated by reference to Exhibit 10.6.3 to the 1995
Form S-1).
10.9 Fifth Amendment to Lease between Registrant and Metropolitan
Life Insurance Company dated as of December 5, 1996
(incorporated by reference to Exhibit 10.6.4 to the 1997
Form 10-K).
10.10** Loan Payoff Plan dated August 3, 1993 between Registrant and
Charles Duncheon (incorporated by reference to Exhibit 10.7
to the 1995 Form S-1).
10.11** Promissory Note between Registrant and Charles Duncheon
dated August 20, 1998 (incorporated by reference to Exhibit
10.7.1 to the 1999 Form 10-K).
10.12** Promissory Note between Registrant and Richard Casler dated
April 16, 1999 (incorporated by reference to Exhibit 10.7.2
to the 1999 Form 10-K).
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
-------- -------------
<C> <S>
10.13** Promissory Note between Registrant and Brian Carlisle dated
May 7, 1999 (incorporated by reference to Exhibit 10.7.3 to
the 1999 Form 10-K).
10.14** Promissory Note between Registrant and Bruce Shimano dated
May 7, 1999 (incorporated by reference to Exhibit 10.7.4 to
the 1999 Form 10-K).
10.15** Offer Letter between the Registrant and Marcy Alstott dated
February 19, 1998, as amended (incorporated by reference to
Exhibit 10.8 to the Registrant's Form 10-K for the fiscal
year ended June 30, 1998 (the "1998 Form 10-K")).
10.16** Promissory Note between Registrant and Marcy Alstott dated
April 27, 1998 (incorporated by reference to Exhibit 10.8.1
to the 1998 Form 10-K).
10.17** Offer Letter between the Registrant and Kathleen Fisher
dated July 16, 1999 (incorporated by reference to Exhibit
10.8.2 to the 1999 Form 10-K).
10.18** Promissory Note between Registrant and Kathleen Fisher dated
August 2, 1999 (incorporated by reference to Exhibit 10.8.3
to the 1999 Form 10-K).
10.19 Lease Agreement dated as of April 30, 1998 between the
Registrant and the Joseph and Eda Pell Revocable Trust dated
August 18, 1989 (incorporated by reference to Exhibit 10.9
to the 1998 Form 10-K).
10.20 Lease Agreement dated June 1, 1998 between the Registrant
and Technology Centre Associates LLC for the premises
located at 180 Rose Orchard Way, San Jose, California
(incorporated by reference to Exhibit 10.10 to the 1998 Form
10-K).
10.21 First Amendment to Lease Agreement dated June 1, 1998
between the Registrant and Technology Centre Associates LLC
dated July 31, 1998 (incorporated by reference to Exhibit
10.10.1 to the 1998 Form 10-K).
10.22 Sublease between the Registrant and Ascent Logic Corporation
dated as of July 31, 1998 (incorporated by reference to
Exhibit 10.10.2 to the 1998 Form 10-K).
10.23 Second Amendment to Lease Agreement dated March 31, 2000
between Registrant and Technology Centre Associates LLC
dated July 31, 1998 (incorporated by reference to Exhibit
10.23 to the 2000 Form 10-K).
10.24 First Addendum to Lease Agreement dated August 18, 1999
between Registrant and Joseph and Eda Pell Revocable Trust
dated August 18, 1989 (incorporated by reference to Exhibit
10.24 to the 2000 Form 10-K).
10.25 Lease Agreement dated April 28, 2000 between Registrant and
Michael and Diane Edwards for premises located in Tucson,
Arizona (incorporated by reference to Exhibit 10.25 to the
2000 Form 10-K).
10.26 Lease Agreement dated May 19, 2000 between NanoMotion Inc.
and United Insurance Co. of America for premises located at
Santa Barbara, California (incorporated by reference to
Exhibit 10.26 to the 2000 Form 10-K).
10.27*** Agreement between Registrant and Altron Systems Corporation
(acquired by Sanmina Corporation) dated January 30, 1998
(incorporated by reference to Exhibit 10.27 to the 2000 Form
10-K).
10.28 Agreement between Registrant and Ramix Incorporated dated
October 27, 1998 (incorporated by reference to Exhibit 10.28
to the 2000 Form 10-K).
10.29 Robot Module Purchase and Service Agreement between
Registrant and NSK Corporation dated January 19, 1995
(incorporated by reference to Exhibit 10.29 to the 2000 Form
10-K).
10.30 Agreement between Registrant and Electronic Manufacturing
Systems, Inc. dated August 28, 1997 (incorporated by
reference to Exhibit 10.30 to the 2000 Form 10-K).
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
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<C> <S>
10.31*** Original Equipment Manufacturer Agreement between Registrant
and Hirata Corporation dated January 31, 1995 (incorporated
by reference to Exhibit 10.31 to the 2000 Form 10-K).
10.32*** Original Equipment Manufacturing Agreement between
Registrant and Samsung Electronics Co., LTD dated February
26, 1999 (incorporated by reference to Exhibit 10.32 to the
2000 Form 10-K).
10.33*** Sublicense Agreement between SILMA Division of Registrant
and Adept Japan Co., LTD dated September 26, 2000
(incorporated by reference to Exhibit 10.33 to the 2000 Form
10-K).
10.34*** Original Equipment Manufacturing Agreement between
Registrant and Yaskawa Electric Corp. dated August 29, 2000
(incorporated by reference to Exhibit 10.34 to the 2000 Form
10-K).
21.1 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21.1 to the 2000 Form 10-K).
23.1 Consent of Independent Auditors regarding Adept Technology,
Inc.
23.2 Consent of Independent Auditors regarding HexaVision
Technologies Inc.
23.3 Consent of Gibson, Dunn & Crutcher LLP (included in their
opinion filed as Exhibit 5.1).
24.1 Power of Attorney (See Signature Page to this Registration
Statement).
</TABLE>
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+ Schedules have been omitted and will be provided to the SEC upon request.
* To be filed by amendment.
** Management contract or compensatory plan or arrangement.
*** Confidential treatment has been requested as to certain portions of this
exhibit. An unredacted version of this exhibit has been filed separately
with the SEC.
