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KTEC > SEC Filings for KTEC > Form 8-K/A on 16-May-2013All Recent SEC Filings

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Form 8-K/A for KEY TECHNOLOGY INC


16-May-2013

Financial Statements and Exhibits


ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of Business Acquired.

The following combined financial statements of Visys NV and Advanced Sorting Solutions Inc. ("Visys") and the report of DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises, independent auditors, are included in this report:

Independent Auditor's Report Combined Balance Sheet as of November 30, 2012 Combined Statement of Operations and Comprehensive Loss for the Eleven Month Period Ended November 30, 2012 Combined Statement of Invested Equity for the Eleven Month Period Ended November 30, 2012 Combined Statement of Cash Flows for the Eleven Month Period Ended November 30, 2012
Notes to the Combined Financial Statements


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of Visys NV and Advanced Sorting Solutions Inc.

We have audited the accompanying combined balance sheet of Visys NV and Advanced Sorting Solutions Inc. (jointly the "Company"), as of November 30, 2012, and the related combined statement of operations and comprehensive loss, combined statement of invested equity and combined statement of cash flows for the eleven months then ended. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companies' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the combined financial position of Visys NV and Advanced Sorting Solutions Inc. as of November 30, 2012, and the combined results of their operations and their combined cash flows for the eleven months then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 11 to the combined financial statements, Visys NV is a defendant in several lawsuits alleging infringement of certain patent rights.

Hasselt, Belgium
March 20, 2013

DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL
Represented by

/s/ Dominique Roux /s/ Koen Neijens
Dominique Roux Koen Neijens


Visys NV and Advanced Sorting Solutions Inc.
Combined Balance Sheet
November 30, 2012

--------------------------------------------------------------------------------
                                               (in thousands)

ASSETS                                              2012
Current assets:
Cash and cash equivalents                            2,111
Trade accounts receivable, net                          596
Other receivables                                       136
Inventories                                           4,253
Deferred income taxes                                   511
Prepaid expenses and other current assets               262
Total current assets                                  7,869
Property, plant and equipment, net                      228
Intangibles, net                                         22
Deferred income taxes                                   108
Other non current assets                                  3
Total assets                                         8,229

LIABILITIES AND INVESTED EQUITY
Current Liabilities:
Accounts payable                                     1,606
Accrued payroll                                         443
Accrued warranty costs                                   56
Amounts due to related parties                           62
Advance payments                                      1,713
Current portion of long-term debt                       419
Other accrued liabilities                               120
Total current liabilities                             4,419
Long-term debt                                        1,158
Commitments and contingencies (Note 11)
Invested Equity:
Owners' net investment                                3,240
Retained losses                                        (588 )
Total invested equity                                 2,652
Total liabilities and invested equity                8,229

See notes to combined financial statements.


Visys NV and Advanced Sorting Solutions Inc.
Combined Statement of Operations and Comprehensive Loss
For the Eleven Month Period Ended November 30, 2012

--------------------------------------------------------------------------------
                                               (in thousands)
                                                    2012

Sales                                                8,502
Cost of sales                                         5,043
Gross profit                                          3,459
Operating expenses:
Sales and marketing                                   1,734
Research and development                              1,435
General and administrative                              410
Amortization                                            115
Total operating expenses                              3,694
Other income (expense):
Insurance proceeds                                       60
Interest income                                          68
Interest expense                                        (40 )
Exchange gains                                           53
Other, net                                               39
Total other income (expense)-net                        180
Loss before income taxes                                (55 )
Income tax benefit                                       20
Net loss                                                (35 )
Comprehensive income                                      -
Total comprehensive loss                               (35 )

See notes to combined financial statements.


Visys NV and Advanced Sorting Solutions Inc.
Combined Statement of Invested Equity
For the Eleven Month Period Ended November 30, 2012

--------------------------------------------------------------------------------
                                                            (in thousands)

                                                              Accumulated Other
                                                                Comprehensive
                                Owners' Net Investment          Income/(Loss)               Total
Balance at January 1, 2012                   2,687                            -               2,687
Components of comprehensive
loss:
Net loss                                        (35 )                           -                  (35 )
Comprehensive income                              -                             -                    -
Total comprehensive loss                        (35 )                           -                  (35 )
Balance at November 30,
2012                                         2,652                            -               2,652

See notes to combined
financial statements.


Visys NV and Advanced Sorting Solutions Inc. Combined Statement of Cash Flows
For the Eleven Month Period Ended November 30, 2012


(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                      (35 )
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization                                                   80
Bad debt expense                                                               116
Inventory obsolescence                                                          17
Deferred income taxes                                                          (20 )
Changes in assets and liabilities:
Trade accounts receivable                                                      182
Inventories                                                                   (282 )
Prepaid expenses and other current assets                                     (153 )
Accounts payable                                                               286
Accrued payroll                                                                129
Advance customer payments                                                     (475 )
Taxes payable                                                                  (41 )
Other changes in operating assets and liabilities                             (111 )
Cash used in operating activities                                            (307 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment                                    (149 )
Cash used in investing activities                                             (149 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt                                     1,334
Repayment of long-term debt                                                   (162 )
Cash provided by financing activities                                        1,172

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                          -
NET INCREASE IN CASH AND CASH EQUIVALENTS                                      716
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                               1,395
CASH AND CASH EQUIVALENTS, END OF PERIOD                                    2,111

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest                                       66
Cash received during the period for income taxes                               (1 )

See notes to combined financial statements.


VISYS NV AND ADVANCED SORTING SOLUTIONS INC. NOTES TO THE COMBINED FINANCIAL STATEMENTS


1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General-Visys NV is a company incorporated and domiciled in Belgium. The address of the registered office is Kiewitstraat 242, 3500 Hasselt. Visys NV designs, manufactures, sells and provides associated professional services, proprietary high-end electro-optical inspection and sorting systems. Visys operates globally and uses the services of its related party, Advanced Sorting Solutions Inc. in the United States of America. Advanced Sorting Solutions Inc. provides pre-sales, sales support and after sales support in the United States of America. Visys NV and Advanced Sorting Solutions Inc. are under common control. Visys NV and Advanced Sorting Solutions, Inc. are collectively referred to herein as "Visys" or "the Company".

Basis of Presentation-The combined financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of Visys NV and its related party Advanced Sorting Solutions, Inc.. All receivables and payables and transactions between Visys and Advanced Sorting Solutions have been eliminated.

Going Concern-The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going concern and meet its obligations as they come due is dependent upon its ability to generate sufficient cash flows or to raise capital. The Company also anticipates it will be successful in defending against the alleged patent infringements as described in Note 11. Should the Company be unable to continue raising sufficient cash to continue operations at a level necessary to achieve commercially viable sales levels or should the company be unsuccessful in defending against the alleged patent infringements, the Company may be unable to pay its creditors. The financial statements do not include any adjustments that might result from the outcome of such uncertainty.

Revenue Recognition-The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, the sale price is fixed or determinable, and collectability is reasonably assured. The Company's sales arrangements typically provide for no significant post-shipment obligations other than the installation of the product by Visys at the premises of the customer. Accordingly, revenue recognition from product sales occurs when all criteria are met. Revenue earned from services (maintenance and repairs) is recognized as the services are performed. If any contract provides for both equipment and services (multiple deliverables), the sales price is allocated to the various elements based on the relative selling price. Each element is then evaluated for revenue recognition. If all conditions of revenue recognition are not met, the Company defers revenue recognition. In the event of revenue deferral, the sale value is not recorded as revenue to the Company and the cost of the goods or services deferred is carried in inventory. Upon receipt of an order, the Company generally receives a deposit which is recorded as customers' deposits. The Company generally does not require collateral. The Company records revenues net of any taxes, such as sales tax, which are passed through to the customer.

Accounts Receivable-Accounts Receivable credit risk is monitored and the requirement for an impairment is analyzed at each reporting date on an individual basis. An allowance for credit losses is provided based upon specific analysis of outstanding receivables. Visys is not exposed to any concentrated credit risk because of its large and unrelated customer base. Management believes there is no further credit risk provision required in excess of the normal individual impairment analysis performed at each reporting date. The fair values of the trade and other receivables equal their carrying values.

Cash and Cash Equivalents-The Company considers all highly liquid investments with original maturities of 90 days or less at date of acquisition to be cash equivalents. The Company has not experienced any losses in such accounts.

Inventories- are stated at the lower of cost (first-in, first-out method) or market and include direct labor, direct materials and production overhead absorption.


Property, Plant and Equipment- is stated at cost less accumulated depreciation and impairment, if any. Acquisition costs include expenditures that are directly attributable to the acquisition of the asset. Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets and starts when the asset is available for use as intended by management.

Leasehold improvements are amortized over the lesser of useful life or the term of the applicable lease using the straight-line method. The range of useful lives for fixed assets is as follows:

                                            Years
Machinery & equipment                      3 to 5
Office equipment, furniture and fixtures   3 to 5
Computer equipment and software            3 to 5
Vehicles                                      5
Other                                      5 to 10

Intangible Assets- relate to patents and software and are amortized over their estimated useful lives which are between 3 and 5 years.

Impairment of Long-Lived Assets-The Company regularly reviews its long-lived assets, including property, plant and equipment, and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Product Warranties-The Company provides a warranty on its products generally ranging from 6 months up to 3 years. Warranties are recorded as a liability on the balance sheet and as charges to expense for estimated normal warranty costs and, if applicable, for specific performance issues known to exist on products already sold. The expenses estimated to be incurred are provided at the time of sale and adjusted as needed, based primarily upon experience.

Deferred Income Taxes-Deferred tax assets and liabilities are recognized, using the asset and liability method, on temporary differences arising between the carrying amount in the combined financial statements and the tax basis of assets and liabilities. Deferred income taxes are provided by using currently enacted tax rates.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profit will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Research and Development-Expenditures for research and development are expensed when incurred.

Foreign Currency Risk-The Company incurs foreign currency risk on sales and purchases denominated in other currencies than the functional currency. The currency giving rise to this risk is the U.S. dollar. The company does not have any foreign currency exchange contracts.

Foreign Currency Translation-Assets and liabilities of Advanced Sorting Solutions, Inc. denominated in U.S. dollars are translated to Euros at the exchange rate on the balance sheet date. Foreign currency translation adjustments are shown as part of accumulated other comprehensive income (loss) and are immaterial given the size of Advanced Sorting Solutions, Inc.

Estimates-The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Financial Instruments-The carrying value of the Company's cash and cash equivalents, accounts receivable, accounts payable, accrued payroll liabilities, accrued warranty costs, customer advance payments, debt, and other accrued liabilities approximates their estimated fair values due to the short maturities of those instruments.

Accounting for Income Taxes- Total income tax expense for the period comprises current and deferred tax. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties on income taxes as a component of income tax expense.

Recently Adopted Accounting Pronouncements-In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. This standard eliminated the option to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. This standard did not change the items that constitute net income and other comprehensive income, when an item of other comprehensive income must be reclassified to net income or the earnings per unit computation (which will continue to be based on net income). We adopted this standard as of January 1, 2012 and there was no material impact on our combined financial statements.

In February 2013, the FASB issued ASU No. 2013-02, Other Comprehensive Income. The amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. We do not expect its adoption to have a material effect on our combined financial statements.

2. TRADE ACCOUNTS RECEIVABLE
(In thousands)

Trade accounts receivable consist of the following:

                                         November 30, 2012
Trade accounts receivable                          712
Allowance for doubtful accounts                    (116 )
Total trade accounts receivable, net               596

Amounts charged to bad debt expense for fiscal 2012 was 116.

3. INVENTORIES
(In thousands)

Inventories consist of the following:

                     November 30, 2012
Raw materials                    1,825
Work in process                     726
Finished goods                    1,702
Total inventories                4,253


4. PROPERTY, PLANT AND EQUIPMENT
(In thousands)

Property, plant and equipment consist of the following:

                                             November 30, 2012
Buildings and improvements                              39
Manufacturing equipment                                  56
Computer equipment and software                         168
Office equipment, furniture and fixtures                102
Vehicles                                                187
Subtotal property, plant and equipment                  552
Accumulated depreciation                               (324 )
Total property, plant and equipment, net               228

Depreciation expense was 80 for fiscal 2012 of which 9 is reflected in Cost of Sales.

5. FINANCING AGREEMENTS
(In thousands)

Visys manages its debt and overall financing strategies using a combination of short and long-term debt. Visys finances its daily working capital requirements, when necessary, through the use of its lines of credit.

Visys has a credit agreement with KBC Bank for a total amount of 2,696. This agreement, entered into on November 16, 2012, covers several lines of credit and loan agreements:

A fixed 3.98% 5 year loan of 800, of which 800 was outstanding as at November 30, 2012. The loan was primarily obtained to finance the acquisition of property, plant and equipment. The European Investment Bank has awarded a 0.60% reduction on the applicable interest rate of 3.98% for the period of the loan. This implies that the European Investment Bank will reimburse 0.60% of the interest paid by Visys to KBC Bank.

A fixed 2.91% 4 year loan of 33, of which 33 was outstanding as at November 30, 2012 obtained to finance the acquisition of several vehicles.

A fixed 3.68% 5 year loan of 500, of which 431 was outstanding as at November 30, 2012. This loan was originally entered into on February 6, 2012 and made part of the overall credit agreement on November 16, 2012.

A fixed 3.90% 4 year loan of 400, of which 131 was outstanding as at November 30, 2012. This loan was originally entered into on February 1, 2010 and made part of the overall credit agreement on November 16, 2012.

A line of credit for an amount of 800, of which no amount was outstanding at November 30, 2012, and a line of credit for an amount of 500, of which no amount was outstanding at November 30, 2012.

Collateral on the above lines of credit and loan agreements consists of a pledge on current assets for an amount of 450. Furthermore the credit institution has the right to unilaterally increase the existing pledge on current assets for an amount of 1,700. The credit agreement with KBC Bank contains several covenants requiring the company to respect a minimum solvency ratio and debt/EBITDA ratio. Compliance with these covenants is determined based on the statutory accounts of the company under Belgian GAAP. As at November 30, 2012, Visys was in compliance with all debt covenants.


On October 10, 2006, Visys received a fixed 3.7% 152 subordinated loan from IWT Vlaanderen to support its research and development efforts. Of that loan, 25 remains outstanding at November 30, 2012. A second subordinated loan with VINNOF was entered into on June 17, 2009 for an amount of 156, of which 156 was outstanding at November 30, 2012. This loan, to support financing R&D activities, has a fixed interest rate of 4.99%. The first installment payment on the VINNOF loan is due in 2013.

Principal payments on long-term debt are as follows:

Period Ending November 30,    (In thousands)
2013                                     419
2014                                      382
2015                                      323
2016                                      288
2017                                      165
Total                                  1,577

Principal payments on long-term debt - current portion amount 419.

The estimated fair value of the Company's long term debt approximates the carrying amount of long term debt.

6. LEASES

(In thousands)

In 2007, the Company entered into an operating lease agreement of an industrial building consisting of office space and production and storage facilities in Hasselt, Belgium. The initial agreement was concluded for a period of 3 years, starting on April 15th, 2007 and expiring on April 14th, 2010. In October 2011, an additional lease was signed for an annex to the building. The initial lease . . .

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