UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20569
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended JUNE 30, 2001
Or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______________ to ___________________
Commission file number 0-23150
IBIS TECHNOLOGY CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2987600
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
32 CHERRY HILL DRIVE, DANVERS, MA 01923
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(Address of principal executive offices) (Zip Code)
(978) 777-4247
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
8,390,495 shares of Common Stock, par value $.008, were outstanding on
August 10, 2001.
IBIS TECHNOLOGY CORPORATION
INDEX
PAGE
NUMBER
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Balance Sheets
December 31, 2000 and June 30, 2001 (unaudited)............................................... 3
Statements of Operations
Three Months Ended June 30, 2000 and 2001
and Six Months Ended June 30, 2000 and 2001 (unaudited)...................................... 4
Statements of Cash Flows
Six Months Ended June 30, 2000 and 2001 (unaudited)............................................ 5
Notes to Unaudited Interim Financial Statements................................................... 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................... 10
Item 3 - Quantitative and Qualitative Disclosure About Market Risk.................................. 16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................................................................ 17
Item 2 - Changes in Securities........................................................................ 17
Item 3 - Defaults upon Senior Securities.............................................................. 17
Item 4 - Submission of Matters to a Vote of Security Holders.......................................... 17
Item 5 - Other Information............................................................................ 17
Item 6 - Exhibits and Reports on Form 8-K............................................................. 17
Signatures............................................................................................ 19
2
IBIS TECHNOLOGY CORPORATION
BALANCE SHEETS
DECEMBER 31, JUNE 30,
2000 2001
------------- -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................................................................... $ 26,366,299 $ 17,388,379
Accounts receivable, trade, net ................................................................. 1,209,916 1,285,046
Unbilled revenue ................................................................................ 510,500 164,711
Inventories (note 3) ............................................................................ 10,932,859 2,022,642
Prepaid expenses and other current assets ....................................................... 326,103 235,286
------------ ------------
Total current assets ...................................................................... 39,345,677 21,096,064
------------ ------------
Property and equipment ............................................................................. 25,416,692 41,945,013
Less: Accumulated depreciation and amortization ................................................ (10,875,048) (12,142,079)
------------ ------------
Net property and equipment ................................................................ 14,541,644 29,802,934
Patents and other assets, net ...................................................................... 2,411,203 2,295,466
------------ ------------
Total assets .............................................................................. $ 56,298,524 $ 53,194,464
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Capital lease obligation, current................................................................ $ 11,593 $ 12,240
Accounts payable ................................................................................ 1,046,960 2,526,556
Accrued liabilities ............................................................................. 2,718,240 1,831,697
Deferred revenue ................................................................................ 2,984,094 2,877,286
------------ ------------
Total current liabilities ................................................................. 6,760,887 7,247,779
Capital lease obligation, noncurrent ........................................................... 18,479 12,650
------------ ------------
Total liabilities ......................................................................... 6,779,366 7,260,429
------------ ------------
STOCKHOLDERS' EQUITY:
Undesignated preferred stock, $.01 par value
Authorized 2,000,000 shares; none issued ....................................................... -- --
Common stock, $.008 par value
Authorized 50,000,000 shares; issued 8,342,709 shares and
8,385,978 shares in 2000 and 2001, respectively ............................................. 66,742 67,088
Additional paid-in capital ..................................................................... 66,183,143 66,431,386
Accumulated deficit ............................................................................ (16,730,727) (20,564,439)
------------ ------------
Total stockholders' equity ................................................................ 49,519,158 45,934,035
------------ ------------
Total liabilities and stockholders' equity ................................................ $ 56,298,524 $ 53,194,464
============ ============
See accompanying notes to unaudited interim financial statements.
3
IBIS TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ----------------------------
2000 2001 2000 2001
------------- ----------- --------- -------------
NET SALES AND REVENUE:
Product sales ...................................... $ 1,441,605 $ 771,550 $ 3,085,365 $ 3,234,945
Contract and other revenue ......................... 254,772 145,006 334,180 345,893
Equipment revenue .................................. 4,223,853 339,862 4,539,797 876,085
----------- ----------- ----------- -----------
Total net sales and revenue
(notes 2 and 4) ................................ 5,920,230 1,256,418 7,959,342 4,456,923
COST OF SALES AND REVENUE:
Cost of product sales .............................. 1,150,821 1,857,699 2,083,841 3,650,307
Cost of contract and other revenue ................. 168,196 194,584 220,440 261,373
Cost of equipment revenue .......................... 2,748,947 161,991 2,881,201 413,435
----------- ----------- ----------- -----------
Total cost of sales and revenue ................. 4,067,964 2,214,274 5,185,482 4,325,115
----------- ----------- ----------- -----------
Gross profit (loss) ............................. 1,852,266 (957,856) 2,773,860 131,808
----------- ----------- ----------- -----------
OPERATING EXPENSES:
General and administrative ......................... 627,458 589,580 1,074,202 1,132,556
Marketing and selling .............................. 428,512 529,258 855,532 1,020,910
Research and development ........................... 1,309,768 1,223,927 2,222,853 2,405,256
----------- ----------- ----------- -----------
Total operating expenses ........................ 2,365,738 2,342,765 4,152,587 4,558,722
----------- ----------- ----------- -----------
Loss from operations ............................ (513,472) (3,300,621) (1,378,727) (4,426,914)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income .................................... 495,744 245,193 997,404 588,350
Interest expense ................................... (967) (697) (8,295) (1,463)
Other .............................................. (4,489) 7,571 (3,609) 7,571
----------- ----------- ----------- -----------
Total other income .............................. 490,288 252,067 985,500 594,458
----------- ----------- ----------- -----------
Loss before income taxes ........................ (23,184) (3,048,554) (393,227) (3,832,456)
Income tax expense ................................... -- -- 1,256 1,256
----------- ----------- ----------- -----------
Net loss ........................................ $ (23,184) $(3,048,554) $ (394,483) $(3,833,712)
=========== =========== =========== ===========
Net loss per common share:
Basic ............................................... $ 0.00 $ (0.36) $ (0.05) $ (0.46)
=========== =========== =========== ===========
Diluted ............................................. $ 0.00 $ (0.36) $ (0.05) $ (0.46)
=========== =========== =========== ===========
Weighted average number of common shares outstanding:
Basic ............................................... 8,295,062 8,374,346 8,252,858 8,363,398
=========== =========== =========== ===========
Diluted ............................................. 8,295,062 8,374,346 8,252,858 8,363,398
=========== =========== =========== ===========
See accompanying notes to unaudited interim financial statements.
4
IBIS TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
------------------------------------
2000 2001
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................................ $ (394,483) $ (3,833,712)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ................................................. 680,987 1,481,382
(Loss) gain on sale of equipment .............................................. (3,609) 7,571
Changes in operating assets and liabilities:
Accounts receivable, trade ................................................ (3,635,894) (75,130)
Unbilled revenue .......................................................... (394,213) 345,789
Inventories ............................................................... (4,395,126) (3,150,284)
Prepaid expenses and other current assets ................................. 96,506 90,817
Accounts payable .......................................................... 285,350 1,479,596
Accrued liabilities and deferred revenue .................................. 1,610,395 (993,351)
------------ ------------
Net cash used in operating activities ..................................... (6,150,087) (4,647,322)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net ........................................ (2,554,466) (4,523,943)
Other assets .................................................................... 8,719 (50,062)
------------ ------------
Net cash used in investing activities ..................................... (2,545,747) (4,574,005)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital lease obligations ........................................... (4,649) (5,182)
Exercise of stock options and warrants .......................................... 565,822 248,589
------------ ------------
Net cash provided by financing activities ................................. 561,173 243,407
------------ ------------
Net decrease in cash and cash equivalents ................................. (8,134,661) (8,977,920)
Cash and cash equivalents, beginning of period ..................................... 36,361,621 26,366,299
------------ ------------
Cash and cash equivalents, end of period ........................................... $ 28,226,960 $ 17,388,379
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ........................................ $ 8,295 $ 1,463
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Transfer of internally constructed equipment from inventory
to property and equipment ...................................................... $ 2,372,767 $ 12,060,501
============ ============
See accompanying notes to unaudited interim financial statements.
5
IBIS TECHNOLOGY CORPORATION
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL STATEMENTS
The accompanying financial statements are unaudited, except for the
Balance Sheet as of December 31, 2000, and have been prepared by the Company in
accordance with accounting principles generally accepted in the United States of
America.
In the opinion of management, the interim financial statements include
all adjustments which consist only of normal and recurring adjustments necessary
for a fair presentation of the Company's financial position and results of
operations. Results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. These financial
statements should be read in conjunction with the financial statements of the
Company as of and for the year ended December 31, 2000 which are included in the
Company's Annual Report on Form 10-K.
(2) REVENUE RECOGNITION
The Company recognizes revenue from product sales, equipment sales and
the sales of spare parts when all of the following criteria have been met: (1)
evidence exists that the customer is bound to the transaction; (2) the product
has been delivered to the customer; (3) the sales price to the customer has been
fixed or is determinable; and (4) collectibility of the sales price is
reasonably assured. Provisions for estimated sales returns and allowances are
made at the time the products are sold. Revenue derived from services is
recognized upon performance. Contract revenue is recognized on the
percentage-of-completion method. Provisions for anticipated losses are made in
the period in which such losses become determinable. Unbilled revenue under
customer contracts represents revenue earned under the percentage-of-completion
method but not yet billable under the terms of the contract. These amounts are
billable based on the terms of the contract, which can include shipment of the
product, achievement of milestones or completion of the contract.
(3) INVENTORIES
Inventories consist of the following:
DECEMBER 31, JUNE 30,
2000 2001
-------------- -----------
Raw materials .............................. $ 392,708 $ 608,312
Work in process ............................ 332,844 268,768
Finished goods ............................. 218,210 1,145,562
----------- -----------
Subtotal wafer inventory ................... 943,762 2,022,642
Equipment inventory ........................ 9,989,097 --
----------- -----------
Total inventories ...................... $10,932,859 $ 2,022,642
=========== ===========
Equipment inventory at December 31, 2000 included Ibis 1000 implanters
under construction for either resale or the Company's own use. In view of the
continued downturn in the semiconductor industry through June 30, 2001, and the
fact that an upturn from the present economic and industry conditions and Ibis
1000 implanter sales are not visible, the Company now intends to use a majority
of the implanters under construction in its internal wafer production facility.
Accordingly, the Company transferred its equipment inventory to property and
equipment as of June 30, 2001.
6
IBIS TECHNOLOGY CORPORATION
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(4) LEASE COMMITMENTS
In January 2001, the Company gave notice of its intention to
exercise an option to lease an additional 18,674 square feet of space under
its existing lease. The option provided that it was subject to certain
conditions, including the availability of the space and the execution of a
mutually satisfactory amendment of the existing lease to incorporate the new
space. In May 2001, prior to receiving any notice from the landlord that the
space was or would be available and prior to receiving or executing the
required amendment to the existing lease, the Company rescinded the exercise
of the option. The landlord contends that the Company's initial notice binds
it and the Company is therefore liable for the additional space as of July 1,
2001 through May 31, 2005. The Company contends it is not liable for the
space because it properly revoked the option prior to the satisfaction of the
necessary preconditions to its validity. The aggregate commitment that would
be due under the option over 42 months is approximately $714,000.
(5) STOCK OPTION PLANS
On May 3, 2001, the stockholders of the Company approved an
amendment to the Company's 1997 Employee, Director and Consultant Stock
Option Plan to increase by 600,000 shares the aggregate number of shares of
common stock for which stock options may be granted under this plan.
(6) NET LOSS PER SHARE
Net loss per share of common stock is computed based upon the weighted
average number of shares outstanding during each period and including the
dilutive effect, if any, of stock options and warrants. SFAS 128 requires the
presentation of basic and diluted earnings (loss) per share for all periods
presented. As the Company was in a net loss position for the three and six
months ended June 30, 2000 and June 30, 2001, common stock equivalents of
410,827, 508,246, 169,497 and 239,043, respectively, were excluded from the
diluted loss per share calculation, as they would be antidilutive. As a result,
diluted loss per share is the same as basic loss per share for all periods
presented.
(7) INDUSTRY SEGMENTS
The Company's reportable segments are SIMOX Wafer Products, SIMOX
Equipment and Other Products or Services. For purposes of segment reporting,
equipment, equipment spares and field service revenue are combined and reported
as SIMOX Equipment. Government contracts, other services and license revenue are
combined and reported as Other Products or Services.
7
IBIS TECHNOLOGY CORPORATION
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
The table below provides unaudited information for the three and six
months ended June 30, 2000 and 2001 pertaining to the Company's three industry
segments.
SIMOX WAFER SIMOX OTHER PRODUCTS
PRODUCTS EQUIPMENT OR SERVICES TOTAL
NET SALES AND REVENUE
Three Months Ended June 30, 2000 $ 1,441,605 $ 4,223,853 $ 254,772 $ 5,920,230
Three Months Ended June 30, 2001 771,550 339,862 145,006 1,256,418
Six Months Ended June 30, 2000 3,085,365 4,539,797 334,180 7,959,342
Six Months Ended June 30, 2001 3,234,945 876,085 345,893 4,456,923
OPERATING INCOME (LOSS)
Three Months Ended June 30, 2000 (41,136) 68,544 86,578 113,986
Three Months Ended June 30, 2001 (1,915,655) ( 745,809) (49,577) (2,711,041)
Six Months Ended June 30, 2000 273,861 (692,128) 113,742 (304,525)
Six Months Ended June 30, 2001 (1,789,273) (1,589,605) 84,520 (3,294,358)
ASSETS
June 30, 2001 31,668,765 3,246,925 123,931 35,039,621
CAPITAL EXPENDITURES
Three Months Ended June 30, 2000 1,535,179 378,959 -- 1,914,138
Three Months Ended June 30, 2001 3,415,838 -- -- 3,415,838
Six Months Ended June 30, 2000 1,999,327 408,604 -- 2,407,931
Six Months Ended June 30, 2001 4,344,849 47,808 -- 4,392,657
DEPRECIATION AND AMORTIZATION OF PROPERTY AND
EQUIPMENT
Three Months Ended June 30, 2000 311,799 74,124 626 386,549
Three Months Ended June 30, 2001 617,792 135,594 -- 753,386
Six Months Ended June 30, 2000 561,030 85,070 1,486 647,586
Six Months Ended June 30, 2001 1,209,009 212,312 -- 1,421,321
8
IBIS TECHNOLOGY CORPORATION
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS (CONTINUED)
The table below provides the reconciliation of reportable segment
operating loss and assets to Ibis' totals.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
SEGMENT RECONCILIATION 2000 2001 2000 2001
---- ---- ---- ----
<c> <c>
Loss Before Income Taxes:
Total operating loss for reportable segments $ 113,986 $ (2,711,041) $ (304,525) $(3,294,358)
Corporate general & administrative expenses (627,458) (589,580) (1,074,202) (1,132,556)
Net other income 490,288 252,067 985,500 594,458
---------- ------------ ----------- -----------
Loss before income taxes (23,184) (3,048,554) (393,227) (3,832,456)
========== ============ =========== ===========
Capital Expenditures:
Total capital expenditures for reportable segments 1,914,138 3,415,838 2,407,931 4,392,657
Corporate capital expenditures 89,831 84,690 146,535 131,286
---------- ------------ ----------- -----------
Total capital expenditures 2,003,969 3,500,528 2,554,466 4,523,943
========== ============ =========== ===========
Depreciation and Amortization:
Total depreciation and amortization for reportable
segments 386,549 753,386 647,586 1,421,321
Corporate depreciation and amortization (13,024) 31,500 33,401 60,061
---------- ------------ ----------- -----------
Total depreciation and amortization 373,525 784,886 680,987 1,481,382
========== ============ =========== ===========
BALANCE AS OF
6/30/01
Assets:
Total assets for reportable segments 35,039,621
Cash & cash equivalents not allocated to segments 17,388,379
Other unallocated assets 766,464
------------
Total assets 53,194,464
============
(8) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") that
establishes accounting and reporting requirements for derivative instruments and
for hedging activities. SFAS 133 requires companies to recognize all derivatives
as either assets or liabilities in the statement of financial position at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge of the exposures to changes in fair value of recognized
assets or liabilities or unrecognized firm commitments, a hedge of the exposure
to variable cash flows of a forecasted transaction, or a hedge of the foreign
currency exposure of a net investment in a foreign operation, unrecognized firm
commitments, an available-for-sale security or a foreign-currency denominated
forecasted transaction. The accounting for changes in fair value under SFAS 133
depends on the intended use of the derivative and the resulting designation. In
June 1999, the FASB decided that the effective date for adopting the
requirements of SFAS 133 should be delayed to fiscal years beginning after June
15, 2000. This delay, published as SFAS 137, applies to quarterly and annual
financial statements. In June 2000, the FASB issued SFAS 138, which addresses a
limited number of issues causing implementation difficulties for numerous
entities that apply SFAS 133. Ibis adopted the provisions of SFAS 133 as
amended, on January 1, 2001. The adoption of these provisions had no impact on
the Company's financial condition or results of operations.
9
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OVERVIEW
Ibis Technology Corporation ("Ibis") was formed in October 1987 and
commenced operations in January 1988. Ibis' initial activities consisted of
producing and selling SIMOX-SOI wafers and conducting research and development
activities. This research led to the development of proprietary next generation
oxygen implanters, the Ibis 1000 and Ibis 2000, and to other proprietary process
technology.
Initially, much of our revenue was derived from research and
development contracts and sales of wafers for military applications. Over the
years, there was a shift in revenue to sales of SIMOX-SOI wafers for commercial
applications and the nature of our business has evolved through stages where
sometimes our revenues primarily resulted from selling wafers for evaluation
purposes, and sometimes our revenue was generated primarily from equipment
sales. This is a normal path to follow while developing and promoting a
fundamental new technology, especially when it relates to the semiconductor
industry embracing any change that affects fabrication operations. We believe
that we are in the technology rollout stage of our corporate life cycle. Our
fundamental SIMOX-SOI technology has been developed, refined and proven over the
last dozen years. Ibis is at a point of introducing the next generation
production-worthy SIMOX-SOI, which includes both the recently licensed modified
low dose ("MLD") wafer process and the Ibis 2000 which will be capable of
producing eight and twelve inch (or 200 and 300mm) SIMOX-SOI wafers. The first
Ibis 2000 is anticipated to be complete by the end of the year. We believe we
are now at a stage where customers are actively and seriously taking steps
toward adopting our SIMOX-SOI technology in their mainstream manufacturing
processes.
Looking at it from our customer's perspective, the pathway to SOI
adoption is complex and time consuming. Typically, a customer will go through
three major stages:
o Sampling, where preliminary performance characteristics are
explored and verified;
o R&D, where specific customer specifications are tested and
developed; and
o Production, where yield and cost benefits are optimized.
There are many steps within each of these stages, and customers must
evaluate each new wafer technology that essentially lays a new foundation for
substantially all other processes they have spent billions of dollars and
decades of time developing. Accordingly, it takes anywhere from 12 to 36
months for a customer to proceed from initial sampling through R&D to initial
production, which is not unlike the standard process for qualifying any new
wafer material. These steps apply each time there is a change in the
customer's fabrication process, such as a feature-size change or new
material. Ibis has a number of customers going through this process right
now. We have several customers in the sampling and R&D stages and four
customers are already in the production stage.
Since most of our customers have purchased wafers for the purpose of
characterizing and evaluating the wafers, developing prototype products or for
pilot production, historical sales are not necessarily indicative of future
operations because such sales would not be considered of a recurring nature.
Ibis has experienced quarterly and annual fluctuations in revenue and
results of operations due to the timing of receipt of equipment orders and
dependence on a limited number of customers. We may continue to experience
fluctuations in revenue and results of operations due to equipment sales and
shifts in customer demands during the various stages of the SIMOX-SOI adoption
cycle.
10
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During the second quarter of 2001, two to three of our Ibis 1000 oxygen
implanters were used by Ibis to generate SIMOX-SOI wafer sales and four to five
implanters were used for non-revenue generating activities, such as research and
development. Ibis currently has ten Ibis 1000 oxygen implanters, including two
owned by a customer which reside at Ibis pursuant to terms of a consignment
agreement.
On April 12, 2001, Ibis announced in a press release that one of our
largest customers, an optical components manufacturer, had informed us that it
expects to order substantially reduced quantities of wafers for the remainder of
2001. As a result, second quarter results were adversely affected and we expect
the remaining quarters and full year revenues to be substantially reduced from
our earlier estimates.
Another major factor affecting our revenue and results is that Ibis is
in the midst of a major SIMOX technology transition where customers are focusing
their activities on sampling or qualifying our new Advantox MLD wafers and
anticipating the availability of the Ibis 2000 implanter. In addition, we
believe the semiconductor industry downturn is slowing the Advantox MLD
qualification process because in some cases our customers' resources are being
limited. In view of the continued downturn in the semiconductor industry through
June 30, 2001, and the fact that an upturn from the present economic and
industry conditions is not visible, Ibis now intends to use a majority of the
implanters under construction for internal wafer production. Accordingly, we
transferred our equipment inventory to property and equipment as of June 30,
2001 and are evaluating projected demand versus capacity for potential
impairment in future quarters.
RESULTS OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 2001 COMPARED TO SECOND QUARTER ENDED JUNE 30,
2000
PRODUCT SALES. Wafer product sales decreased $670,055 or 46%, to
$771,550 for the second quarter ended June 30, 2001 from $1,441,605 for the
second quarter ended June 30, 2000. This decrease in product sales is
attributable to decreased wafer sales by Ibis in Europe as the impact of the
order cutback announced in mid-April 2001 from one of our largest wafer
customers was realized this quarter. Sales by Ibis in the United States and
Pacific Rim increased this quarter and a majority of these sales represented
wafers shipped to customers in the sampling and R&D stages.
CONTRACT AND OTHER REVENUE. Contract and other revenue includes revenue
derived from government contracts, license agreements, characterization and
other services. Contract and other revenue decreased for the second quarter
ended June 30, 2001 to $145,006 from $254,772 for the second quarter ended June
30, 2000, a decrease of $109,766 or 43%. This decrease is attributable to
decreases in royalties earned and in government contract work.
EQUIPMENT REVENUE. Equipment revenue represents revenue recognized from
sales of implanters, spare parts and field service revenue. Equipment revenue
decreased to $339,862 for the second quarter ended June 30, 2001 from $4,223,853
for the second quarter ended June 30, 2000, a decrease of $3,883,991 or 92%.
Equipment revenue last year included an implanter sale, whereas this year
consisted solely of parts and service revenue. Field service revenue accounted
for $124,235 of equipment revenue for the second quarter ended June 30, 2001 as
compared to $69,300 of equipment revenue for the second quarter ended June 30,
2000. Sales of spare parts accounted for $215,627 of equipment revenue for the
second quarter ended June 30, 2001 as compared to $224,553 of equipment revenue
for the second quarter ended June 30, 2000.
11
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
TOTAL NET SALES AND REVENUE. Total net revenue for the second quarter
ended June 30, 2001 was $1,256,418, a decrease of $4,663,812, or 79%, from total
revenue of $5,920,230 for the second quarter ended June 30, 2000. This decrease
resulted primarily from a decrease in wafer product sales and the lack of
implanter sales.
TOTAL COST OF SALES AND REVENUE. Cost of wafer product sales for the
second quarter ended June 30, 2001 was $1,857,699, as compared to $1,150,821 for
the second quarter ended June 30, 2000, an increase of $706,878 or 61%. This
increase is primarily attributable to the increase in fixed costs associated
with production, which include depreciation and amortization, utilities,
occupancy expenses, and repair and maintenance. Ibis also increased its reserve
for wafer inventory obsolescence due to market conditions and decreased demand
for certain products. Cost of contract and other revenue consists of labor and
materials expended during the quarter. Cost of contract and other revenue for
the second quarter ended June 30, 2001 was $194,584, as compared to $168,196 for
the second quarter ended June 30, 2000, an increase of $26,388, or 16%. This
increase is primarily attributable to subcontract work on contracts. Cost of
equipment revenue represents the cost of equipment, the cost for spare parts
along with labor incurred for field service. Cost of equipment revenue for the
second quarter ended June 30, 2001 was $161,991 as compared to $2,748,947 for
the second quarter ended June 30, 2000, a decrease of $2,586,956 or 94%. This
decrease is due to lack of implanter sales in the quarter. As a result of the
foregoing, the total cost of sales and revenue for the second quarter ended June
30, 2001 was $2,214,274 as compared to $4,067,964 for the second quarter ended
June 30, 2000, a decrease of $ 1,853,690 or 46%. The gross margin for all sales
was a negative 76% for the second quarter ended June 30, 2001 as compared to 31%
for the second quarter ended June 30, 2000. This decrease in gross margin for
all sales is attributable to the decreased revenue along with an increase in the
cost of wafer product sales. The gross margin for wafer product sales was a
negative 141% in the second quarter of 2001 compared to 20% in the prior year
quarter. This decrease is due to the decrease in sales volume along with the
increase in our fixed costs as a result of the expansion of our wafer operations
during the second half of 2000 and the first half of 2001, which included
additional space, clean rooms and equipment. This resulted in higher
depreciation and occupancy costs. In addition, cost of wafer product sales for
the second quarter ended June 30, 2001 includes amortization of technology which
was licensed by Ibis in December 2000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the second quarter ended June 30, 2001 were $589,580 (or 47% of
total revenue) as compared to $627,458 (or 11% of total revenue) for the second
quarter ended June 30, 2000, a decrease of $37,878, or 6%. This is primarily a
result of a decrease in professional service fees.
MARKETING AND SELLING EXPENSES. Marketing and selling expenses for the
second quarter ended June 30, 2001 were $529,258 (or 42% of total revenue) as
compared to $428,512 (or 7% of total revenue) for the second quarter ended June
30, 2000, an increase of $100,746, or 24%. The increase in marketing and selling
expenses is primarily a result of an increase in customer support personnel and
professional services.
RESEARCH AND DEVELOPMENT EXPENSES. Internally funded research and
development expenses decreased by $85,841 or 7%, to $1,223,927 (or 97% of total
revenue) for the second quarter ended June 30, 2001, as compared to $1,309,768
(or 22% of total revenue) for the second quarter ended June 30, 2000. This
decrease in absolute dollars is primarily due to a decrease in consulting
expenses for the Ibis design and development effort on our next generation
oxygen implanter, the Ibis 2000, which was partially offset by increased
material expenses on Ibis' SIMOX-SOI wafer development programs.
12
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OTHER INCOME (EXPENSE). Total other income for the second quarter ended
June 30, 2001 was $252,067 as compared to $490,288 for the second quarter ended
June 30, 2000, a decrease of $238,221, or 49%. The decrease in total other
income is primarily attributable to decreased interest income earned as a result
of lower average cash balances and a reduction in interest rates.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
PRODUCT SALES. Wafer product sales increased $149,580 or 5%, to
$3,234,945 for the six months ended June 30, 2001 from $3,085,365 for the six
months ended June 30, 2000. The increase in product sales is attributable to
increased wafer sales by Ibis in the Pacific Rim, while in Europe wafer sales
remained constant. Sales by Ibis in the United States decreased overall during
the six months ended June 30, 2001, primarily because our largest domestic
customer is delaying further SIMOX-SOI wafer purchases until our new Advantox
MLD process is qualified. In December 2000, Ibis entered into a royalty-bearing
license agreement with this customer which gives Ibis the right to manufacture
and sell SIMOX-SOI wafers using the licensed process. Ibis began shipping sample
quantities of this material in May 2001.
CONTRACT AND OTHER REVENUE. Contract and other revenue increased for
the six months ended June 30, 2001 to $345,893 from $334,180 for the six months
ended June 30, 2000, an increase of $11,713 or 4%. This increase is primarily
attributable to an increase in royalty revenue.
EQUIPMENT REVENUE. Equipment revenue decreased to $876,085 for the six
months ended June 30, 2001 from $4,539,797 for the six months ended June 30,
2000, a decrease of $3,663,712 or 81%. Equipment revenue last year included an
implanter sale, whereas this year consisted solely of parts and service revenue.
Field service revenue accounted for $417,385 of equipment revenue for the six
months ended June 30, 2001 as compared to $143,100 of equipment revenue for the
six months ended June 30, 2000. Sales of spare parts accounted for $458,700 of
equipment revenue for the six months ended June 30, 2001 as compared to $466,697
of equipment revenue for the six months ended June 30, 2000.
TOTAL NET SALES AND REVENUE. Total revenue for the six months ended
June 30, 2001 was $4,456,923, a decrease of $3,502,419, or 44%, from total
revenue of $7,959,342 for the six months ended June 30, 2000. This decrease
resulted primarily from lack of implanter sales.
TOTAL COST OF SALES AND REVENUE. Cost of wafer product sales for the
six months ended June 30, 2001 was $3,650,307, as compared to $2,083,841 for the
six months ended June 30, 2000, an increase of $1,566,466 or 75%. This increase
is primarily attributable to the increase in fixed costs associated with
production, which include depreciation and amortization, utilities, occupancy
expenses, and repair and maintenance. Cost of contract and other revenue for the
six months ended June 30, 2001 was $261,373, as compared to $220,440 for the six
months ended June 30, 2000, an increase of $40,933, or 19%. This increase is
primarily attributable to subcontract work on contracts. Cost of equipment
revenue for the six months ended June 30, 2001 was $413,435 as compared to
$2,881,201 for the six months ended June 30, 2000, a decrease of $2,467,766 or
86%. This decrease is due to lack of implanter sales, thus no equipment costs
were recognized in this six month period. As a result of the foregoing, the
total cost of sales and revenue for the six months ended June 30, 2001 was
$4,325,115 as compared to $5,185,482 for the six months ended June 30, 2000, a
decrease of $860,367 or 17%. The gross margin for all sales was 3% for the six
months ended June 30, 2001 as compared to 35% for the six months ended
13
BIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
June 30, 2000. This decrease in gross margin for all sales is attributable to
the lack of implanter sales along with the increase in the cost of wafer product
sales. The gross margin for wafer product sales was a negative 13% in the first
six months of 2001 compared to 32% in the prior year six month period. This
decrease is primarily due to the expansion of our wafer operations during the
second half of 2000 and the first half of 2001, which included additional space,
clean rooms and equipment. This resulted in higher depreciation and occupancy
costs. In addition, cost of wafer product sales for the six months ended June
30, 2001 includes amortization of technology which was licensed by Ibis in
December 2000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the six months ended June 30, 2001 were $1,132,556 (or 25% of total
revenue) as compared to $1,074,202 (or 13% of total revenue) for the six months
ended June 30, 2000, an increase of $58,354, or 5%. This is primarily a result
of an increase in personnel and professional service fees.
MARKETING AND SELLING EXPENSES. Marketing and selling expenses for the
six months ended June 30, 2001 were $1,020,910 (or 23% of total revenue) as
compared to $855,532 (or 11% of total revenue) for the six months ended June 30,
2000, an increase of $165,378, or 19%. The increase in marketing and selling
expenses is primarily a result of an increase in public relations and
professional services.
RESEARCH AND DEVELOPMENT EXPENSES. Internally funded research and
development expenses increased by $182,403 or 8%, to $2,405,256 (or 54% of total
revenue) for the six months ended June 30, 2001, as compared to $2,222,853 (or
28% of total revenue) for the six months ended June 30, 2000. This increase is
primarily due to increased material expenses on Ibis' SIMOX-SOI wafer
development programs.
OTHER INCOME (EXPENSE). Total other income for the six months ended
June 30, 2001 was $594,458 as compared to $985,500 for the six months ended June
30, 2000, a decrease of $391,042, or 40%. The decrease in total other income is
primarily attributable to decreased interest income earned as a result of lower
average cash balances and a reduction in interest rates.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2001, Ibis had cash and cash equivalents of $17,388,379,
reflecting in large part our receipt of approximately $25 million in net
proceeds from the August 1999 public sale of 1,000,000 shares of Common Stock.
During the six months ended June 30, 2001, Ibis used $4,647,322 in cash from
operating activities as compared to cash used by operations in the amount of
$6,150,087 for the same period in 2000. Depreciation and amortization expense
for the six months ended June 30, 2001 and 2000 was $1,481,382 and $680,987,
respectively. This accounted for 33% and 9% of total revenue, respectively. Due
to the capital intensive nature of Ibis' business and the anticipated expansion
of its facilities and production capacity, management expects that depreciation
and amortization will continue to be a significant portion of its expenses. To
date, Ibis' working capital requirements have been funded primarily through debt
and equity financings. The principal use of cash during the six months ended
June 30, 2001 was to fund additions to property and equipment which totaled
$4,523,943. At June 30, 2001, Ibis had commitments to purchase approximately
$2,024,320 in material or subassemblies to be used for manufacturing Ibis 1000
and the first Ibis 2000 implanters and $2,092,738 in capital equipment
purchases.
14
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Our existing cash resources, anticipated equipment lease financing
along with funds generated from operations are believed to be sufficient to
support Ibis' operations on our anticipated scale for at least the next 15
months. Management of Ibis currently believes that this anticipated scale of
operations will include the purchase of support equipment, the expansion of
Ibis' facilities, and the development and build of the next generation oxygen
implanter, the Ibis 2000. Additional implanters are expected to be
transferred to production at various times as additional capacity is needed
to meet demand. We anticipate that we may be required to raise substantial
additional capital in the future in order to finance further expansion of our
manufacturing capacity and our research and development programs.
EFFECTS OF INFLATION
The Company believes that over the past three years inflation has not
had a significant impact on the Company's sales or operating results.
BUSINESS OUTLOOK
In September 1995, Ibis entered into a strategic business
development agreement with a customer whereby the customer advanced cash to
Ibis to ensure dedicated wafer production capacity over a five-year period.
Such amounts were recognized in revenue over the five-year period as wafers
were produced. Ibis and this customer are currently evaluating the status of
this agreement, which is anticipated to be resolved in the third quarter of
2001. Should Ibis conclude not to extend the status of this agreement beyond
the original termination date of December 2000, all or a portion of the
remaining balance in deferred revenue of approximately $1.4 million will be
recognized as non-recurring income at the time that all remaining certainties
are resolved.
This Form 10-Q contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 including statements regarding the anticipated completion
of the first Ibis 2000, the adoption by our customers of SIMOX-SOI technology
in their mainstream manufacturing processes, the continuation of fluctuations
in revenue and results of operations, the expectation that revenues for the
remaining quarters of 2001 and the full year will be substantially reduced
from earlier estimates, the intention to use a majority of the implanters
under construction for internal wafer production, the expectation that
depreciation and amortization will continue to be a significant portion of
expenses, the anticipated equipment lease financing, the need for future
additional capital and the sufficiency of our current capital, the
anticipated scale of Ibis' operations, poor visibility into upcoming
quarters, and the possible recognition of approximately $1.4 million in
non-recurring other income. Such statements are based on our current
expectations and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those described in the
forward-looking statements. Such factors and uncertainties include, but are
not limited to, the uncertainty that the performance advantages of SIMOX-SOI
wafers will continue to be realized commercially or that a commercial market
for SIMOX-SOI wafers will continue to develop; the dependence by Ibis on key
customers (during 1998, 1999 and 2000, revenues from two customers averaged
in the aggregate between 78% and 81% of our revenues, so that the loss of one
or more of these major customers and the failure of Ibis to obtain other
sources of revenue could have a material adverse impact on us); the loss of
the services of one or more of our key individuals, which
15
IBIS TECHNOLOGY CORPORATION
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
could have a material adverse impact on Ibis; the dependence by Ibis on key
suppliers, so that the loss of services of one or more suppliers could have a
material adverse impact on us; the development of competing or superior
technologies and products from manufacturers, many of which have substantially
greater financial, technical and other resources than us; Ibis' lack of
experience in producing commercial quantities of our products at acceptable
costs; our ability to successfully complete the manufacture of our implanters
and the uncertainty of commercial acceptance of these implanters by our
customers; Ibis' ability to develop and maintain strategic alliances for the
manufacturing, marketing and distribution of our products and sale of equipment;
the cyclical nature of the semiconductor industry, which has negatively affected
our sales of SIMOX-SOI wafers during industry downturns and which could continue
to do so in the future; the limited availability of critical materials and
components for wafer products and implanters, as a shortage of such materials
and components or a significant increase in the price thereof could have a
material adverse effect on our business and results of operations; the
availability of additional capital to fund expansion on acceptable terms, if at
all; and general economic conditions. All information set forth in this Form
10-Q is as of the date of this Form 10-Q, and Ibis undertakes no duty to update
the information, unless required by law.
PART I - ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The exposure of market risk associated with risk-sensitive instruments
is not material to the Company, as the Company does not transact its sales
denominated in other than United States dollars, invests primarily in short-term
commercial paper, holds its investments until maturity and has not entered into
hedging transactions.
16
IBIS TECHNOLOGY CORPORATION
PART II
OTHER INFORMATION (CONTINUED)
Item 1 - LEGAL PROCEEDINGS
None
Item 2 - CHANGES IN SECURITIES
None
Item 3 - DEFAULTS UPON SENIOR SECURITIES
None
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Ibis was held on May 3, 2001. The
following matters were voted on at the meeting:
(1) Three people were elected to the Board of Directors of the
Company to serve for a term ending in 2004 and until their
successors are duly elected and qualified. The following is a
table setting forth the number of votes cast for and withheld
for each nominee for Director.
NAME VOTE FOR VOTE WITHHELD
Dimitri Antoniadis 7,657,018 73,369
Robert L. Gable 7,657,087 73,300
Martin J. Reid 7,645,962 84,425
Peter H. Rose, Donald F. McGuinness and Lamberto Raffaelli
continue to serve as Directors for terms which expire in 2002
and Geoffrey Ryding and Leslie B. Lewis continue to serve as
Directors for terms which expire in 2003.
(2) The stockholders of the Company approved an amendment to the
Company's 1997 Employee, Director and Consultant Stock Option
Plan to increase by 600,000 shares the aggregate number of
shares of common stock for which stock options may be granted
under this plan. This proposal was approved with 2,330,838
votes for, 481,298 votes against, 434,848 abstentions and
4,483,403 shares not voted.
(3) The stockholders of the Company ratified the appointment of
KPMG LLP as the Company's independent public accountants for
the fiscal year ending December 31, 2001. This proposal was
approved with 7,678,081 votes for, 23,200 votes against and
29,106 abstentions.
Item 5 - OTHER INFORMATION
None
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits furnished as Exhibits hereto:
None
17
IBIS TECHNOLOGY CORPORATION
PART II
OTHER INFORMATION
(b) Reports on Form 8-K:
The Company filed with the Securities and Exchange Commission on April 2,
2001 a Current Report on Form 8-K for the March 27, 2001 event announcing a
major expansion of its wafer manufacturing facility.
The Company filed with the Securities and Exchange Commission on April 12,
2001 a Current Report on Form 8-K for the April 12, 2001 event announcing
the Company's revised outlook for second quarter and full year 2001.
The Company filed with the Securities and Exchange Commission on April 26,
2001 a Current Report on Form 8-K for the April 26, 2001 event announcing
its financial results for the first quarter ended March 31, 2001.
The Company filed with the Securities and Exchange Commission on May 31,
2001 a Current Report on Form 8-K for the May 31, 2001 event announcing
cost reduction actions.
The Company filed with the Securities and Exchange Commission on June 6,
2001 a Current Report on Form 8-K for the June 5, 2001 event announcing its
Advantox(R) MLD wafers being sampled by global chipmakers.
18
IBIS TECHNOLOGY CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Ibis Technology Corporation
Date: August 13, 2001 By: /s/ Debra L. Nelson
-------------------------------------------
Debra L. Nelson
Chief Financial Officer, Treasurer and Clerk
(principal financial and accounting officer)
Date: August 13, 2001 By: /s/ Thomas F. Lacey
-------------------------------------------
Thomas F. Lacey
Controller and Assistant Treasurer
19