8-K 1 d80953e8-k.txt FORM 8-K PERIOD 7/12/00 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): October 18, 2000 (July 12, 2000) SPATIAL TECHNOLOGY INC. ----------------------- (Exact Name of Registrant as Specified in Charter) DELAWARE 0-288-42 84-1035353 (State of Incorporation) (Commission File Number) (IRS Employer Identification No) 2425 55TH STREET, SUITE 100 BOULDER, COLORADO 80301 (303) 544-2900 (Address of Principal Executive Offices and telephone number, including area code) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS (a) On July 12, 2000 (the "Closing Date"), pursuant to the terms of the Asset Purchase Agreement (the "Purchase Agreement") by and Between Spatial Technology Inc, a Delaware corporation (the "Company"), Prescient Technologies, Inc., a Delaware corporation ("Prescient") and Stone & Webster Incorporated, a Delaware corporation the Company acquired certain assets and liabilities of Prescient Technologies, Inc. ("Prescient") for total consideration of approximately $1.2 million, including $100,000 cash and 300,000 shares of common stock (the "Acquisition"). The purchase price was determined through negotiations between the Company and Prescient. In connection with the Acquisition, the parties to the Purchase Agreement also executed an Escrow Agreement, pursuant to which an additional 50,000 shares of common stock (the "Escrow Shares") are to be held in escrow pursuant to the Purchase Agreement, and will be released to Prescient upon the attainment of certain performance objectives relating to the execution of certain customer contracts. The forward looking statements contained herein involve risks and uncertainties. Actual results and developments may differ materially from those described herein, due to a number of factors, including future performance and additional factors discussed in the Company's most recent Form 10-KSB. (b) Not applicable. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Audited financial statements of Prescient Technologies, Inc. as of December 31, 1998 and 1999 and for the years then ended and unaudited interim financial statements of Prescient Technologies, Inc. as of June 30, 2000 and for the six months ended June 30, 1999 and 2000. 2 3 INDEPENDENT AUDITORS' REPORT The Board of Directors Spatial Technology Inc.: We have audited the accompanying balance sheets of Prescient Technologies, Inc. as of December 31, 1998 and 1999, and the related statements of operations, stockholder's deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Prescient Technologies, Inc. as of December 31, 1998 and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Boulder, Colorado October 6, 2000 3 4 PRESCIENT TECHNOLOGIES, INC. BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, --------------------- JUNE 30, 1998 1999 2000 --------- --------- ----------- (UNAUDITED) ASSETS Current assets: Trade accounts receivable, net of allowance for doubtful accounts of $59, $25 and $25 in 1998, 1999 and 2000, respectively .............. $ 1,005 1,016 298 Prepaid expenses and other ......................... 120 280 209 -------- -------- -------- Total current assets ........................... 1,125 1,296 507 Property and equipment, net ........................... 599 370 209 Capitalized software development costs, net ........... 555 715 817 -------- -------- -------- Total assets ................................... $ 2,279 2,381 1,533 ======== ======== ======== LIABILITIES AND STOCKHOLDER'S DEFICIT Current liabilities: Bank overdraft ..................................... $ -- 130 60 Trade accounts payable ............................. 182 118 181 Due to affiliate, net .............................. 10,707 15,584 16,946 Accrued expenses and other liabilities ............. 140 322 162 Deferred revenue ................................... 331 490 636 -------- -------- -------- Total liabilities .............................. 11,360 16,644 17,985 -------- -------- -------- Stockholder's deficit Common stock, $.01 par value, 12,000,000 shares authorized; 10,000,000 shares issued and outstanding in 1998, 1999 and 2000 ................ 100 100 100 Additional paid-in capital ......................... 2 2 2 Accumulated deficit ................................ (9,083) (14,265) (16,454) Subscription receivable ............................ (100) (100) (100) -------- -------- -------- Total stockholder's deficit .................... (9,081) (14,263) (16,452) -------- -------- -------- Commitments and contingencies Total liabilities and stockholder's deficit .... $ 2,279 2,381 1,533 ======== ======== ========
See accompanying notes to financial statements. 4 5 PRESCIENT TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS)
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30 ----------------------- ------------------------ 1998 1999 1999 2000 ------- ------- ------- ------- (UNAUDITED) Revenue: License fees .................... $ 2,081 1,929 906 281 Maintenance ..................... 819 906 449 450 Professional services ........... 865 278 179 293 ------- ------- ------- ------- Total revenue ............... 3,765 3,113 1,534 1,024 ------- ------- ------- ------- Cost of revenue: License fees .................... 365 860 258 236 Maintenance ..................... 209 214 71 160 Professional services ........... 464 105 44 163 ------- ------- ------- ------- Total costs of revenue ...... 1,038 1,179 373 559 ------- ------- ------- ------- Gross profit ................ 2,727 1,934 1,161 465 ------- ------- ------- ------- Operating expenses: Sales and marketing ............. 4,700 4,279 2,123 1,757 Research and development ........ 938 1,701 713 630 General and administrative ...... 1,376 1,136 623 267 ------- ------- ------- ------- Total operating expenses .... 7,014 7,116 3,459 2,654 ------- ------- ------- ------- Net loss .................... $(4,287) (5,182) (2,298) (2,189) ======= ======= ======= =======
See accompanying notes to financial statements. 5 6 PRESCIENT TECHNOLOGIES, INC. STATEMENTS OF STOCKHOLDER'S DEFICIT (AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK ADDITIONAL TOTAL ----------------------- PAID-IN ACCUMULATED SUBSCRIPTION STOCKHOLDER'S SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE DEFICIT ---------- ---------- ---------- ----------- ------------ ------------- Balances at January 1, 1998 ............. 10,000 $ -- 2 (4,796) -- (4,794) Issuance of common stock to affiliate.... 9,990,000 100 -- -- (100) -- Net loss ................................ -- -- -- (4,287) -- (4,287) ---------- ---------- ---------- ---------- ---------- ---------- Balances at December 31, 1998 ........... 10,000,000 100 2 (9,083) (100) (9,081) Net loss ................................ -- -- -- (5,182) -- (5,182) ---------- ---------- ---------- ---------- ---------- ---------- Balances at December 31, 1999 ........... 10,000,000 100 2 (14,265) (100) (14,263) Net loss (unaudited) .................... -- -- -- (2,189) -- (2,189) ---------- ---------- ---------- ---------- ---------- ---------- Balances at June 30, 2000 (unaudited).... 10,000,000 $ 100 2 (16,454) (100) (16,452) ========== ========== ========== ========== ========== ==========
See accompanying notes to financial statements. 6 7 PRESCIENT TECHNOLOGIES, INC. STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30 ----------------------- ------------------------ 1998 1999 1999 2000 ------- ------- ------- ------- (UNAUDITED) Cash flows from operating activities: Net loss .............................................. $(4,287) (5,182) (2,298) (2,189) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization .................... 693 754 365 380 Changes in operating assets and liabilities: Trade accounts receivable ....................... 930 (11) (208) 718 Prepaid expenses and other assets ............... 207 (160) (43) 71 Trade accounts payable .......................... 121 (64) (23) 63 Due to affiliate ................................ 3,203 4,877 2,275 1,362 Accrued expenses and other liabilities .......... (174) 182 79 (160) Deferred revenue ................................ (150) 159 253 146 ------- ------- ------- ------- Net cash provided by operating activities ..... 543 555 400 391 ------- ------- ------- ------- Cash flows from investing activities: Acquisition of property and equipment ................. (255) (162) (51) (32) Capitalized software development costs ................ (454) (523) (349) (289) ------- ------- ------- ------- Net cash used by investing activities ......... (709) (685) (400) (321) ------- ------- ------- ------- Cash flows from financing activities - bank overdraft .... -- 130 -- (70) ------- ------- ------- ------- Net decrease in cash and cash equivalents ..... (166) -- -- -- Cash and cash equivalents at beginning of period ......... 166 -- -- -- ------- ------- ------- ------- Cash and cash equivalents at end of period ............... $ -- -- -- -- ======= ======= ======= =======
See accompanying notes to financial statements. 7 8 PRESCIENT TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 (1) Organization and Summary of Significant Accounting Policies (a) Business and Basis of Financial Statement Presentation Prescient Technologies, Inc. (Prescient or the Company) is a wholly-owned subsidiary of Stone & Webster, Incorporated, and was originally incorporated under the laws of the State of Delaware on May 6, 1992 as Stone & Webster Advanced Systems Development Services, Inc. On June 13, 1996 the incorporation was amended, changing the name to Prescient Technologies, Inc. Prescient, is a provider of engineering data quality software solutions for manufacturers. The Company's engineering quality tools are used in aerospace, automotive, electronics and other discrete manufacturing industries for detecting, assessing, correcting and preventing product development problems caused by inaccurate, incomplete or inconsistent design modeling practices. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The accompanying unaudited financial information as of June 30, 2000 and for the six months ended June 30, 1999 and 2000 has been prepared in accordance with generally accepted accounting principles for interim financial information. All significant adjustments, consisting of only normal and recurring adjustments, that, in the opinion of management, are necessary for a fair presentation of the results of operations and cash flows for the six months ended June 30, 1999 and 2000, have been included. Operating results for the six months ended June 30, 1999 and 2000 are not necessarily indicative of the results that may be expected for the full year. (b) Property and Equipment Equipment is recorded at cost and depreciated over the useful lives of the assets, which range from two to three years. Costs of maintenance and repairs are charged to operations as incurred. Purchased computer software represents software and enhancements purchased from third parties, and is amortized over its estimated useful life of two years, beginning at purchase, or for enhancements, when the software is incorporated into the Company's products. (c) Capitalized Software Development Costs The Company accounts for software development costs in accordance with Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed," which provides that capitalization of costs begins when technological feasibility has been established and ceases when the product is available for general release to customers, at which time amortization begins on a product-by-product basis. Capitalized costs are amortized over the estimated useful life of the product or the ratio of the current gross revenues to the total of current and estimated total future gross revenues for the product, whichever is greater. Software development costs capitalized in the years ended December 31, 1999 and 2000 and the six months ended June 30, 1999 and 2000 were $457,000, $523,000, $349,000 and $290,000, respectively. Amortization of software development costs for the years ended December 31, 1999 and 2000 and the six months ended June 30, 1999 and 2000 was $213,000, $363,000, $165,000 and $187,000, respectively. 8 9 PRESCIENT TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED (d) Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash and cash equivalents, trade receivables, accounts payable, and accrued expenses and other liabilities. The carrying values of these financial instruments approximate fair value because of their short-term nature. (e) Long-Lived Assets and Assets to Be Disposed Of In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used in operations is generally measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is equal to the amount by which the carrying amounts of the assets exceed the fair values. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. No asset impairment was recognized in 1998, 1999 or 2000. (f) Revenue Recognition The Company recognizes revenue in accordance with the provisions of Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2) which requires that revenue for licensing, selling, leasing, or otherwise marketing computer software be recognized when evidence of an arrangement exists, delivery of the product has occurred, collectibility of the related receivable is assured and the vendor's fee is fixed or determinable. In addition, revenue is recognized for the multiple elements of software arrangements based upon the vendor specific objective evidence of fair value for each element. Accordingly, revenue from products or services is recognized based upon shipment of products or performance of services. In December 1998, the American Institute of Certified Public Accountants (AICPA) issued SOP No. 98-9, "Modification of SOP No. 97-2, Software Revenue Recognition, with Respect to Certain Transactions." SOP No. 98-9 clarifies certain provisions of SOP No. 97-2, and effectively defers the required adoption of those provisions until the Company's fiscal year beginning January 1, 2000. Effective January 1, 1999, the Company adopted the provisions of SOP No. 98-9, and the impact on the Company's results of operations, financial position or cash flows was not material. License fee revenue is recognized upon completion of a signed contract and delivery of the software. Revenue from maintenance contracts is deferred and recognized ratably over the period of the agreement. Training and consulting revenue is recognized upon completion of the training or performance of services, respectively. (g) Stock-Based Compensation The Company accounts for its stock-based compensation plan in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related interpretations. As such, compensation expense is recorded on the date of grant only if the current fair value of the underlying stock exceeds the exercise price. Under SFAS 123, "Accounting for Stock-Based Compensation," entities are permitted to recognize as expense the fair value of all stock-based awards on the date of grant over the vesting period. Alternatively, SFAS 123 also allows entities to continue to apply the provisions of APB 25 and provide pro forma net earnings disclosures as if the fair-value-based method defined in SFAS 123 had been applied. The Company has elected to continue to apply the provisions of APB 25 and provide the pro forma disclosures required by SFAS 123. 9 10 PRESCIENT TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED (h) Liquidity The Company incurred net losses in 1998, 1999 and 2000 and has a deficit in stockholder's equity as of June 30, 2000. The net losses have primarily been funded by advances from Stone & Webster, Incorporated. These advances are reflected in the accompanying balance sheet as due to affiliate. Without advances from Stone & Webster, Incorporated, the Company would be required to obtain additional sources of financing. It is uncertain such additional sources of financing would be available to the Company. (i) Income Taxes The Company accounts for income taxes under the provisions of SFAS 109, "Accounting for Income Taxes." SFAS 109 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. (2) Property and Equipment Property and equipment consists of the following (amounts in thousands):
DECEMBER 31, ------------------- JUNE 30, 1998 1999 2000 -------- -------- ----------- (UNAUDITED) Computer and office equipment ..................... $ 1,719 1,811 1,811 Purchased computer software ....................... 183 253 285 ------- ------- ------- 1,902 2,064 2,096 Less accumulated depreciation and amortization .... (1,303) (1,694) (1,887) ------- ------- ------- $ 599 370 209 ======= ======= =======
(3) Stockholder's Equity Stock Options In July 1998, the Company adopted an equity incentive plan (the Plan) pursuant to which the Company's Board of Directors may issue restricted common stock and grant incentive stock options and non-statutory stock options to employees, directors and consultants. The Plan authorizes issuances and grants of options to purchase up to 1,900,000 shares of authorized but unissued common stock. Incentive and non-statutory stock options generally vest over four years and expire upon the earlier of 30 days after termination of employment or ten years from the date of grant. 10 11 PRESCIENT TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED Option activity during the years ended December 31, 1998 and 1999 and the six months ended June 30, 2000 consisted of the following:
NUMBER WEIGHTED OF OPTIONS AVERAGE OPTIONS OUTSTANDING EXERCISE PRICE EXERCISABLE ----------- -------------- ----------- Balance at January 1, 1998 .............. -- -- Granted ................................. 388,300 $ 1.50 Forfeited ............................... (35,200) 1.50 -------- Balance at December 31, 1998 ............ 353,100 1.50 -- Granted ................................. 456,000 1.50 Forfeited ............................... (160,700) 1.50 -------- Balance at December 31, 1999 ............ 648,400 1.50 52,600 Granted (unaudited) ..................... -- 1.50 Forfeited (unaudited) ................... (34,500) -------- Balance at June 30, 2000 (unaudited) .... 613,900 1.50 80,975 ========
The weighted average fair value of all options granted during 1998, 1999 and 2000 was $.81 per share on the date of grant using the Black-Scholes option-pricing model with the following assumptions: no expected dividends, volatility of 25%, risk-free interest rate of approximately 6.4% and an expected life of 10 years. The remaining weighted average contractual life of options outstanding at December 31, 1999 was approximately 3 years. If the Company determined compensation expense based on the fair value of the options at the grant date under SFAS 123, the Company's net loss would have been approximately $4,142,000 and $5,165,000, for the years ended December 31, 1998 and 1999, respectively. Subscription Receivable In July 1998, Stone & Webster, Incorporated increased its investment by subscribing to 9,990,000 shares at $.01 per share. The subscription receivable is reflected as a reduction of equity. (4) Income Taxes Income tax benefit relating to losses incurred differs from the amounts that would result from applying the federal statutory rate as follows (amounts in thousands):
YEARS ENDED DECEMBER 31, ------------------------ 1998 1999 -------- -------- Expected tax benefit .................................... $(1,500) (1,814) Change in valuation allowance for deferred tax assets ... 1,424 1,779 Other, net .............................................. 76 35 ------- ------- Income tax benefit ...................................... $ -- -- ======= =======
11 12 PRESCIENT TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED Temporary differences that give rise to significant components of net deferred tax assets and liabilities are as follows (amounts in thousands):
YEARS ENDED DECEMBER 31, ------------------------ 1998 1999 -------- -------- Net operating loss carryforwards ............................ $ 4,629 6,457 Other, net .................................................. 83 201 ------- ------- Gross deferred tax assets ................................... 4,712 6,658 Valuation allowance ......................................... (4,476) (6,255) ------- ------- Net deferred tax assets ..................................... $ 236 403 ======= ======= Deferred tax liabilities - research and development costs ... $ (236) (403) ------- ------- Total deferred tax liabilities .............................. $ (236) (403) ======= =======
At December 31, 1999 and June 30, 2000, the Company had cumulative net operating loss carryforwards for income tax purposes of approximately $14,800,000 and $17,000,000, respectively, which will expire in various amounts through the year 2020, if not utilized. Due to the uncertainty regarding the utilization of net operating loss carryforwards, no tax benefits for losses have been recorded by the Company in any periods, and a valuation allowance has been recorded for the entire amount of the deferred tax asset. (5) Leases The Company is obligated for payments of approximately $90,000 through December 31, 2000 for leases related to office space and equipment. Rent expense for operating leases, which is recognized using the straight-line method over the lease term, for the years ended December 31, 1998 and 1999 and the six months ended June 30, 1999 and 2000 was approximately $437,000, $441,000, $215,000 and $304,000, respectively. (6) Employee Benefit Plans The Company has a defined contribution 401(k) plan which covers substantially all employees and allows employee contributions of up to 15% of their compensation, subject to the maximum amount allowed under the Internal Revenue Code. The Company matches 25% of the first 1% of an employee's contribution, and may also provide a discretionary contribution each year. The Company's contributions to the Plan totaled $27,000 in 1998 and $20,000 in 1999. In addition, the Company's employees are eligible to participate in a pension plan sponsored by Stone & Webster Incorporated. Costs of the plan charged to the Company were $8,000 and $39,000 in 1998 and 1999, respectively. 12 13 PRESCIENT TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (7) Revenue and Significant Customers Revenue by geographic area is summarized as follows (amounts in thousands):
YEARS ENDED SIX MONTHS ENDED DECEMBER 31, JUNE 30, --------------- ---------------- 1998 1999 1999 2000 ------ ------ ------ ------ (UNAUDITED) United States .... $2,945 2,385 1,220 940 Europe ........... 615 725 312 66 Asia ............. 205 3 2 18 ------ ------ ------ ------ Total ...... $3,765 3,113 1,534 1,024 ====== ====== ====== ======
No individual customers accounted for greater than 10% of total revenue during 1998 or 1999. (8) Sale of the Company On July 12, 2000, substantially all of the net assets of the Company were acquired by Spatial Technology Inc. (Spatial) for $100,000 cash and 300,000 shares of the common stock of Spatial. An additional 50,000 shares of Spatial common stock are required to be issued if certain performance objectives are attained. 13 14 (b) Unaudited pro forma condensed combined financial statements as of June 30, 2000 and for the six months ended June 30, 2000 and the year ended December 31, 1999. SPATIAL TECHNOLOGY INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS On July 12, 2000, the Company acquired substantially all of the net assets of Prescient Technologies, Inc. ("Prescient) for total consideration of $1.2 million, including $100,000 cash and 300,000 shares of common stock. In addition, the Company may be required to issue an additional 50,000 shares of common stock if certain performance objectives are met. The additional shares, if any, will be recorded as additional acquisition consideration at the time of issuance. The unaudited pro forma condensed combined balance sheet presents the financial position of the Company as of June 30, 2000 giving effect to the Prescient acquisition as if it had occurred on such date. The unaudited pro forma condensed combined statements of operations of the Company for the six months ended June 30, 2000 and the year ended December 31, 1999, assume that the Prescient acquisition was completed on January 1, 1999. The unaudited pro forma condensed combined financial statements have been derived from the historical financial statements of the Company. The pro forma adjustments and the assumptions on which they are based are described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements and the notes thereto of the Company which were previously reported in the Company's Report on Form 10-KSB for the year ended December 31, 1999 and the Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2000 and June 30, 2000, and the audited financial statements and the notes thereto of Prescient as of December 31, 1998 and 1999 and for the years then ended, and the unaudited interim financial statements as of June 30, 2000 and for the six months ended June 30, 1999 and 2000, included elsewhere in this Current Report on Form 8-K. The unaudited pro forma condensed combined financial statements are not necessarily indicative of the financial position or operating results that would have occurred had the acquisition of Prescient been completed at that date, or at the beginning of the period for which the transaction has been given effect, nor the financial results of the combined company in the future. 14 15 SPATIAL TECHNOLOGY INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 30, 2000 (In Thousands)
PRO FORMA ADJUSTMENTS SPATIAL PRESCIENT FOR PRESCIENT TOTAL ------------ ------------ ------------------ ----------- ASSETS Current Assets: Cash and cash equivalents........... $ 3,331 $ -- $ (100)(a) $ 3,231 Accounts receivable, net............ 4,475 298 -- 4,773 Prepaid expenses and other.......... 819 209 -- 1,028 ----------- ----------- ---------- ---------- Total current assets............. 8,625 507 (100) 9,032 Equipment, net......................... 2,513 209 -- 2,722 Software costs, net.................... 2,082 817 (29)(b) 2,870 ----------- ----------- ---------- ---------- $ 13,220 $ 1,533 $ (129) $ 14,624 =========== =========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable.................... $ 1,370 $ 241 $ (15)(c) $ 1,596 Due to affiliate.................... -- 16,946 (16,946)(d) -- Accrued expenses.................... 1,442 162 (2)(e) 1,602 Deferred revenue.................... 2,569 636 (392)(f) 2,813 ----------- ----------- ---------- ---------- Total current liabilities........ 5,381 17,985 (17,355) 6,011 ----------- ----------- ---------- ---------- Stockholder's Equity Common stock........................ 115 100 (97)(a) (g) 118 Additional paid-in capital.......... 32,849 2 940 (a) (g) 33,791 Accumulated deficit................. (24,986) (16,454) 16,283 (h) (25,157) Subscription receivable............. -- (100) 100 (i) -- Other comprehensive loss............ (139) -- -- (139) ----------- ----------- ---------- ---------- Total stockholders' equity....... 7,839 (16,452) 17,226 8,613 ----------- ----------- ---------- ---------- $ 13,220 $ 1,533 $ (129) $ 14,624 =========== =========== ========== ==========
15 16 SPATIAL TECHNOLOGY INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA ADJUSTMENTS SPATIAL PRESCIENT FOR PRESCIENT TOTAL ------------ ------------ ------------- ----------- Revenue................................ $ 7,252 $ 1,024 $ -- $ 8,276 Cost of revenue........................ 1,293 559 131 (j) 1,983 ----------- ----------- ---------- ---------- Gross profit........................... 5,959 465 (131) 6,293 Operating expenses: Sales and marketing.................... 3,782 1,757 -- 5,539 Research and development............... 5,398 630 -- 6,028 General and administrative............. 1,796 267 -- 2,063 ----------- ----------- ---------- ---------- Total operating expenses............... 10,976 2,654 -- 13,630 ----------- ----------- ---------- ---------- Loss from operations................... (5,017) (2,189) (131) (7,337) Other income (expense)................. 105 -- -- 105 ----------- ----------- ---------- ---------- Loss before income taxes............... (4,912) (2,189) (131) (7,232) Income taxes........................... 138 -- -- 138 ----------- ----------- ---------- ---------- Net loss............................... $ (5,050) $ (2,189) $ (131) $ (7,370) =========== =========== ========== ========== Loss per common share: Basic and Diluted...................... $ (0.46) $ (0.66) Weighted average number of shares outstanding Basic and Diluted................... 10,914 300 (a) 11,214
16 17 SPATIAL TECHNOLOGY INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA ADJUSTMENTS SPATIAL PRESCIENT FOR PRESCIENT TOTAL ------------ ------------ -------------- ----------- Revenue................................ $ 14,900 $ 3,113 $ -- $ 18,013 Cost of revenue........................ 1,132 1,179 263 (j) 2,574 ----------- ----------- ---------- ---------- Gross profit........................... 13,768 1,934 (263) 15,439 Operating expenses: Sales and marketing.................... 5,918 4,279 -- 10,197 Research and development............... 7,742 1,701 -- 9,443 General and administrative............. 2,362 1,136 -- 3,498 Acquired in-process research and development...................... 500 -- -- 500 ----------- ----------- ---------- ---------- Total operating expenses............... 16,522 7,116 -- 23,638 Loss from operations................... (2,754) (5,182) (263) (8,199) Other income (expense)................. 139 -- -- 139 ----------- ----------- ---------- ---------- Net income (loss) before income taxes.. (2,615) (5,182) (263) (8,060) Income taxes........................... 246 -- -- 246 ----------- ----------- ---------- ---------- Net income (loss)...................... $ (2,861) $ (5,182) $ (263) $ (8,306) =========== =========== ========== ========== Loss per common share: Basic and Diluted...................... $ (0.31) $ (0.86) Weighted average number of shares outstanding Basic and Diluted.................... 9,345 300 (a) 9,645
17 18 SPATIAL TECHNOLOGY INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The Prescient acquisition was accounted for using the purchase method of accounting. The pro forma adjustments have been prepared on the basis of assumptions described in the following notes and includes assumptions relating to the allocation of the consideration paid for the assets and liabilities of Prescient based on preliminary estimates of their fair values. The actual allocation of such consideration may differ from that reflected in the pro forma financial information after valuations and finalization of the purchase accounting entries, including the allocation to acquired in-process research and development. In the opinion of the Company's management, all adjustments necessary to present fairly such pro forma financial information have been made based on the terms and structure of the Prescient acquisition agreement. The pro forma financial statements give effect to the following pro forma adjustments related to the prescient acquisition: (a) To record the consideration of $1.2 million paid by the Company in connection with the acquisition of Prescient, including $100,000 cash and 300,000 shares of common stock. (b) To adjust long-term intangible assets for the excess of the fair value of the acquired net assets over the acquisition consideration. (c) To adjust accounts payable for amounts not assumed by the Company in connection with the acquisition. (d) To eliminate amount due to affiliate of Prescient which was forgiven as part of the acquisition by the Company. (e) To record liabilities incurred by the Company in connection with acquisition, including direct legal and accounting expenses totaling $136,000, and to record the elimination of accrued liabilities totaling $138,000 not assumed by the Company in connection with acquisition. (f) To reduce deferred revenue to the fair value of the deferred revenue assumed by the Company in connection with the acquisition. (g) To eliminate Prescient common stock of $100,000 and additional paid in capital of $2,000. (h) To eliminate Prescient's accumulated deficit and reflect a $171,000 charge for acquired in-process research and development pursuant to the acquisition of certain assets of Prescient. (i) To eliminate Prescient's stock subscription receivable. (j) To reflect the additional amortization of intangible assets from the Prescient acquisition. The acquisition of certain assets and liabilities of Prescient resulted in approximately $788,000 of software costs, which are being amortized over their estimated useful lives of three years. 18 19 (c) Exhibits Exhibit Description Number of Document 10.37 Asset Purchase Agreement, by and between the Company, Prescient and Stone & Webster, dated as of June 28, 2000. 23.1 Consent of KPMG LLP. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SPATIAL TECHNOLOGY INC. Date: October 18, 2000 /s/ Todd S. Londa ---------------------------------- Todd S. Londa Vice President, Administration and Corporate Controller 20 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.37 Asset Purchase Agreement, by and between the Company, Prescient and Stone & Webster, dated as of June 28, 2000. 23.1 Consent of KPMG LLP.