<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 6, 2000
---------------
Brooks Automation, Inc.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
000-25434 04-3040660
- ------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
15 Elizabeth Drive, Chelmsford, MA 01824
-------------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
(978) 262-2400
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
The undersigned Registrant hereby amends Item 7 of its Current Report on
Form 8-K dated January 6, 2000 to read in its entirety as follows:
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
AutoSimulations, Inc. and Subsidiaries:
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1999
(unaudited) and March 31, 1999 and 1998
Consolidated Statements of Operations for the nine months
ended December 31, 1999 and 1998 (unaudited) and the years
ended March 31, 1999 and 1998, the period from November 27,
1996 to March 31, 1997 and the period from April 1, 1996 to
November 26, 1996
Consolidated Statement of Changes in Stockholder's Equity
for the nine months ended December 31, 1999 (unaudited) and
the years ended March 31, 1999 and 1998, the period from
November 27, 1996 to March 31, 1997 and the period from
April 1, 1996 to November 26, 1996
Consolidated Statements of Cash Flows for the nine months
ended December 31, 1999 and 1998 (unaudited) and the years
ended March 31, 1999 and 1998, the period from November 27,
1996 to March 31, 1997 and the period from April 1, 1996 to
November 26, 1996
Notes to Consolidated Financial Statements
Auto-Soft Corporation and Subsidiary:
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1999
(unaudited) and March 31, 1999 and 1998
Consolidated Statements of Operations for the nine months
ended December 31, 1999 and 1998 (unaudited) and the years
ended March 31, 1999 and 1998, the period from September 6,
1996 to March 31, 1997 and the period from April 1, 1996 to
September 5, 1996
<PAGE> 3
Consolidated Statements of Changes in Stockholder's Equity
for the nine months ended December 31, 1999 (unaudited) and
the years ended March 31, 1999 and 1998, the period from
September 5, 1996 to March 31, 1997 and the period from
April 1, 1996 to September 5, 1996
Consolidated Statements of Cash Flows for the nine months
ended December 31, 1999 and 1998 (unaudited) and the years
ended March 31, 1999 and 1998, the period from September 6,
1996 to March 31, 1997 and the period from April 1, 1996 to
September 5, 1996
Notes to Consolidated Financial Statements
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Condensed Balance Sheet as of
December 31, 1999
Unaudited Pro Forma Combined Condensed Statement of Operations
for the three months ended December 31, 1999
Unaudited Pro Forma Combined Condensed Statement of Operations
for the year ended September 30, 1999
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
(c) EXHIBITS
<TABLE>
<CAPTION>
Item No. Description
-------- -----------
<S> <C>
*2.1 Agreement and Plan of Merger dated December 15, 1999, by and
among Brooks Automation, Inc., ASC Merger Corp., ASI
Merger Corp., Daifuku America Corporation, and Daifuku Co.,
Ltd.
*2.2 Stockholder Agreement by and among Brooks Automation, Inc.,
Daifuku America Corporation, and Daifuku Co., Ltd. dated
January 6, 2000
*2.3 Corporate Non-Competition and Proprietary Information
Agreement between Brooks, Daifuku Co., Ltd. and Daifuku
America Corporation dated January 6, 2000
23.1 Consent of PricewaterhouseCoopers LLP
</TABLE>
- ---------------------------------------
* Previously filed
<PAGE> 4
AUTOSIMULATIONS, INC.
AND SUBSIDIARIES
REPORT ON AUDITS OF CONSOLIDATED FINANCIAL
STATEMENTS AS OF MARCH 31, 1999 AND 1998
AND FOR THE TWO YEARS ENDED MARCH 31, 1999
AND THE PERIODS FROM NOVEMBER 27, 1996 TO
MARCH 31, 1997 AND APRIL 1, 1996 TO
NOVEMBER 26, 1996
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder and Board of Directors of
AutoSimulations, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholder's equity, and
of cash flows present fairly, in all material respects. the financial position
of AutoSimulations, Inc. and its subsidiaries as of March 31, 1999 and 1998, and
the results of their operations and their cash flows for the two years ended
March 31, 1999 and the periods from November 27, 1996 to March 31, 1997 and
April 1, 1996 to November 26, 1996, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As described in note 2, the accompanying consolidated financial statements have
been revised to reflect a new cost basis resulting from the acquisition of the
Company in 1996.
/s/ PricewaterhouseCoopers LLP
December 27, 1999
<PAGE> 6
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, -----------------------------------
1999 1999 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 965,312 $ 11,218 $ 1,141,040
Trade accounts receivable, net of allowance for
doubtful accounts of $53,900 at March 31,
1999 and 1998 2,816,785 4,081,111 3,276,194
Costs in excess of billings 128,754 125,911 6,041
Other receivables 29,413 80,228 200,985
Income taxes receivable 320,667 707,155 310,932
Deferred tax asset 749,583 562,286 333,481
Other current assets 35,236 145,401 43,611
------------ ------------ ------------
Total current assets 5,045,750 5,713,310 5,312,284
Property and equipment, net 2,816,416 2,923,049 3,091,136
Intangible assets, net 13,399,222 15,710,485 19,633,437
Other assets 71,005 73,157 68,852
------------ ------------ ------------
Total assets $ 21,332,393 $ 24,420,001 $ 28,105,709
============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 41,374 $ 141,669 $ 225,451
Accrued liabilities 1,460,604 1,647,298 1,193,895
Long-term debt current 275,241 1,058,769 2,663,349
Capital lease obligations, current -- 2,167 30,356
Income taxes payable to parent 541,539 -- --
Deferred income 1,453,590 1,774,529 1,359,192
------------ ------------ ------------
Total current liabilities 3,772,348 4,624,432 5,472,243
Long-term debt, noncurrent -- -- 275,227
Capital lease obligations, noncurrent -- -- 2,167
Deferred tax liability 1,651,949 2,304,273 2,874,584
------------ ------------ ------------
Total liabilities 5,424,297 6,928,705 8,624,221
------------ ------------ ------------
Commitments (Notes 6 and 8)
Stockholder's equity:
Common stock, no par value: 5,000,000 shares
authorized: 100 shares issued and outstanding 34,646 34,646 34,646
Additional paid-in capital 22,069,732 22,069,732 22,069,732
Accumulated deficit (6,196,282) (4,613,082) (2,622,890)
------------ ------------ ------------
Total stockholder's equity 15,908,096 17,491,296 19,481,488
------------ ------------ ------------
Total liabilities and stockholder's equity $ 21,332,393 $ 24,420,001 $ 28,105,709
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 7
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, YEAR ENDED MARCH 31, NOVEMBER 27, APRIL 1, 1996 TO
---------------------------- ---------------------------- 1996 TO NOVEMBER 26,
1999 1998 1999 1998 MARCH 31, 1997 1996
---- ---- ---- ---- -------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses $ 5,545,647 $ 5,743,119 $ 6,551,760 $ 7,157,887 $ 1,714,056 $ 2,837,101
Software support and services 4,566,787 3,172,972 6,295,287 4,557,608 1,154,015 2,467,001
Other revenues 275,197 890,407 57,837 54,548 1,800 75,299
------------ ------------ ------------ ------------ ------------ ------------
Total revenues 10,387,631 9,806,498 12,904,884 11,770,043 2,869,871 5,379,401
------------ ------------ ------------ ------------ ------------ ------------
Cost of sales 2,601,341 2,662,934 3,361,360 2,869,350 782,224 981,838
------------ ------------ ------------ ------------ ------------ ------------
Gross margin 7,786,290 7,143,564 9,543,524 8,900,693 2,087,647 4,397,563
------------ ------------ ------------ ------------ ------------ ------------
Operating expenses:
Development and support 4,714,997 3,702,561 3,409,379 4,704,826 968,955 1,611,719
Sales and marketing 1,771,884 1,520,588 1,862,494 1,932,329 350,651 641,672
General and administrative 1,130,560 1,651,791 3,560,994 1,597,348 728,360 1,007,490
Depreciation and amortization 2,040,385 2,150,596 2,982,614 3,028,911 843,383 334,863
------------ ------------ ------------ ------------ ------------ ------------
Total operating expenses 9,657,826 9,025,536 11,815,481 11,263,414 2,891,349 3,595,744
------------ ------------ ------------ ------------ ------------ ------------
Operating income (loss) (1,871,536) (1,881,972) (2,271,957) (2,362,721) (803,702) 801,819
Interest expense, net (43,331) (77,470) (121,651) (197,236) (28,137) (33,012)
Other income (expense), net 16,632 85,875 (100,459) 66,744 36,000 67,599
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before income
taxes and cumulative effect
of accounting change (1,898,235) (1,873,567) (2,494,067) (2,493,213) (795,839) 836,406
Provision for (benefit from)
income taxes (488,175) (449,019) (578,724) (534,785) (169,636) 374,656
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) after taxes, before
cumulative effect of
accounting change (1,410,060) (1,424,548) (1,915,343) (1,958,428) (626,203) 461,750
Cumulative effect of accounting
change, net of income tax
benefit of $15,902 (26,730) -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) $ (1,436,790) $ (1,424,548) $ (1,915,343) $ (1,958,428) $ (626,203) $ 461,750
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 8
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Additional Earnings Total
Common Paid-in Treasury Deferred (Accumulated Stockholder's
Stock Capital Stock Compensation Deficit) Equity
------ ---------- -------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1996 $ 45,550 $ 274,995 $ (145,701) $ (50,223) $ 2,175,778 $ 2,300,399
Issuance of 1,000 shares of common stock 100 -- -- -- -- 100
Purchase of 82,200 shares of common
stock for treasury -- -- (98,824) -- -- (98,824)
Net issuance/forfeiture of options -- (1,350) -- 1,350 -- --
Amortization of deferred compensation -- -- -- 48,873 -- 48,873
Net income -- -- -- -- 461,750 461,750
--------- ------------ ---------- --------- ------------ ------------
Balance at November 26, 1996 45,650 273,645 (244,525) -- 2,637,528 2,712,298
Adjustment to reflect new cost basis
resulting from acquisition of Company
by Daifuku (11,004) 21,796,087 244,525 -- (2,637,528) 19,392,080
Net loss -- -- -- -- (626,203) (626,203)
--------- ------------ ---------- --------- ------------ ------------
Balance at March 31, 1997 34,646 22,069,732 -- -- (626,203) 21,478,175
Net loss -- -- -- -- (1,958,428) (1,958,428)
Dividend paid to Parent -- -- -- -- (38,259) (38,259)
--------- ------------ ---------- --------- ------------ ------------
Balance at March 31, 1998 34,646 22,069,732 -- -- (2,622,890) 19,481,488
Net loss -- -- -- -- (1,915,343) (1,915,343)
Dividend paid to Parent -- -- -- -- (74,849) (74,849)
--------- ------------ ---------- --------- ------------ ------------
Balance at March 31, 1999 34,646 22,069,732 -- -- (4,613,082) 17,491,296
Prior period adjustment -- -- -- -- (146,410) (146,410)
Net loss (unaudited) -- -- -- -- (1,436,790) (1,436,790)
--------- ------------ ---------- --------- ------------ ------------
Balance at December 31, 1999 (unaudited) $ 34,646 $ 22,069,732 $ -- $ -- $ (6,196,282) $(15,908,096)
========= ============ ========== ========= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 9
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED PERIOD FROM APRIL 1,
DECEMBER 31, YEAR ENDED MARCH 31, NOVEMBER 27, 1996 TO
------------------------- -------------------------- 1996 TO NOVEMBER 26,
1999 1998 1999 1998 MARCH 31, 1997 1996
---- ---- ---- ---- -------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,436,790) $(1,424,548) $(1,915,343) $(1,958,428) $ (626,203) $ 461,750
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Cumulative effect of accounting change 26,730 -- -- -- -- --
Depreciation and amortization 2,971,958 2,920,867 3,866,365 3,917,372 1,133,378 339,748
Write-down of intangible assets -- -- -- 27,306 -- --
Loss on disposal of assets -- -- 28,246 -- 16,807 11,893
Amortization of deferred compensation -- -- -- -- -- 48,873
Deferred income taxes (823,720) (367,153) (799,116) (763,480) (161,633) (28,906)
Changes in operating assets and
liabilities:
Trade accounts receivable, net and
costs in excess of billings 1,261,483 839,847 (924,787) (1,041,541) (498,267) 126,181
Other receivables 50,816 (606,392) 120,757 (46,912) (53,640) 102,660
Other current assets 110,165 (2,163) (101,790) (20,499) (8,279) 79,736
Other assets 2,153 (221,627) (4,306) 78,929 (93,112) (129)
Accounts payable (100,295) (234,179) (83,782) 127,682 (113,872) (4,909)
Accrued liabilities (186,693) (221,973) 453,402 433,217 (570,614) 692,672
Income taxes payable/receivable, net 928,027 564,581 299,829 (273,980) (34,357) (302,094)
Deferred income (320,939) (123,419) 415,337 611,404 230,691 (180,110)
---------- ---------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
operating activities 2,482,895 1,123,841 1,354,812 1,091,070 (779,101) 1,347,365
---------- ---------- ----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, equipment
and intangible assets (646,695) (364,701) (499,624) (560,928) (126,020) (248,502)
Proceeds from sale of property and equipment -- -- -- 3,025 -- 29,259
Acquisition of distribution rights -- -- -- (460,000) -- --
Acquisition of business -- -- -- -- (1,000,000) --
---------- ---------- ----------- ----------- ----------- ----------
Net cash used in investing activities (646,695) (364,701) (499,624) (1,017,903) (1,126,020) (219,243)
---------- ---------- ----------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (783,529) (740,270) (2,663,336) (1,149,671) (6,848) (13,190)
Proceeds from long-term debt -- -- 783,529 1,721,259 500,000 --
Principal payments on capital lease
obligations (2,167) (32,523) (30,354) (128,109) (73,850) (115,118)
Issuance of common stock -- -- -- -- -- 100
Acquisition of treasury stock -- -- -- -- -- (98,824)
Dividend paid to parent (96,410) (71,283) (74,849) (38,259) -- --
---------- ---------- ----------- ----------- ----------- ----------
Net cash (used in) provided by
financing activities (882,106) (844,076) (1,985,010) 405,220 419,302 (227,032)
---------- ---------- ----------- ----------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents 954,094 (84,936) (1,129,822) 478,387 (1,485,819) 901,090
Cash and cash equivalents at beginning of
period 11,218 1,141,040 1,141,040 662,653 2,148,472 1,247,382
---------- ---------- ----------- ----------- ----------- ----------
Cash and cash equivalents at end of period $ 965,312 $1,056,104 $ 11,218 $ 1,141,040 $ 662,653 $2,148,472
========== ========== =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 10
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED PERIOD FROM APRIL 1,
DECEMBER 30, YEAR ENDED MARCH 31, NOVEMBER 27, 1996 TO
------------------------- ------------------------- 1996 TO NOVEMBER 26,
1999 1998 1999 1998 MARCH 31, 1997 1996
---- ---- ---- ---- -------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest $ 39,334 $ 107,898 $ 119,481 $ 229,548 $ 43,752 $ 83,635
========== =========== =========== =========== =========== =========
Income taxes $ (592,881) $ 3,300 $ 12,169 $ 407,055 $ 108,550 $ 708,253
========== =========== =========== =========== =========== =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Capital lease obligations for equipment $ 38,636
Issuance of options to purchase common stock 16,200
Forfeiture of options to purchase common stock (17,550)
On January 26, 1997, the Company acquired a
business. The fair value of the related assets
and liabilities are set forth below:
Equipment $ 13,250
Intellectual property 1,612,312
Notes payable to seller (625,562)
-----------
$ 1,000,000
===========
On November 26, 1996, the Company was acquired
by Daifuku. The Company's consolidated financial
statements have been revised to reflect the new
cost basis as set forth below:
Property and equipment $ 1,210,316
Software products 6,700,000
Value assigned to workforce 1,600,000
Non-compete agreement 3,513,302
Goodwill 9,887,673
Deferred tax liability (3,519,211)
-----------
19,392,080
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 11
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE BUSINESS AND PRINCIPLES OF CONSOLIDATION
AutoSimulations, Inc. (a Utah corporation) and its wholly-owned
subsidiaries, AutoSimulations Asia Pacific Pte. Limited and
AutoSimulations, Limited (collectively, the Company) develop software for
and consult with customers using core technologies for modeling, reporting
and scheduling complex industrial systems designed to change the way
organizations are managed. These technologies are being applied to
manufacturing systems through the Company's products: AutoMod, AutoSched,
and ISS Reporter and Real-Time Dispatcher (ISS-RTD).
AutoMod allows engineers to test and experiment with a proposed facility
design or modification before any actual construction occurs. AutoSched is
a capacity planning and scheduling tool which is designed to reduce the
cost of production while ensuring on-time customer deliveries. ISS-RTD is
fully integrated with manufacturing execution systems, which allows
customers to dynamically schedule and report on factory performance.
The accompanying consolidated financial statements include the accounts of
AutoSimulations, Inc. and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
The unaudited consolidated financial statements of AutoSimulations, Inc.
and its subsidiaries included herein have been prepared in accordance with
generally accepted accounting principles. In the opinion of management, all
material adjustments necessary for a fair presentation of the results for
the periods presented have been reflected.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation. On November 26, 1996, 100% of the outstanding stock
of the Company was acquired by Daifuku America Corporation (Daifuku or
Parent), a wholly-owned subsidiary of Daifuku Co., Ltd. (a Japanese
company), in a transaction accounted for by the purchase method of
accounting. The purchase price was $25,497,000. consisting of $19,147,000
of cash, liabilities assumed of $3,452,000, a deferred payment arrangement
requiring annual payments totaling $2,232,000 in varying amounts for four
years, and other direct acquisition costs of $566,000.
On December 15, 1999. the Parent entered into an agreement to sell 100% of
the outstanding common stock of the Company to Brooks Automation. Inc.
(Brooks). In accordance with Brooks' reporting requirements, the
accompanying consolidated financial statements present the historical
results of operations and cash flows of the Company from April 1, 1996 to
November 26. 1996. the date of acquisition by Daifuku, and the financial
position, results of operations and cash flows after the acquisition date
based on the new cost basis resulting from the acquisition by Daifuku.
Acquisition indebtedness is the sole responsibility of Daifuku and is not
reflected in the accompanying consolidated financial statements. The
previously issued financial statements of the Company did not reflect the
new cost basis resulting from the acquisition by Daifuku.
During 1999, the Company restated the number of outstanding common shares
to reflect the actual number of shares outstanding upon consummation of the
purchase of the Company by Daifuku. This restatement had no effect on total
stockholder's equity.
Change in Accounting Principle. Effective April 1, 1999, the Company
adopted AICPA Statement of Position No. 98-5 ("SOP 98-5"), "Accounting for
the Costs of Start-up Activities". SOP 98-5 requires entities to expense
all start-up costs. The implementation of the SOP resulted in a charge to
expense of $42,632 which is reflected in the consolidated statement of
operations as a cumulative effect of accounting change, net of the related
income tax benefit of $15,902.
7
<PAGE> 12
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Revenue recognition. Revenue results from sales of computer software, as
well as simulation and engineering services provided under written
contracts. The Company also sells maintenance contracts related to software
sales. Revenues from the sale of computer software are recognized when the
products are delivered. Revenues from maintenance contracts that are
bundled with software are initially deferred and recognized ratably over
the initial service period, which is generally one year. Revenues from
maintenance and support services provided after the initial period are
deferred and recognized ratably over the related contract period. Revenues
from certain simulation and engineering service contracts are recognized on
a percentage-of-completion basis, based on the proportion of contract costs
incurred to total projected contract costs.
Cash and cash equivalents. The Company considers all highly liquid
financial instruments purchased with original maturities of three months or
less to be cash equivalents. Cash equivalents are comprised primarily of
money market accounts.
Trade accounts receivable. Each customer is billed according to the terms
of its specific sales contract. Costs in excess of billings reflect the
work performed on simulation and engineering service contracts in process
that have yet to be invoiced to the customer.
Property and equipment. Property and equipment are stated at cost.
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the related assets, which range from 3
to 31-1/2 years, or the term of the lease if less than the related useful
life. The realizibility of property and equipment is evaluated periodically
as events or circumstances change that might indicate a possible inability
to recover the carrying amount.
Upon the sale or other disposition of property and equipment, the cost and
related accumulated depreciation or amortization are removed from the
accounts. The resulting gain or loss is included in the determination of
income. Major renewals and betterments are capitalized while minor
expenditures for maintenance and repairs are charged to expense as
incurred.
Intangible assets. The Company amortizes intangible assets over periods
ranging from 16 months to ten years. The realizibility of these intangible
assets is evaluated periodically as events or circumstances change that
might indicate a possible inability to recover the carrying amount.
Income taxes. The Company files a consolidated federal income tax return
with the Parent. Income tax expense has been calculated on a separate
company basis. Any federal income tax liability is payable, upon demand,
to the Parent.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and
the tax rates which will be in effect when these differences are expected
to reverse. If appropriate, deferred tax assets are reduced by a valuation
allowance which reflects expectations of the extent to which such assets
will be realized.
Product development. Product development costs include expenditures
incurred prior to the determination of the technological feasibility of new
software products and costs incurred for enhancements to existing software
products, and are expensed as incurred. Total product development costs
expensed for the years ended March 31, 1999 and 1998 and the periods from
November 27, 1996 to March 31, 1997 and April 1, 1996 to November 26, 1996
were $2,900,735 and $3,099,808, $1,062,091 and $1,480,203, respectively.
8
<PAGE> 13
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Use of estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications. Certain balances of the prior year have been
reclassified to conform to the current year's presentation. These
reclassifications had no effect on net loss or total assets.
3. INCOME TAXES RECEIVABLE
During the year ended March 31, 1997, the Company amended prior year tax
returns and requested an income tax refund, which represented primarily the
tax benefit resulting from stock options exercised in connection with the
acquisition of the Company by the Parent in late 1996. Shortly thereafter,
the Company was notified that the amended returns would be subject to IRS
audit. Due to the uncertainty regarding the collectibility of the refund,
the Company initially recorded no income tax receivable from the refund
claim. During the year ended March 31, 1999, the IRS completed its audit
and the Company recognized a $696,052 income tax receivable and a decrease
to goodwill. During the year ended March 31, 1999, the Company received
approximately $91,000 of the refund claim. The remaining balance of the
refund was collected in August 1999.
4. PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following at March 31:
<TABLE>
<CAPTION>
USEFUL
1999 1998 LIFE
---- ---- ------
<S> <C> <C> <C>
Building and leasehold improvements $ 1,981,036 $ 1,981,036 3-31 years
Equipment 2,508,749 2,505,728 5 years
Land 260,000 260,000
Furniture and fixtures 268,684 269,638 5 years
----------- -----------
5,018,469 5,016,402
Less accumulated depreciation and amortization (2,095,420) (1,925,266)
----------- -----------
$ 2,923,049 $ 3,091,136
=========== ===========
</TABLE>
Equipment held under capital leases as of March 31, 1999 and 1998 was
$531,063 and $758,637, with related accumulated amortization of $497,751
and $591,668, respectively.
9
<PAGE> 14
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. PROPERTY AND EQUIPMENT, CONTINUED
The minimum future obligations under these capital leases for years ending
after March 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending March 3l, 2000 $ 2,186
-------
Total future minimum lease payments 2,186
Less amount representing interest (19)
-------
Present value of net minimum lease payments $ 2,167
=======
</TABLE>
Depreciation and amortization expense for property and equipment was
$636,102, $610,580. $234,347 and $249,367 for the years ended March 31,
1999 and 1998 and the periods from November 27, 1996 to March 31, 1997 and
April 1, 1996 to November 26, 1996, respectively.
5. INTANGIBLE ASSETS
Intangible assets are comprised of the following at March 31:
<TABLE>
<CAPTION>
USEFUL
1999 1998 LIFE
---- ---- ------
<S> <C> <C> <C>
Intellectual property 1,612,312 $ 1,612,312 5 years
Software products 6,700,000 6,700,000 10 years
Value assigned to workforce 1,600,000 1,600,000 10 years
Non-compete agreement 3,513,302 3,513,302 4 years
Goodwill 9,887,673 9,887,673 10 years
Distribution rights -- 460,000 16 months
Other intangible assets 167,155 163,791 5 years
------------ ------------
23,480,442 23,937,078
Less accumulated amortization (7,769,957) (4,303,641)
------------ ------------
$ 15,710,485 $ 19,633,437
============ ============
</TABLE>
Amortization expense was $3,230,263, $3,306,792, $899,031 and $92,381 for
the years ended March 3l, 1999 and 1998 and the periods from November 27,
1996 to March 31, 1997 and April 1, 1996 to November 26, 1996,
respectively.
10
<PAGE> 15
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. LONG-TERM DEBT
Long-term debt is comprised of the following at March 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Note payable to an insurance company, interest rate adjusted
every three years to 1.6 percent over the referenced yield on
three year U.S. Treasury Notes, payable in monthly installments
of $9,582. The note payable was paid in full during the year
ended March 31, 1999 $ -- $ 1,218,056
Notes payable to individuals, payable in annual installments
through January 2000, collateralized by certain intangible
assets, noninterest bearing (interest imputed at 9 percent) 275,240 481,861
Note payable to Parent, interest at the prime rate, interest payable
semi-annually. The note payable was paid in full during the
year ended March 31, 1999 -- 1,238,659
Note payable to a bank under revolving line-of-credit. The note
payable was paid in full in April 1999 783,529 --
----------- -----------
Total long-term debt 1,058,769 2,938,576
Less current portion (1,058,769) (2,663,349)
----------- -----------
Long-term debt, noncurrent $ -- $ 275,227
=========== ===========
</TABLE>
In 1999, the Company entered into a revolving line-of-credit arrangement
with a bank which provides for maximum borrowings of S2,500,000. The line
of credit is collateralized by certain domestic accounts receivable and a
building and expires on October 1, 2000. Interest on borrowings is payable
monthly at the bank's prime lending rate minus .25 percent (8 percent at
March 31, 1999). The Company had no borrowings on the line of credit at
March 31, 1999.
7. INCOME TAXES
The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Period From Period From
Year Ended March 31, November 27, April 1, 1996 to
----------------------------- 1996 to November 26,
1999 1998 March 31, 1997 1996
---- ---- -------------- ----------------
<S> <C> <C> <C> <C>
Current tax provision (benefit) $ 115,485 $ 188,744 $ (8,003) $ 403,562
Deferred tax provision (benefit) (694,209) (723,529) (161,633) (28,906)
--------- --------- --------- ---------
$(578,724) $(534,785) $(169,636) $ 374,656
========= ========= ========= =========
</TABLE>
11
<PAGE> 16
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. INCOME TAXES, CONTINUED
The provision for (benefit from) income taxes differs from the amount
computed by applying the statutory federal income tax rate to income (loss)
before taxes as follows:
<TABLE>
<CAPTION>
Period From Period From
Year Ended March 31, November 27, April 1, 1996 to
-------------------- 1996 to November 26,
1999 1998 March 31, 1997 1996
---- ---- -------------- ----------------
<S> <C> <C> <C> <C>
Statutory federal income tax rate (34)% (34)% (34)% 34%
State tax provision (benefit) (5)% (5)% (5)% 4%
Nondeductible acquisition costs 0% 0% 0% 6%
Intangible asset amortization 15% 15% 16% 0%
Other 0% 2% 2% 1%
--- --- --- ---
Provision for (benefit from)
income taxes (24)% (22)% (21)% 45%
=== === === ===
</TABLE>
At March 31, 1999 and 1998, the net deferred tax liability consists of the
following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Accrued reserves $ 39,993 $ 39,992
Accrued liabilities 78,857 65,162
Intangible amortization 426,292 228,327
Excess book basis in intangible assets (2,091,958) (2,703,638)
Excess tax depreciation (194,972) (150,949)
Other (199) (19,997)
----------- -----------
$(1,741,987) $(2,541,103)
=========== ===========
</TABLE>
The net deferred tax liability at March 31, 1999 and 1998 is reflected in
the consolidated balance sheets as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred income tax assets $ 562,286 $ 333,481
Deferred income tax liabilities (2,304,273) (2,874,584)
----------- -----------
(1,741,987) $(2,541,103)
=========== ===========
</TABLE>
12
<PAGE> 17
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. COMMITMENTS
Operating leases. The Company has noncancelable operating lease agreements
in effect for office space, equipment and automobiles. The Company leases
portions of its corporate headquarters building to other companies. Total
rent expense was approximately $260,000, $209,000, $30,000 and $53,000 for
the years ended March 31, 1999 and 1998 and the periods from November 27,
1996 to March 31, 1997 and April 1, 1996 to November 26, 1996,
respectively. Total rental income was approximately $51,000, $109,000,
$37,000 and $73,000 for the years ended March 31, 1999 and 1998 and the
periods from November 27, 1996 to March 31, 1997 and April 1, 1996 to
November 26, 1996, respectively.
Future minimum lease payments for equipment and office space under
noncancelable operating leases in effect as of March 31. 1999, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 216,624
2001 155,758
2002 132,333
2003 103,690
2004 76,443
Thereafter 248,440
---------
$ 933,288
=========
</TABLE>
Future minimum lease income under noncancelable operating leases for office
space, in effect as of March 31,1999. which expire in the year ending March
31, 2000, is approximately $25,250.
Royalty agreement. In connection with the January 1997 acquisition of ISL
(Note 12), the Company agreed to pay a royalty of 10 percent of product
sales related to the acquired technology, over the next five years, not to
exceed an aggregate amount of $1,750,000. Royalty expense for the years
ended March 31, 1999 and 1998 and the period from November 27, 1996 to
March 31, 1997 was $351,223, $307,783, and $72,074, respectively.
Savings plan. The Company has a defined contribution savings plan (the
Plan) which qualifies under Section. 401(k) of the Internal Revenue Code
for employees meeting certain service requirements. The Plan provides for
contributions by the Company of 2% for all employees and up to an
additional 2% of eligibe employee contributions. The Company's
contributions totaled $175,269, $163,491, $43,661 and $77,480 for the years
ended March 31, 1999 and 1998 and the periods from November 27, 1996 to
March 31, 1997 and April 1, 1996 to November 26, 1996, respectively.
9. RELATED-PARTY TRANSACTIONS
As of March 31, 1998, the Company had a note payable to the Parent totaling
$1,238,659. This note payable was paid in full during the year ended March
31, 1999. During the years ended March 31, 1999 and 1998, the Company paid
interest totaling $95,450 and $67,631, respectively, to the Parent.
13
<PAGE> 18
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. RELATED-PARTY TRANSACTIONS, CONTINUED
During the years ended March 31, 1999 and 1998 and the periods from
November 27, 1996 to March 31, 1997 and April 1, 1996 to November 26, 1996,
the Company sold software consulting services totaling $33,840, $14,300,
$82,372 and $220,725, respectively, to the Parent and $128,287, $40,730,
$33,292 and $27,180, respectively, to another wholly-owned subsidiary of
the Parent. During the years ended March 31, 1999 and 1998 and the periods
from November 27, 1996 to March 31, 1997 and April 1, 1996 to November 26,
1996, the Company sold software and related support services totaling
$1,008,421, $598,961, $0 and $0, respectively, to Daifuku Co., Ltd. and
$14,490, $2,826, $129,614 and $0 respectively, to other related parties. As
of March 31, 1999 and 1998, the Company had accounts receivable totaling
$93,309 and $115,539, respectively, due from various related parties.
10. SALES AND CREDIT RISK CONCENTRATIONS
During the years ended March 31, 1999 and 1998 and the periods from
November 27, 1996 to March 31, 1997 and April 1, 1996 to November 26, 1996,
the Company generated approximately $4,076,000, $4,377,000, $440,000 and
$1,370,000, respectively, of sales of software and services to locations
outside the United States (primarily in Europe and Asia). At March 31, 1999
and 1998, approximately $832,500 and $1,755,000, respectively, of the
Company's trade accounts receivable were from foreign customers and
approximately $2,736,600 and $1,902,350, respectively, of the Company's
trade accounts receivable were from customers in the semi-conductor
industry.
The Company primarily maintains its cash and cash equivalents at a
financial institution in Utah, the balance of which may at times exceed
federally insured limits.
11. GEOGRAPHIC SEGMENT INFORMATION
In the fiscal year ended March 31, 1999, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 131. "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 131 supersedes SFAS No.
14, "Financial Reporting for Segments of a Business Enterprise", replacing
the "industry segment" approach with the "management" approach.
The management approach designates the internal organization that is used
by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. The adoption of SFAS 131
did not affect the Company's results of operations or financial position.
Based on the Company's method of internal reporting, the Company operates
and reports as a single industry segment, which is the development of
support software for modeling, reporting and scheduling complex industrial
systems.
The Company did not have any single foreign country, revenue, based on the
country, in which the revenue originates (i.e. where the legal subsidiary
is domiciled), that was material to consolidated revenues during the
periods presented.
14
<PAGE> 19
AUTOSIMULATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. ASSET ACQUISITION
Effective January 26, 1997, the Company completed the acquisition of
certain assets of Integral Solutions Limited (ISL), a distributor and
developer of software and software related products in England. Of the
total purchase price of $1,750,000, $1,000,000 was paid at closing, and
$200,000, $250,000 and $300,000 will be paid over each of the next three
years, respectively. The assets acquired included primarily intellectual
property of ISL.
In addition, the Company agreed to pay a royalty on product sales related
to the acquired technology.
13. SUBSEQUENT EVENTS
In November 1999, the Company's board of directors declared a cash dividend
of $96,410 to the Parent.
In November 1999, the Company entered into three-year operating leases for
automobiles and equipment, which expire in November 2002. The future
minimum lease payments total $70,263.
15
<PAGE> 20
AUTO-SOFT CORPORATION
AND SUBSIDIARY
REPORT ON AUDITS OF CONSOLIDATED FINANCIAL
STATEMENTS AS OF MARCH 31, 1999 AND 1998 AND
FOR THE TWO YEARS ENDED MARCH 31, 1999 AND THE
PERIODS FROM SEPTEMBER 6, 1996 TO MARCH 31,
1997 AND APRIL 1, 1996 TO SEPTEMBER 5, 1996
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder and Board of Directors of
Auto-Soft Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
Auto-Soft Corporation and its subsidiary as of March 31, 1999 and 1998, and the
results of their operations and their cash flows for the two years ended March
31, 1999 and the periods from September 6, 1996 to March 31, 1997 and April 1,
1996 to September 5, 1996, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As described in note 2, the accompanying consolidated financial statements have
been revised to reflect a new cost basis resulting from the acquisition of the
Company in 1996 and to exclude certain assets, liabilities, revenues and
expenses of a division of the Company which was transferred to the Parent in
November 1999.
PricewaterhouseCoopers LLP
December 27, 1999
<PAGE> 22
AUTO-SOFT CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, -----------------------------
1999 1999 1998
------------ ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 4,333,044 $ 3,034,109 $ 7,814,991
Marketable debt securities, short-term 92,945 186,898 192,492
Trade accounts receivable 1,914,787 3,753,951 4,398,368
Costs and estimated earnings in excess of
billings on uncompleted contracts 3,526,506 4,529,864 3,690,638
Inventories 50,000 352,947 210,947
Prepaid expenses and other current assets 735,330 528,301 540,748
Deferred tax asset 1,196,950 399,151 361,159
----------- ----------- -----------
Total current assets 11,849,562 12,785,221 17,209,343
Property and equipment, net 2,715,435 3,345,229 3,520,883
Intangible assets, net 35,894,351 38,998,539 43,239,974
Marketable debt securities, long-term 216,575 315,216 246,168
----------- ----------- -----------
Total assets $50,675,923 $55,444,205 $64,216,368
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 576,963 $ 575,441 $ 593,874
Accrued expenses 1,263,830 1,750,649 1,411,973
Accrued wages 476,730 1,098,295 2,123,056
Note payable to employee, current 50,000 50,000 50,000
Note payable, current 750,000 750,000 750,000
Income taxes payable to Parent (126,422) 555,630 474,545
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,739,858 2,423,061 5,100,003
----------- ----------- -----------
Total current liabilities 5,730,959 7,203,076 10,503,451
Note payable to employee, noncurrent 132,758 136,133 189,358
Note payable, noncurrent -- -- 750,000
Deferred tax liability 7,161,072 7,961,008 8,900,631
----------- ----------- -----------
Total liabilities 13,024,789 15,300,217 20,343,440
----------- ----------- -----------
Commitments and contingencies (Notes 11, 12 and 13)
Stockholders' equity:
Common stock, no par value; 941,176 shares
authorized, issued and outstanding 47,438,098 46,107,341 46,107,341
Accumulated deficit (9,786,964) (5,963,353) (2,234,413)
----------- ----------- -----------
Total stockholder's equity 37,651,134 40,143,988 43,872,928
----------- ----------- -----------
Total liabilities and stockholder's equity $50,675,923 $55,444,205 $64,216,368
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<PAGE> 23
AUTO-SOFT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, YEAR ENDED MARCH 31, SEPTEMBER 6, 1996 APRIL 1, 1996
-------------------------- -------------------------- TO MARCH 31, TO SEPTEMBER 5,
1999 1998 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net sales $13,651,269 $18,449,636 $23,894,080 $27,785,893 $10,847,195 $12,838,266
Cost of sales 9,795,598 9,722,480 13,602,681 14,146,250 4,596,589 6,477,833
----------- ----------- ----------- ----------- ----------- -----------
Gross profit 3,855,671 8,727,156 10,291,399 13,639,643 6,250,606 6,360,433
Expenses:
Selling and marketing 2,191,530 2,073,728 4,457,747 2,710,964 1,611,406 393,313
Research and development 397,796 996,419 647,473 1,687,505 706,518 511,307
General and administrative 7,087,582 8,294,671 8,837,139 9,660,207 4,943,846 3,028,510
----------- ----------- ----------- ----------- ----------- -----------
Operating (loss) income (5,821,237) (2,637,662) (3,650,960) (419,033) (1,011,164) 2,427,303
Other income (expenses):
Stock compensation -- -- -- -- -- (8,353,899)
Interest income 161,227 210,797 252,837 378,601 187,923 84,014
Interest expense (45,320) (76,737) (107,685) (150,322) (37,529) (15,249)
Other, net (77,474) (167,960) (24,024) 59,735 8,676 750
----------- ----------- ----------- ----------- ----------- -----------
Loss before income taxes (5,782,804) (2,671,562) (3,529,832) (131,019) (852,094) (5,857,081)
Provision for (benefit from)
income taxes (2,022,334) (703,291) (946,926) 457,101 (49,163) (1,922,485)
----------- ----------- ----------- ----------- ----------- -----------
Net loss $(3,760,470) $(1,968,271) $(2,582,906) $ (588,120) $ (802,931) $(3,934,596)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE> 24
AUTO-SOFT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
COMMON TREASURY (ACCUMULATED UNEARNED STOCKHOLDER'S
STOCK STOCK DEFICIT) COMPENSATION EQUITY
----------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1996 $ 2,165,861 $(29,196) $ 3,883,454 $(218,094) $ 5,802,025
Grant of stock award 6,861,692 -- -- -- 6,861,692
Accelerated vesting of
unearned compensation 1,274,113 -- -- 218,094 1,492,207
Net loss -- -- (3,934,596) -- (3,934,596)
----------- -------- ----------- --------- -----------
Balance at September 5, 1996 10,301,666 (29,196) (51,142) -- 10,221,328
Adjustment to reflect new
cost basis resulting
from acquisition of
Company by Daifuku 35,805,675 29,196 51,142 -- 35,886,013
Net loss -- -- (802,931) -- (802,931)
----------- -------- ----------- --------- -----------
Balance at March 31, 1997 46,107,341 -- (802,931) -- 45,304,410
Net loss -- -- (588,120) -- (588,120)
Dividend paid to Parent -- -- (843,362) -- (843,362)
----------- -------- ----------- --------- -----------
Balance at March 31, 1998 46,107,341 -- (2,234,413) -- 43,872,928
Net loss -- -- (2,582,906) -- (2,582,906)
Dividend paid to Parent -- -- (1,146,034) -- (1,146,034)
----------- -------- ----------- --------- -----------
Balance at March 31, 1999 46,107,341 -- (5,963,353) -- 40,143,988
Net loss (unaudited) -- -- (3,760,470) -- (3,760,470)
Dividend paid to Parent -- -- (63,141) -- (63,141)
Capital contribution from
parent 1,330,757 -- -- -- 1,330,757
----------- -------- ----------- --------- -----------
Balance at December 30, 1999
(unaudited) $47,438,098 $ -- $(9,786,964) $ -- $37,651,134
=========== ======== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE> 25
AUTO-SOFT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, YEAR ENDED MARCH 31, SEPTEMBER 6, 1996 APRIL 1, 1996
-------------------------- --------------------------- TO MARCH 31, TO SEPTEMBER 5,
1999 1998 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,760,470) $(1,968,271) $(2,582,906) $ (588,120) $ (802,931) $(3,934,596)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Depreciation and amortization 3,876,367 3,964,387 5,262,539 5,053,848 2,716,132 205,925
Amortization of investment premium 6,213 3,450 14,852 10,333 11,965 --
Deferred income taxes (1,597,735) (504,146) (977,615) (998,028) (238,341) (459,622)
Loss (gain) on sale of property
and equipment 46,623 -- 20,953 (515) (6,597) --
Grant of stock award -- -- -- -- -- 6,861,692
Accelerated vesting of
unearned compensation -- -- -- -- -- 1,492,207
Changes in operating assets and
liabilities:
Trade accounts receivable 1,835,164 (1,467,736) 644,417 (630,390) 2,633,822 (2,787,113)
Inventories 302,947 (74,755) (142,000) 182,213 678,865 339,755
Prepaid expenses and other
current assets (449,363) (98,815) (160,615) (376,592) 72,955 (434,878)
Costs and estimated earnings on
uncompleted contracts, net 1,002,632 (356,499) (3,516,168) 171,327 (2,271,173) 3,192,121
Accounts payable 1,522 (305,494) (18,433) (133,941) 471,607 (313,081)
Accrued expenses and wages 468,706 2,127,783 (513,023) 1,019,818 -- (77,835)
Income tax receivable, net -- -- -- -- -- (2,430,274)
Income taxes payable to Parent (364,529) (2,165,783) 81,085 417,622 2,487,197 --
----------- ----------- ----------- ----------- ----------- -----------
Net cash (used in) provided
by operating activities 1,368,077 (845,879) (1,886,914) 4,127,575 5,753,501 1,654,301
----------- ----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (189,569) (915,162) (898,651) (1,451,512) (1,021,244) (299,832)
Proceeds from sale of property and
equipment 562 -- 32,248 2,199 24,681 --
Purchase of marketable debt
securities (21,200) (216,158) (269,456) (106,359) (373,225) --
Proceeds from maturity of marketable
debt securities 207,581 126,000 191,150 135,950 177,000 12,976
Maturity of certificate of deposit -- -- -- -- 194,906 --
Acquisition of businesses, net of
cash acquired -- -- -- -- (1,971,622) --
----------- ----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities (2,626) (1,005,320) (944,709) (1,419,722) (2,969,504) (286,856)
----------- ----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on note payable to
employee (3,375) (3,225) (53,225) (64,923) -- (59,060)
Principal payments on notes payable -- (800,000) (750,000) (750,000) (49,460) --
Borrowings on note payable -- -- -- -- -- 49,460
Dividend paid to Parent (63,141) (1,146,034) (1,146,034) (843,362) -- --
----------- ----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities (66,516) (1,949,259) (1,949,259) (1,658,285) (49,460) (9,600)
----------- ----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents 1,298,935 (3,800,458) (4,780,882) 1,049,568 2,734,537 1,357,845
Cash and cash equivalents at beginning
of period 3,034,109 7,814,991 7,814,991 6,765,423 4,030,886 2,887,946
----------- ----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end
of period $ 4,333,044 $ 4,014,533 $ 3,034,109 $ 7,814,991 $ 6,765,423 $ 4,245,791
=========== =========== =========== =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 27,346 $ 231 $ 92,833 $ 139,936 $ 31,645 $ --
=========== =========== =========== =========== =========== ===========
Income taxes $ -- $ 4,029 $ 3,125 $ 1,179,654 $ 361,900 $ 2,411,611
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-5-
<PAGE> 26
AUTO-SOFT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During the period from September 6, 1996 to March 31, 1997, the Company acquired
certain businesses. The fair values of the related assets and liabilities
are set forth below:
<TABLE>
<S> <C>
Trade accounts receivable $ 303,825
Equipment 200,000
Goodwill 3,321,391
Non-compete agreements 450,000
Deposits 7,900
Accounts payable (61,494)
Notes payable (2,250,000)
-----------
$ 1,971,622
-----------
</TABLE>
On September 5, 1996, the Company was acquired by Daifuku. The Company's
financial statements have been revised to reflect the new cost basis as set
forth below:
<TABLE>
<S> <C>
Property and equipment $ 294,123
Non-compete agreements 6,000,000
Value assigned to customer base 17,000,000
Value assigned to workforce 2,600,000
Trade name 6,300,000
Goodwill 13,907,590
Deferred tax liability (10,215,700)
------------
$ 35,886,013
------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-6-
<PAGE> 27
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE BUSINESS AND PRINCIPLES OF CONSOLIDATION
Auto-Soft Corporation (a Utah Corporation) and its wholly-owned
subsidiary, Auto-Soft "Scotland" Limited (collectively, the Company),
develop and market custom designed software and standard software products
for automated material handling applications. The Company's headquarters
are located in Salt Lake City, Utah, and the Company has satellite offices
in Austin, Texas; Phoenix, Arizona; Rochester, New York; and Portland,
Oregon. The Company also has foreign satellite offices in Korea and
Scotland. Customers are located throughout the United States and certain
foreign countries and include distribution centers, manufacturing centers,
warehouses and factories.
The accompanying consolidated financial statements include the accounts of
Auto-Soft Corporation and its wholly-owned subsidiary. All significant
intercompany balances and transactions have bee eliminated in
consolidation.
The unaudited consolidated financial statements of Auto-Soft Corporation
and its subsidiary included herein have been prepared in accordance with
generally accepted accounting principles. In the opinion of management,
all material adjustments necessary for a fair presentation of the results
for the periods presented have been reflected.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation. On September 5, 1996, 100% of the outstanding stock
of the Company was acquired by Daifuku America Corporation (Daifuku or
Parent), a wholly-owned subsidiary of Daifuku Co., Ltd. (a Japanese
Company), in a transaction accounted for by the purchase method of
accounting. The purchase price was $60,753,000, consisting of $25,000,000
of cash, liabilities assumed of $8,237,000, a deferred payment arrangement
requiring annual payments of $5,000,000 over seven years, and other direct
acquisition costs of $551,000.
On December 15, 1999, the Parent entered into an agreement to sell 100% of
the outstanding common stock of the Company to Brooks Automation, Inc.
(Brooks). In accordance with Brooks' reporting requirements the
accompanying consolidated financial statements resent the historical
results of operations and cash flows of the Company from April 1, 1996 to
September 5, 1996, the date of acquisition by Daifuku and the financial
position, results of operation and cash flows after the acquisition date
based on the new cost basis resulting from the acquisition by Daifuku.
Acquisition indebtedness is the sole responsibility of Daifuku and is not
reflected in the accompanying financial statements.
On November 14, 1999, the Company transferred to Daifuku all contracts,
inventories, property and equipment and employees related to its Factory
Automation Distribution Automation (FADA) division. Accordingly, certain
assets, liabilities, revenues and expenses related to the FADA division
have been excluded from the accompanying consolidated financial
statements. The FADA division did not constitute a segment of business for
the Company.
The previously issued financial statements of the Company did not reflect
the new cost basis resulting from the acquisition by Daifuku and did not
excluded the FADA division.
Revenue recognition. Net sales include revenue form system and software
products, software license rights and maintenance and support services.
Revenue from long-term contracts is recorded using the
percentage-of-completion method, determined by the labor hours method.
Billings on uncompleted contracts may be greater than or less than
incurred costs and estimated earnings and are recorded as an asset or
liability in the accompanying consolidated balance sheets. Provisions for
estimated losses on uncompleted contracts are made in the period in which
such losses are determined. Changes in estimated profits on contracts are
recognized in the period in which the revisions are made.
-7-
<PAGE> 28
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Revenue from maintenance and support services that are bundled with
hardware or software are initially deferred and recognized ratably over
the initial service period, which is generally one year. Revenues from
maintenance and support services provided after the initial period are
deferred and recognized ratably over the related contract period.
Cash and cash equivalents. The Company considers all highly liquid
financial instruments purchased with original maturities of three months
or less to be cash equivalents. Cash equivalents are comprised primarily
of money market accounts and certificates of deposit.
Marketable debt securities. The Company has categorized its marketable
debt securities as held-to-maturity, and accordingly, the investments are
reported at amortized cost in the accompanying balance sheets.
Held-to-maturity securities are those securities that the Company has the
ability and intent to hold to maturity. Premiums and discounts are
amortized or accreted over the life of the securities using the
effective-interest method. Marketable debt securities with remaining
maturities greater than one year are classified as long-term.
Inventories. Inventories are stated at the lower of cost or market. Cost
is determined using the specific identification method. Inventories are
comprised of computer hardware purchased in connection with custom
software development projects.
Property and equipment. Property and equipment are recorded at cost.
Depreciation for assets acquired prior to January 1. 1995 is determined
using the declining-balance method over the estimated useful lives of five
to seven years. The Company changed to the straight-line depreciation
method for all assets acquired in 1995 and thereafter. Leasehold
improvements are depreciated over the shorter of the term of the lease or
the related useful life.
The realizability of property and equipment is evaluated periodically as
events or circumstances change that might indicate a possible inability to
recover the carrying amount.
Maintenance repairs and minor replacements arc charged to expense as
incurred. Upon the sale or retirement of property and equipment, and gain
or loss on disposition is reflected in the consolidated statements of
operations, and the related asset cost and accumulated depreciation are
removed from the respective accounts.
Software development costs. Software development costs are capitalized
from the date technological feasibility is achieved Such costs are not
material at March 31, 1999 and 1998.
Intangible assets. Intangible assets are recorded at cost and amortized
using the straight-line method over the estimated useful lives of the
assets as follows:
Non-compete agreements 3 and 5 years
Value assigned to customer base 15 years
Value assigned to work force 15 years
Trade name 15 years
Goodwill 15 years
The realizability of these intangible assets is evaluated periodically as events
or circumstances change that might indicate a possible inability to recover the
carrying amount.
-8-
<PAGE> 29
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Income taxes. The Company files a consolidated federal income tax return
with the Parent. Income tax expense has been calculated on a separate
company basis. Any federal income tax liability is payable, upon demand,
to the Parent.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities
and the tax rates which will be in effect when these differences are
expected to reverse. If appropriate, deferred tax assets are reduced by a
valuation allowance which reflects expectations of the extent to which
such assets will be realized.
Major customers, and concentration of credit risk. The Company sells its
products primarily to customers with large distribution and manufacturing
centers. Trade accounts receivable from two customers each represented 11%
of the outstanding balance as of March 31, 1999. The Company does not
require collateral for its receivables. Net sales to four customers ranged
from 10% to 20%, and to related parties 28% of total net sales, for the
year ended March 3 1, 1999: net sales to two customers ranged from 12% to
15%. and to related parties 28% of total net sales, for the year ended
March 31, 1998. Net sales to three customers ranged from 10% to 20%, and
to related parties 36%, for the period from September 6, 1996 to March 31,
1997. Net sales to 4 customers ranged from 12% to 17% and to related
parties 0% of total net sales, for the period from April 1, 1996 to
September 5, 1996.
The Company primarily maintains its cash and cash equivalents at a
financial institution in Utah, the balance of which may at times exceed
federally insured limits.
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Reclassifications. Certain balances of the prior year have been
reclassified to conform to the current year's presentation. These
reclassifications had no effect on net loss or total assets.
3. MARKETABLE DEBT SECURITIES
The amortized cost and fair value of held-to-maturity securities at March
31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
1999 cost Gains Losses Value
- ------ --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
State and municipal securities:
Maturing in one year or less $186,898 $ 309 $(18) $187,189
Maturing between one and two years 315,216 3,988 -- 319,204
-------- ------ ---- --------
$502,114 $4,297 $(18) $506,393
-------- ------ ---- --------
</TABLE>
-9-
<PAGE> 30
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. MARKETABLE DEBT SECURITIES, CONTINUED
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
1998 Cost Gains Losses Value
- ------ ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
State and municipal securities:
Maturing in one year or less $192,492 $ 335 $ (6) $192,821
Maturing between one and two years 246,168 1,202 -- 247,370
-------- ------ ---- --------
$438,660 $1,537 $ (6) $440,191
-------- ------ ---- --------
</TABLE>
4. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are comprised of the following at March 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Completed contracts $ 131,441 $1,430,834
Contracts-in-progress 3,622,510 2,967,534
---------- ----------
Total $3,753,951 $4,398,368
========== ==========
</TABLE>
5. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings in excess of billings on uncompleted
contracts represent revenues recognized in excess of amounts billed.
Billings in excess of costs and estimated earnings on uncompleted
contracts represent billings in excess of revenues recognized.
Costs and estimated earnings on uncompleted contracts are comprised of the
following at March 31:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Accumulated costs and estimated
earnings on uncompleted contracts $ 19,152,755 $ 22,080,052
Less billings to date (17,045,952) (23,489,417)
------------ ------------
$ 2,106,803 $ (1,409,365)
============ ============
Included in the accompanying consolidated
balance sheets under the following
captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 4,529,864 $ 3,690,638
Billings in excess of costs and estimated
earnings on uncompleted contracts (2,423,061) (5,100,003)
------------ ------------
$ 2,106,803 $ (1,409,365)
============ ============
</TABLE>
-10-
<PAGE> 31
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following at March 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Computer equipment and purchased software $ 4,852,292 $ 4,460,353
Office equipment and leasehold improvements 1,491,290 1,124,745
Automobiles 51,549 91,837
----------- -----------
6,395,13l 5,676,935
Less accumulated depreciation and amortization (3,049,902) (2,156,052)
----------- -----------
$ 3,345,229 $ 3,520,883
=========== ===========
</TABLE>
Depreciation and amortization expense related to property and equipment
was $1,021,104, $812,413, $458,736 and $206,925 for the years ended March
31, 1999 and 1998 and the periods from September 6, 1996 to March 31, 1997
and April 1, 1996 to September 5, 1996, respectively.
7. INTANGIBLE ASSETS
Intangible assets are comprised of the following at March 31:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Non-compete agreement $ 6,450,000 $ 6,450,000
Value assigned customer base 17,000,000 17,000,000
Value assigned to work force 2,600,000 2,600,000
Trade name 17,468,715 17,468,715
Goodwill 6,300,000 6,300,000
------------ -----------
49,818,715 49,818,715
Less accumulated amortization (10,820,176) (6,578,741)
------------ -----------
$ 38,998,539 $43,239,974
============ ===========
</TABLE>
Amortization expense related to intangible assets was $4,241,435,
$4,241,435 and $2,257,396 for the years ended March 31. 1999 and 1998 and
the period from September 6, 1996 to March 31, 1997, respectively.
-11-
<PAGE> 32
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. NOTES PAYABLE
In July 1993, a current employee loaned the Company $750,000 pursuant to a
promissory note agreement. The note is unsecured and bears interest at
five percent. The Company is required to make the following principal
payments for the years ending March 31:
2000 $ 50,000
2001 50,000
2002 50,000
2003 36,133
--------
$186,133
--------
In January 1997, the Company entered into a promissory note agreement with
an original principal amount of $2,250,000. The note is guaranteed by the
Parent and bears interest at six percent. The Company is required to make
the final payment of $750,000 in January 2000.
9. RELATED-PARTY TRANSACTIONS
A condominium, owned by a current employee's family through an investment
company, is leased to the Company on a month-to-month basis for the
purpose of entertaining prospective customers and promoting the Company.
Lease payments totaling $9,000, $18,000, $10,500 and $7,500 were paid to
the investment company during the years ended March 31, 1999 and 1998 and
the periods from September 6, 1996 to March 31, 1997 and April 1, 1996 to
September 5, 1996, respectively. The lease was terminated during 1999.
On November 1, 1994. Lakeside Building Investment Group, L.C. (Lakeside)
was organized. The Company's president is Lakeside's initial managing
member and its members are also employees of the Company. Lakeside was
organized to construct and own an office building and to lease office
space to the Company. The Company has guaranteed a $3 million loan to
Lakeside, which had a balance of $2,870,260 at March 31. 1999. In January
1995, various stockholders entered into promissory notes with the Company
in order to finance the down payment on the office building. The notes
were paid off during 1999.
On September 8, 1995, the Company entered into a lease for office space
with Lakeside. The lease expires on September 7, 2015 and has average
monthly lease payment of $39,671. The Company paid $517,658, $526,262,
$366,297 and $184,205 to Lakeside under this lease during the years ended
March 31, 1999 and 1998 and the periods from September 6, 1996 to March
31, 1997 and April 1, 1996 to September 5, 1996, respectively.
On April 1, 1998, the Company entered into an office lease in Arizona with
the Desert Building Investment Group (Desert Group). The Desert Group
consists of various Company employees and was formed in order to construct
a building to be leased to the Company and other tenants. The lease
expires on April 1, 2008 and has average monthly lease payments of
$16,862. The Company paid $176,505 to the Desert Group under this lease
during the year ended March 31, 1999.
-12-
<PAGE> 33
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. RELATED-PARTY TRANSACTIONS, CONTINUED
As of March 31, 1999 and 1998, the Company had $1,632,620 and $1,556,858,
respectively, in accounts receivable due from its Parent and certain of
its subsidiaries and from Daifuku Co., Ltd., which are included in trade
accounts receivable in the accompanying consolidated balance sheets. As of
March 31, 1999, the Company had $66,329 in accounts payable due to its
Parent and certain of its subsidiaries and to Daifuku Co., Ltd., which are
included in trade accounts payable in the accompanying consolidated
balance sheets. Sales to these related parties were $8,517,088,
$8,858,053, $5,143,167 and $0 for the years ended March 31, 1999 and 1998
and the periods from September 6, 1996 to March 31, 1997 and April 1, 1996
to September 5, 1996, respectively. Purchases from these related parties
were $190,256, $132,000, $94,000 and $0 for the years ended March 31, 1999
and 1998 and the periods from September 6, 1996 to March 31, 1997 and
April 1, 1996 to September 5, 1996, respectively.
10. INCOME TAXES
The provision for income taxes is comprised of the following
<TABLE>
<CAPTION>
Period From Period From
Year Ended March 31, September 6, 1996 April 1, 1996
------------------------------ to March 31, to September 5,
1999 1998 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current tax provision (benefit) $ 60,586 $ 1,330,838 $ 189,178 $(1,645,200)
Deferred tax provision (benefit) (1,007,512) (873,737) (238,341) (277,285)
----------- ----------- ----------- -----------
$ (946,926) $ 457,101 $ (49,163) $(1,922,485)
----------- ----------- ----------- -----------
</TABLE>
The provision for (benefit from) income taxes differs from the amount
computed by applying the statutory federal income tax rate to
income(loss) before taxes as follows:
<TABLE>
<CAPTION>
Period From Period From
Year Ended March 31, September 6, 1996 April 1, 1996
-------------------- to March 31, to September 5,
1999 1908 1997 1996
---- ----- ----------------- ---------------
<S> <C> <C> <C> <C>
Statutory federal income tax rate (34)% (34)% (34)% (34)%
State tax benefit (5)% (5)% (5)% (3)%
Meals and entertainment 2 % 110 % 3 % 0 %
Tax - exempt activity 0 % (8)% 0 % 0 %
Intangible asset amortization 10 % 281 % 25 % 0 %
Other 0 % 5 % 6 % (1)%
--- --- --- ---
Provision for (benefit from)
income taxes (27)% 349 % (5)% (38)%
--- --- --- ---
</TABLE>
-13-
<PAGE> 34
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. INCOME TAXES, CONTINUED
At March 31, 1999 and 1998, the net deferred income tax liability
consists of the following:
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Accrued liabilities $ 279,767 $ 255,167
Excess tax inventory capitalization 18,415 18,812
State net operating loss carryforward -- 30,875
Intangible asset amortization 100,969 56,305
Excess book basis on intangible assets (7,610,945) (8,619,237)
Excess tax depreciation (350,063) (281,394)
----------- -----------
$(7,561,857) $(8,539,472)
=========== ===========
</TABLE>
The net deferred tax liability at March 31, 1999 and 1998 is reflected in
the consolidated balance sheets as follows:
<TABLE>
<S> <C> <C>
Deferred income tax asset $ 399,151 $ 361,159
Deferred income tax liability (7,961,008) (8,900,631)
----------- -----------
$(7,561,857) $(8,539,472)
=========== ===========
</TABLE>
11. SAVINGS PLAN
The Company has a defined contribution savings plan (the Plan) which
qualifies under Section 401(k) of the Internal Revenue Code for employees
meeting certain service requirements. The Plan provides for discretionary
contributions by the Company which totaled $364,678 and $294,525, $121,135
and $81,299 for the years ended March 31, 1999 and 1998 and the periods
from September 6, 1996 to March 31, 1997 and April 1, 1996 to September 5,
1996, respectively.
-14-
<PAGE> 35
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. LEASES
The Company has operating leases primarily for office space (see Note 9).
Rent expense under these leases was $1,193,691, $999,041, $377,087 and
$222,151 for the years ended March 31, 1999 and 1998 and the periods from
September 6, 1996 to March 31, 1997 and April 1, 1996 to September 5,
1996, respectively. The office lease has fixed escalating payments and,
accordingly, rent expense is recognized on a straight-line basis. Future
minimum lease payments under noncancelable operating leases for years
ending March 31 are as follows:
2000 $ 1,009,455
2001 899,831
2002 845,675
2003 779,189
2004 757,851
Thereafter 9,125,492
-----------
$13,417,493
-----------
13. CONTINGENCIES
The Internal Revenue Service (IRS) recently performed an examination of
the Company's taxable years ended December 31, 1993, 1994 and 1995 and the
period from January 1, 1996 to September 5, 1996. The examination is
currently under review by the IRS and management is unable to estimate the
ultimate outcome of this examination or its potential impact on the
Company's financial position.
14. GEOGRAPHIC SEGMENT INFORMATION
In the fiscal year ended March 31, 1999, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
SFAS 131 supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry segment" approach with the
"management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments.
The adoption of SFAS 131 did not affect the Company's results of
operations or financial position.
Based on the Company's method of internal reporting, the Company operates
and reports as a single industry, segment, which is development and
marketing of custom designed software and standard software products for
automated material handling applications.
-15-
<PAGE> 36
AUTO-SOFT CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. GEOGRAPHIC SEGMENT INFORMATION, CONTINUED
Revenue information by geographic areas is as follows:
<TABLE>
<CAPTION>
Period From Period From
Year Ended March 31, September 6, 1996 April 1, 1996
----------------------------- to March 31, to September 5,
1999 1998 1997 1996
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
United States $11,729,544 $24,744,313 $ 5,914,180 $ 7,314,960
Korea 1,095,802 1,016,930 1,788,721 2,071,796
Germany 3,048,539 825,779 1,284,116 202,578
Singapore 5,340,296 49,938 71,959 276,416
Other 2,679,899 1,148,933 1,788,219 2,972,516
----------- ----------- ----------- -----------
$23,894,080 $27,785,893 $10,847,195 $12,838,266
=========== =========== =========== ===========
</TABLE>
Foreign revenue is based on the country in which the sales originate.
Long-lived assets located in foreign countries are not material.
15. SUBSEQUENT EVENTS
In November 1999, the Company's board of directors declared a cash
dividend of $63,141 to the Parent.
During the six month period ended September 30, 1999, the Company agreed
to issue to a customer a $350,000 credit against a future maintenance
contract. In exchange for the credit, the customer agreed not to enforce
any penalties under the provisions of the project contract. The amount has
been accrued in the September 30, 1999 consolidated financial statements
as a liability and an increase to cost of sales.
-16-
<PAGE> 37
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following unaudited Pro Forma Combined Condensed Balance Sheet as of
December 31, 1999 and the Pro Forma Combined Condensed Statements of Operations
for the three months ended September 30, 1999 and the year ended December 31,
1999 have been prepared to reflect the effect of the acquisition by the Company
of Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI") from Daifuku
America Corporation ("Daifuku America"), a U.S. subsidiary of Daifuku Co., Ltd.
of Japan. ASC is a leading material handling software and systems integration
company focusing on manufacturing and distribution of logistic systems for the
semiconductor industry. ASI is a world leader in robotic and material handling
simulation, scheduling and real time dispatching software for the semiconductor
industry.
The pro forma information assumes that the acquisition occurred on December 31,
1999 for purposes of the balance sheet and at October 1, 1998, for purposes of
the statements of operations. The pro forma information is based on the
historical statements of the Company and the combined historical statements of
ASC and ASI, giving effect to the transaction under the purchase method of
accounting and the assumptions and adjustments in the accompanying notes to the
pro forma financial information.
The pro forma information does not purport to be indicative of the financial
position or results of operations that would have been attained had the
combination been in effect on the dates indicated nor of future results of
operations of the Company. The pro forma combined condensed financial statements
should be read in conjunction with the separate audited financial statements and
notes thereto of Brooks Automation, Inc. included in its Annual Report on Form
10-K for the year ended September 30, 1999, the unaudited financial information
included in the Company's Form 10-Q for the three months ended December 31, 1999
and the audited and unaudited financial statements and notes thereto of ASC and
ASI included as part of this Form 8-K/A.
<PAGE> 38
BROOKS AUTOMATION, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET (1)
DECEMBER 31, 1999
$000'S
<TABLE>
<CAPTION>
Combined
Historical
Historical Auto-Soft and Pro forma Pro forma
Brooks (A) AutoSimulations adjustments combined
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 61,097 $ 5,391 $ (27,000) (2) $ 39,488
Accounts receivable, net 43,912 4,732 -- 48,644
Inventories 29,997 50 -- 30,047
Prepaid expenses and other current assets 7,608 6,723 (35) (2)(3) 14,296
--------- --------- --------- ---------
Total current assets 142,614 16,896 (27,035) 132,475
Fixed assets, net 18,897 5,531 -- 24,428
Auto-Soft/AutoSimulations intangible assets -- -- 48,624 (2)(3)(4) 48,624
Other intangible assets, net 13,065 49,293 (49,293) (2) 13,065
Other 9,218 288 -- 9,506
--------- --------- --------- ---------
TOTAL ASSETS $ 183,794 $ 72,008 $ (27,704) $ 228,098
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings due within one year $ 531 $ 1,075 $ 16,000 (2) $ 17,606
Accounts payable 8,820 618 -- 9,438
Accrued expenses and other current liabilities 26,643 7,810 3,500 (4) 37,953
--------- --------- --------- ---------
Total current liabilities 35,994 9,503 19,500 64,997
--------- --------- --------- ---------
LONG-TERM LIABILITIES
Long-term debt 683 133 -- 816
Other long-term liabilities 695 8,813 (8,372) (2) 1,136
--------- --------- --------- ---------
Total long-term liabilities 1,378 8,946 (8,372) 1,952
--------- --------- --------- ---------
TOTAL LIABILITIES 37,372 18,449 11,128 66,949
--------- --------- --------- ---------
MINORITY INTERESTS 1,367 -- -- 1,367
--------- --------- --------- ---------
STOCKHOLDERS' EQUITY
Common stock 128 69,542 (69,537) (2) 133
Additional paid-in capital 168,982 -- 14,722 (2) 183,704
Accumulated other comprehensive income (loss) (1,210) -- -- (1,210)
Deferred compensation (58) -- -- (58)
Retained earnings (accumulated deficit) (22,787) (15,983) 15,983 (2) (22,787)
--------- --------- --------- ---------
Total stockholders' equity 145,055 53,559 (38,832) 159,782
--------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 183,794 $ 72,008 $ (27,704) $ 228,098
========= ========= ========= =========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
(A) As filed on Form 10-Q for the quarterly period ended December 31, 1999.
<PAGE> 39
BROOKS AUTOMATION, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (1)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Combined
Historical
Historical Auto-Soft and Pro forma Pro forma
Brooks (A) AutoSimulations adjustments combined
---------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 50,280 $ 5,892 $ -- $ 56,172
Cost of revenues 25,828 3,999 -- 29,827
-------- -------- -------- --------
Gross profit 24,452 1,893 -- 26,345
OPERATING EXPENSES
Research and development 7,140 1,512 -- 8,652
Selling, general and administrative 12,501 4,839 (1,774) (5) 15,566
Amortization of acquired intangible assets 795 -- 4,052 (6) 4,847
-------- -------- -------- --------
Total operating expenses 20,436 6,351 2,278 29,065
OPERATING INCOME (LOSS) 4,016 (4,458) (1,948) (2,720)
OTHER (INCOME) EXPENSE
Interest (income) expense, net (605) (54) 545 (7)(8) (114)
Other (income) expense, net 41 18 -- 59
-------- -------- -------- --------
Total other (income) expense (564) (36) 545 (55)
Income (loss) before income taxes
and minority interests 4,580 (4,422) (2,823) (2,665)
Income tax provision(benefit) 1,808 (1,712) 491 (10) 587
-------- -------- -------- --------
INCOME(LOSS) BEFORE MINORITY INTERESTS 2,772 (2,710) (3,314) (3,252)
Minority interests in loss of consolidated subsidiary (93) -- -- (93)
-------- -------- -------- --------
NET INCOME (LOSS) 2,865 (2,710) (3,314) (3,159)
Accretion and dividends on preferred stock -- -- -- --
-------- -------- -------- --------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ 2,865 $ (2,710) $ (3,314) $ (3,159)
======== ======== ======== ========
Earnings (loss) per share attributable to
common stockholders:
Basic $ 0.22 $ (0.24)
Diluted $ 0.21 $ (0.24)
Shares used to compute earnings (loss) per share:
Basic 12,769 13,304
Diluted 13,411 13,304
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
(A) As filed on Form 10-Q for the quarterly period ended December 31, 1999.
<PAGE> 40
BROOKS AUTOMATION, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (1)
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Combined
Historical
Historical Auto-Soft and Pro forma Pro forma
Brooks (A) AutoSimulations adjustments combined
---------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 103,906 $ 37,528 $ -- $ 141,434
Cost of revenues 57,877 16,817 -- 74,694
--------- --------- --------- ---------
Gross profit 46,029 20,711 -- 66,740
OPERATING EXPENSES
Research and development 22,425 4,641 -- 27,066
Selling, general and administrative 31,631 21,298 (7,096) (5) 45,833
Amortization of acquired intangible assets 349 -- 16,208 (6) 16,557
Acquisition-related and restructuring 3,120 -- -- 3,120
--------- --------- --------- ---------
Total operating expenses 57,525 25,939 9,112 92,576
OPERATING LOSS (11,496) (5,228) (9,112) (25,836)
OTHER (INCOME) EXPENSE
Interest (income) expense, net (2,782) 28 1,990 (7)(9) (764)
Other (income) expense, net 225 242 -- 467
--------- --------- --------- ---------
Total other (income) expense (2,557) 270 1,990 (297)
Loss before income taxes
and minority interests (8,939) (5,498) (11,102) (25,539)
Income tax provision(benefit) (1,015) (1,298) 2,042 (10) (271)
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTERESTS (7,924) (4,200) (13,144) (29,268)
Minority interests in loss of consolidated subsidiary (40) -- -- (40)
Cumulative effect of accounting change -- 27 -- 27
--------- --------- --------- ---------
NET LOSS (7,884) (4,227) (13,144) (25,255)
Accretion and dividends on preferred stock (654) -- -- (654)
--------- --------- --------- ---------
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ (8,538) $ (4,227) $ (13,144) $ (25,909)
========= ========= ========= =========
Loss per share attributable to common stockholders:
Basic $ (0.76) $ (2.21)
Diluted $ (0.76) $ (2.21)
Shares used to compute loss per share:
Basic 11,192 11,727
Diluted 11,192 11,727
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
(A) As filed on Form 10-K for the year ended September 30, 1999.
<PAGE> 41
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) In consideration for the acquisition of ASC and ASI, the Company paid
Daifuku America $27.0 million in cash, 535,404 shares of Brooks common
stock with a value of $14.7 million, and issued a $16.0 million promissory
note payable in one year, bearing interest at a rate of 4.0% per annum.
Additionally, the Company accrued $3.5 million for transaction fees and
recorded a $1.2 million receivable from Daifuku to reimburse the Company
for the difference between the value of net tangible assets acquired and
net tangible assets as defined in the Agreement and Plan of Merger dated
December 15, 1999, by and among Brooks Automation, Inc., ASC Merger Corp.,
ASI Merger Corp., Daifuku America Corporation and Daifuku Co., Ltd.
("Merger Agreement").
The Pro Forma Combined Condensed Balance Sheet has been prepared based on
the Company's, ASC's and ASI's unaudited consolidated balance sheets. The
Company has a fiscal year-end of September 30, while ASC and ASI have a
fiscal year-end of March 31. Therefore, the Pro Forma Combined Condensed
Statement of Operations for the year ended September 30, 1999 includes the
Company's historical results for the twelve months ended September 30, 1999
and the ASC and ASI results for the six months ended September 30, 1999
plus the results for the twelve months ended March 31, 1999 less the
results for the six months ended September 30, 1998. The acquisition is
being accounted for using the purchase method of accounting in accordance
with Accounting Principles Board Opinion No. 16, "Business Combinations"
("APB 16"). Under APB 16, purchase price allocations are made to the assets
acquired and the liabilities assumed based on their respective fair values.
A summary of the transaction is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Consideration:
Cash $ 27,000
Stock 14,727
Promissory note 16,000
Transaction costs 3,500
---------
Total consideration 61,227
Net tangible assets acquired 12,603
---------
Excess of purchase price over net tangible assets acquired $ 48,624
=========
</TABLE>
<PAGE> 42
(2) To adjust the combined historical balance sheets of ASC and ASI to equal
the assets acquired and the liabilities assumed. The following purchase
price and purchase accounting adjustments were made to the historical
balance sheet:
- Pro forma consideration of $27.0 million of cash, 535,404 shares of
Brooks common stock, par value $0.01, valued at $14.7 million and a
promissory note for $16.0 million, payable in one year.
- Elimination of $49.3 million of ASC and ASI historical intangible
assets in accordance with APB 16.
- Elimination of $1.3 million and $8.4 million of deferred tax assets
and liabilities, respectively, principally related to the goodwill
amortization recorded by ASC and ASI prior to their acquisition by the
Company, as the Company is neither acquiring these assets nor assuming
these liabilities.
- Elimination of equity of the acquired companies in accordance with APB
16. The equity amounts eliminated are $69.5 million of common stock,
no par value, and $16.0 million of accumulated deficit.
(3) To record a receivable from Daifuku for $1.2 million to reflect the
receivable due from Daifuku to reimburse the Company for the difference
between the value of net tangible assets acquired and net tangible assets
as defined in the Merger Agreement.
(4) To accrue $3.5 million of transaction costs related to the acquisition,
including audit and legal fees.
(5) To eliminate amortization expense related to goodwill recorded by ASC and
ASI prior to their acquisition by the Company. Under purchase accounting,
these goodwill assets are eliminated; accordingly, the expense to amortize
these intangible assets is also eliminated.
(6) To record amortization expense for the intangible assets which represent
the excess of purchase price over net tangible assets acquired established
as part of the Company's purchase accounting for the acquisition. The
excess of the purchase price over the fair value of the net tangible assets
acquired has been recorded based on a preliminary price allocation.
Finalization of the allocation of the purchase price to tangible and
identifiable intangible assets acquired will be made after analyses of
their fair values. The Company anticipates that the weighted average useful
life of the acquired intangible assets will be three years. The assets
will be amortized using the straight-line method.
(7) To record the reduction in the Company's interest income resulting from the
$27.0 million payment at the time of closing. The reductions to the
Company's interest income recorded for the three months ended December 31,
1999 and the year ended September 30, 1999 are $0.3 million and $1.3
million, respectively, at an assumed interest rate of 5.0% per annum.
(8) To record the reduction in the Company's interest income resulting from the
payment of the promissory note of $16.0 million plus accrued interest of
$0.6 million on October 1, 1999. The reduction to the Company's interest
income recorded for the three months ended December 31, 1999 is $0.2
million, at an assumed interest rate of 5.0% per annum.
(9) To record interest expense on the $16.0 million promissory note issued to
Daifuku America. Interest expense recorded on the note, which bears an
interest rate of 4.0% per annum, is $0.6 million.
<PAGE> 43
(10) To record the income tax effect of the pro forma adjustments to interest
income and expense and the elimination of amortization expense related to
goodwill recorded by ASC and ASI prior to their acquisition by the Company.
The adjustments to the income tax provision (benefit) were recorded at a
40.0% tax rate. The amortization expense related to the intangible assets
established as part of the Company's purchase accounting was not
tax-effected, since this expense is not deductible.
<PAGE> 44
SIGNATURE
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.
By: /s/ Ellen B. Richstone
----------------------
Ellen B. Richstone
Senior Vice President of
Finance and Administration and
Chief Financial Officer
Dated: February 11, 2000
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
Item No. Description
-------- -----------
<S> <C>
*2.1 Agreement and Plan of Merger dated December 15, 1999, by and
among Brooks Automation, Inc., ASC Merger Corp., ASI
Merger Corp., Daifuku America Corporation, and Daifuku Co.,
Ltd.
*2.2 Stockholder Agreement by and among Brooks Automation, Inc.,
Daifuku America Corporation, and Daifuku Co., Ltd. dated
January 6, 2000
*2.3 Corporate Non-Competition and Proprietary Information
Agreement between Brooks, Daifuku Co., Ltd. and Daifuku
America Corporation dated January 6, 2000
23.1 Consent of PricewaterhouseCoopers LLP
</TABLE>
- ---------------------------------------
* Previously filed
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on From S-8 (Nos. 33-95268, 333-07313, 333-22717, 333-66457,
333-66429 and 333-66455) of Brooks Automation, Inc. of our reports dated
December 27, 1999, with respect to the financial statements of
AutoSimulations, Inc. and Auto-Soft Corporation appearing in Amendment No.
1 to the Current Report on From 8-K/A of Brooks Automation, Inc. dated
February 14, 2000.
PricewaterhouseCoopers LLP
Salt Lake City, Utah
February 14, 2000
