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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of Report (Date of earliest event reported)
July 29, 1998
GENUS, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA
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(State or other jurisdiction of incorporation or organization)
0-17139 94-2790804
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Commission File Number (I.R.S. Employer Identification Number)
1139 Karlstad Drive
Sunnyvale, CA 94089
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(Address of principal executive offices)
(408) 747-7120
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 29, 1998, Genus, Inc., a California corporation (the "Registrant"),
sold to Varian Associates, Inc., a Delaware corporation ("Varian"),
substantially all of the assets of, and assigned its rights and obligations
under its existing contracts related to, the Registrant's ion implantations
systems business (the "Business"). Additionally, the Registrant granted to
Varian a royalty free, nonexclusive, irrevocable, worldwide, perpetual license
covering the Registrant's intellectual property related to the Business,
excluding any such intellectual property primarily used in the development,
manufacture, testing and sale of products in the Registrant's chemical vapor and
thin film deposition systems business (the "CVD Business") (the "Licensed
Intellectual Property"), of which the Registrant retains ownership.
The assets of the Registrant sold to Varian consist of all raw materials
and inventories; all machinery, equipment, computers, tapes, data bases,
furniture, automobiles, trucks, vehicles, tools, supplies and parts and other
tangible personal property, whether owned, leased or subleased, which were used
primarily in the conduct of the Business; all written contracts entered into in
the ordinary course of business and necessary for the conduct of the Business,
and that were for the sale and non-warranty service of products of the Business,
all rights, indemnification, warrants, claims and causes of action against third
persons; all security, utility or similar deposits and prepaid expenses related
primarily to the Business; all letters of credit issued in favor of the
Registrant that related to any contract; to the extent permitted by law, all
governmental licenses, permits approvals, license applications, license
amendment applications and product registrations with respect to the conduct of
the Business; real property leased by the Registrant, together with all
improvements thereon and fixtures thereto; all Intellectual Property, other than
the Licensed Intellectual Property; all books and records related to the assets
sold to Varian; all rights to causes of action, claims, lawsuits, arbitrations,
orders, judgements, decrees, awards and injunctions available to or being
pursued by the Registrant; and the goodwill of the Business. Assets retained by
the Registrant include the Registrant's cash or cash equivalents, accounts
receivable and any business, operation, subsidiary or division of the Registrant
other than the Business, which consists primarily of the CVD Business.
The Registrant retains ownership of the Licensed Intellectual Property, and
granted Varian a license under these intellectual property rights pursuant to
the terms of a Cross-License Agreement. The license allows Varian to manufacture
and sell products, other than CVD products under the Licensed Intellectual
Property. The license is royalty free and extends through the term of the last
to expire patent included within the Licensed Intellectual Property. The
License Agreement does not transfer any ownership rights to Varian in the
Licensed Intellectual Property and does not transfer any ownership rights to the
Registrant in the Owned Intellectual Property.
Varian paid the Registrant an aggregate purchase price of $24.15 million,
and will make additional payments if certain revenue targets are achieved during
the next six months. Of the $24.15 million, approximately $14.23 million was
used to pay off short-term borrowings, pro-rated rent on the facility assigned
to Varian, redemption of Series A Preferred Stock, and other accounts
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payable. Additionally, $1.0 million has been placed in escrow accounts to be
used for certain contingent liabilities. Of these contingent liabilities,
approximately half are expected to be resolved within three months and
approximately half are expected to be resolved after one year. The remaining
approximately $9.0 million of proceeds will be used for general working
capital purposes.
The Registrant received approval of its shareholders for this transaction
in an annual meeting held on July 24, 1998.
ITEM 5. OTHER EVENTS
On July 30, 1998, the Registrant redeemed 70,000 shares of its outstanding
unconverted Series A Convertible Preferred Stock for $4,725,000 and exchanged
the remaining 28,000 shares of its outstanding unconverted Series A Convertible
Preferred Stock for 28,000 shares of Series B Convertible Preferred Stock.
The material agreements between the Registrant and the holders of Series B
Convertible Preferred Stock (the "Investors") and a copy of the Registrant's
press release announcing the redemption and exchange have been filed as exhibits
to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Financial Data:
The following unaudited pro forma condensed balance sheet of March 31,
1998, and unaudited pro forma condensed statement of operations for the year
ended December 31, 1997 and the three months ended March 31, 1998 give pro forma
effect to the estimated financial effects of the Asset Purchase Agreement (the
"Agreement") with Varian. The pro forma condensed balance sheet as of March 31,
1998 gives pro forma effect to the Agreement as if such transaction was
consummated on that date. The pro forma condensed statements of operations for
the year ended December 31, 1997 and the three months ended March 31, 1998,
present the results of operations of the Company as if the transaction
contemplated by the Agreement occurred on January 1, 1997 and January 1, 1998,
respectively. The pro forma information is based on the historical financial
statements of the Company giving effect to the assumptions and adjustments set
forth in the accompanying notes.
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GENUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(AMOUNTS IN THOUSANDS)
March 31, 1998
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Pro Forma
Pro Forma Pro Forma After Sale of
Genus, Inc. Adjustment Note Business
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Assets
Cash and cash equivalents . . . . . . . . . . . . . $ 3,683 $ 20,100 (1) $ 23,783
Accounts receivable, net . . . . . . . . . . . . . . 11,858 11,858
Inventories . . . . . . . . . . . . . . . . . . . . 9,709 9,709
Net Assets held for sale . . . . . . . . . . . . . . 30,500 (25,310) (2) 5,190
Other current assets . . . . . . . . . . . . . . . . 1,001 1,001
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Total current assets . . . . . . . . . . . . . . 56,751 (5,210) 51,541
Property and equipment, net . . . . . . . . . . . . 6,406 6,406
Other assets, net . . . . . . . . . . . . . . . . . 2,025 2,025
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Total assets . . . . . . . . . . . . . . . . . . $ 65,182 $ (5,210) $ 59,972
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Liabilities and shareholders' equity
Total current liabilities . . . . . . . . . . . . . $ 19,073 $ (2,800) (1) $ 16,273
Long-term debt . . . . . . . . . . . . . . . . . . . 74 74
Shareholders' equity . . . . . . . . . . . . . . . . 46,035 (2,410) (1) 43,625
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Total liabilities and shareholders' equity . . . $ 65,182 $ (5,210) $ 59,972
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended March 31, 1998
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Pro Forma
After Sale of
Genus, Inc. Business Business
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Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,238 $ (5,823) $ 1,415
Cost and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . 6,941 (4,986) 1,955
Research and Development . . . . . . . . . . . . . . . . 3,332 (1,744) 1,588
Selling, general and administrative . . . . . . . . . . 4,223 (2,750) 1,473
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Income (loss) from operations . . . . . . . . . . . . (7,258) (3,657) (3,601)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (156) (80) (76)
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Loss before income taxes . . . . . . . . . . . . . . . . (7,414) (3,737) (3,677)
Provision for (benefit from) income taxes . . . . . . . . . -- -- --
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Net loss . . . . . . . . . . . . . . . . . . . . . . . . (7,414) (3,737) $ (3,677)
Deemed dividend on preferred stock . . . . . . . . . . . $ 1,829 -- $ 1,829
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Net loss available to common shareholders . . . . . . . $ (9,243) $ (3,737) $ (5,506)
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Pro forma net loss per share -- basic and diluted . . . . . $ (0.32)
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Shares used in per share calculations . . . . . . . . . . . 17,125
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Year Ended December 31, 1997
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Pro Forma
After Sale of
Genus, Inc. Business Business
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Net sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,286 $ (57,102) $ 27,184
Cost and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . 54,762 (38,022) $ 16,740
Research and Development . . . . . . . . . . . . . . . . 12,327 (6,599) $ 5,728
Selling, general and administrative . . . . . . . . . . 20,326 (12,808) $ 7,518
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Income (loss) from operations . . . . . . . . . . (3,129) (327) (2,802)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (1,363) (829) (534)
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Income (loss) before income taxes . . . . . . . . . . . (4,492) (1,156) (3,336)
Provision for (benefit from) income taxes . . . . . . . . . 14,844 - 14,844
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Net income (loss) . . . . . . . . . . . . . . . . . . . $ (19,336) $ (1,156) $ (18,180)
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Pro forma net income (loss) per share-basic and diluted . . $ (1.08)
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Shares used in per share calculations . . . . . . . . . . . 16,860
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Pro Forma Notes:
(1) Reflects proceeds of $24.15 million from Varian, the repayment of $2.8
million of short-term bank borrowings, and the payment of transaction
expenses estimated to be $1.25 million. Since transaction expenses
represent non-recurring charges resulting directly from the Proposed
Transaction that will be included in the operating results of the
Company within the 12 months succeeding the Proposed Transaction, these
transaction expenses were not considered in the pro forma condensed
statements of operations for the year ended December 31, 1997 and the
three months ended March 31, 1998.
(2) Transfer of $25.31 million of net assets held for sale to Varian. After
giving effect to the sale of the Business, pro forma net assets held for
sale of $5.19 million primarily represent sales of inventory, and
repayments of capital lease obligations of the Business prior to the
Closing.
The unaudited pro forma condensed financial data have been prepared by
company management and are not necessarily indicative of how the Company's
balance sheet and results of operations would have been presented had the
transaction with Varian actually been consummated at the assumed dates, nor are
they necessarily indicative of the presentation of the Company's balance sheet
and results of operations for any future period. The unaudited pro forma
condensed financial data should be read in conjunction with the financial
statements and related notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations incorporated herein by reference.
(c) EXHIBITS (in accordance with Item 601 of Regulation S-K)
2.1* Asset Purchase Agreement, dated April 15, 1998, by and
between Varian Associates, Inc. and Registrant and exhibits
thereto.
Certain exhibits and schedules to the Asset Purchase
Agreement are listed on page (iv) thereto and the
Registrant agrees to furnish them supplementally to the
Securities and Exchange Commission upon request;
provided, however, that the Registrant reserves the
right to seek confidential treatment for those exhibits
and schedules which it deems confidential.
4.2** Convertible Preferred Stock Purchase Agreement, dated
February 2, 1998, among the Registrant and the
Investors.
4.3** Registration Rights Agreement, dated February 2, 1998,
among the Registrant and the Investors.
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4.4** Certificate of Determination of Rights, Preferences and
Privileges of Series A Convertible Preferred Stock.
4.5 Certificate of Determination of Rights, Preferences and
Privileges of Series B Convertible Preferred Stock.
4.6 Redemption and Exchange Agreement, dated July 16, 1998,
among the Registrant and the Investors.
99.1 Press Release dated July 29, 1998.
99.2 Press Release dated August 3, 1998.
* Incorporated by reference to the Current Report on Form 8-K filed April 24,
1998.
** Incorporated by reference to the Current Report on Form 8-K filed February
17, 1998.
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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 hereunder duly authorized.
GENUS, INC.
Date: August 4, 1998 /s/ MARY F. BOBEL
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Mary F. Bobel
Executive Vice President and Chief Financial
Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT NAME
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2.1* Asset Purchase Agreement, dated April 15, 1998, by and between Varian
Associates, Inc. and Registrant and exhibits thereto.
Certain exhibits and schedules to the Asset Purchase Agreement are
listed on page (iv) thereto and the Registrant agrees to furnish them
supplementally to the Securities and Exchange Commission upon request;
provided, however, that the Registrant reserves the right to seek
confidential treatment for those exhibits and schedules which it deems
confidential.
4.2** Convertible Preferred Stock Purchase Agreement, dated February 2,
1998, among the Registrant and the Investors.
4.3** Registration Rights Agreement, dated February 2, 1998, among the
Registrant and the Investors.
4.4** Certificate of Determination of Rights, Preferences and Privileges of
Series A Convertible Preferred Stock.
4.5 Certificate of Determination of Rights, Preferences and Privileges of
Series B Convertible Preferred Stock.
4.6 Redemption and Exchange Agreement, dated July 16, 1998, among the
Registrant and the Investors.
99.1 Press Release dated July 29, 1998.
99.2 Press Release dated August 3, 1998.
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* Incorporated by reference to the Current Report on Form 8-K filed April 24,
1998.
** Incorporated by reference to the Current Report on Form 8-K filed February
17, 1998.
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