-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FBinxwK2Q9kK5j+lUrnKm+2CUw3SKmNaRo5vI8MHWfRG2W+HS0sX7ceySkVtsuOA DELDDubJR6VeCmtMZAhm2Q== 0000927016-99-003334.txt : 20000211 0000927016-99-003334.hdr.sgml : 20000211 ACCESSION NUMBER: 0000927016-99-003334 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990831 ITEM INFORMATION: FILED AS OF DATE: 19990929 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROOKS AUTOMATION INC CENTRAL INDEX KEY: 0000933974 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 043040660 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-25434 FILM NUMBER: 99719949 BUSINESS ADDRESS: STREET 1: 15 ELIZABETH DRIVE CITY: CHELMSFORD STATE: MA ZIP: 01824 BUSINESS PHONE: 9782622566 MAIL ADDRESS: STREET 1: 15 ELIZABETH DRIVE CITY: CHELMSBORO STATE: MA ZIP: 01824 8-K/A 1 FORM 8-K/A 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): August 31, 1999 ----------------------- 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 - ------------------------------------------------------------------------------- (978) 262-2400 - ------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) The undersigned Registrant hereby amends Item 7 of its Current Report on Form 8-K filed on September 15, 1999 to read in its entirety as follows: Item 7. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Smart Machines Inc. Balance Sheets as of December 31, 1998 and 1997 Smart Machines Inc. Statements of Operations for the years ended December 31, 1998, 1997 and 1996 and for the period from October 1, 1994 (date of inception) to December 31, 1998 Smart Machines Inc. Statements of Changes in Nonredeemable Preferred Stock and Shareholders' Equity (Deficit) for the period from October 1, 1994 (date of inception) to December 31, 1998 Smart Machines Inc. Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 and for the period from October 1, 1994 (date of inception) to December 31, 1998 Smart Machines Inc. Notes to Financial Statements Report of Independent Accountants Smart Machines Inc. Unaudited Condensed Balance Sheet as of March 31, 1999 and Condensed Balance Sheet as of December 31, 1998 Smart Machines Inc. Unaudited Condensed Statements of Operations for the three months ended March 31, 1999 and 1998, and for the period from October 1, 1994 (date of inception) to March 31, 1999 Smart Machines Inc. Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 1999 and 1998, and for the period from October 1, 1994 (date of inception) to March 31, 1999 Smart Machines Inc. Notes to Unaudited Condensed Financial Statements (b) UNAUDITED PRO FORMA FINANCIAL INFORMATION Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1999 Pro Forma Condensed Consolidated Statements of Operations for the six months ended March 31, 1999 and 1998, and the years ended September 30, 1998, 1997 and 1996 Notes to Pro Forma Condensed Consolidated Financial Statements (c) EXHIBITS Item No. Description -------- ----------- 2.05 Agreement and plan of merger dated as of July 7, 1999 among the Registrant, Smart Acquisition Corporation and Smart Machines [incorporated by reference as Exhibit 2.05 to the Registrant's Registration Statement on Form S-4 (No. 333-84727)]. 23.1 Consent of PricewaterhouseCoopers LLP 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: September 29, 1999 SMART MACHINES INC. (a company in the development stage) BALANCE SHEETS
December 31, ------------------------- 1998 1997 ------------ ----------- ASSETS Current assets: Cash and cash equivalents......................... $ 1,318,073 $ 2,079,742 Accounts receivable, net.......................... 154,943 23,842 Inventories....................................... 581,377 893,392 Prepaid expenses and other current assets......... 95,585 172,669 Receivable from related party..................... -- 70,368 ------------ ----------- Total current assets............................ 2,149,978 3,240,013 Fixed assets, net................................... 342,619 567,806 Other assets........................................ 14,662 16,260 ------------ ----------- Total assets.................................... $ 2,507,259 $ 3,824,079 ============ =========== LIABILITIES, AND REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND NONREDEEMABLE PREFERRED STOCK, COMMON STOCK, AND OTHER SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Notes payable--current portion.................... $ 265,468 $ 61,298 Capital lease obligations--current portion........ 9,299 108,908 Accounts payable.................................. 174,163 278,399 Accrued interest payable.......................... 97,223 341 Accrued compensation and benefits................. 68,257 54,890 Allowance for warranty............................ 19,098 33,214 Accrued expenses and other current liabilities.... 88,588 71,453 ------------ ----------- Total current liabilities....................... 722,096 608,503 Notes payable--less current portion................. 713,913 91,947 Convertible notes................................... 2,500,008 -- Capital lease obligations--less current portion..... -- 12,095 ------------ ----------- Total liabilities............................... 3,936,017 712,545 ------------ ----------- Commitments (Note 8) Redeemable convertible preferred stock: no par value; authorized 3,249,511 shares; issued and outstanding 1,166,581 shares at December 31, 1998 and 1997........................................... 3,561,828 2,662,801 ------------ ----------- Nonredeemable convertible preferred stock, common stock, and other shareholders' equity (deficit): Convertible preferred stock: no par value; authorized: 12,750,489 shares; issued and outstanding; 3,331,478 shares at December 31, 1998 and 1997 (Liquidation value; $6,481,482).... 6,467,306 6,467,306 Common stock; no par value: authorized; 33,000,000 shares; issued and outstanding; 4,554,712 shares at December 31, 1998, and 4,486,151 shares at December 31, 1997................................ 746,649 688,639 Preferred stock warrant value..................... 1,838,256 1,838,256 Deficit accumulated during the development stage.. (14,042,797) (8,545,468) ------------ ----------- Total nonredeemable convertible preferred stock, common stock, and other shareholders' equity (deficit)...................................... (4,990,586) 448,733 ------------ ----------- Total liabilities, and redeemable convertible preferred stock, and nonredeemable convertible preferred stock, common stock, and other shareholders' equity (deficit)................. $ 2,507,259 $ 3,824,079 ============ ===========
The accompanying notes are an integral part of these financial statements. SMART MACHINES INC. (a company in the development stage) STATEMENTS OF OPERATIONS
Cumulative Period from October 1, 1994 (date of Years Ended December 31, inception) ------------------------------------- to December 1998 1997 1996 31, 1998 ----------- ----------- ----------- ------------ Net sales................ $ 382,374 $ 686,564 $ -- $ 1,068,938 Cost of sales............ 1,171,460 1,549,441 -- 2,720,901 ----------- ----------- ----------- ------------ Gross profit............ (789,086) (862,877) -- (1,651,963) ----------- ----------- ----------- ------------ Research and development............. 2,715,223 1,615,835 1,979,343 7,669,475 Selling, general and administrative.......... 1,029,413 953,721 851,706 3,411,330 ----------- ----------- ----------- ------------ Loss from operations.... (4,533,722) (3,432,433) (2,831,049) (12,732,768) Interest income.......... 65,764 94,677 49,397 257,228 Interest expense......... 130,344 30,157 19,292 181,852 Other expense............ -- -- 2,400 2,400 ----------- ----------- ----------- ------------ Net loss................. (4,598,302) (3,367,913) (2,803,344) (12,659,792) Dividends on preferred stock................... 899,027 483,978 -- 1,383,005 ----------- ----------- ----------- ------------ Net loss attributable to common shareholders..... $(5,497,329) $(3,851,891) $(2,803,344) $(14,042,797) =========== =========== =========== ============ Loss per share: Basic................... $ (1.22) $ (0.94) $ (0.80) Diluted................. $ (1.22) $ (0.94) $ (0.80) Shares used in computing loss per share: Basic................... 4,524,067 4,103,896 3,502,676 Diluted................. 4,524,067 4,103,896 3,502,676
The accompanying notes are an integral part of these financial statements. SMART MACHINES INC. (a company in the development stage) STATEMENTS OF CHANGES IN NONREDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT) For the Period from October 1, 1994 (date of inception) to December 31, 1998
Deficit Convertible Preferred Notes Accumulated Preferred Stock Common Stock Stock Receivable During -------------------- ----------------- Warrant for Common Development Shares Amount Shares Amount Value Stock Stage Total --------- ---------- --------- ------- --------- ---------- ----------- ----------- Issuance of series A preferred stock for cash and transfer of predecessor company net assets and technology at $1.00 per share in May 1995............... 1,965,000 $1,965,000 -- $ -- $-- $ -- $ -- $ 1,965,000 Issuance of Series B preferred stock for cash at $3.00 per share in May 1995............ 333,333 1,000,000 -- -- -- -- -- 1,000,000 Issuance of common stock for cash at $.0001 per share in June 1995..... -- -- 2,860,000 286 -- -- -- 286 Issuance of common stock for cash and notes receivable at $.001 per share in June 1995..... -- -- 195,000 195 -- (175) -- 20 Issuance of common stock for services rendered at $.10 per share in September 1995......... -- -- 45,311 4,531 -- -- -- 4,531 Issuance of common stock for cash and notes receivable at $.10 per share in August and October 1995........... -- -- 405,000 40,500 -- (5,500) -- 35,000 Net loss................ -- -- -- -- -- -- (1,890,233) (1,890,233) --------- ---------- --------- ------- --- ------- ----------- ----------- Balances, December 31, 1995................... 2,298,333 $2,965,000 3,505,311 $45,512 $-- $(5,675) $(1,890,233) $ 1,114,604 ========= ========== ========= ======= === ======= =========== ===========
The accompanying notes are an integral part of these financial statements. SMART MACHINES INC. (a company in the development stage) STATEMENTS OF CHANGES IN NONREDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT) (Continued) For the Period from October 1, 1994 (date of inception) to December 31, 1998
Deficit Convertible Preferred Notes Accumulated Preferred Stock Common Stock Stock Receivable During -------------------- ------------------ Warrant for Common Development Shares Amount Shares Amount Value Stock Stage Total --------- ---------- --------- ------- --------- ---------- ----------- ----------- Balances, December 31, 1995................... 2,298,333 $2,965,000 3,505,311 $45,512 $-- $(5,675) $(1,890,233) $ 1,114,604 --------- ---------- --------- ------- --- ------- ----------- ----------- Issuance of Series B preferred stock for cash at $3.00 per share in February, March, April and May 1996..... 199,049 597,147 -- -- -- -- -- 597,147 Issuance of series C preferred stock for cash at $3.50 per share in June, July August and October 1996, net of issuance costs of $14,177................ 679,088 2,362,631 -- -- -- -- -- 2,362,631 Issuance of Series C preferred stock for services rendered at $3.50 per share in November 1996.......... 8,294 29,029 -- -- -- -- -- 29,029 Issuance of common stock for services rendered at $0.30 per share in June 1996.............. -- -- 1,000 300 -- -- -- 300 Issuance of common stock for services rendered at $0.35 per share in November 1996.......... -- -- 8,921 3,122 -- -- -- 3,122 Repurchase of common stock.................. -- -- (5,000) (500) -- -- -- (500) Repayment of notes receivable............. -- -- -- -- -- 5,675 -- 5,675 Net loss................ -- -- -- -- -- -- (2,803,344) (2,803,344) --------- ---------- --------- ------- --- ------- ----------- ----------- Balances, December 31, 1996................... 3,184,764 $5,953,807 3,510,232 $48,434 $-- $ -- $(4,693,577) $ 1,308,664 ========= ========== ========= ======= === ======= =========== ===========
The accompanying notes are an integral part of these financial statements. SMART MACHINES INC. (a company in the development stage) STATEMENTS OF CHANGES IN NONREDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT) (Continued) For the Period from October 1, 1994 (date of inception) to December 31, 1998
Deficit Convertible Preferred Notes Accumulated Preferred Stock Common Stock Stock Receivable During -------------------- ------------------ Warrant for Common Development Shares Amount Shares Amount Value Stock Stage Total --------- ---------- --------- -------- ---------- ---------- ------------ ---------- Balances, December 31, 1996................... 3,184,764 $5,953,807 3,510,232 $ 48,434 $ -- $-- $ (4,693,577) $1,308,664 Issuance of common stock for cash at $0.70 per share and 2,333,162 Series E warrants at $0.79 in June 1997..... -- -- 870,254 599,363 1,838,256 -- -- 2,437,619 Dividends on preferred stock.................. -- -- -- -- -- -- (483,978) (483,978) Issuance of Series C preferred stock for services rendered at $3.50 per share in March 1997............. 1,716 6,006 -- -- -- -- -- 6,006 Issuance of Series C preferred stock for cash at $3.50 per share in January, February and March 1997......... 144,998 507,493 -- -- -- -- -- 507,493 Exercise of common stock options................ -- -- 34,999 11,875 -- -- -- 11,875 Issuance of common stock for services rendered at $.30 per share in May 1997............... -- -- 25,000 7,500 -- -- -- 7,500 Issuance of common stock for services rendered at $.35 per share in January and October 1997................... -- -- 30,000 10,500 -- -- -- 10,500 Issuance of common stock for services rendered at $.70 per share in September and December 1997................... -- -- 15,666 10,967 -- -- -- 10,967 Net loss................ -- -- -- -- -- -- (3,367,913) (3,367,913) --------- ---------- --------- -------- ---------- --- ------------ ---------- Balances, December 31, 1997................... 3,331,478 $6,467,306 4,486,151 $688,639 $1,838,256 $-- $ (8,545,468) $ 448,733 ========= ========== ========= ======== ========== === ============ ==========
The accompanying notes are an integral part of these financial statements. SMART MACHINES INC. (a company in the development stage) STATEMENTS OF CHANGES IN NONREDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT) (Continued) For the Period from October 1, 1994 (date of inception) to December 31, 1998
Deficit Convertible Preferred Notes Accumulated Preferred Stock Common Stock Stock Receivable During -------------------- ------------------- Warrant for Common Development Shares Amount Shares Amount Value Stock Stage Total --------- ---------- --------- -------- ---------- ---------- ------------ ----------- Balances, December 31, 1997................... 3,331,478 $6,467,306 4,486,151 $688,639 $1,838,256 $ -- $ (8,545,468) $ 448,733 Dividends on preferred stock.................. -- -- -- -- -- -- (899,027) (899,027) Exercise of common stock options................ -- -- 11,812 4,134 -- -- -- 4,134 Issuance of common stock for services rendered at $.70 per share in May, June and August 1998................... -- -- 79,161 55,413 -- -- -- 55,413 Repurchase of common stock.................. -- -- (22,412) (1,537) -- -- -- (1,537) Net loss................ -- -- -- -- -- -- (4,598,302) (4,598,302) --------- ---------- --------- -------- ---------- --------- ------------ ----------- Balances, December 31, 1998................... 3,331,478 $6,467,306 4,554,712 $746,649 $1,838,256 $ -- $(14,042,797) $(4,990,586) ========= ========== ========= ======== ========== ========= ============ ===========
The accompanying notes are an integral part of these financial statements. SMART MACHINES INC. (a company in the development stage) STATEMENTS OF CASH FLOWS
Cumulative Period from October 1, 1994 Years Ended December 31, (date of inception) ------------------------------------- to December 31, 1998 1997 1996 1998 ----------- ----------- ----------- ------------------- Cash flows from operating activities: Net loss.............. $(4,598,302) $(3,367,913) $(2,803,344) $(12,659,792) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization....... 398,839 359,507 179,012 982,377 Increase in allowance for excess and obsolete inventory.......... -- 42,752 30,000 72,752 Technology acquired for Series A preferred stock.... -- -- -- 459,354 Issuance of common and preferred stock for services rendered........... 55,413 34,973 32,451 127,368 Change in assets and liabilities: Accounts receivable....... (131,101) (23,842) -- (154,943) Inventories....... 312,015 (367,314) (598,830) (654,129) Prepaid expenses and other current assets........... 77,084 38,885 (185,073) (84,977) Receivable from related party.... 70,368 (57,593) (10,162) -- Accounts payable.. (104,236) 84,652 121,813 108,052 Accrued liabilities...... 113,268 102,240 31,027 234,449 ----------- ----------- ----------- ------------ Net cash used in operating activities..... (3,806,652) (3,153,653) (3,203,106) (11,569,489) ----------- ----------- ----------- ------------ Cash flows from investing activities: Purchase of fixed assets............... (173,652) (269,111) (140,875) (667,180) Decrease (increase) in other assets......... 1,598 55,879 (25,412) (14,662) ----------- ----------- ----------- ------------ Net cash used in investing activities....... (172,054) (213,232) (166,287) (681,842) ----------- ----------- ----------- ------------ Cash flows from financing activities: Proceeds from issuance of notes payable..... 1,000,000 -- -- 1,000,000 Proceeds from issuance of convertible notes................ 2,500,008 -- -- 2,500,008 Proceeds from issuance of preferred stock... -- 4,524,572 2,959,778 9,983,513 Proceeds from issuance of common stock...... 4,134 611,238 -- 650,678 Repurchase of common stock................ (1,537) -- (500) (2,037) Repayment of notes receivable for common stock................ -- -- 5,675 5,675 Repayment of notes payable.............. (173,864) -- -- (173,864) Repayment of capital lease obligations.... (111,704) (158,494) (108,970) (394,569) ----------- ----------- ----------- ------------ Net cash provided by financing activities..... 3,217,037 4,977,316 2,855,983 13,569,404 ----------- ----------- ----------- ------------ (Decrease) increase in cash and cash equivalents............ (761,669) 1,610,431 (513,410) 1,318,073 Cash and cash equivalents at beginning of period.... 2,079,742 469,311 982,721 -- ----------- ----------- ----------- ------------ Cash and cash equivalents at end of period................. $ 1,318,073 $ 2,079,742 $ 469,311 $ 1,318,073 =========== =========== =========== ============ Supplemental disclosures: Series A preferred stock issued upon acquisition of net assets and technology from predecessor company.............. $ 500,000 Capital lease obligations incurred upon acquisition of fixed assets......... $ 238,276 $ 403,868 Loan obligation incurred upon acquisition of fixed assets............... $ 153,245 $ 153,245 Interest paid......... $ 33,121 $ 30,157 $ 19,292 $ 84,629
The accompanying notes are an integral part of these financial statements. SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS 1. Formation and Business of the Company Smart Machines, Inc. (the "Company") was started as a partnership on October 1, 1994, and incorporated on May 16, 1995. Concurrent with the initial sale of preferred stock, the Company issued 500,000 shares of Series A preferred stock and 2,860,000 shares of common stock to the founders in exchange for their interest in the partnership. Operations from October 1, 1994 to December 31, 1994 were insignificant. To date, the Company has been primarily involved in developing its semiconductor manufacturing equipment technology, recruiting personnel and raising capital. 2. Summary of Significant Accounting Policies Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to makes 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. Basis of presentation The Company's financial statements have been prepared on a basis which contemplates realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred operating losses and negative cash flows from operations since inception. As a development stage company, Smart Machines Inc.'s ability to continue as a going concern is highly dependent, among other factors, on its ability to complete the development and commercialization of its products, obtain sufficient financing to produce the products, and obtain adequate customers for its products. The Company is currently pursuing additional funding to further the development of its products and markets. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue in existence. Financial instruments Amounts reported for cash and cash equivalents, accounts receivable, receivable from related parties, accounts payable and other accrued liabilities are considered to approximate fair value primarily due to their short maturities. Cash and cash equivalents The Company's policy is to invest cash in excess of operating requirements in interest-bearing investments with maturities of one year or less. Investments with original or remaining maturities of three months or less at the date of purchase are included in cash and cash equivalents. Cash and cash equivalents at December 31, 1998 include approximately $1,300,000 held in two demand accounts with two financial institutions. Cash and cash equivalents at December 31, 1997 included $1,485,558 in commercial paper of U.S. companies maturing in January through March 1998, whose fair value approximated the carrying value, and approximately $593,000 held in four demand accounts with the two financial institutions. Deposits in these banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its cash and cash equivalents. SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) Inventories Inventories are stated at the lower of cost (standard cost which approximates first-in, first-out basis) or market. Depreciation and amortization Depreciation is computed using the straight-line method over the estimated useful lives of the related assets (generally three years). Leasehold improvements are amortized over their estimated useful lives or the remaining lease term, whichever is less. Revenue recognition Revenue from product sales are recorded upon shipment to the customer provided that no significant obligations remain and collection of the related receivable is probable. When insignificant obligations remain after shipment of the product, Smart Machines accrues the estimated costs of such obligations upon shipment. A provision for product warranty costs is recorded at the time of sale. In the event significant post-shipment obligations or uncertainties remain, revenue is deferred and recognized when such obligations are fulfilled by Smart Machines or the uncertainties are resolved. Significant Customers In 1998 the Company had revenues from five customers that represented 12%, 12%, 18%, 21%, and 20% of revenues and in 1997 the Company had revenues from four customers that represented 11%, 15%, 16%, and 40% of revenues. Earnings Per Share Earnings per share has been calculated in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share," Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares and dilutive common equivalent shares assumed outstanding during the period. Shared used to compute diluted earnings per share in loss years exclude common share equivalents, as their inclusion would have an anti-dilutive effect. Stock-based compensation The Company accounts for its stock based compensation in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," with the pro forma disclosures required by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Research and Development and Software Development Costs Costs incurred in the research and development of the Company's products are expensed as incurred, except for certain software development costs. Software development costs are expensed prior to establishing technological feasibility and capitalized thereafter until the related product is available for general release to customers. Capitalized software development costs are amortized to cost of sales on a product-by-product basis over the estimated lives of the related products. Income taxes The Company reports income taxes in accordance with the liability method whereby deferred tax asset and liability account balances are calculated at the balance sheet date using current tax laws and rates in effect. SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) Reclassification Certain amounts in the 1997 financial statements have been reclassified to conform to the 1998 presentation. These reclassifications did not change previously reported net assets or net loss. 3. Inventories Inventories consist of the following:
December 31, ----------------- 1998 1997 -------- -------- Raw materials........................................... $501,588 $847,953 Work in process......................................... 79,789 45,439 -------- -------- $581,377 $893,392 ======== ========
4. Fixed Assets Fixed assets, including furniture, equipment and software, under capital leases (cost $145,707 and $371,708 and accumulated amortization of $127,617 and $252,441 at December 31, 1998 and 1997, respectively) consist of the following:
Estimated December 31, Useful ---------------------- Life 1998 1997 ---------- ---------- ---------- Machinery and equipment.................... 3 years $ 609,245 $ 508,102 Furniture and fixtures..................... 3 years 141,725 136,800 Software................................... 3 years 252,479 214,684 Test and demonstration equipment........... 2 years 256,457 256,457 Leasehold improvements..................... lease term 40,301 35,301 ---------- ---------- 1,300,207 1,151,344 Less: Accumulated depreciation and amortization.............................. (957,588) (583,538) ---------- ---------- $ 342,619 $ 567,806 ========== ==========
Amortization expense for fixed assets under capital lease was $56,567, $130,480, $93,350 and $289,664 for the years ended December 31, 1998, 1997, and 1996, and the cumulative period from October 1, 1994 (date of inception to December 31, 1998). 5. Notes Payable In November 1998, the Company entered into an agreement, expiring December 31, 1999, which allows for working capital borrowings of up to $2,000,000, and equipment loans of $500,000. Working capital advances over $1,500,000 are permitted only to the extent of 80% of eligible accounts receivable plus 50% of inventories. All borrowings are collateralized by the Company's assets, have a stated interest rate of 8.92% per annum for working capital borrowings, and 8.63% for equipment loans, and are payable in monthly installments of principal and interest. (See also Note 10--Warrants.) At December 31, 1998, working capital SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) borrowings of $979,381 were outstanding, payable in monthly installments of $31,400. Annual maturities are as follows: 1999................................................................. $ 265,468 2000................................................................. 301,925 2001................................................................. 411,988 --------- 979,381 Less current portion................................................. (265,468) --------- $ 713,913 =========
In March 1999, the Company increased its working capital borrowings to $1,500,000. Notes payable at December 31, 1997, consisting of bank borrowings to purchase equipment and software, were paid off in 1998. 6. Convertible Notes On June 15, 1998, the Company issued convertible promissory notes in the amount of $2,500,008. Each of $4.022 of outstanding principal will automatically convert into one unit consisting of one share of Series D preferred stock and 0.746 of a share of common stock, upon the earliest of (i) consent of the holders of 60% of the principal amount of all the notes, (ii) the closing of an investment by an institutional investor unanimously accepted by the Company's Board of Directors with gross proceeds to the Company of at least $1,500,000, (iii) June 15, 2000, or (iv) the conversion of all of the Company's Series D preferred stock into common stock. Interest of 7.00% per annum is payable in cash upon conversion of the notes. Accrued interest of $97,223 is included in accrued liabilities at December 31, 1998. The note holders may declare the entire unpaid principal and accrued interest immediately due and payable in case of default, as defined in the promissory notes. These notes are subordinated to the notes payable described in Note 5 above. The Company reserved 621,552 shares of Series D preferred stock and 463,778 shares of common stock in the event of conversion. 7. Capital Lease Obligations The Company leases certain furniture, equipment and software under capital leases expiring in January and February 1999. Future minimum lease payments are $9,442, including interest of $143. 8. Commitments The Company leases its facility under an operating lease expiring on November 30, 2001. Under the terms of the lease, the Company is responsible for its share of common area expenses. Future minimum lease payments are as follows: 1999............................................................. $313,092 2000............................................................. 313,092 2001............................................................. 287,001 -------- $913,185 ========
Rent expense for the years ended December 31, 1998, 1997, and 1996, and the cumulative period from October 1, 1994 (date of inception) to December 31, 1998, was approximately $186,000, $117,000, $98,000 and $446,000, respectively. SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) 9. Preferred Stock Convertible preferred stock The convertible preferred stock at December 31, 1998 comprises:
Number of Number of Shares Dividend Liquidation Total Shares Issued and Per Value Per Liquidation Authorized Outstanding Share Share Value ---------- ----------- -------- ----------- ----------- Series A................ 1,965,000 1,965,000 $0.05 $1.00 $ 1,965,000 Series B................ 532,382 532,382 $0.15 $3.00 1,597,146 Series C................ 879,096 834,096 $0.175 $3.50 2,919,336 Series D*............... 2,287,250 1,166,581 $0.18 $3.50 4,083,034 Series E*............... 962,261 -- $0.23 $4.25 -- Undesignated............ 9,374,011 -- -- ---------- --------- ----------- 16,000,000 4,498,059 $10,564,516 ========== ========= ===========
- -------- * Redeemable preferred stock. See redemption features below. The rights, preferences and privileges of the preferred shareholders are as follows: Dividends The holders of Series D and E preferred stock are entitled to noncumulative dividends, in preference to the Series C, Series B and Series A preferred stock and common stock, when and as declared by the Board of Directors, at the annual rate stated above. After the dividends on Series D stock have been paid, the holders of Series C preferred stock are entitled to noncumulative dividends, in preference to the Series B and Series A preferred stock and common stock, when and as declared by the Board of Directors, at the annual rate stated above. After the dividends on Series D and Series C preferred stock have been paid, the holders of Series B preferred stock are entitled to noncumulative dividends, in preference to the Series A preferred stock and common stock, when and as declared by the Board of Directors, at the annual rate stated above. After the dividends on Series D, Series C and Series B preferred stock have been paid, the holders of the Series A preferred stock are entitled to noncumulative dividends, in preference to common stock, when and as declared by the Board of Directors, at the annual rate stated above. After payment of all dividends of the preferred stock, the holders of such stock are entitled to participate, on an as converted basis, with the holders of common stock as to any dividends payable on common stock. No dividends have been declared as of December 31, 1998. Liquidation Holders of Series D and E preferred stock are entitled to a preference in liquidation to Series C, Series B and Series A preferred shareholders and common shareholders of $3.50 and $4.25 per share, respectively, plus declared but unpaid dividends. Holders of Series C preferred stock are entitled to a preference in liquidation to Series B and Series A preferred shareholders and common shareholders of $3.50 per share plus declared but unpaid dividends. Holders of Series B preferred stock are entitled to a preference in liquidation to Series A preferred shareholders and common shareholders of $3.00 per share plus declared but unpaid dividends. The holders of the Series A preferred stock are entitled to a preference in liquidation to common shareholders of $1.00 per share plus declared but unpaid dividends. After the above amounts have been paid on the preferred SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) stock, the holders of common stock are entitled to a distribution of $3,000,000. Any remaining assets are distributed to the holders of common and preferred stock on an as converted basis. Conversion and registration The preferred stock is convertible, at the option of the holders, at any time, into common stock on a one-for-one basis subject to certain adjustments. Conversion is automatic upon the closing of a public offering of the Company's common shares for aggregate proceeds of not less than $10,000,000, with an offering price of not less than $10.00 per share, or the vote of a majority of the holders of the outstanding shares of Series A, B and C preferred stock, voting together as a single class and the vote of 75% of the holders of Series D and E preferred stock, voting together as a single class. The preferred shareholders have certain registration rights. The Company has reserved 4,641,565 shares of common stock in the event of conversion. Voting Each share of preferred stock is entitled to vote on an "as converted" basis along with common shareholders. So long as any shares of preferred stock are outstanding, the Company shall not, without the vote or written consent by a majority of the preferred shareholders, voting as a single class, and at least 66 2/3% of the Series D and E holders, voting as a single class, (i) amend the Company's articles of incorporation, (ii) alter or change any of the rights, preferences or privileges of the preferred stock, (iii) create or issue any new class or series of preferred stock that has rights equal to or superior to the rights, preferences and privileges of the preferred stock, (iv) increase the authorized number of shares of any series of preferred stock, (v) pay or declare any dividends, (vi) authorize a change in the number of directors on the Company's Board of Directors, (vii) merge or sell all or substantially all of the assets, or liquidate, dissolve or wind up the corporation, or (viii) redeem, purchase or otherwise acquire shares of preferred or common stock. As long as at least 250,000 shares of originally issued shares of Series D preferred stock are outstanding, the holders of Series D and E preferred stock, voting as a single class, are entitled to elect one member of the Company's Board of Directors. Redemption At any time after May 2, 2003, upon written request from the holders of at least 66 2/3% of the Series D and E preferred stock, the Company is required to redeem the shares specified in the request at a price of $3.50 and $4.25 per share, respectively, plus $0.175 and $0.225 per share, compounded annually, per share of Series D and E preferred stock, respectively. The difference between the issuance price and the redemption value is accreted annually. 10. Shareholders' Equity Warrants In connection with the notes payable agreement discussed in Note 5, the Company issued warrants to purchase 57,182 shares of Series D preferred stock at $3.50 per share and 42,658 shares of common stock at $0.70 per share. These warrants are exercisable at any time and expire on December 31, 2004. In connection with the sale of equity units in June 1997, the Company issued warrants to purchase 961,234 shares of Series E preferred stock at $4.25 per share. These warrants are exercisable at any time. Warrants to purchase 480,617 shares each expire upon the earlier of (i) May 30, 1999 and May 30, 2001, respectively, (ii) dissolution of the Company or sale of substantially all of the Company' assets, or (iii) merger SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) or acquisition of the Company in which more than 50% of the voting power is disposed of, unless the warrants are assumed by the surviving entity. The Company also issued warrants to purchase 10,000 shares of Series C preferred stock at $3.50 per share, exercisable at any time and expiring on September 30, 2006. The Company reserved 961,234 shares of Series E, 57,182 shares of Series D and 10,000 shares of Series C preferred stock in the event of issuance. Common stock Common stock held by the Company's founders and employees is subject to stock purchase agreements whereby the Company has the option to repurchase unvested shares upon termination of employment at the initial issuance price. These shares generally vest as follows: 12.5% at the date of the agreement and 2.0833% per month thereafter in the case of founders, and 25% one year from the date of the agreement and 2.0833% per month thereafter in the case of other employees. At December 31, 1998, 321,142 shares of common stock remain subject to repurchase by the Company. The Company has the right of first refusal should any shareholder decide to sell shares. The Company, the Series D preferred shareholders and the holders of promissory notes convertible into Series D preferred stock also have the right of first refusal and the right to participate in the sale, should any founder decide to sell shares. Stock Option Plan During 1996, the Company adopted the 1996 Stock Option Plan (the "Plan") and reserved 619,689 shares for issuance under the Plan. In April 1997 and February 1998, the shareholders approved increases in shares reserved for issuance under the Plan to 1,119,689 and 1,419,689 shares respectively. Management allocated 100,000 of these shares for issuance to employees under a special incentive plan. 49,988 of the incentive plan shares were issued in 1998; the remaining 50,012 shares are included in shares available under the Plan at December 31, 1998. Under the Plan, incentive options to purchase the Company's common stock may be granted to employees at prices not lower than fair market value at the date of grant (110% of fair market value in certain instances), as determined by the Board of Directors. Nonqualified stock options may be granted to employees, directors and consultants at prices not less than 85% of fair market value at the date of grant, as determined by the Board of Directors. The Board of Directors also has the authority to set the term of the options (no longer than ten years from the date of grant, five years in certain instances). Options generally vest at a rate of 25% one year from the vesting date, and 2.0833% per month thereafter and expire in five to ten years. Unexercised options expire 30 days after termination of employment or consultancy with the Company. SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) Activity under the Plan is set forth below:
Weighted Number Average Shares of Price Per Exercise Available Shares Share Total Price --------- -------- ----------- --------- -------- Shares reserved.......... 619,689 -- -- $ -- -- Options granted.......... (114,000) 114,000 $0.30-$0.35 36,400 $0.32 -------- -------- --------- Balances, December 31, 1996.................... 505,689 114,000 $0.30-$0.35 36,400 $0.32 Shares reserved.......... 500,000 -- -- -- -- Options granted.......... (588,000) 588,000 $0.35-$0.70 279,300 $0.48 Options exercised........ -- (34,999) $0.30-$0.35 (11,875) $0.34 Options forfeited........ 36,001 (36,001) $0.30-$0.35 (11,975) $0.33 -------- -------- --------- Balances, December 31, 1997.................... 453,690 631,000 $0.30-$0.70 291,850 $0.46 Shares reserved.......... 300,000 -- -- -- -- Shares issued under incentive plan.......... (49,988) -- -- -- -- Options granted.......... (404,502) 404,502 $0.70 283,151 $0.70 Options exercised........ -- (11,812) $0.35 (4,134) $0.35 Options forfeited........ 363,188 (363,188) $0.35-$0.70 (166,250) $0.46 -------- -------- --------- Balances, December 31, 1998.................... 662,388 660,502 $0.30-$0.70 $ 404,617 $0.61 -------- -------- ---------
The following table summarizes information with respect to stock options outstanding and currently exercisable at December 31, 1998:
Options Currently Options Outstanding Exercisable -------------------------- ----------------------- Weighted Average Weighted Weighted Remaining Average Average Exercise Number Contractual Exercise Number Exercise Price Outstanding Life Price Exercisable Price -------- ----------- ----------- -------- ----------- -------- $0.30 50,000 7.4 $0.30 31,250 $0.30 $0.35 103,000 8.1 $0.35 48,833 $0.35 $0.70 507,502 9.4 $0.70 156,161 $0.70 ------- ------- 660,502 236,244 ------- -------
The following table summarizes information with respect to stock options outstanding and currently exercisable at December 31, 1997:
Options Currently Options Outstanding Exercisable -------------------------- ----------------------- Weighted Average Weighted Weighted Remaining Average Average Exercise Number Contractual Exercise Number Exercise Price Outstanding Life Price Exercisable Price -------- ----------- ----------- -------- ----------- -------- $0.30 50,000 8.4 $0.30 18,749 $0.30 $0.35 371,000 9.2 $0.35 11,000 $0.35 $0.70 210,000 9.8 $0.70 45,000 $0.70 ------- ------ 631,000 $0.46 74,749 $0.54 ------- ------
SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) No options were exercisable at December 31, 1996. No compensation cost has been recognized for the Plan in the financial statements. Had compensation cost for the Plan been determined based on the fair value of the options at the grant date consistent with the provisions of SFAS 123, it would not result in a significant difference from the reported net loss for 1998, 1997, and 1996. However, such differences may not be representative of future compensation cost because options vest over several years and additional grants are made each year. 11. Earnings per share The following table is a summary of shares used in calculating basic and diluted earnings per share:
1998 1997 1996 --------- --------- --------- Weighted average number of shares outstanding used in computing basic earnings per share..... 4,524,067 4,103,896 3,502,676 Dilutive securities*............................ -- -- -- --------- --------- --------- Shares used in computing diluted earnings per share.......................................... 4,524,067 4,103,896 3,502,676 ========= ========= =========
- -------- * Dilutive securities excluded in loss years, as inclusion would be anti- dilutive. 12. Income Taxes At December 31, 1998, the Company had net operating loss carryforwards of approximately $7,453,000 and $5,549,000 available to reduce future federal and state taxable income, respectively. The carryforwards expire by the year 2013 for federal and 2003 for state tax purposes unless utilized. For federal and state tax purposes, the Company's net operating loss carryforwards may be subject to an annual utilization limitation in case of a change in stock ownership, as defined by federal and state tax law. Temporary differences which gave rise to significant portions of deferred tax assets are as follows:
December 31, ---------------------- 1998 1997 ---------- ---------- Net operating losses.................................... $2,862,000 $1,004,000 Capitalized research and development.................... 1,953,000 1,875,000 Tax credit carryforwards................................ 375,000 229,000 Other................................................... 148,000 330,000 ---------- ---------- 5,338,000 3,438,000 Valuation Allowance..................................... (5,338,000) (3,438,000) ---------- ---------- $ -- $ -- ========== ==========
A valuation allowance must be established for a deferred tax asset if a tax benefit may not be realized from the asset. The Company has established a 100% valuation allowance to the extent of its deferred tax assets as no immediate benefit is expected to be received due to the Company's recurring losses. The changes in the valuation allowance during 1998 and 1997 were increases of $1,900,000 and $1,503,000, respectively. SMART MACHINES INC. (a company in the development stage) NOTES TO FINANCIAL STATEMENTS--(Continued) 13. Employee Benefit Plan Effective January 1, 1995, the Company adopted a plan (the "Plan"), which is intended to qualify under Section 401(k) of the Internal Revenue Code of 1986. The Plan covers essentially all employees. Eligible employees may make voluntary contributions to the Plan up to 20% of their annual eligible compensation. 14. Related Party Transactions A shareholder and member of the Company's Board of Directors is also a shareholder of Xulu Entertainment, Inc. ("Xulu"). The Company subleased part of its facility to Xulu and provided certain clerical support until May 1998, when Xulu left the premises. The expense charged to Xulu for the years ended December 31, 1998, 1997, and 1996, and the cumulative period from October 1, 1994 (date of inception) to December 31, 1998 was $109,149, $201,327 and $110,744, and $429,587, respectively. In January 1997, the Company entered into a revolving credit agreement with its president and chief executive officer, who is also a shareholder, which allows for borrowings up to $400,000 for working capital. Borrowings are subordinated to the note payable to bank discussed in Note 5, bear interest at the Silicon Valley Bank's prime rate plus 2% per annum, payable semi-annually, mature after one year, and are collateralized by the Company's assets. During 1997, the Company borrowed $100,000 under this agreement. This amount, plus accrued interest thereon, was repaid during the year. In connection with this agreement, the Company issued a warrant to purchase 25,000 shares of Series C preferred stock at $3.50 per share, exercisable at any time and expiring on January 9, 2002. The Company reserved 25,000 shares of Series C preferred stock in the event of issuance. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Smart Machines Inc. In our opinion, the accompanying balance sheets and the related statements of operations, of changes in nonredeemable preferred stock and shareholders' equity (deficit) and of cash flows present fairly, in all material respects, the financial position of Smart Machines Inc. (a company in the development stage) at December 31, 1998 and 1997 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, and for the cumulative period from October 1, 1994 (date of inception) to December 31, 1998, 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. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in the development stage and has not yet generated significant revenues and, as a result, has incurred losses and negative cash flows from operations since inception that raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PricewaterhouseCoopers LLP San Jose, California June 1, 1999 SMART MACHINES INC. CONDENSED BALANCE SHEETS
March 31, December 31, 1999 1998 ----------- ------------ (unaudited) (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents........................... $ 977 $ 1,318 Accounts receivable, net............................ 105 155 Inventories......................................... 521 581 Prepaid expenses and other current assets........... 83 96 -------- -------- Total current assets.............................. 1,686 2,150 Fixed assets, net..................................... 303 343 Other assets.......................................... 15 14 -------- -------- Total assets...................................... $ 2,004 $ 2,507 -------- -------- LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND NONREDEEMABLE PREFERRED STOCK, COMMON STOCK, AND OTHER STOCKHOLDERS' DEFICIT Current liabilities: Current portion of long term debt................... $ 407 $ 265 Current portion of capital lease obligations........ -- 10 Accounts payable.................................... 152 174 Accrued interest payable............................ 141 97 Accrued expenses and other current liabilities...... 138 176 -------- -------- Total current liabilities......................... 838 722 Other long-term liabilities........................... 3,499 3,214 -------- -------- Total liabilities................................. 4,337 3,936 -------- -------- Redeemable convertible preferred stock................ 3,787 3,562 -------- -------- Nonredeemable convertible preferred stock, common stock and other stockholders' equity: Preferred stock, no par value; 12,750,489 shares authorized; 3,331,478 issued and outstanding, respectively ...................................... 6,467 6,467 Common stock, no par value; 33,000,000 shares authorized; 4,577,422 and 4,554,712 shares issued and outstanding, respectively...................... 747 747 Preferred stock warrant value....................... 1,838 1,838 Accumulated deficit during development stage........ (15,172) (14,043) -------- -------- Total nonredeemable convertible preferred stock, common stock, and other stockholders' deficit.... (6,120) (4,991) -------- -------- Total liabilities, redeemable convertible preferred stock, and nonredeemable convertible preferred stock, common stock, and other stockholders' deficit............................ $ 2,004 $ 2,507 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. SMART MACHINES INC. CONDENSED STATEMENTS OF OPERATIONS (unaudited)
Three months ended March 31, ---------------- 1999 1998 ------- ------- (In thousands, except share data) Net sales.................................................... $ 230 $ 32 Cost of sales................................................ (397) (260) ------- ------- Gross profit ............................................ (167) (228) ------- ------- Operating expenses: Research and development................................... 474 509 Selling, general and administrative........................ 193 179 ------- ------- Loss from operations..................................... (834) (916) Interest income.............................................. 9 20 Interest expense............................................. 80 7 ------- ------- Net loss..................................................... (905) (903) Dividends on preferred stock................................. 225 225 ------- ------- Net loss attributable to common shareholders................. $(1,130) $(1,128) ======= ======= Loss per share: Basic...................................................... $ (0.25) $ (0.25) Diluted.................................................... $ (0.25) $ (0.25) Shares used in computing loss per share: Basic...................................................... 4,566 4,491 Diluted.................................................... 4,566 4,491
The accompanying notes are an integral part of these condensed consolidated financial statements. SMART MACHINES INC. CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
Three months Three months ended ended March 31, March 31, 1999 1998 ------------ ------------ (In thousands) Cash flows from operating activities Net loss............................................. $ (905) $ (903) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization...................... 70 107 Issuance of common stock for services rendered..... -- 55 Changes in operating assets and liabilities: Accounts receivable............................... 50 (15) Inventories....................................... 60 (51) Prepaid expenses and other current assets......... 13 (4) Accounts payable.................................. (22) (129) Accrued expenses and other current liabilities.... (5) 58 ------ ------ Net cash used in operating activities............ (739) (882) ------ ------ Cash flows from investing activities Purchases of fixed assets, net....................... (30) (27) Increase in other assets............................. -- -- ------ ------ Net cash used in investing activities............ (30) (27) ------ ------ Cash flows from financing activities Proceeds from issuance of long term debt............. 500 -- Proceeds from issuance of common stock............... 1 -- Proceeds from issuance of convertible notes.......... -- -- Repayment of long term debt.......................... (73) (132) Repurchase of common stock........................... -- -- ------ ------ Net cash provided by (used in) financing activities...................................... 428 (132) ------ ------ Net decrease in cash and cash equivalents............ (341) (1,041) Cash and cash equivalents, beginning of period....... 1,318 2,080 ------ ------ Cash and cash equivalents, end of period............. $ 977 $1,039 ====== ======
The accompanying notes are an integral part of these condensed consolidated financial statements. SMART MACHINES INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited condensed financial statements of Smart Machines Inc. have been prepared in accordance with generally accepted accounting principles and the instructions to Article 10 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 1999, are not necessarily indicative of the results that may be expected for other quarters or the entire fiscal year. 2. INVENTORIES Inventories consist of the following (in thousands):
March 31, December 31, 1999 1998 --------- ------------ Raw materials and purchased parts..................... $443 $501 Work-in-process....................................... 78 80 ---- ---- $521 $581 ==== ====
3. EARNINGS (LOSS) PER SHARE The following is a summary of the shares used in computing basic and diluted loss per share (in thousands):
Three months ended March 31, ----------- 1999 1998 ----- ----- Weighted average shares outstanding used in computing basic loss per share............................................... 4,566 4,491 Dilutive securities(a)........................................ -- -- ----- ----- Shares used in computing diluted loss per share............... 4,566 4,491 ===== =====
- -------- (a) Shares used to compute diluted earnings per share in loss years exclude common share equivalents as their inclusion would be anti-dilutive. SMART MACHINES INC. NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued) (unaudited) 4. SIGNIFICANT CUSTOMERS For the three months ended March 31, 1999, Smart Machines had revenues from four customers representing 19%, 20%, 30% and 31% of revenues and for the three months ended March 31, 1998, Smart Machines had revenues from one customer representing 98% of revenues. 5. SUBSEQUENT EVENTS In July 1999 Smart Machines entered into an Agreement and Plan of Merger with Brooks Automation, Inc. This merger is expected to be accounted for as a pooling-of-interests. Brooks Automation is based in Massachusetts and manufacturers process tool automation, components, systems and factory automation software for the semiconductor, flat panel and disk drive industries. BROOKS AUTOMATION, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements give effect to the Merger of Brooks Automation, Inc. ("Brooks") and Smart Machines Inc. ("Smart Machines") which was accounted for as a pooling of interests. The unaudited pro forma condensed consolidated balance sheet presents the combined financial position of Brooks and Smart Machines as of March 31, 1999, assuming that the merger had occurred as of March 31, 1999. Such pro forma information is based upon the historical balance sheets of Brooks and Smart Machines as of that date. The unaudited pro forma condensed consolidated statements of operations give effect to the merger of Brooks and Smart Machines by combining the results of operations of Brooks for the three years ended September 30, 1998, and the six months ended March 31, 1999 and 1998, with the results of operations of Smart Machines for the three years ended December 31, 1998, and the six months ended March 31, 1999 and 1998, respectively, on a pooling-of-interests basis. The operations of Smart Machines, Inc. for the three months ended December 31, 1998, resulting in net revenues of $244,000 and a net loss of $1,613,000, have been included in the pro forma statements of income for the year ended September 30, 1998, and for the six-month period ended March 31, 1999. The operations of Smart Machines for the three months ended December 31, 1997, resulting in net revenues of $127,000 and a net loss of $1,224,000, have been included in the pro forma statements of income for the year ended September 30, 1997, and for the six-month period ended March 31, 1998. On July 6, 1999, Brooks filed Form 8-K/A to give the effect of the acquisition of Hanyon Technologies, Inc., ("Hanyon") by Brooks, which was accounted for under the purchase method. The pro forma information filed in that Form 8-K/A, has been used in lieu of the historical information for Brooks in the unaudited pro forma condensed consolidated balance sheet as of March 31, 1999, and the unaudited pro forma condensed consolidated statements of operations for the fiscal year ended September 30, 1998, and the six months ended March 31, 1999. The unaudited pro forma financial statements should be read in conjunction with the separate audited financial statements and notes thereto of Brooks included in its Annual Report on Form 10-K for the year ended September 30, 1998, the unaudited financial information included in Brooks' Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 1999 and June 30, 1999, and the historical financial statements and notes thereto of Smart Machines contained herein and Hanyon contained in Brooks' Form 8-K/A filed on July 6, 1999 with the Securities and Exchange Commission. Brooks and Smart Machines estimate that they will incur direct transaction costs of approximately $750,000 associated with the Merger, which will be charged to operations as incurred. There can be no assurance that the combined company will not incur additional charges to reflect costs associated with the Merger or that management will be successful in its efforts to integrate the operations of the two companies. The unaudited pro forma condensed combined financial information set forth below is presented for illustrative purposes only, and is not necessarily indicative of the financial position or results of operations that would have actually been reported had the Merger occurred at the beginning of the periods presented, nor is it necessarily indicative of the future financial position or results of operations of the combined companies. BROOKS AUTOMATION, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999 (In thousands, except per share data)
Pro Historical Pro Forma Forma Brooks(1) SMART Adjustments Combined --------- ---------- ----------- -------- ASSETS Current assets: Cash and cash equivalents.... $ 66,314 $ 977 $ -- $ 67,291 Accounts receivable, net..... 25,095 105 -- 25,200 Inventories.................. 16,839 521 -- 17,360 Prepaids expenses and other current assets.............. 9,261 83 -- 9,344 -------- -------- ------- -------- Total current assets....... 117,509 1,686 -- 119,195 Fixed assets, net............ 17,860 303 -- 18,163 Goodwill..................... 1,914 -- -- 1,914 Other assets................. 5,099 15 -- 5,114 -------- -------- ------- -------- Total assets............... $142,382 $ 2,004 $ -- $144,386 ======== ======== ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............. $ 5,093 $ 152 $ -- $ 5,245 Accrued expenses and other current liabilities......... 13,688 686 609 (1)(4) 14,983 -------- -------- ------- -------- Total current liabilities.. 18,781 838 609 20,228 Other long-term liabilities.... 1,760 3,499 (2,500)(1) 2,759 -------- -------- ------- -------- Total liabilities.......... 20,541 4,337 (1,891) 22,987 -------- -------- ------- -------- Redeemable convertible preferred stock............... -- 3,787 (3,787) -- -------- -------- ------- -------- Stockholders' equity: Preferred stock.............. -- 6,467 (6,467)(1) -- Common stock................. 111 747 (742)(1) 116 Additional paid-in capital... 129,237 1,838 13,637 (1) 144,712 Cumulative translation adjustment.................. (431) -- -- (431) Deferred compensation........ (104) -- -- (104) Accumulated deficit.......... (6,972) (15,172) (750)(4) (22,894) -------- -------- ------- -------- Total stockholders' equity.................... 121,841 (6,120) 5,678 121,399 -------- -------- ------- -------- Total liabilities and stockholders' equity...... $142,382 $ 2,004 $ -- $144,386 ======== ======== ======= ========
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements. BROOKS AUTOMATION, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
Six months ended March 31, Year ended September 30, ----------------- ---------------------------- 1999 1998 1998 1997 1996 ------- -------- -------- -------- -------- Revenues (a)................. $45,082 $ 53,882 $107,697 $109,428 $112,730 Cost of revenues............. 24,358 39,015 73,924 65,311 57,961 ------- -------- -------- -------- -------- Gross profit................. 20,724 14,867 33,773 44,117 54,769 ------- -------- -------- -------- -------- Operating expenses: Research and development... 10,122 13,919 25,389 22,207 20,315 Selling, general and administrative............ 13,997 14,957 30,392 24,906 23,798 Acquisition-related and restructuring............. -- -- 3,722 -- 230 ------- -------- -------- -------- -------- Total operating expenses................ 24,119 28,876 59,503 47,113 44,343 ------- -------- -------- -------- -------- Net income (loss) from operations.................. (3,395) (14,009) (25,730) (2,996) 10,426 Interest income (expense), net......................... 1,330 1,544 2,941 (705) (36) ------- -------- -------- -------- -------- Net income (loss) before income taxes................ (2,065) (12,465) (22,789) (3,701) 10,390 Income tax provision (benefit)................... 265 (1,287) (2,835) 1,267 4,599 ------- -------- -------- -------- -------- Net income (loss)............ (2,330) (11,178) (19,954) (4,968) 5,791 Dividends on preferred stock....................... 450 711 1,420 1,005 521 ------- -------- -------- -------- -------- Net income (loss) attributable to common stockholders................ $(2,780) $(11,889) $(21,374) $ (5,973) $ 5,270 ======= ======== ======== ======== ======== Earnings (loss) per share: Basic...................... $ (0.24) $ (1.12) $ (1.99) $ (0.73) $ 0.67 Diluted.................... $ (0.24) $ (1.12) $ (1.99) $ (0.73) $ 0.62 Shares used in computing earnings (loss) per share: Basic...................... 11,502 10,609 10,739 8,175 7,846 Diluted.................... 11,502 10,609 10,739 8,175 9,326
- -------- (a) Includes revenues from a related party of $4.5 million and $10.2 million for the six months ended March 31, 1999 and 1998, and $16.3 million, $18.9 million, and $19.1 million for the years ended September 30, 1998, 1997, and 1996. See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. PRO FORMA BASIS OF PRESENTATION These unaudited pro forma condensed consolidated financial statements give effect to the Merger as if it had occurred at the beginning of the earliest period presented. The shares issued were based upon a purchase price of $14.2 million minus the outstanding obligations of Smart Machines under its existing third party credit facility. There were 478,000 shares of Brooks common stock, at $27.49 per share, issued in exchange for all of the Smart Machines outstanding common stock, preferred stock, and convertible notes and related interest. For the purposes of these pro forma condensed consolidated financial statements, the price per share of the Books common stock was based upon the average of the closing price for Brooks common stock on the Nasdaq National Market for the 20 consecutive trading-day period ending July 29, 1999. In addition, all outstanding options and warrants to purchase Smart Machines capital stock will be exchanged for options and warrants to purchase Brooks common stock, based on the Capital Stock Conversion Ratios of $0.015, $0.0370, $0.1111, $0.1296, 0.1296 for Common Stock, Preferred Stock Series A, Preferred Stock Series B, Preferred Stock Series C and Preferred Stock Series D, respectively. As of March 31, 1999, options to purchase a total of 480,617 shares and warrants to purchase a total of 592,064 shares of Smart Machines common stock were outstanding. On July 6, 1999, Brooks filed Form 8-K/A to give the effect of the acquisition of Hanyon Technologies, Inc., by Brooks, which was accounted for under the purchase method. The pro forma information filed in that Form 8-K/A, has been used in lieu of the historical information for Brooks in the unaudited pro forma condensed consolidated balance sheet as of March 31, 1999, and in the unaudited pro forma condensed consolidated statements of operations for the fiscal year ended September 30, 1998, and the six months ended March 31, 1999. The unaudited pro forma condensed consolidated financial statements give effect to the Merger on a retroactive basis. The unaudited pro forma condensed consolidated balance sheet as of March 31, 1999, gives effect to the Merger as if it had occurred on March 31, 1999, and combines the pro forma balance sheet of Brooks and the unaudited historical balance sheet of Smart Machines as of March 31, 1999. The unaudited pro forma condensed consolidated statements of operations give effect to the Merger as if it had occurred at the beginning of the earliest period presented. The unaudited pro forma condensed consolidated statements of operations for the fiscal years ended September 30, 1998, 1997, and 1996, and the six months ended March 31, 1999 and 1998, combine the historical results of operations of Brooks for the fiscal years ended September 30, 1998, 1997, and 1996, and the six months ended March 31, 1999 and 1998, with the historical results of operations of Smart Machines for the three years ended December 31, 1998, and the six months ended March 31, 1999 and 1998, respectively, on a pooling-of-interests basis. The operations of Smart Machines for the three months ended December 31, 1998, resulting in net revenues of $244,000 and a net loss of $1,613,000, have been included in the pro forma statements of income for the year ended September 30, 1998, and for the six-month period ended March 31, 1999. The operations of Smart Machines for the three months ended December 31, 1997, resulting in net sales of $127,000 and a net loss of $1,224,000, have been included in the pro forma statements of income for the year ended September 30, 1997, and for the six-month period ended March 31, 1998. 2. PRO FORMA EARNINGS PER SHARE The unaudited pro forma combined earnings per share information is based upon the weighted average number of common and dilutive potential common shares outstanding of Brooks and Smart Machines for each period presented, giving effect to the Merger as if it occurred at the beginning of the earliest period presented, using the per share price for Brooks common stock of $27.49 and a purchase price of $14.2 million minus the outstanding obligations of Smart Machines under its existing third party credit facility. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 3. CONFORMING ADJUSTMENTS AND INTERCOMPANY TRANSACTIONS There were no material adjustments required to conform the accounting policies of Brooks and Smart Machines. There are no material intercompany transactions included in the unaudited pro forma condensed consolidated financial statements. 4. TRANSACTION COSTS It is estimated that the combined company will incur charges to operations of approximately $750,000 representing direct transaction costs of the Merger, primarily for accounting and legal fees. The estimated charge is reflected in the unaudited condensed consolidated balance sheet as March 31, 1999, but is not reflected in the unaudited pro forma condensed consolidated statements of operations. These nonrecurring transaction costs will be charged to operations as incurred. These costs reflect a preliminary estimate only, and therefore, are subject to change. It is expected that following the Merger, the combined company will incur additional significant costs associated with integrating the two companies, which amounts will be charged to operations as incurred. The amount of such costs is not currently reasonably estimable and, accordingly, the amount has not been reflected in the unaudited pro forma condensed consolidated balance sheet as of March 31, 1999. There can be no assurance that the combined company will not incur additional material charges to reflect costs associated with the Merger or that management will be successful in its efforts to integrate the operations of the two companies. EXHIBIT INDEX 2.05 Agreement and plan of merger dated as of July 7, 1999 among the Registrant, Smart Acquisition Corporation and Smart Machines [incorporated by reference as Exhibit 2.05 to the Registrant's Registration Statement on Form S-4 (No. 333- 84727)]. 23.1 Consent of PricewaterhouseCoopers LLP EX-23.1 2 CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-95268, 333-07313, 333-07315, 333-22717, 333-66457, 333-66429 and 333-66455) of Brooks Automation, Inc. of our report dated June 1, 1999, with respect to the financial statements of Smart Machines Inc. appearing in Amendment No. 1 to the Current Report on Form 8-K/A of Brooks Automation, Inc. dated September 29, 1999. /s/ PricewaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP San Jose, California September 29, 1999 -----END PRIVACY-ENHANCED MESSAGE-----