<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 24, 1998
MATTSON TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
-------------
- --------------------------------------------------------------------------------
Delaware 0-21970 77-0208119
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
- --------------------------------------------------------------------------------
3550 West Warren Avenue
Fremont, California 94538
(Address of principal executive offices) (Zip Code)
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code (510) 657-5900
(Former name or former address, if changed since last report)
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K
filed August 6, 1998 as set forth in the pages attached hereto.
Item 7. Financial Statements and Exhibits
1
<PAGE>
(a) AUDITED FINANCIAL STATEMENTS OF BUSINESS ACQURIED
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Concept Systems Design, Inc.
We have audited the accompanying balance sheets of Concept Systems Design, Inc.
(a California corporation) as of June 30, 1997 and 1996, and the related
statements of operations, shareholders' 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 Concept Systems Design, Inc.
as of June 30, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
San Jose, California
September 4, 1997
2
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
BALANCE SHEETS
JUNE 30, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,140,619 $ 3,608,381
Restricted cash 1,434,254 150,000
Accounts receivable, net of allowance for doubtful
accounts of $46,677 and $46,706 1,409,011 2,832,399
Income tax receivable 1,774,863 --
Inventories 2,828,385 4,273,781
Prepaid expenses and other current assets 271,365 382,404
------------ ------------
Total current assets 8,858,497 11,246,965
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 2,495,054 619,729
Leasehold improvements 1,456,553 327,198
Furniture and fixtures 162,481 114,411
------------ ------------
4,114,088 1,061,338
Less: Accumulated depreciation and amortization (743,553) (214,397)
------------ ------------
Net property and equipment 3,370,535 846,941
------------ ------------
DEPOSITS AND OTHER ASSETS 535,075 582,173
------------ ------------
Total Assets $ 12,764,107 $ 12,676,079
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable under lines of credit $ 675,000 $ 500,000
Note payable -- 2,000,000
Accounts payable 1,373,498 3,261,573
Accrued liabilities 928,502 922,179
Deferred revenue 699,405 609,524
------------ ------------
Total current liabilities 3,676,405 7,293,276
------------ ------------
LONG-TERM PORTION OF NOTES PAYABLE UNDER LINES OF CREDIT 700,000 --
COMMITMENTS (Note 5) -- --
SHAREHOLDERS' EQUITY:
Series A Convertible Preferred stock, no par value:
Authorized--400,000 shares
Issued and outstanding--400,000 shares in 1997
liquidation preference of $6,000,000 6,000,000 --
Common stock, no par value:
Authorized--10,000,000 shares
Issued and outstanding--2,253,541 and 2,230,000 shares
in 1997 and 1996, respectively 292,249 238,000
Retained earnings 2,095,453 5,144,803
------------ ------------
Total shareholders' equity 8,387,702 5,382,803
------------ ------------
Total liabilities and shareholders' equity $ 12,764,107 $ 12,676,079
------------ ------------
------------ ------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------------- ----------------
<S> <C> <C>
SALES $ 12,809,289 $ 20,132,262
COST OF SALES 7,867,286 10,497,725
------------------- ----------------
Gross margin 4,942,003 9,634,537
------------------- ----------------
OPERATING EXPENSES:
General and administrative 1,714,825 1,394,451
Sales and marketing 2,117,203 2,365,672
Research and development 5,976,388 2,539,335
------------------- ----------------
Total operating expenses 9,808,416 6,299,458
------------------- ----------------
Income (loss) from operations (4,866,413) 3,335,079
INTEREST INCOME (EXPENSE), net (24,060) 34,697
OTHER INCOME 20,144 --
------------------- ----------------
Income (loss) before provision for income taxes (4,870,329) 3,369,776
BENEFIT FROM (PROVISION FOR) INCOME TAXES 1,820,979 (1,307,473)
------------------- ----------------
Net income (loss) $ (3,049,350) $ 2,062,303
------------------- ----------------
------------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Series A Convertible
Preferred Stock Common Stock
-------------------- ------------ Retained
Shares Amount Shares Amount Earnings Total
------ ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1995 -- $ -- 2,230,000 $ 238,000 $ 3,082,500 $ 3,320,500
Net income -- -- -- -- 2,062,303 2,062,303
--------- ----------- --------- ----------- ---------- -----------
BALANCE, JUNE 30, 1996 -- -- 2,230,000 238,000 5,144,803 5,382,803
Issuance of common stock -- -- 23,541 54,249 -- 54,249
Issuance of preferred stock 400,000 6,000,000 -- -- -- 6,000,000
Net loss -- -- -- -- (3,049,350) (3,049,350)
--------- ----------- --------- ----------- ----------- -----------
BALANCE, JUNE 30, 1997 400,000 $ 6,000,000 2,253,541 $ 292,249 $ 2,095,453 $ 8,387,702
--------- ----------- --------- ----------- ----------- -----------
--------- ----------- --------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,049,350) $ 2,062,303
Adjustments to reconcile net income (loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 529,156 145,166
Change in operating assets and liabilities:
Restricted cash (1,284,254) (150,000)
Accounts receivable 1,423,388 (418,891)
Income tax receivable (1,774,863) --
Inventories 1,445,396 (1,577,860)
Prepaid expenses, other assets and deposits 158,137 (836,809)
Deferred revenue 89,881 (494,412)
Accounts payable and accrued liabilities (1,881,752) 2,254,281
---------------- --------------
Net cash provided by (used for) operating activities (4,344,261) 983,778
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,052,750) (552,533)
---------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 875,000 2,500,000
Repayment of note payable (2,000,000) (250,000)
Proceeds from issuance of preferred stock 6,000,000 --
Proceeds from issuance of common stock 54,249 --
---------------- --------------
Net cash provided by financing activities 4,929,249 2,250,000
---------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,467,762) 2,681,245
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,608,381 927,136
---------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,140,619 $ 3,608,381
---------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 141,125 $ 19,711
Cash paid for income taxes 290,000 1,967,000
Transfer of equipment to inventory -- 400,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
1. ORGANIZATION:
Concept Systems Design, Inc. was incorporated in California on July 1, 1989,
to develop, manufacture, and sell semiconductor capital equipment. In
addition, the Company also provides field service support and sells spare
parts for its products. The principal markets for the Company's semiconductor
capital equipment are domestic, European and Pacific-rim semiconductor
manufacturers. All of the Company's manufacturing operations are carried out
in a single facility, located in Fremont, California. The Company is subject
to a number of risks including concentrations of customers in the
semiconductor industry, the need to obtain adequate financing, competition
from firms with greater financial resources than the Company, and dependence
on key personnel.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents. The carrying amounts of these
instruments approximate fair value due to their short maturities.
Restricted Cash
The cash received in connection with the sale of Series A Convertible
Preferred Stock is restricted for use only in the development of the
Company's next generation product, the Single Wafer System. In addition, the
Company is required to maintain cash balances that are restricted by
provisions of its building lease agreement. Restricted cash is invested in
accounts earning market rates; therefore, its carrying value approximates
fair value. Such cash is excluded from cash and cash equivalents for purposes
of the statements of cash flows.
Inventories
Inventories are stated at the lower of cost or market and include material,
labor and manufacturing costs. Inventories are valued at currently adjusted
standards which approximate actual costs on a first-in, first-out basis.
The Company provides inventory reserves for excess, obsolete, damaged or lost
inventory. The process of estimating required inventory reserves is
judgmental and is based on a number of factors which require input and
discussion among various members of management. Such factors include changes
in customer demand and technology, as well as other economic factors.
Therefore, it is reasonably possible that these estimates could change in the
near term.
7
<PAGE>
Inventories consisted of the following as of June 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------ --------------
<S> <C> <C>
Raw materials $2,258,235 $2,513,423
Work-in-process 570,150 1,145,697
Finished goods -- 614,661
------------ --------------
$2,828,385 $4,273,781
------------ --------------
------------ --------------
</TABLE>
Property and Equipment
Property and equipment are stated at cost and are generally depreciated over
the estimated useful lives of the assets (five years) using the straight-line
method. Leasehold improvements are amortized on a straight-line basis over
the shorter of the useful lives of the assets or the remaining lease term.
During March 1995, the Financial Accounting Standards Board issued Statement
No. 121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which requires the Company to
review for impairment of long-lived assets, certain identifiable intangibles,
and goodwill related to those assets whenever events or changes in
circumstances indicate that the carrying amount of an asset might not be
recoverable. SFAS No. 121 became effective for the Company's year ended June
30, 1997. The new accounting statement did not have a material impact on the
Company's financial condition or results of operations.
Revenue Recognition and Product Warranty
Product revenue is generally recognized upon shipment. The Company provides a
reserve for the estimated costs of installation and warranty at the time of
sale. Maintenance and service revenues are recognized as the related work is
performed. Deferred revenues consist primarily of customer deposits.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash investments and trade receivables.
The Company has cash investment policies that limit cash investments to
short-term, low risk investments. Additionally, the Company grants credit to
customers, who are concentrated in the semiconductor industry. The Company
performs ongoing credit evaluations of its customers' financial condition,
and establishes an allowance for doubtful accounts based upon factors
surrounding the credit risks of specific customers, historical trends, and
other information. During 1997, two customers accounted for 77% of total
accounts receivable. During 1996, four customers accounted for 91% of total
accounts receivable.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles require 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
8
<PAGE>
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
3. MAJOR CUSTOMERS AND EXPORT SALES:
For the years ended June 30, 1997 and 1996, the Company had the following
customers who accounted for greater than 10% of revenues:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Customer A 28% *
Customer B * 22%
Customer C 19% *
Customer D * 18%
Customer E 15% *
Customer F * 13%
------- -------
62% 53%
------- -------
</TABLE>
*These customers did not account for over 10% of revenue in these periods.
For the years ended June 30, 1997 and 1996 international sales, consisting of
export sales from the U.S., were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Europe 10% 3%
Asia/Pacific 30% 32%
------- -------
40% 35%
------- -------
</TABLE>
4. NOTES PAYABLE UNDER LINES OF CREDIT:
During fiscal year 1996, the Company entered into a $1,300,000 revolving
line of credit with a bank to finance $650,000 of domestic accounts
receivable and $650,000 of foreign accounts receivable. In addition, the
Company entered into a $1,000,000 term line of credit to finance capital
equipment. The accounts receivable lines and the capital equipment line
expire on January 2, 1998 and December 3, 2001, respectively. As of June 30,
1997, $475,000 was outstanding on the domestic line of credit and $900,000
was outstanding under the capital equipment term line. These amounts are
included in current and long-term notes payable under lines of credit on the
accompanying balance sheets.
9
<PAGE>
Scheduled maturities of the long-term note payable for the next five years
are as follows:
<TABLE>
<S> <C>
1998 $ 200,012
1999 200,012
2000 200,012
2001 200,012
2002 99,952
</TABLE>
The lines of credit are secured by all of the Company's assets. Borrowings
under the domestic, foreign and capital lines bear interest at 9.00%, 8.50%
and 8.51%, respectively. Borrowings on the accounts receivable lines are
limited to the lesser of 80% of the eligible borrowing base (as defined) or
$650,000. Under the Agreements, the Company is required to maintain certain
financial covenants, including a minimum tangible net worth of $2,500,000, a
ratio of total liabilities to tangible net worth not greater than 2 to 1 and
after-tax profitability on a yearly basis. The Company was not in compliance
with profitability covenant of the Agreements and has obtained a waiver from
its bank to cure the violation.
During 1996, the Company borrowed $2,000,000 under an unsecured note payable
from an unrelated commercial enterprise. The note bears interest at a rate of
6% and principal and accrued interest are payable upon demand of the holder.
The $2,000,000 note was paid in full during fiscal year 1997.
The fair value of the corporation's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Corporation for debt of the same remaining maturities.
5. COMMITMENTS AND CONTINGENCIES:
The Company leases its primary operating facility in Fremont, California
under an operating lease. Under the term of the operating lease, monthly rent
payments are scheduled to escalate over the period of the lease. The Company
records rent expense on a straight-line basis over the lease period. The
minimum future lease payments required under the Company's operating leases
are as follows at June 30: 1997
<TABLE>
<CAPTION>
Fiscal Year Operating
Ending June 30, Lease
------------------------ -----------------------
<S> <C>
1998 $ 610,000
1999 628,000
2000 647,000
2001 667,000
2002 687,000
Thereafter 585,000
-------------
Total minimum payments $ 3,824,000
-------------
</TABLE>
Rent expense was approximately $620,000 and $261,000 for fiscal 1997 and
1996, respectively.
10
<PAGE>
6. INCOME TAXES:
The Company accounts for taxes using an asset and liability approach under
which deferred income taxes are provided based upon enacted tax laws and rates
applicable to the periods in which the taxes become payable.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying value of assets and liabilities for financial reporting
purposes and the amounts reported for income tax purposes, primarily certain
accrued expenses and reserves. The Company's deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets $ 212,701 $ 88,303
Deferred tax liabilities -- --
----------- -----------
Total $ 212,701 $ 88,303
</TABLE>
The benefit from (provision for) income taxes is reconciled with the Federal
statutory rate as follows:
<TABLE>
<CAPTION>
1997 1996
--------- -----------
<S> <C> <C>
Benefit (provision) computed at Federal statutory rate 1,655,912 (1,145,724)
State taxes, net of Federal tax benefit 449,932 (274,669)
Permanent Differences (11,000) 99,127
Total current tax benefit (provision) 2,094,844 (1,321,266)
Deferred tax benefit (provision) (273,866) 13,793
Net tax benefit (provision) 1,820,979 (1,307,473)
Net effective tax rate 37% 39%
</TABLE>
The income tax benefit (provision) consists of the following:
<TABLE>
<S> <C> <C>
Current $2,094,844 $(1,321,266)
Deferred (273,865) 13,793
----------------------------
$1,820,979 $(1,307,473)
----------------------------
</TABLE>
The difference between the statutory tax rate and the Company's effective tax
rate is primarily due to research and development credits, foreign sales tax
benefits, and changes in the valuation allowance related to certain net
operating losses. As of June 30, 1997, the Company had net operating loss
carrybacks of approximately $1,941,000.
7. CONVERTIBLE PREFERRED STOCK:
As of June 30, 1997, the Company had issued 400,000 shares of Series A
Convertible Preferred Stock ("Series A"). The Series A shareholder has the
option to purchase the outstanding shares of the Company, for an amount based
on a valuation formula wherein the total valuation of the Company will not be
less than $45,000,000. This option expires on July 15, 1998. Upon the
occurrence of certain events, the option may be extended to January 15, 1999.
Other rights, restrictions and preferences of the Series A Convertible
Preferred Stock are as follows:
* Each share of Series A is convertible, at the right and option of the
shareholder, into one share of common stock.
* Each shareholder of Series A is entitled to the number of votes equal to
the number of shares of common stock into which the preferred stock can be
converted.
11
<PAGE>
- Each share of Series A will automatically convert into common stock in
the event of the closing of an underwritten public offering of the
Company's common stock from which the Company receives proceeds in
excess of $10,000,000 and for which the offering price is not less than
$10.00 per share of common stock or immediately upon the closing of the
acquisition of a majority of the then outstanding shares of the
Company's common stock by holders of the majority of the then
outstanding shares of the Series A Convertible Preferred Stock.
- Each shareholder of Series A is entitled to receive annual dividends at
the rate of $1.50 per share, when and if declared by the Board of
Directors, prior to payment of dividends on common stock. Dividends are
non-cumulative, and no dividends have been declared to date.
- In the event of any liquidation, dissolution, or winding-up of the Company,
either voluntary or involuntary, each shareholder of Series A shall be
entitled to receive prior and in preference to any distribution of any
assets or surplus funds to the holders of common stock, an amount equal to
$15.00 per share. If the full amount is not available for distribution,
amounts shall be paid out in proportion to the aggregate preferential
amounts owed.
8. Common Stock:
As of June 30, 1997, the Company had reserved shares of common stock for
future issuance as follows:
<TABLE>
<S> <C>
Conversion of Series A Convertible Preferred Stock 400,000
Exercise of stock options 396,459
---------
796,459
---------
---------
</TABLE>
9. Incentive Stock Option Plan:
In 1994, the Board of Directors approved the 1994 Stock Incentive Plan (the
"Plan"). Under the Plan, incentive and nonqualified stock options to purchase
up to 400,000 shares may be granted to employees and outside directors of the
Company. The exercise price per share shall not be less than fair value at
the date of grant, as determined by the Board of Directors. Options become
exercisable as determined by the Board of Directors, which is generally
ratably over four years from the date of grant, and expire ten years after
the date of grant.
12
<PAGE>
Option activity under the Plan for the two years ended June 30, 1996 and 1997
is as follows:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------
Shares Weighted
Available Number Average
for Grant of Shares Exercise Price
-----------------------------------------------
<S> <C> <C> <C>
Balance at June 30, 1995 306,000 94,000 $0.60
Canceled 15,000 (15,000) $1.20
Granted (180,500) 180,500 $2.09
-----------------------------
Balance at June 30, 1996 140,500 259,500 $1.64
Exercised -- (3,541) $1.20
Canceled 7,209 (7,209) $1.43
Granted (60,500) 60,500 $2.50
-----------------------------
Balance at June 30, 1997 87,209 309,250 $1.78
-----------------------------
-----------------------------
</TABLE>
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 ("SFAS No. 123") "Accounting for Stock-Based Compensation," which
establishes a fair value-based method of accounting for stock-based
compensation plans and requires additional disclosures for those companies
who elect not to adopt the new method of accounting. The Company adopted SFAS
No. 123 in fiscal 1997, and in accordance with provisions of SFAS No. 123,
the Company has elected to continue to apply APB Opinion 25 and related
interpretations in accounting for its stock option plan. Had compensation
cost for this plan been determined consistent with SFAS No. 123, the
Company's net loss in 1997 would have increased to $3,089,584 and net income
in 1996 would have decreased to $2,028,768. Because the SFAS No. 123 method
of accounting 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 weighted average fair values of options granted during 1997 and 1996 were
$0.44 and $0.74, respectively. The options outstanding at June 30, 1997 have a
weighted average contractual remaining life of 8 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 assumptions used
for grants in 1997 and 1996; risk-free interest rates ranged from 5.2 to 6.4
percent; expected dividend yields of 0%; expected lives of 3 years beyond
grant date; and expected volatility of .01%.
13
<PAGE>
Outstanding and Exercisable by Price Range
<TABLE>
<CAPTION>
As of June 1997
Options Outstanding Options Exercisable
-------------------- ----------------------
Number Weighted Number Weighted
Range of Outstanding As Average Exercisable As Average
Exercise Prices Of June 30, 1997 Exercise Price Of June 30, 1997 Exercise Price
----------------- --------------------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C>
$0.35-1.32 140,500 $0.91 129,824 $0.93
$2.50 168,750 $2.50 38,780 $2.50
----------------- --------------------- --------------- ------------------ ------------------
$0.35-2.50 309,250 $1.78 168,604 $1.29
----------------- --------------------- --------------- ------------------ ------------------
----------------- --------------------- --------------- ------------------ ------------------
</TABLE>
10. EMPLOYEE BENEFIT PLAN:
Effective January 1, 1994, the Company adopted an Employee Benefit Plan which
covers substantially all employees. The Company may make discretionary
contributions to this Employee Benefit Plan and contributions vest
immediately. The Company contributed $105,000 and $132,680 to the Employee
Benefit Plan during the years ended June 30, 1997 and 1996. These amounts are
included in accrued liabilities at June 30, 1997 and 1996.
11. EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED)
On July 24, 1998 (the "Closing Date"), Mattson Technology, Inc. (the
"Company") completed its acquisition of Concept Systems Design, Inc.
("Concept") through the merger (the "Merger") of a wholly-owned subsidiary,
Concept Acquisition Corporation ("Sub"), with and into Concept, pursuant to
an Agreement and Plan of Reorganization dated as of July 10, 1998 (the
"Agreement"), among Mattson, Sub and Concept.
The Merger will be recorded as a purchase for accounting purposes, and the
purchase price will be allocated to the assets acquired and liabilities
assumed based upon their estimated fair market values on the date of
acquisition. The amount allocated to in-process technology, which is
presently being determined, will be expensed.
Under the terms of the Agreement, each share of Concept Common Stock issued
and outstanding and held by the former shareholders of Concept (the "Concept
Shareholders") was converted into the right to receive one-third of a share
of Mattson Common Stock. Of the 895,138 shares of Mattson Common Stock to be
issued in connection with the Merger (the "Mattson Shares"), 89,514 shares,
will be held in escrow for one year as security against breaches by Concept
of the representations, warranties and covenants made under the Agreement.
Notwithstanding the foregoing, an aggregate of 100,000 shares from the
Mattson Shares otherwise issuable to the shareholders of Concept as a result
of the Merger shall not be issued initially and shall only be issued if
Concept achieves net revenues of $16,667,000 based upon generally accepted
accounting principles (the "Concept Revenue Milestone") during the first
twenty-four (24) full calendar months following the Closing Date (the
"Measurement Period"). In addition, up to 447,569 additional shares of Mattson
Common Stock may be issued by the Company to the Concept Shareholders at the
end of the Measurement Period if the Concept Revenue Milestone is met and the
Company's closing share price for its Common Stock (as reported by the Wall
Street Journal and as adjusted as adjusted by stock splits, stock dividends
and the like) does not reach at least $12 per share for any consecutive ten
(10) day trading period during the Measurement Period.
14
<PAGE>
(b) UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
give effect to the merger of Mattson Technology, Inc. (Mattson) and Concept
Systems Design, Inc. (Concept) using the purchase method of accounting in
accordance with generally accepted accounting principles. Mattson is
considered the accounting acquirer. The unaudited pro forma condensed
combined financial statements are based upon the historical financial
statements of the respective companies. The unaudited pro forma condensed
combined balance sheet assumes that the merger took place on June 28, 1998
and combines Concept's June 30, 1998 unaudited historical balance sheet with
Mattson's June 28, 1998 historical unaudited consolidated balance sheet. The
unaudited pro forma condensed combined statements of operations for the
twelve months ended December 31, 1997 and the six months ended June 28, 1998
assume the merger took place as of January 1, 1997 and combine Mattson's
consolidated statement of operations for the twelve months ended December 31,
1997 with Concept's statements of operations for the six months ended June
30, 1997 (unaudited) and the six months ended December 31, 1997 (unaudited).
The unaudited pro forma condensed combined statement of operations for the
six months ended June 28, 1998 combine Mattson's condensed consolidated
statement of operations for the six months ended June 28, 1998 (unaudited)
with Concept's condensed statement of operations for the six months ended
June 30, 1998 (unaudited). The unaudited pro forma condensed combined
financial statements are based on the estimates and assumptions set forth in
the notes to such statements. The pro forma adjustments are based on a
preliminary valuation of Concept, that has yet to be finalized, made in
connection with the development of the pro forma information for illustrative
purposes to comply with the disclosure requirements of the Securities and
Exchange Commission. The pro forma adjustments included in the unaudited pro
forma condensed combined financial statements may be revisd upon the
finalization of the valuation of the net assets acquired by Mattson. The
unaudited pro forma condensed combined financial statements do not purport to
be indicative of the results of operations for future periods or the combined
financial position or results that would have been realized had the companies
been a single entity during these periods. These unaudited pro forma
condensed combined financial statements should be read in conjunction with
the historical financial statements and related notes thereto of Concept,
which are included elsewhere herein and the historical consolidated financial
statements of Mattson included in Mattson's December 31, 1997 Annual Report
on Form 10-K and June 28, 1998 Quarterly Report on Form 10-Q previously filed
with the Securities and Exchange Commission.
15
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 28, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
MATTSON
TECHNOLOGY CONCEPT SYSTEMS
INC. DESIGN, INC. PRO FORMA
--- ------------ ADJUSTMENTS COMBINED
----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,773 $ 256 $ - $ 30,029
Short-term investments 10,545 - - 10,545
Accounts receivable, net 11,572 1,218 - 12,790
Inventories 13,163 2,563 - 15,726
Prepaid expenses and other current
assets 5,843 572 - 6,415
----------- ----------- ----------- -----------
Total current assets 70,896 4,609 - 75,505
Property and equipment, net 10,388 2,632 500 (a) 13,520
Other intangible assets - 5,413 (b) 5,413
Other long term assets - 447 - 447
----------- ----------- ----------- -----------
$ 81,284 $ 7,688 $ 5,913 $ 94,885
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable $ - $ 683 $ - $ 683
Accounts payable 2,076 4,472 - 6,548
Accrued liabilities 14,246 485 650 (c) 15,381
Deferred revenue - 4,221 - 4,221
Debentures Payable - 4,000 4,000
----------- ----------- ----------- -----------
Total current liabilities 16,322 13,861 650 30,833
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
500 (a)
5,413 (b)
(650)(c)
5,750 (d)
(5,750)(d)
-----------
Stockholders' equity (deficit) 64,962 (6,173) 5,263 64,052
----------- ----------- ----------- -----------
$ 81,284 $ 7,688 $ 5,913 $ 94,885
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to pro forma condensed combined balance sheet
16
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CONCEPT
MATTSON TECHNOLOGY SYSTEMS DESIGN,
INC. INC. PRO FORMA
--- --- ADJUSTMENTS COMBINED
----------- --------
<S> <C> <C> <C> <C>
Net sales $ 76,730 $ 6,310 $ - $ 83,040
Cost of sales 37,130 5,302 806 (b) 43,238
----------- ----------- ----------- -----------
Gross profit 39,600 1,008 (806) 39,802
----------- ----------- ----------- -----------
Operating expenses:
Amortization of goodwill 7 (e) 7
----------- -----------
100 (a)
173 (b)
-----------
Research, development and engineering 14,709 8,200 273 23,182
Selling, general and administrative 24,495 3,265 67 (b) 27,827
----------- ----------- ----------- -----------
Total operating expenses 39,204 11,465 347 51,016
----------- ----------- ----------- -----------
Income (loss) from operations 396 (10,457) (1,153) (11,214)
Interest and other income (expense), net 1,486 (34) - 1,452
----------- ----------- ----------- -----------
Income (loss) before income taxes 1,882 (10,491) (1,153) (9,762)
Provision for (benefit from) income taxes 451 (1,601) (214) (c) (1,364)
----------- ----------- ----------- -----------
Net income (loss) $ 1,431 $ (8,890) $ (939) $ (8,398)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per share:
Basic $ 0.10 $ (0.56)
----------- -----------
----------- -----------
Diluted $ 0.09 $ (0.56)
----------- -----------
----------- -----------
Weighted average shares outstanding:
Basic 14,117 14,912 (d)
----------- -----------
----------- -----------
Diluted 15,311 14,912 (d)
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information
17
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 28, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
MATTSON TECHNOLOGY, CONCEPT SYSTEMS
INC. DESIGN, INC. PRO FORMA
--- ------------ ADJUSTMENTS COMBINED
----------- --------
<S> <C> <C> <C> <C>
Net sales $ 35,897 $ 3,241 $ - $ 39,138
Cost of sales 19,621 4,346 403 (b) 24,370
----------- ----------- ----------- -----------
Gross profit 16,276 (1,105) (403) 14,768
----------- ----------- ----------- -----------
Operating expenses:
Amortization of goodwill 4 (e) 4
----------- -----------
50 (a)
86 (b)
-----------
Research, development and engineering 8,272 5,011 136 13,419
-----------
Selling, general and administrative 12,367 1,833 34 (b) 14,234
----------- ----------- ----------- -----------
Total operating expenses 20,639 6,844 174 27,657
----------- ----------- ----------- -----------
Income (loss) from operations (4,363) (7,949) (577) (12,889)
Interest and other income (expense), net 989 (336) - 653
----------- ----------- ----------- -----------
Income (loss) before income taxes (3,374) (8,285) (577) (12,236)
Provision for (benefit from) income taxes ( 909) (255) - (1,164)
----------- ----------- ----------- -----------
Net income (loss) $ (2,465) $ (8,030) $ (577) $ (11,072)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per share:
Basic $ (0.17) $ (0.73)
----------- -----------
----------- -----------
Diluted $ (0.17) $ (0.73)
----------- -----------
----------- -----------
Weighted average shares outstanding:
Basic 14,364 15,159 (d)
----------- -----------
----------- -----------
Diluted 14,364 15,159 (d)
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. The Acquisition
The pro forma condensed combined financial information reflects the
acquisition of Concept on July 24, 1998 for 795,138 shares of Mattson
Common Stock. The purchase price of the acquisition of $4,689,000, which
includes $650,000 of estimated acquisition related costs, was used to
acquire the net assets of Concept. The purchase price for pro forma
purposes was allocated to assets acquired and liabilities assumed based on
the book value of Concept's current assets and liabilities, which
management believes approximates their fair value, the estimated fair value
of property and equipment, based on management's estimates of fair value,
and an independent appraisal for all other identifiable assets. The excess
of the purchase price over the net tangible and intangible assets acquired
and liabilities assumed has been allocated to goodwill. The allocation of
the purchase price is as follows (in thousands):
<TABLE>
<S> <C>
Property and equipment $ 3,055
Current and other assets 4,041
Liabilities assumed (13,570)
Goodwill 36
Acquired in-process research and development 5,750
Acquired developed technology and workforce 5,377
------------
$ 4,689
------------
------------
</TABLE>
In addition to the purchase price shown above, the agreement for the
acquisition of Concept also includes the contingent distribution of shares
of Common Stock of Mattson of 100,000 shares that will be issued to the
Concept shareholders if Concept achieves net revenues of at least
$16,667,000 during the first twenty-four full calendar months following the
acquisition date. Up to an additional 447,569 shares of Mattson Common
Stock will be issued to the Concept shareholders if the net revenue
milestone is achieved and the stock price of Mattson Common Stock does not
reach at least $12 per share for any consecutive ten day trading period
during the twenty-four full calendar months following the acquisition.
2. Unaudited Pro forma Condensed Combined Statement of Operations
The following adjustments were applied to the historical statements of
operations for Mattson and Concept for the year ended December 31, 1997 and
the six months ended June 28, 1998 to arrive at the pro forma unaudited
condensed combined statement of operations of the respective periods as
though the acquisition took place on January 1, 1997:
(a) To reflect net change in depreciation related to the change in fair
value of property and equipment.
(b) To reflect amortization of the fair values of the developed
technology and work force over periods ranging from 3 to 7 years.
(c) To adjust the provision for (benefit from) income taxes to the
estimated benefit from income taxes on a pro forma combined basis.
(d) Shares used in the per share calculation reflect 895,138 shares
issued to shareholders as if they were outstanding from the beginning of
each period presented. Basic and diluted weighted average shares
outstanding are the same in each period because of the pro forma combined
net loss.
(e) Adjustment to recognize amortization of goodwill arising from the
merger over 5 years.
19
<PAGE>
The one time charge to expense for the fair value of the in-process
research and development has been excluded from the unaudited pro
forma condensed combined statement of operations since it is a
non-recurring charge.
The year ended December 31, 1997 for Concept is unaudited and consists
of the last two quarters of Concept's fiscal year ended June 30, 1997
and the first two quarters of Concept's fiscal year ended June 30,
1998.
3. Unaudited Pro Forma Condensed Combined Balance Sheet
The following adjustments were applied to the historical balance sheet of
Mattson and Concept at June 28, 1998 to arrive at the pro forma condensed
combined balance sheet:
(a) To record the net increase in fair value of property and equipment
over their historical book value.
(b) To record intangible assets acquired at their fair values, as
follows (in thousands):
<TABLE>
<S> <C>
Developed technology $ 4,417
Work force 960
Goodwill 36
----------
$ 5,413
----------
----------
</TABLE>
(c) Adjustment to record the estimate of transaction costs related to
the merger. Estimated costs include all costs directly incurred as a
result of the agreement including, but not limited to, accounting and
attorney fees, consultants and other miscellaneous items.
(d) To reflect the one time charge for the acquired in-process research
and development charges of $5,750,000.
20
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
BALANCE SHEET
JUNE 30, 1998
(in thousands, except share data)
(unaudited)
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 256
Accounts receivable, net of allowance for doubtful
Accounts of $46 1,218
Income tax receivable 551
Inventories 2,563
Prepaid expenses and other assets 21
------------
Total current assets 4,609
------------
Property and equipment, at cost:
Machinery and equipment 1,209
Leasehold improvements 1,899
Furniture and fixtures 936
------------
4,044
Less: Accumulated depreciation and amortization (1,412)
------------
2,632
Deposits and other assets: 447
------------
$ 7,688
------------
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 683
Accounts payable 4,472
Accrued liabilities 485
Deferred revenue 4,221
Debentures payable 4,000
------------
Total current liabilities 13,861
------------
Shareholders' Equity
Series A Convertible Preferred stock, no par value;
Authorized, issued and outstanding - 400,000 shares
Liquidation preference of $6,000 6,000
Common stock, no par value
Authorized - 10,000,000 shares
Issued and outstanding - 2,257,441 shares 296
Accumulated deficit (12,469)
------------
Total shareholders' equity (6,173)
------------
$ 7,688
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
(in thousands, except shares and per share data)
(unaudited)
<TABLE>
<S> <C>
Sales $ 6,104
Cost of sales 6,985
-----------
Gross margin (881)
-----------
Operating expenses:
Selling, general and administrative 3,417
Research and development 10,356
-----------
Total operating expenses 13,773
-----------
Loss from operations (14,654)
Interest expense, net (374)
-----------
Loss before provision for income taxes (15,028)
Benefit from income taxes (463)
-----------
Net loss $ (14,565)
-----------
-----------
Net loss per share:
Basic $ (6.46)
-----------
Diluted $ (6.46)
-----------
Weighted average shares outstanding:
Basic 2,255,491
-----------
-----------
Diluted 2,255,491
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
(in thousands)
(unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (14,565)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation 838
Loss on disposition of property and equipment 272
Change in operating assets and liabilities:
Restricted cash 1,434
Accounts receivable 191
Income tax receivable 1,224
Inventories 265
Prepaid expenses and other current assets 250
Other assets 88
Deferred revenue 3,524
Accounts payable 3,100
Accrued liabilities (480)
-----------
Net cash used for operating activities (3,859)
-----------
Cash flows from investing activities:
Purchase of property, plant and equipment (371)
-----------
Net cash used for investing activities (371)
-----------
Cash flows from financing activities:
Proceeds from borrowing 4,000
Repayment of note payable (658)
Proceeds from issuance of common stock 4
-----------
Net cash provided by financing activities 3,346
-----------
Net decrease in cash and cash equivalents (884)
Cash and cash equivalents, beginning of period 1,140
-----------
Cash and cash equivalents, end of period $ 256
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
CONCEPT SYSTEMS DESIGN, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
JUNE 30, 1998
NOTE 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included.
The financial statements should be read in conjunction with the audited
financial statements for the year ended June 30, 1997.
NOTE 2 BALANCE SHEET DETAIL (IN THOUSANDS):
<TABLE>
<S> <C>
Inventories:
Purchased parts and raw materials $ 919
Work-in-process 613
Finished goods 1,031
----------
$ 2,563
----------
----------
Accrued liabilities:
Accrued compensation and benefits $ 194
Warranty and installation reserves 184
Other 87
Commissions 20
----------
$ 485
----------
----------
</TABLE>
NOTE 3: NET INCOME (LOSS) PER SHARE
Basic EPS is computed by dividing income (loss) available to common stockholders
(numerator) by the weighted average number of common shares outstanding
(denominator) for the period. Diluted EPS gives effect to all dilutive potential
common shares outstanding during the period. The computation of diluted EPS uses
the average market prices during the period.
During the year ended June 30, 1998 there were no differences between the
numerators and denominators used for the basic and diluted EPS calculations as a
result of the loss incurred during the year.
24
<PAGE>
NOTE 4: SUBSEQUENT EVENTS
On July 24, 1998, the Company was acquired by Mattson.
Under the terms of the agreement, each share of Concept Common Stock issued
and outstanding and held by the former shareholders of the Company was
converted into the right to receive one-third of a share of Mattson Common
Stock. Of the 895,138 shares of Mattson Common Stock issued in connection
with the merger, (the "Mattson Shares"), 89,514 shares, will be held in
escrow for one year as security against breaches by the Company of the
representations, warranties and covenants made under the agreement.
Notwithstanding the foregoing, an aggregate of 100,000 additional shares from
the Mattson Shares otherwise issuable to the shareholders of the Company as a
result of the merger shall not be issued initially and shall only be issued
are contingently issuable if the Company achieves net revenues of $16,667,000
during the first twenty-four (24) full calendar months following the closing
date. In addition, up to 447,569 additional shares of Mattson Common Stock
may be issued to the Company shareholders at the end of the twenty-four month
period if the Company meets the revenue milestones stated above and Mattson's
closing share price for its Common stock does not reach at least $12 per
share for any consecutive ten (10) day trading period during the twenty-four
month period following the closing date.
25
<PAGE>
(c) Exhibits
Exhibit No. Description
- ----------- -----------
23.1 Consent of Independent Public Accountants
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Amendment No. 1 to Current
Report to be signed on its behalf by the undersigned hereunto duly authorized.
MATTSON TECHNOLOGY, INC.
Date: September 28, 1998 By: /s/ Richard Mora
---------------------------------
Richard Mora
Vice President of Finance and Chief
Financial Officer
27
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
23.1 Consent of Independent Public Accountants
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in
this amendment to the Current Report (File No. 000-24838) on Form 8-K of
Mattson Technology, Inc. filed August 6, 1998 of our report dated
September 4, 1997 with respect to the unaudited financial statements of Concept
Systems Design, Inc.
/s/ Arthur Andersen LLP
September 23, 1998
San Jose, California
