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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 12, 1996
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ZYGO CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 0-12944 06-0864500
- ---------------------------- ----------- ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
LAUREL BROOK ROAD, MIDDLEFIELD, CONN. 06455
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 347-8506
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 12, 1996, Zygo Corporation (the "Company") completed the
acquisition of NexStar Automation, Inc. ("Nexstar"), a Canadian company that was
publicly traded on the Vancouver Stock Exchange. NexStar shareholders voted on
September 11, 1996 to approve the acquisition at an extraordinary meeting. In
the transaction, which was structured as a statutory plan of arrangement under
Canadian law, Zygo acquired all the outstanding shares of NexStar in exchange
for 250,000 shares of Zygo's common stock. On September 12, 1996, the closing
price of the Company's common stock, as reported by the Nasdaq National Market,
was $29.75 per share. The acquisition was consummated pursuant to the terms of
the Acquisition Agreement dated as of August 12, 1996 by and among the Company,
NexStar and NX Acquisition Corp., a wholly owned subsidiary of the Company.
NexStar is engaged in the business of designing, developing and
manufacturing automation and parts handling equipment to improve production
efficiency and manufacturing yields within the data storage, semiconductor and
medical disposables markets. Its operations are located in Longmont, Colorado.
The press release issued by NexStar dated September 12, 1996, is attached hereto
as Exhibit 99.1 and incorporated herein by reference. The press release issued
by the Company and NexStar dated September 13, 1996, is attached hereto as
Exhibit 99.2 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1. Consolidated Financial Statements of NexStar as of December 31, 1995
and 1994 and for the three years ended December 31, 1995, 1994 and
1993.
Report of Independent Auditors.
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993.
Consolidated Statement of Stockholders' Equity for the years
ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
-2-
2. Interim Consolidated Financial Statements of NexStar as of March 31,
1996 and for the three-month periods ended March 31, 1996 and 1995.
Consolidated Balance Sheet as of March 31, 1996.
Consolidated Statements of Operations for the three-months ended
March 31, 1996 and 1995.
Consolidated Statement of Stockholders' Equity for the
three-months ended March 31, 1996.
Consolidated Statement of Cash Flows for the three-months ended
March 31, 1996.
Notes to Interim Financial Statements.
It is impracticable for the Company to provide the required Interim
Consolidated Financial Statements as of June 30, 1996 and for the three-month
periods ended June 30, 1996 and 1995 of NexStar (the Business Acquired) on
the date this report is being filed. The Company intends to file the required
Interim Consolidated Financial Statements under cover of Form 8-K/A as soon as
practicable; but not later than 60 days after the date this report must have
been filed.
B. PRO FORMA FINANCIAL INFORMATION.
It is impracticable for the Company to provide the required pro forma
financial information on the date this report is being filed. The Company
intends to file the required Financial Statements under cover of Form 8-K/A as
soon as practicable; but not later than 60 days after the date this report must
have been filed.
C. EXHIBITS.
2. The Acquisition Agreement by and among Zygo Corporation, NX Acquisition
Corp. and NexStar Automation, Inc.
23. Consent of Ehrhardt Keefe Steiner & Hottman PC.
99.1 Press Release issued by NexStar Automation, Inc. dated September 12,
1996.
99.2 Press Release issued by the Company and NexStar Automation, Inc.
dated September 13, 1996.
-3-
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.
ZYGO CORPORATION
Date: September 26, 1996 By /s/ GARY K. WILLIS
------------------------------
Gary K. Willis
President and Chief Executive Officer
-4-
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1995, 1994, AND 1993
F-1
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
TABLE OF CONTENTS
Page
----
Independent Auditors' Report................................................F-3
Financial Statements
Consolidated Balance Sheets............................................F-4
Consolidated Statements of Operations..................................F-5
Consolidated Statement of Stockholders' Equity.........................F-6
Consolidated Statements of Cash Flows..................................F-7
Notes to Consolidated Financial Statements..................................F-8
F-2
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
NexStar Automation, Inc. and Subsidiary
Longmont, CO
We have audited the consolidated balance sheets of NexStar Automation, Inc. and
Subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NexStar Automation,
Inc. and Subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
We have reviewed the accompanying balance sheet of NexStar Automation, Inc. and
consolidated subsidiary as of March 31, 1996 and the related statements of
operations and cash flows for the three months ended March 31, 1996 and 1995 for
the three months. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
Ehrhardt Keefe Steiner & Hottman PC
June 13, 1996
Denver, Colorado
F-3
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------------- March 31,
1994 1995 1996
--------------- --------------- --------------
(Reviewed)
ASSETS
Current assets
Cash and cash equivalents (Note 6) $ 111,827 $ 429,039 $ 246,828
Contract receivables 107,092 67,359 648,348
Revenue in excess of billings 53,379 79,250 -
Note receivable - current portion (Note 4) - 13,123 10,053
Inventory - 19,165 17,688
Prepaid engineering costs - 57,674 66,935
Prepaids and other 12,837 21,834 18,000
--------------- -------------- --------------
Total current assets 285,135 687,444 1,007,852
--------------- -------------- --------------
Property and equipment 53,760 121,789 147,431
Less accumulated depreciation (6,837) (24,566) (31,190)
--------------- -------------- --------------
46,923 97,223 116,241
--------------- -------------- --------------
Other assets
Note receivable (Note 4) - 56,877 55,840
Deferred offering costs - 26,629 26,629
Deposits 2,795 2,333 2,333
Organizational costs, net of amortization of $2,256 (1994), $3,384
(1995), and $3,666 (1996) 3,385 2,257 1,975
--------------- -------------- --------------
Total other assets 6,180 88,096 86,777
--------------- -------------- --------------
Total assets $ 338,238 $ 872,763 $ 1,210,870
=============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 148,241 $ 350,363 $ 488,160
Line-of-credit (Note 5) 52,700 - -
Notes payable (Note 5) 35,000 12,000 12,000
Accrued payroll and payroll taxes 25,584 38,753 38,435
Deferred tax liability - 11,265 -
Other accrued expenses 794 6,189 -
Loss contingency - - 31,000
Deferred contract revenue - - 143,754
--------------- -------------- --------------
Total current liabilities 262,319 418,570 713,349
--------------- -------------- --------------
Commitments (Note 6)
Stockholders' equity
Common stock, no par value, 100,000,000 shares authorized,
4,847,001 (1994) and 5,171,618 (1995 and 1996) issued and
outstanding 334,688 630,779 630,779
Retained deficit (258,769) (176,586) (133,258)
--------------- -------------- --------------
Total stockholders' equity 75,919 454,193 497,521
--------------- -------------- --------------
Total liabilities and stockholders' equity $ 338,238 $ 872,763 $ 1,210,870
=============== ============== ==============
See notes to consolidated financial statements.
F-4
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months
Years Ended December 31, Ended March 31,
-------------------------------------------------- --------------------------------
1993 1994 1995 1995 1996
--------------- --------------- --------------- --------------- -------------
(Reviewed)
Sales
Automation projects revenue (Note 9) $ 225,137 $ 735,445 $ 2,625,930 $ 356,248 $ 898,955
Consulting revenue 119,190 - - - -
-------------- ------------- -------------- -------------- -------------
Total revenue 344,327 735,445 2,625,930 356,248 898,955
Cost of automation projects (115,437) (437,377) (1,684,603) (210,318) (538,188)
-------------- ------------- -------------- -------------- -------------
Gross profit 228,890 298,068 941,327 145,930 360,767
Selling, general and administrative expenses
Salaries 121,606 190,556 449,675 73,196 141,470
Professional fees 306,950 31,295 40,652 19,273 22,759
Rent 14,472 27,610 91,069 7,717 29,462
Travel 15,973 18,526 47,726 9,185 42,264
Utilities 13,443 15,438 28,238 4,559 11,380
Research and development - 4,946 67,634 - -
Marketing - 3,641 18,792 473 10,304
Depreciation and amortization 2,909 6,299 18,857 3,349 6,906
Other 6,523 20,207 80,351 19,676 45,294
-------------- -------------- -------------- -------------- -------------
481,876 318,518 842,994 137,428 309,839
-------------- -------------- -------------- -------------- -------------
Earnings (loss) income before income taxes
and extraordinary item (252,986) (20,450) 98,333 8,502 50,928
Income tax (expense)\benefit (7,000) 3,584 (16,150) (1,700) (7,600)
-------------- ------------- -------------- -------------- -------------
(Loss) income before extraordinary item (259,986) (16,866) 82,183 6,802 43,328
Extraordinary item - gain on extinguishment
of debt - net of income tax of $3,969
(Note 8) - 18,083 - - -
-------------- ------------- -------------- -------------- -------------
Net income (loss) $ (259,986) $ 1,217 $ 82,183 $ 6,802 $ 43,328
============== ============= ============== ============== =============
Net (loss) income per share of common stock
before extraordinary item $ (.15) $ *** $ .02 $ *** $ .01
============== ============= ============== ============== =============
Net income per share of common stock on
extraordinary item $ - $ *** $ - $ - $ -
============== ============= ============== ============== =============
Net income per common share $ (.15) $ *** $ .02 $ *** $ .01
============== ============= ============== ============== =============
Weighted common shares outstanding 1,782,729 4,039,801 5,289,215 4,847,001 5,409,204
============== ============= ============== ============== =============
*** Less than .01 per share.
See notes to consolidated financial statements.
F-5
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Additional Retained
-------------------------------- Paid-in Earnings
Shares Amount Capital (Deficit) Total
-------------- -------------- -------------- -------------- --------------
Balances at December 31, 1992 - $ - $ - $ - $ -
Common stock issued for property and
debt 326,302 326 3,753 - 4,079
Common stock issued for cash 1,673,698 1,674 19,247 - 20,921
Net loss - - - (259,986) (259,986)
-------------- -------------- -------------- -------------- --------------
Balance at December 31, 1993 2,000,000 2,000 23,000 (259,986) (234,986)
Recapitalization and issuance of stock
for assets in reverse acquisition
(including 237,560 shares issued for
finders fee) (Note 1) 2,847,001 332,688 (23,000) - 309,688
Net income - - - 1,217 1,217
-------------- ------------- -------------- ------------- --------------
Balance at December 31, 1994 4,847,001 334,688 - (258,769) 75,919
Stock issued for services, valued at
$.46 (Note 3) 54,617 25,000 - - 25,000
Stock issued in conjunction with
private placement (net of offering
costs) (Note 10) 250,000 256,171 - - 256,171
Exercise of stock options for cash
(Note 10) 20,000 14,920 - - 14,920
Net income - - - 82,183 82,183
-------------- ------------- -------------- ------------- --------------
Balance at December 31, 1995 5,171,618 630,779 - (176,586) 454,193
Net income (reviewed) - - - 43,328 43,328
-------------- -------------- -------------- -------------- --------------
Balance at March 31, 1996 (reviewed)
5,171,618 $ 630,779 $ - $ (133,258) $ 497,521
============== ============== ============== ============== ==============
See notes to consolidated financial statements.
F-6
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months
Years Ended December 31, Ended March 31,
-------------------------------------------------- ---------------------------------
1993 1994 1995 1995 1996
--------------- --------------- -------------- -------------- --------------
(Reviewed)
Cash flows from operating activities
Net income (loss) $ (259,986) $ 1,217 $ 82,183 $ 6,802 $ 43,328
------------- ------------- ------------- -------------- --------------
Adjustments to reconcile net income to
net cash provided used by operating
activities -
Depreciation and amortization 2,909 6,313 18,857 3,349 6,906
Common stock issued for services - - 25,000 - -
Gain on extinguishment of debt - (18,083) - - -
Changes in assets and liabilities -
Loss contingency - 31,000
Contract receivables (47,207) (59,885) 39,733 46,822 (580,989)
Revenue in excess of billings - (53,379) (25,871) - 79,250
Inventory - - (76,839) - (7,784)
Prepaids and other - (12,837) (8,997) (3,094) 3,834
Accounts payable 129,713 88,586 202,122 (30,141) 137,797
Accrued liabilities 61,002 9,399 18,564 (1,572) (6,507)
Deferred contract revenue 47,891 (47,891) - 53,227 143,754
Deferred tax liability - - 11,265 - (11,265)
------------- ------------- ------------- -------------- --------------
194,308 (87,777) 203,834 68,591 (204,004)
------------- ------------- ------------- -------------- --------------
Net cash (used in) provided by
operating activities (65,678) (86,560) 286,017 75,393 (160,676)
------------- ------------- ------------- -------------- --------------
Cash flows from investing activities
Purchase of property and equipment (13,586) (41,903) (68,029) (21,337) (25,642)
Proceeds from sale of fixed assets - 2,053 - - -
Deposits (4,809) 249 462 - -
Note receivable - - (70,000) - 4,107
------------- ------------- ------------- -------------- --------------
Net cash (used in) investing
activities (18,395) (39,601) (137,567) (21,337) (21,535)
------------- ------------- ------------- -------------- --------------
Cash flows from financing activities
Borrowing (payment) on line-of-credit - 52,700 (52,700) - -
Proceeds from notes payable 68,035 237,974 - - -
Net proceeds from private placement - - 256,171 - -
Cash received upon exercise of stock
options - - 14,920 - -
Deferred offering costs - - (26,629) - -
Proceeds from reverse acquisition 20,920 3,679 - - -
Payment on long-term debt - (61,247) (23,000) (23,000) -
------------- ------------- ------------- -------------- -------------
Net cash provided by financing
activities 88,955 233,106 168,762 (23,000) -
------------- ------------- ------------- -------------- -------------
Net increase (decrease) in cash and cash
equivalents 4,882 106,945 317,212 31,056 (182,211)
Cash and cash equivalents at beginning of
period - 4,882 111,827 111,827 429,039
------------- ------------- ------------- -------------- --------------
Cash and cash equivalents at end of period $ 4,882 $ 111,827 $ 429,039 $ 142,883 $ 246,828
============= ============= ============= ============== ==============
Supplemental schedule of non-cash investing and financing activities
Cash paid during the year for income taxes of $14,100 (1995) and $5,400 (1994)
Issuance of stock in exchange for elimination of debt in conjunction with reverse
acquisition of $311,009 (1994)
Equipment and organization costs donated by stockholder was $4,080 (1993).
See notes to consolidated financial statements.
F-7
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 1 - INTERIM FINANCIAL STATEMENTS (UNAUDITED)
In the opinion of Nexstar Automation, Incorporated and Subsidiary (the
"Company"), the accompanying unaudited consolidated financial statements contain
all adjustments (consisting of only normal recurring accruals) necessary to
present fairly the financial position of the Company at March 31, 1996 and the
results of their operations and changes in cash flows for the three months ended
March 31, 1996 and 1995. The results of operations for the three months ended
March 31, 1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is engaged in the business of designing, assembling, customizing,
installing and supporting production automation systems, which typically
incorporate customized robotics. The Company's focus is directed toward the data
storage, medical/pharmaceutical and food processing industries. The Company
commenced operations on January 4, 1993.
In April of 1994, FBA Ventures Ltd. ("FBA") acquired all the issued and
outstanding common shares of NexStar Corporation ("NexStar") in exchange for
2,700,000 shares of common stock of FBA, of which 2,525,000 shares held in
escrow. For financial reporting purposes, the business combination was accounted
for as an additional capitalization of the Company (a reverse acquisition with
NexStar as the acquirer). NexStar is considered the surviving entity. The
historical financial statements prior to the merger are those of NexStar. The
stockholders of NexStar received 2,700,000 shares of FBA stock for an
approximate 58% interest in the new combined entity. FBA's only assets consisted
of cash and funds advanced to NexStar.
ESCROW AGREEMENT
According to the purchase agreement, 2,525,000 shares of FBA common stock are to
be placed in escrow with the Escrow Agent for the Shareholder. In September of
1994, 224,015 shares were released leaving 2,300,985 escrow shares as of
December 31, 1994. The shareholders may exercise all voting rights of these
shares with certain restrictions. Under the escrow agreement, the shares may be
released annually, on a pro rata basis based on the Company's cumulative cash
flow. In the event that any escrow shares are not released from escrow before
December 31, 2004, those escrow shares are to be canceled. The escrow shares are
presented as outstanding in these financial statements as management believes
they will all be released from escrow.
F-8
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The 1995 and 1996 consolidated financial statements include the accounts of
NexStar Automation, Inc. and Subsidiary, a Canadian corporation and its wholly
owned subsidiary NexStar Corporation (a Colorado corporation). All significant
intercompany balances and transactions have been eliminated in consolidation.
RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The differences between generally accepted accounting principles used in Canada
(Canadian GAAP) and the United States (U.S. GAAP) do not significantly impact
the financial statements of the Company for all periods presented. All amounts
are expressed in United States dollars.
INVENTORY
Inventory is stated at the lower of cost or market and primarily consists of
purchased raw materials and work in process. Cost is determined using the
first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Replacements, renewals and
improvements are capitalized and costs for repairs and maintenance are expensed
as incurred. Depreciation is computed using the straight-line method over the
estimated useful lives of five years.
ORGANIZATION COSTS
Organization costs are all business start-up costs incurred by the Company.
These costs have been capitalized and are being amortized over a five-year
period.
DEFERRED OFFERING COSTS
Deferred offering costs represent costs incurred in connection with the
Company's proposed public offering in the United States. Deferred offering costs
will be offset against net proceeds, if successful, or expensed in operations if
the offering is unsuccessful.
F-9
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenue from automation projects is accounted for under the
percentage-of-completion method, using labor costs incurred to date in relation
to estimated total labor costs of the contracts to measure the stage of
completion. The cumulative effects of revisions of estimated total contract
costs and revenues are recorded in the period in which the facts requiring the
revision become known. When a loss is anticipated on a contract, the full amount
thereof is provided currently. The differences between amounts billed and
revenue recognized is shown as revenue in excess of billings and deferred
revenue on the accompanying balance sheets.
Totals of revenue earned billings on uncompleted contracts are as follows:
December 31,
--------------------------------- March 31,
1994 1995 1996
-------------- --------------- ---------------
(Reviewed)
Revenue recognized to date $ 150,250 $ 1,592,565 $ 898,955
Billings to date (96,871) (1,513,315) (1,042,709)
-------------- --------------- ---------------
Revenue in excess of billings $ 53,379 $ 79,250 $ (143,754)
============== =============== ===============
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid cash investments with original maturity dates of three months or less to
be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company occasionally has deposits in financial institutions which exceed the
federally insured limits as of December 31, 1995. This amount exceeded the
limits by approximately $307,000. The Company reduced its credit risk with
respect to receivables by requiring deposits before production begins and
continually monitors the industries and its customers before granting credit.
RESEARCH AND DEVELOPMENT
Research and development costs for new products are charged to expense as
incurred.
F-10
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 2 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain accounts in the December 31, 1994 and 1995 financial statements have
been reclassified to conform with the current period presentation.
INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109") (Note 6).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3 - RELATED PARTY TRANSACTIONS
In March of 1995, the Company issued 54,617 shares of its common stock to the
President of the Company as compensation for guarantying the line-of-credit. The
shares were valued at $.46 per share, the fair market value of the stock on the
date of issue.
NOTE 4 - NOTE RECEIVABLE
At December 31, 1995, the Company received a note receivable totaling $70,000.
The note is payable in quarterly installments of $4,107, commencing February
1996 through November 2000. The note bears interest at 7% and is without
collateral. Future maturities of this note are as follows:
Year Ending December 31,
------------------------
1996 $ 13,123
1997 12,775
1998 13,693
1999 14,677
2000 15,732
---------
$ 70,000
=========
F-11
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 5 - NOTES PAYABLE AND LINE-OF-CREDIT
Notes payable consist of the following:
December 31,
--------------------------------- March 31,
1995 1994 1996
-------------- --------------- --------------
(Reviewed)
Unsecured notes payable to individuals due on demand. $ 12,000 $ 35,000 $ 12,000
============== =============== ==============
NOTE 6 - COMMITMENTS AND CONTINGENCIES
In February 1995, the Company entered into a lease agreement for its office and
manufacturing facilities. Under the terms of the lease, the Company is obligated
to make monthly payments of $8,166 through termination of the lease on April 1,
1997. Amounts due after December 31, 1995 are as follows:
1996 $ 97,992
1997 24,498
-------------
Total $ 122,490
=============
Rental expense for the years ended December 31, 1995 and 1994 and three months
ended March 31, 1996 was approximately $91,000, $28,000, and $24,000,
respectively.
In fiscal 1994, the Company entered into $65,000 line-of-credit agreement with a
bank. During 1995, the line-of-credit was renewed to provide up to $150,000 of
borrowings and matures January 31, 1996. Total outstanding borrowings on the
line-of-credit were $0 and $52,700 at December 31, 1995 and 1994, respectively.
The line is collateralized by the Company's savings account and guaranteed by
the Company's President. The line accrues interest at 7%.
NOTE 7 - INCOME TAXES
Effective for the year ended December 31, 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" (SFAS 109) which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statements and tax basis of assets and
liabilities using the enacted tax rates in effect for the year in which the
difference is expected to reverse. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.
F-12
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 7 - INCOME TAXES (CONTINUED)
The components of the provision for income taxes are as follows:
December 31, March 31,
-------------------------------------------------- --------------------------------
1993 1994 1995 1995 1996
--------------- --------------- --------------- --------------- --------------
(Reviewed) (Reviewed)
Current tax provision
Federal $ - $ 3,200 $ (4,500) $ (1,275) $ (6,500)
State - 384 (380) (425) (1,100)
------------- ------------- ------------- ------------- ------------
- 3,584 (4,880) (1,700) (7,600)
Deferred tax expense
Federal (5,250) - (10,370) - -
State (1,750) - (900) - -
------------- ------------- ------------- ------------- ------------
(7,000) - (11,270) - -
------------- ------------- ------------- ------------- ------------
$ (7,000) $ 3,584 $ (16,150) $ (1,700) $ (7,600)
============= ============= ============= ============= ============
The principal temporary differences that result in the deferred tax liability
are depreciation for tax purposes in excess of depreciation for financial
reporting purposes as well as other items being amortized for financial
reporting purposes which are currently deductible for tax purposes.
NOTE 8 - GAIN ON EXTINGUISHMENT OF DEBT
During the year ended December 31, 1994, the Company settled outstanding legal
bills totaling $41,052 for $19,000 resulting in an extraordinary gain of
$22,052.
NOTE 9 - MAJOR CUSTOMERS
For the year ended December 31, 1995, 1994, and 1993, approximately 98%, 54%,
and 78% of the Company's sales were to three customers, respectively.
NOTE 10 - STOCKHOLDERS' EQUITY
In August of 1995, the Company completed a private placement for 250,000 shares
of the Company's common stock for proceeds of approximately $256,000 net of
approximately $3,000 of offering costs.
Also during 1995, an option to purchase 20,000 shares of the Company's common
stock at the price of $1.00 (CN$) was exercised.
F-13
NEXSTAR AUTOMATION, INCORPORATED
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
NOTE 10 - STOCKHOLDERS' EQUITY (CONTINUED)
The Company has granted the following options and warrants to purchase common
stock as of December 31, 1995:
Number of Exercise Expiration
Options Price Date
--------- --------- ----------
(CN$)
35,000 $ .77 1997
95,000 $ 1.10 1998
115,000 $ 1.00 1998
25,000 $ 1.00 1999
7,000 $ .77 2000
20,000 $ 1.92 2000
80,000 $ 2.20 2000
--------
377,000
========
Number of
Warrants
--------
250,000 $ 1.40 1996
=========
F-14
EXHIBIT INDEX
No. Description
- --- -----------
2. The Acquisition Agreement by and among Zygo Corporation, NX Acquisition
Corp. and NexStar Automation, Inc.
23. Consent of Ehrhardt Keefe Steiner & Hottman PC.
99.1 Press Release issued by NexStar Automation, Inc. dated September 12, 1996.
99.2 Press Release issued by the Company and NexStar Automation, Inc. dated
September 13, 1996.