================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K/A
AMENDMENT TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JULY 23, 1997
-------------
APPLIED SCIENCE AND TECHNOLOGY, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-22646 04-2962110
- --------------------------------------------------------------------------------
(STATE/OTHER JURISDICTION (COMMISSION FILE NO.) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
35 CABOT ROAD WOBURN MA (01801)
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NO., INCLUDING AREA CODE: (617) 933-5560
--------------
NOT APPLICABLE
-------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
AMENDMENT NO. 1
THE UNDERSIGNED REGISTRANT (THE "COMPANY") HEREBY AMENDS THE FOLLOWING ITEMS,
FINANCIAL STATEMENTS, EXHIBITS OR OTHER PORTIONS OF ITS FORM 8-K FILED ON MAY 9,
1997 AS SET FORTH IN THE PAGES ATTACHED HERETO.
(LIST ALL SUCH ITEMS, FINANCIAL STATEMENTS, EXHIBITS OR OTHER PORTIONS AMENDED)
1) ITEM 7, PAGE 5 - AMENDED TO INCLUDE THE FINANCIAL STATEMENTS OF CONVERTER
POWER, INC. AND THE COMPANY'S PRO FORMA FINANCIAL INFORMATION.
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Table of Contents
Form 8K/A
July 23, 1997
Item Page
- ---- ----
ITEM 7. Financial Statements and Exhibits ......................... 1
Signatures .......................................................... 26
Exhibits ............................................................ none
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
This Amendment No. 1, on Form 8-K/A is filed by Applied Science and Technology,
Inc.(the "Company") to amend the Current Report on Form 8-K filed by the Company
on May 9, 1997. Only those items which are amended are set forth herein.
( a ) Historical Financial Statements of Converter Power, Inc. ("CPI")
----------------------------------------------------------------
(i) Audited Financial Statements of CPI:
Report of Arthur Andersen & Co. LLP, Independent Public Accountants
Balance Sheets as of September 28, 1996 and September 30, 1995
Statements of Operations for the years ended September 28, 1996 and
September 30, 1995
Statements of Shareholder's Equity for the years ended September 28,
1996 and September 30, 1995
Statements of Cash Flows for the years ended September 28, 1996 and
September 30, 1995
Notes to Financial Statements
(ii) Unaudited Financial Statements of CPI:
Balance Sheet as of April 30, 1997
Statements of Operations for the seven months ended April 30, 1997 and
April 26, 1996
Statement of Cash Flows for the seven months ended April 30, 1997
Statement of Shareholder's Equity for the seven months ended April 30,
1997
Notes to the Financial Statements
( b ) Pro Forma Financial Information (unaudited)
-------------------------------------------
Pro Forma Consolidated Balance Sheets as of April 26, 1997
Pro Forma Consolidated Statements of Operations for the fiscal year
ended June 29, 1996 Pro Forma Consolidated Statements of Operations for
the ten months ended April 26, 1997 Notes to Pro Forma Financial
Statements
( c ) Exhibits
--------
None
2
CONVERTER POWER, INC.
Financial Statements
as of September 28, 1996 and
September 30, 1995
Together with Auditors' Report
3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholder of Converter Power, Inc.
We have audited the accompanying balance sheets of Converter Power,
Inc. (a Massachusetts Corporation) as of September 28, 1996 and September 30,
1995, and the related statements of operations, shareholder's equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Converter Power Inc.
as of September 28, 1996 and September 30, 1995 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Jose, California
June 20, 1997
4
CONVERTER POWER, INC.
BALANCE SHEETS
AS OF SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
- ------ ---- ----
<S> <C> <C>
Current Assets:
Cash ........................................................ $ 32,273 $ 71,100
Accounts receivable, less allowance
for doubtful accounts of $20,000
and $96,682, respectively ................................ 1,223,020 1,489,141
Inventory ................................................... 1,695,772 1,929,353
Prepaid expenses and other current assets ................... 148,883 214,903
--------------- ---------------
Total current assets ..................................... 3,099,948 3,704,497
Property and Equipment, at cost
Machinery and equipment ..................................... 562,359 432,033
Furniture and fixtures ...................................... 118,458 39,141
Leasehold improvements ...................................... 598,814 95,536
--------------- ---------------
1,279,631 566,710
Accumulated depreciation & amortization ..................... (426,238) (319,720)
--------------- ---------------
Net property and equipment ............................... 853,393 246,990
Other assets ................................................ 8,537 21,106
--------------- ---------------
$ 3,961,878 $ 3,972,593
=============== ===============
Liabilities and shareholder's equity
Current Liabilities:
Accounts payable ............................................ $ 406,509 $ 973,494
Accrued payroll and related items ........................... 160,137 130,900
Other accrued liabilities ................................... 180,547 317,318
Payable to related party (Note 6) ........................... 515,124 308,224
--------------- ---------------
Total current liabilities ................................ 1,262,317 1,729,936
Commitments (Note 5)
Shareholder's Equity:
Common stock, no par value, 1,000
shares authorized, issued and outstanding
in 1996 and 1995, respectively ........................... 5,000 5,000
Retained earnings ........................................... 2,694,561 2,237,657
--------------- ---------------
Total shareholder's equity ............................... 2,699,561 2,242,657
--------------- ---------------
$ 3,961,878 $ 3,972,593
=============== ================
</TABLE>
The accompanying notes are an integral part of these balance sheets
5
CONVERTER POWER, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 28, 1996
AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales ................................................ $ 12,235,053 $ 11,932,721
Cost of sales ............................................ 9,146,545 8,063,960
------------- -------------
Gross Margin ............................................. 3,088,508 3,868,761
Expenses:
Research and development ............................. 1,099,741 1,055,684
Sales and marketing .................................. 344,917 295,204
General and administrative ........................... 1,017,423 867,247
------------- -------------
Total operating expenses ......................... 2,462,081 2,218,135
------------- -------------
Income from operations ................................... 626,427 1,650,626
Other income and interest expense, net ................... (590) (1,110)
------------- -------------
Income before taxes ...................................... 625,837 1,649,516
Provision for income taxes ............................... 168,933 566,295
------------- -------------
Net income ............................................... $ 456,904 $ 1,083,221
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
6
CONVERTER POWER, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED SEPTEMBER 28, 1996
AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Common Stock Retained
---------------------------------
Shares Amount Earnings Total
--------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Balance at September 30, 1994 ....... 1,000 $ 5,000 $ 1,154,436 $ 1,159,436
Net income ..................... - - 1,083,221 1,083,221
--------------- --------------- ------------------ -----------------
Balance at September 30, 1995 ....... 1,000 5,000 2,237,657 2,242,657
Net income ..................... - - 456,904 456,904
--------------- --------------- ------------------ -----------------
Balance at September 28, 1996 ....... 1,000 $ 5,000 $ 2,694,561 $ 2,699,561
=============== =============== ================== =================
</TABLE>
The accompanying notes are an integral part of these financial statements
7
CONVERTER POWER, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 28, 1996
AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................................... $ 456,904 $ 1,083,221
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................................ 106,518 154,965
Provision for doubtful accounts .............................. 18,403 57,935
Provision for inventory obsolescence ......................... - 166,300
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ............. 266,121 (775,191)
(Increase) decrease in other receivables ............... (5,834) 23,988
(Increase) decrease in inventories ..................... 233,581 (1,017,224)
(Increase) decrease in prepaid expenses and other assets 66,020 (195,272)
Increase (decrease) in accounts payable ................ (566,985) 433,231
Increase in accrued payroll and related items .......... 29,237 8,609
Increase (decrease) in other accrued liabilities ....... (136,771) 71,947
-------------- --------------
Total adjustments ................................. 10,290 (1,070,712)
-------------- --------------
Net cash provided by operating activities ........................... 467,194 12,509
-------------- --------------
Cash flows from investing activities:
Capital expenditures ................................................ (712,921) (190,649)
-------------- --------------
Net cash used in investing activities ............................... (712,921) (190,649)
-------------- --------------
Cash flows from financing activities:
Increase in payable to related party ................................ 206,900 48,539
-------------- --------------
Net cash provided by (used in) financing activities ................. 206,900 48,539
-------------- --------------
Net decrease in cash ................................................ (38,827) (129,601)
Cash at beginning of year .................................................. 71,100 200,701
-------------- --------------
Cash at end of year ........................................................ $ 32,273 $ 71,100
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
8
CONVERTER POWER, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 28, 1996
1. ORGANIZATION AND OPERATIONS OF THE COMPANY:
Converter Power, Inc. (the "Company"), incorporated in Massachusetts, is a
wholly owned subsidiary of ILC Technology, Inc. (the "Parent"). The Company
designs, manufactures, and sells high efficiency, small form factor power
sources. The Company's products are used in semiconductor, medical, scientific
and industrial applications. The Company's facilities are all located in the
U.S.
In May 1997, the Parent sold substantially all of the assets of the Company to
ASTeX/CPI Acquisition Corp. ("AAC"), a wholly owned subsidiary of Applied
Science and Technology, Inc. (Note 8).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market, and
include material, labor and manufacturing overhead. Inventories at September 28,
1996 and September 30, 1995, respectively, consisted of the following:
1996 1995
---- ----
Raw materials ......................... $1,443,635 $1,376,328
Work-in-process ....................... 160,176 487,902
Finished goods ........................ 91,961 65,123
---------- ----------
Total inventories ..................... $1,695,772 $1,929,353
========== ==========
DEPRECIATION AND AMORTIZATION
Property and equipment are depreciated or amortized on a straight-line basis
over estimated useful lives as follows:
Equipment, furniture and fixtures 5-10 years
Leasehold improvements life of the lease
9
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company is not required to adopt the provisions of this
statement until its fiscal year 1997. The Company plans to adopt the disclosure
provisions of this statement in 1997. The effect on its financial position and
results of operations upon adoption, will not be significant.
REVENUE RECOGNITION
The Company recognizes revenue on all product sales upon shipment of the
product. The Company accrues for estimated warranty obligations at the time of
the sale of the related product based upon its past history of claims experience
and costs to discharge its obligations.
RISKS DUE TO CONCENTRATION OF SIGNIFICANT CUSTOMER AND INDUSTRY AND EXPORT SALES
During fiscal 1996 and 1995, one customer, Varian Associates, Inc., accounted
for 43% and 49% of the Company's revenues, respectively. As of September 28,
1996 and September 30, 1995, amounts receivable from this customer amounted to $
83,125 and $ 469,396, respectively. This customer is in the semiconductor
equipment industry. The semiconductor equipment industry is subject to volatile
business cycles, which can directly affect the Company's revenues. In the fourth
quarter of 1996, the Company experienced a significant reduction in orders from
this customer which led to a significant decrease in revenues with no assurance
that these orders will be replaced.
Export sales accounted for 11% and 5% of total revenues in 1996 and 1995,
respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred and consist primarily of
salaries and other direct expenses.
3. BANK BORROWINGS:
The Company's assets are subject to a security interest related to the bank
borrowings of the Parent. As of September 28, 1996, the Parent was not in
compliance with certain ratios and covenants related to these bank borrowings.
The Parent obtained a waiver from the bank for this non-compliance.
4. EMPLOYEE RETIREMENT PLAN AND STOCK PLANS:
The Company's employees are eligible to participate in the Company's 401 (k)
Benefit Plan if they have more than one year of service with the Company. Under
the terms of the Plan, participating employees must contribute at least 2% of
their salary to the Plan. The Parent contributes (as a matching contribution)
50% of the first 4% of each employee's contribution.
10
Employees may contribute up to 15% of their salary to the Plan. The Company's
contributions vest at a rate of 20% per year, commencing on the first
anniversary of employment.
The Company's employees are eligible to participate in the Parent's 1992 Stock
Option Plan ("Plan") and Employee Stock Purchase Plan ("Purchase Plan"). Under
the Plan, the Company may grant options to employees and directors. The exercise
price per share for stock options cannot be less than the fair market value of
the Parent's common stock on the date of grant. Options granted are for a
ten-year term and generally vest ratably over a period of four years commencing
one year after the date of grant. Under the Parent's Purchase Plan, the number
of shares of the Parent's common stock that is available for purchase by each
participant is based on the participant's annual base earnings and at a purchase
price equal to 85% of the fair market value of the Parent's common stock at the
beginning and end of the quarter of purchase, whichever is lower.
5. COMMITMENTS:
At September 28, 1996, the future minimum rental payments under a building lease
are approximately $207,000 in fiscal 1997 and 1998, respectively, and
approximately $218,000 in fiscal 1999 and 2000, respectively. The amounts total
$850,000.
For fiscal 1996 and 1995, rental expense was approximately $226,000 and $75,000,
respectively.
6. RELATED PARTY TRANSACTIONS:
The following amounts were due to the Parent at September 28, 1996 and September
30, 1995, respectively:
1996 1995
---- ----
Payable to Parent ................ $515,124 $308,224
The payable to the Parent is a net balance resulting from sales to the Parent
and accounting for income taxes for the Company (Note 7).
The financial statements include sales to the Parent of approximately $1,835,000
and $803,000 in fiscal 1996 and 1995, respectively. Sales to the Parent are made
under similar terms and conditions as those to independent third parties.
7. INCOME TAXES:
The Company has not previously recorded any current or deferred income taxes or
benefits as the Company has filed its tax returns as part of a consolidated
group filed by the Parent. Accordingly, all current and deferred income taxes
were recorded by the Parent. However, for the purposes of these financial
statements, the Company has calculated current and deferred income taxes on the
basis that it is a standalone entity. Federal and state taxes payable have been
recorded as a payable to the Parent as taxes have previously been paid by the
Parent through the filing of consolidated tax returns.
11
The components of the provision for income taxes for the year ended September
28, 1996 and September 30, 1995, respectively, were as follows:
1996 1995
---- ----
Federal:
Current ............... $ 83,640 $ 523,150
Deferred .............. 51,023 (84,826)
State:
Current ............... 23,592 147,555
Deferred .............. 10,678 (19,584)
-------------- --------------
$ 168,933 $ 566,295
============== ==============
The components of the deferred tax asset at September 28, 1996 and September 30,
1995 were as follows:
1996 1995
---- ----
Inventory reserves ........... $ 24,936 $ 83,312
Warranty reserves ............ 62,339 22,700
Other cumulative
temporary differences ...... 54,534 97,498
-------------- -------------
$ 141,809 $ 203,510
============== =============
The effective income tax rates differ from the rates computed by applying the
Federal statutory income tax rate to income before provision for income taxes
for the years ended September 28, 1996 and September 30, 1995 as follows:
1996 1995
---- ----
Tax provision at
statutory rate ............. 34 % 34 %
State taxes, net
of Federal benefit ......... 4 4
Tax credits .................. (13) (6)
Other ........................ 2 2
============== =============
27 % 34 %
============== =============
8. SUBSEQUENT EVENT:
On May 9, 1997, Applied Science and Technology, Inc. ("ASTeX"), through a wholly
owned subsidiary, ASTeX/CPI Acquisition Corp. ("AAC"), acquired substantially
all of the assets of the Company.
The acquisition was in the form of an asset purchase in which AAC acquired
substantially all of the assets of the Company in exchange for $6,350,000 in
cash and 45,000 unregistered shares of ASTeX's Common Stock (the "Shares"). In
accordance with the provisions of an escrow agreement, the Shares will be held
for a minimum of twelve months and a maximum of twenty-four months, following
the closing. If, by May 8, 1998, the Shares have not increased in value to
$1,000,000, ASTeX will pay CPI the difference between the market
12
value and $1,000,000, such difference to be paid in cash, stock of ASTeX or a
combination of both.
13
Converter Power, Inc.
Balance Sheet
April 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Assets
- ------
<S> <C>
Current assets:
Accounts receivable, less allowance for doubtful accounts of $30,300 ...... $ 1,254,662
Inventory ................................................................. 2,051,237
Prepaid expenses and other current assets ................................. 40,870
-------------
Total current assets ....................................................... 3,346,769
Property and equipment, at cost
Machinery & equipment ..................................................... 572,064
Furniture and fixtures .................................................... 118,458
Leasehold improvements .................................................... 602,136
-------------
1,292,658
Accumulated depreciation and amortization ................................. (564,939)
-------------
Net property and equipment ................................................. 727,719
-------------
$ 4,074,488
=============
Liabilities and shareholder's equity
Current liabilities:
Cash overdraft ............................................................ $ 48,084
Accounts payable .......................................................... 520,071
Accrued payroll and related items ......................................... 347,685
Other accrued liablilities ................................................ 41,624
Payable to related party .................................................. 586,874
-------------
Total current liabilities .................................................. 1,544,338
Shareholder's equity:
Common stock .............................................................. 5,000
Retained earnings ......................................................... 2,525,150
-------------
Total shareholder's equity ................................................. 2,530,150
-------------
$ 4,074,488
=============
</TABLE>
See accompanying notes to financial statements.
14
Converter Power, Inc.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the seven months ended
------------------------------------
April 30, April 26,
1997 1996
------------- --------------
<S> <C> <C>
Net sales .......................................... $ 5,124,201 $ 7,829,450
Cost of sales and revenue: ......................... 4,002,836 5,535,173
------------- --------------
Gross margin ............................ 1,121,365 2,294,277
------------- --------------
Expenses:
Research and development ..................... 678,909 742,850
Sales and marketing .......................... 298,936 176,272
General and administrative ................... 375,874 594,118
------------- --------------
Total operating expenses ................ 1,353,719 1,513,240
------------- --------------
Income (loss) from operations ........... (232,354) 781,037
Other expense:
Interest expense ............................. 57 62
Other ........................................ - 34,499
------------- --------------
Total other expense ..................... 57 34,561
------------- --------------
Income (loss) before income taxes ....... (232,411) 746,476
Income tax expense (benefit) ....................... (63,000) 202,000
------------- --------------
Net income (loss) ....................... $ (169,411) $ 544,476
============= ==============
</TABLE>
See accompanying notes to financial statements.
15
Converter Power, Inc.
Statement of Cash Flows
For the seven months ended April 30, 1997
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
Cash flow from operating activities:
Net loss ..................................................... $ (169,411)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation & amortization .............................. 138,701
Changes in assets and liabilities:
Accounts receivable .................................. (31,642)
Inventory ............................................ (355,465)
Prepaid expenses & other current assets .............. 116,550
Accounts payable ..................................... 113,562
Accrued payroll and related items .................... 187,548
Other accrued liabilities ............................ (138,923)
Payable to related parties ........................... 71,750
---------------
Net cash used for operating activities .......... (67,330)
---------------
Cash flows from investing activities:
Additions to property and equipment ...................... (13,027)
---------------
Net cash used for investing activities .......... (13,027)
---------------
Net decrease in cash ............................................ (80,357)
Cash at beginning of period ..................................... 32,273
---------------
Cash overdraft at end of period ................................. $ (48,084)
===============
</TABLE>
See accompanying notes to financial statements.
16
Converter Power, Inc.
Statement of Shareholder's Equity
For the seven months ended April 30, 1997
<TABLE>
<CAPTION>
Common Stock Retained
------------------------------
Shares Amount Earnings Total
------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance at September 28, 1996 ...... 1,000 $ 5,000 $ 2,694,561 $ 2,699,561
Net loss ........................... - - (169,411) (169,411)
------------ ---------------- ---------------- ----------------
Balance at April 30, 1997 .......... 1,000 $ 5,000 $ 2,525,150 $ 2,530,150
============ ================ ================ ================
</TABLE>
See accompanying notes to financial statements.
17
Converter Power, Inc.
Notes to Financial Statements
April 30, 1997
(unaudited)
1) Basis of Presentation
The unaudited financial statements as of April 30, 1997 have been prepared in
accordance with generally accepted accounting principles and include all
adjustments, which in the opinion of management, are necessary to present fairly
the results of operations for the period then ended.
2) Description of Business
Converter Power, Inc. (the "Company") is a wholly owned subsidiary of ILC
Technology, Inc. (the "Parent"). The Company designs, manufactures and sells
high efficiency, small form factor power sources built to fit compactly into a
variety of systems. The Company's products are used in semiconductor, medical,
scientific and industrial applications.
3) Acquisition
On May 9, 1997 the net assets of the Company, exclusive of certain liabilities,
were sold to ASTeX/CPI Acquisition Corp. for $6,350,000 plus 40,321 unregistered
shares of ASTeX common stock. The purchase price is subject to certain
adjustments as provided for in the purchase and sale agreement. The effective
date of the transaction is April 30, 1997.
The value of the ASTeX shares on May 8, 1998 is guaranteed by ASTeX to be at
least $1,000,000, subject to certain adjustments as provided for the purchase
and sales agreement. If the shares do not have a market value of at least
$1,000,000 (prior to adjustments) on May 8, 1998, ASTeX will pay the difference
between market value and $1,000,000, less any adjustments, in cash, common stock
of ASTeX, or a combination of both, at its discretion.
18
Pro Forma Consolidated Financial Statements of Applied Science and Technology,
- --------------------------------------------------------------------------------
Inc. and Converter Power, Inc.
------------------------------
The following unaudited Pro Forma Consolidated Statements of Operations set
forth the combined results of operations of Applied Science and Technology, Inc.
("ASTeX") and Converter Power, Inc. ("CPI") based upon accounting for the
acquisition as an asset purchase and assuming the acquisition was consummated as
of the beginning of fiscal year ended June 29, 1996.
The Pro Forma Consolidated Balance Sheet gives effect to the acquisition as if
it had occurred on April 26, 1997.
The unaudited pro forma consolidated financial information combines the
historical Statements of Operations of ASTeX and CPI for the year ended June 29,
1996 and the ten months ended April 26, 1997.
For the periods presented in the Pro Forma Condensed Consolidated Statements of
Operations, pro forma shares used in computing earnings per share give effect to
exchange of 40,321 shares of ASTeX common stock, and $6,482,933 cash payment for
certain assets, liabilities and acquisition related expenses associated with the
acquisition.
The non-recurring expenses of $1,500,000 related to the expense of in process
research and development have been excluded from the Pro Forma statements of
operations presentation. These statements are not necessarily indicative of the
actual results of operations that would have been reported, nor do they purport
to indicate the results of future operations of the Company. In the opinion of
management, all adjustments necessary to present fairly such unaudited Pro Forma
Consolidated Statements of Operations have been made.
The Pro Forma Consolidated Financial Statements which follow should be read in
conjunction with the historical Financial Statements of ASTeX and CPI, and the
notes thereto.
19
Applied Science and Technology, Inc. and Converter Power, Inc.
Pro Forma Consolidated Balance Sheet
April 26, 1997
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Consolidation Pro Forma
ASTeX CPI Adjustments Eliminations Consolidated
Assets
- ------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents .......... $ 6,488,190 (48,084) (4,415,137) (c) $ 2,024,969
Accounts receivable ................ 9,040,072 1,254,662 10,294,734
Inventories ........................ 8,586,260 2,051,237 10,637,497
Prepaid expenses ................... 271,198 40,870 312,068
Deferred income taxes .............. 969,741 - 969,741
------------- ------------- ------------- ------------- -------------
Total current assets ................... 25,355,461 3,298,685 (4,415,137) - 24,239,009
Property, plant and equipment
Land ............................... 473,000 - 473,000
Building & improvements ............ 1,633,946 - 1,633,946
Equipment .......................... 7,651,342 572,064 8,223,406
Furniture and fixtures ............. 549,454 118,458 667,912
Leasehold Improvements ............. 1,475,703 602,136 2,077,839
------------- ------------- ------------- ------------- -------------
Total fixed assets ..................... 11,783,445 1,292,658 - - 13,076,103
Less accumulated depreciation
and amortization ................ (4,766,778) (564,939) (5,331,717)
------------- ------------- ------------- ------------- -------------
Net property, plant and equipment ...... 7,016,667 727,719 - - 7,744,386
Other assets, net of amortization
Patents ............................ 147,292 - 147,292
Other assets ....................... 250,127 - 250,127
Long term cash investments ......... 1,299,397 - 1,299,397
Investments in CPI ................. - - 6,433,958 (e) (6,433,958) -
Goodwill in CPI .................... - - 3,316,934 3,316,934
Note receivable .................... 158,688 - 158,688
------------- ------------- ------------- ------------- -------------
Total other assets ..................... 1,855,504 - 6,433,958 (3,117,024) 5,172,438
------------- ------------- ------------- ------------- -------------
Total assets ............................... $ 34,227,632 4,026,404 2,018,821 (3,117,024) $ 37,155,833
============= ============= ============= ============= =============
</TABLE>
See accompanying notes to Pro Forma Consolidated Financial Statements.
20
Applied Science and Technology, Inc. and Converter Power, Inc.
Pro Forma Consolidated Balance Sheet
April 26, 1997
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Consolidation Pro Forma
ASTeX CPI Adjustments Eliminations Consolidated
Liabilities and shareholder's equity
- ------------------------------------
<S> <C> <C> <C> <C> <C>
Current liabilities
Note payables .......................... $ 1,627,570 - 196,604 (b) $ 1,824,174
Accounts Payable ....................... 2,438,088 520,071 2,958,159
Accrued expenses ....................... 1,077,664 41,624 1,119,288
Accrued compensation ................... 799,865 347,685 1,147,550
Accrued income taxes ................... 292,066 - 292,066
Customer advances ...................... 65,871 - 65,871
Commission payable ..................... 127,179 - 127,179
Payable to related party ............... - 586,874 (586,874)(f) -
------------- ------------- ------------- ------------- -------------
Total current liabilities .................. 6,428,303 1,496,254 (390,270) - 7,534,287
Long term liabilities
Long-term debt, less current
liabilities .......................... 4,792,394 - 1,871,192 (b) 6,663,586
Deferred income tax payable ............ 36,507 - - 36,507
------------- ------------- ------------- ------------- -------------
Total long term liabilities ................ 4,828,901 - 1,871,192 - 6,700,093
Shareholders' equity
Common stock ........................... 44,563 5,000 403 (a) (5,000) 44,966
Additional paid in capital ............. 26,698,234 - 1,482,496 (a,f) (586,874) 27,593,856
Retained earnings
(accumulated deficit) ................ (3,624,043) 2,525,150 (945,000)(d) (2,525,150) (4,569,043)
Note receivable for stock .............. (148,326) - (148,326)
------------- ------------- ------------- ------------- -------------
Total shareholders' equity ................. 22,970,428 2,530,150 537,899 (3,117,024) 22,921,453
------------- ------------- ------------- ------------- -------------
Total liabilities and shareholders' equity ..... $ 34,227,632 4,026,404 2,018,821 (3,117,024) $ 37,155,833
============= ============= ============= ============= =============
</TABLE>
See accompanying notes to Pro Forma Consolidated Financial Statements.
21
Applied Science and Technology, Inc. and Converter Power Inc.
Pro Forma Consolidated Statements of Operations
For the Year Ended June 29, 1996
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
ASTeX CPI Adjustments Consolidated
<S> <C> <C> <C> <C>
Product sales, net ................................ $ 36,175,388 13,359,485 $ 49,534,873
Research contract revenue ......................... 894,517 - 894,517
Other revenue ..................................... 2,065,691 - 2,065,691
--------------- --------------- ---------------
Total revenue .......................... 39,135,596 13,359,485 - 52,495,081
--------------- --------------- --------------- ---------------
Cost of sales and revenue:
Product sales and other revenue ............. 23,414,139 9,388,814 32,802,953
Research contracts .......................... 439,659 - 439,659
--------------- --------------- --------------- ---------------
Total cost of sales and revenue ........ 23,853,798 9,388,814 - 33,242,612
--------------- --------------- --------------- ---------------
Gross profit ........................... 15,281,798 3,970,671 - 19,252,469
--------------- --------------- --------------- ---------------
Operating expenses:
Research and development expenses ........... 4,553,361 1,103,993 5,657,354
Selling expenses ............................ 3,297,664 299,546 3,597,210
General and administrative expenses ......... 3,807,327 1,032,188 4,839,515
Acquisition-related expenses ................ 2,887,647 - 2,887,647
Write-off of goodwill ....................... 6,813,562 - 6,813,562
Goodwill amortization ....................... - - 331,693 (g) 331,693
--------------- --------------- --------------- ---------------
Total operating expenses ............... 21,359,561 2,435,727 331,693 24,126,981
--------------- --------------- --------------- ---------------
Earnings (loss) from operations ........ (6,077,763) 1,534,944 (331,693) (4,874,512)
--------------- --------------- --------------- ---------------
Other expense (income):
Interest expense ............................ 323,510 62 178,397 (h) 501,969
Interest income ............................. (659,066) - 248,368 (i) (410,698)
Other expense (income) ...................... 13,568 42,042 - 55,610
--------------- --------------- --------------- ---------------
Total other (income) expense ........... (321,988) 42,104 426,765 146,881
--------------- --------------- --------------- ---------------
Earnings (loss) before income taxes .... (5,755,775) 1,492,840 (758,458) (5,021,393)
Income tax expense (benefit) ...................... 1,541,000 552,000 (281,000) (j) 1,812,000
--------------- --------------- --------------- ---------------
Net earnings (loss) .................... $ (7,296,775) 940,840 (477,458) $ (6,833,393)
--------------- --------------- --------------- ---------------
Primary net loss per share ........................ $ (1.74) $ (1.61)
=============== ===============
Weighted average common shares outstanding used
to calculate primary loss per share ......... 4,204,764 40,321 (k) 4,245,085
=============== =============== ===============
</TABLE>
See accompanying notes to the Pro Forma Consolidated Financial Statements.
22
Applied Science and Technology, Inc. and Converter Power Inc.
Pro Forma Consolidated Statements of Operations
For the Ten Months Ended April 26, 1997
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
ASTeX CPI Adjustments Consolidated
<S> <C> <C> <C> <C>
Product sales, net ............................... $ 31,089,339 7,233,532 $ 38,322,871
Research contract revenue ........................ 856,009 - 856,009
Other revenue .................................... 2,552,938 - 2,552,938
--------------- --------------- --------------- ----------------
Total revenue ......................... 34,498,286 7,233,532 - 41,731,818
--------------- --------------- --------------- ----------------
Cost of sales and revenue:
Product sales and other revenue ............ 21,201,748 5,836,849 27,038,597
Research contracts ......................... 423,693 - 423,693
--------------- --------------- --------------- ----------------
Total cost of sales and revenue ....... 21,625,441 5,836,849 - 27,462,290
--------------- --------------- --------------- ----------------
Gross profit .......................... 12,872,845 1,396,683 - 14,269,528
--------------- --------------- --------------- ----------------
Operating expenses:
Research and development expenses .......... 5,490,563 955,807 6,446,370
Selling expenses ........................... 2,240,748 418,654 2,659,402
General and administrative expenses ........ 2,882,185 559,946 3,442,131
Goodwill amortization ...................... - - 276,411 (g) 276,411
--------------- --------------- --------------- ----------------
Total operating expenses .............. 10,613,496 1,934,407 276,411 12,824,314
--------------- --------------- --------------- ----------------
Earnings (loss) from operations ....... 2,259,349 (537,724) (276,411) 1,445,214
Other expense (income):
Interest expense ........................... 475,585 57 143,226 (h) 618,868
Interest income ............................ (347,618) - 206,973 (i) (140,645)
Other expense (income) ..................... (27,048) (1,730) (28,778)
--------------- --------------- --------------- ----------------
Total other (income) expense .......... 100,919 (1,673) 350,199 449,445
--------------- --------------- --------------- ----------------
Earnings (loss) before income taxes ... 2,158,430 (536,051) (626,610) 995,769
Income tax expense (benefit) ..................... 799,000 (198,000) (232,000)(j) 369,000
--------------- --------------- --------------- ----------------
Net earnings (loss) ................... $ 1,359,430 (338,051) (394,610) $ 626,769
--------------- --------------- --------------- ----------------
Primary net earnings per share ................... $ 0.30 $ 0.14
=============== ================
Weighted average common shares outstanding used
to calculate primary earnings per share .... 4,529,451 40,321 (k) 4,569,772
=============== =============== ================
</TABLE>
See accompanying notes to the Pro Forma Consolidated Financial Statements.
23
Converter Power, Inc.
Notes to Pro Forma Consolidated Financial Statements
(unaudited)
The Pro Forma Consolidated Financial Statements gives effect to the following
pro forma adjustments and assumptions.
1) The Pro Forma Consolidated balance sheet gives effect to the following pro
forma adjustments to record the acquisition of assets, assumed liabilities
and other adjustments as required in the purchase and sales agreement.
Common stock ............................................. (403) (a)
Additional paid in capital ............................... (895,622) (a)
Short term debt issued ................................... (196,604) (b)
Long term debt issued .................................... (1,871,192) (b)
Cash paid ................................................ (4,415,137) (c)
In-process-research and development expense .............. 945,000 (d)
net of tax benefits (retained earnings)
Investment in CPI ........................................ 6,433,958 (e)
Payable to related parties ............................... 586,874 (f)
Additional paid in capital ............................... (586,874) (f)
(a) Represents 40,321 shares issued as part of the consideration paid.
(b) Represents short term and long term debt incurred in financing the
acquisition.
(c) Represents cash paid.
(d) Represents the expense of $1,500,000 related to non-recurring
in-process-research and development expense, net of deferred tax benefit.
For income tax reporting purposes, the assets acquired and liabilities
assumed are adjusted to fair value and in-process-research and development
is treated as deductible goodwill. Deferred taxes are provided for at ASTeX
effective rate of 37%.
(e) Represents the total ASTeX investment in CPI.
(f) Represents a reclass to equity of liabilities due to the parent, as
provided for in the purchase and sale agreement.
2) The Pro Forma Consolidated Statements of Operations give effect to the
following pro forma adjustments and assumptions.
(g) Represents goodwill amortization (over a 10 year period) as follows:
Year ended Ten months ended
June 29, 1996 April 26, 1997
----------------- -----------------
Goodwill amortization $ 331,693 $ 276,411
================= =================
24
(h) Represents interest expense on revolving debt issued to finance part of the
acquisition. The interest rate is 8.5% plus 0.25% on unused revolving line
of credit.
(i) Represents reduction of interest income on cash used for the acquisition.
(j) Represents tax at the ASTeX effective tax rate of 37%.
(k) Represents the weighted average shares outstanding used for the earnings
per share calculation as the sum of the actual previously reported weighted
average shares outstanding plus 40,321 shares issued in connection with the
acquisition.
25
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Applied Science and Technology
Date: July 23, 1997 By: /s/ John M. Tarrh
-----------------------------------
John M. Tarrh
Chief Financial Officer
Senior Vice President of Finance
26
