Exhibit 99.3
Audited Financial Statements of R2D Ingenierie SAS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amtech Systems, Inc :
We have audited the accompanying balance sheets of S.A.S. R2D INGENIERIE as of December 31, 2006 and 2005, and the related statements of income, stockholders investment and cash flows for the years then ended converted into US Dollars. These financial statements are the responsibility of the companys 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 in the United States. 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 financial statements referred to above present fairly, in all material respects, the financial position of S.A.S. R2D INGENIERIE as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America.
Paris, France September 3, 2007 |
|
AUDIT ET CONSEIL UNION | |
/s/ Jean-Marc Fleury | |
Jean-Marc FLEURY |
1
R2D INGÉNIÉRIE SAS
Balance Sheet
In US Dollars
Years ended December 31, | ||||||
2006 | 2005 | |||||
Current Assets | ||||||
Cash and cash equivalents | $ | 835,300 | $ | 1,213,637 | ||
Accounts receivable - less allowance for doubtful accounts of $ 21,770 | ||||||
(December 31, 2005 - $ 16,117) | 1,463,163 | 670,439 | ||||
Inventories | 895,022 | 659,781 | ||||
Deferred tax assets - current | 18,477 | | ||||
Financial assets | | 264,035 | ||||
Other | 381,205 | 371,789 | ||||
Total current assets | 3,593,167 | 3,179,681 | ||||
Deferred tax assets - non current | 3,793 | 3,205 | ||||
Property, Plant and Equipment - Net | 52,075 | 85,774 | ||||
Financial assets | 11,403 | 10,230 | ||||
Total Assets | $ | 3,660,439 | $ | 3,278,889 | ||
Liabilities and Stockholders Equity | ||||||
Current Liabilities | ||||||
Accounts payable | $ | 1,046,344 | $ | 568,456 | ||
Bank loans and current maturities of long-term debt | 50,387 | 288,875 | ||||
Payable to shareholders | 942,619 | 27,274 | ||||
Accrued compensation and related taxes | 280,927 | 214,273 | ||||
Accrued warranty expense | 30,367 | 27,241 | ||||
Deferred profit | 51,492 | 84,092 | ||||
Deferred tax liabilities - current portion | | 311 | ||||
Long-Term obligation - current portion | | 130,284 | ||||
Other accrued liabilities | 11,378 | 9,615 | ||||
Income taxes payable | 71,944 | 115,814 | ||||
Total current liabilities | 2,485,458 | 1,466,237 | ||||
Commitments, Contingencies and Subsequent Event | ||||||
Stockholders Equity | ||||||
Common stock | 118,532 | 118,532 | ||||
Legal reserve | 11,870 | 11,870 | ||||
Accumulated other comprehensive income | 295,041 | 129,218 | ||||
Retained earnings | 749,537 | 1,553,032 | ||||
Total stockholders equity | 1,174,981 | 1,812,652 | ||||
Total Liabilities and Stockholders Equity | $ | 3,660,439 | $ | 3,278,889 |
The accompanying notes are an integral part of these financial statements
2
R2D INGÉNIÉRIE SAS
Statement of
Operations
In US Dollars
Years ended December 31, | ||||||
2006 | 2005 | |||||
Revenues, net of returns and allowances | $ | 4,882,652 | $ | 3,179,953 | ||
Cost of sales | 3,311,965 | 1,968,287 | ||||
Gross profit | 1,570,687 | 1,211,666 | ||||
Selling expenses | 561,471 | 463,577 | ||||
General and Administrative expenses | 212,233 | 169,811 | ||||
Operating income | 796,982 | 578,278 | ||||
Interest and other income (expense), net | (165,920 | ) | 89,255 | |||
Income before income taxes | 631,062 | 667,533 | ||||
Income tax provision | 179,459 | 205,869 | ||||
Net income | $ | 451,603 | $ | 461,664 | ||
Earnings Per Share: | ||||||
Basic earnings per share | $ | 3.76 | $ | 3.85 | ||
Weighted average shares outstanding | 120,000 | 120,000 | ||||
Diluted earnings per share | $ | 3.76 | $ | 3.85 | ||
Weighted average shares outstanding | 120,000 | 120,000 |
The accompanying notes are an integral part of these financial statements
3
R2D INGÉNIÉRIE SAS
Statement of Stockholders
Equity
US Dollars
Common stock | Accumulated | |||||||||||||
Number | other | Total | ||||||||||||
of | Amount | Legal | comprehensive | Retained | Stockholders | |||||||||
shares | in USD | reserve | income | earnings | Equity | |||||||||
Balance at December 31, 2004 | 120,000 | $118,532 | $11,870 | $ 392,140 | $ 1,332,688 | $ 1,855,229 | ||||||||
Net income | 461,664 | 461,664 | ||||||||||||
Dividends | (241,320 | ) | (241,320 | ) | ||||||||||
USD translation difference | (262,922 | ) | (262,922 | ) | ||||||||||
Balance at December 31, 2005 | 120,000 | 118,532 | 11,870 | 129,218 | 1,553,032 | 1,812,652 | ||||||||
Net income | 451,603 | 451,603 | ||||||||||||
Dividends | (1,255,100 | ) | (1,255,100 | ) | ||||||||||
USD translation difference | (165,824 | ) | (165,824 | ) | ||||||||||
Balance at December 31, 2006 | 120,000 | $118,532 | $11,870 | $ 295,041 | $ 749,537 | $ 1,174,981 |
The accompanying notes are an integral part of these financial statements
4
R2D INGÉNIÉRIE SAS
Statement of
Cash Flows
In US Dollars
Years ended December 31, | |||||||
2006 | 2005 | ||||||
Operating Activities | |||||||
Net income | $ | 451,603 | $ | 461,664 | |||
Adjustments to reconcile net income to net cash provided by | |||||||
(used in) operating activities: | |||||||
Depreciation and amortization | 24,564 | (74,530 | ) | ||||
Provision for doubtful accounts | 3,620 | 1,599 | |||||
Deferred income taxes | (18,120 | ) | 110 | ||||
Other | 208,894 | 141,379 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (628,545 | ) | 544,984 | ||||
Inventories | (463,337 | ) | (542,579 | ) | |||
Accrued income taxes | (55,640 | ) | 72,307 | ||||
Prepaid expenses and other assets | 18,514 | (39,641 | ) | ||||
Accounts payable | 392,634 | 75,574 | |||||
Accrued liabilities and customer deposits | 33,727 | 6,548 | |||||
Deferred profit | 48,993 | 88,423 | |||||
Net cash provided by operating activities | 16,907 | 735,839 | |||||
Investing Activities | |||||||
Purchases of property, plant and equipment | (940 | ) | (10,997 | ) | |||
Net cash used in investing activities | (940 | ) | (10,997 | ) | |||
Financing Activities | |||||||
Preferred stock cash dividends paid | (1,255,100 | ) | (241,320 | ) | |||
Borrowings on long-term obligations | (138,184 | ) | (112,085 | ) | |||
Net short-term borrowings | 885,963 | (372,551 | ) | ||||
Net cash provided by financing activities | (508,441 | ) | (733,714 | ) | |||
Effect of Exchange Rate Changes on Cash | (114,137 | ) | 185,294 | ||||
Net Decrease in Cash and Cash Equivalents | (378,336 | ) | (194,166 | ) | |||
Cash and Cash Equivalents, Beginning of Year | 1,213,637 | 1,407,803 | |||||
Cash and Cash Equivalents, End of Year | $ | 835,301 | $ | 1,213,637 |
The accompanying notes are an integral part of these financial statements
5
Notes to the Financial Statements
For the Years Ended December 31, 2006 and 2005
1. Summary of Significant Accounting Policies
Nature of operations and basis of presentation SAS R2D Ingenierie (the Company) manufactures robotic systems for the semiconductor and the solar industries. The Company sells these products to manufacturers of silicon wafers, semiconductors and solar cells worldwide. In addition, the Company provides semiconductor manufacturing support services.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Foreign currency translation The Financial Statements are presented in US Dollar which is the Companys presentation currency. The Companys functional currency (the currency of the primary economic environment in which the Company operates) is Euro.
The results and financial position of the Company are translated into the presentation currency as follows:
Revenue Recognition Revenue is recognized upon shipment of the Companys products equal to the sales price less the greater of (i) the fair value of undelivered services and (ii) the contingent portion of the sales price, which is generally 10-20% of the total contract price. The entire cost of the equipment relating to proven technology is recorded upon shipment. The remaining contractual revenue, deferred costs, and installation costs are recorded upon successful installation of the product.
Revenue from services is recognized as the services are performed. Revenue from prepaid service contracts is recognized ratably over the life of the contract. Revenue from spare parts is recorded upon shipment.
Accounts receivable and allowance for doubtful accounts Accounts receivable are recorded at the gross sales price of products sold to customers on trade credit terms. Accounts receivable are considered past due when payment has not been received from the customer within the normal credit terms extended to that customer. Accounts are charged-off against the allowance when the probability of collection is remote.
The following is a summary of the activity in the Companys allowance for doubtful accounts:
Years Ended December 31, | |||||||
2006 | 2005 | ||||||
(in USD) | |||||||
Balance at beginning of year | $16,117 | $16,815 | |||||
Charged to expense | 3,619 | 1,599 | |||||
Write-offs | | | |||||
USD translation difference | 2,034 | (2,297 | ) | ||||
Balance at end of year | $21,770 | $16,117 |
6
Concentrations of Credit Risk The Companys financial assets that are exposed to credit risk consist primarily of cash and cash equivalents and accounts receivables.
About 98 % of Companys cash is held at one bank which is a subsidiary of HSBC, one of the worlds top ranked banks.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of trade accounts receivable. The Companys customers consist of first rank manufacturers of semiconductors, semiconductor wafers and solar cells located throughout the world. Credit risk is managed by performing ongoing credit evaluations of the customers financial condition, by requiring significant deposits where appropriate, and by actively monitoring collections.
Foreign Currency risk management The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with respect to US Dollars. The Company uses deposit contracts in US Dollars and interest rate swaps to minimise the potential impact of foreign exchange rate exposures .
Cash and cash equivalent All highly liquid investments with original maturities of three months or less are classified as cash and cash equivalents. At 31 December 2006 the carrying value of cash and cash equivalents approximated their fair values.
Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The components of inventories are as follows:
Years Ended December 31, | |||||||
2006 | 2005 | ||||||
(in USD) | |||||||
Purchased parts and raw materials | $399,549 | $339,059 | |||||
Work-in-process | 362,845 | 278,162 | |||||
Finished goods | 132,628 | 42,560 | |||||
$895,022 | $659,781 |
Property, Plant and Equipment Property plant, and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred. The cost of property retired or sold and the related accumulated depreciation are removed from the applicable accounts when disposition occurs and any gain or loss is recognized. Depreciation is computed using the straight-line method. Useful lives for equipment, machinery and leasehold improvements range from three to seven years; for furniture and fixtures from five to ten years; and for buildings twenty years.
The following is a summary of property, plant and equipment:
Years Ended December 31, | |||||||
2006 | 2005 | ||||||
(in USD) | |||||||
Land, building and leasehold improvements | $110,109 | $ 98,775 | |||||
Equipment and machinery | 215,069 | 192,046 | |||||
Furniture and fixtures | 34,816 | 31,233 | |||||
359,994 | 322,054 | ||||||
Accumulated depreciation and amortization | 307,919 | 236,280 | |||||
$ 52,075 | $ 85,774 |
7
Intangibles Intangible assets are capitalized and amortized over the useful life of the asset.
The following is a summary of intangibles:
Years Ended December 31, | |||||||
2006 | 2005 | ||||||
(in USD) | |||||||
Software | $32,839 | $29,458 | |||||
Accumulated depreciation and amortization | 32,839 | 29,458 | |||||
$ | $ |
Warranty A limited warranty is provided free of charge, generally for periods of 12 to 24 months to all purchasers of the Companys products and systems. Accruals are recorded for estimated warranty costs at the time revenue is recognized. The following is a summary of activity in accrued warranty expense:
Years Ended December 31, | |||||
2006 | 2005 | ||||
(in USD) | |||||
Beginning balance | $ 27,241 | $ 31,381 | |||
Warranty expenditures | (28,893 | ) | (28,644 | ) | |
Reserved Adjustment | 28,893 | 28,644 | |||
USD translation difference | 3,126 | (4,140 | ) | ||
Ending Balance | $ 30,367 | $ 27,241 |
Research and Development Expenses Product development costs are expensed as incurred.
Foreign Currency Transactions and Translation The functional currency of the Companys operations is the Euro. Net income (loss) includes pretax net gains (losses) from foreign currency transactions of ($62,000) and $105,000 in fiscal 2006 and 2005, respectively.
Income Taxes The Company files income tax returns and computes deferred income tax assets and liabilities based upon cumulative temporary differences between financial reporting and taxable income, carryforwards available and enacted tax laws.
Fair Value of Financial Instruments The carrying values of the Companys current financial instruments approximate fair value due to the short term in which these instruments mature. The carrying values of the Companys line of credit (see Note 5) and long-term debt (see Note 6) approximate fair value because their variable interest rates approximate the prevailing interest rates for similar debt instruments.
2. Earnings Per Share
Basic earnings per share is computed by dividing net income (loss) available to common stockholders (net income less accrued preferred stock dividends) by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued, and the numerator is based on net income. In the case of a net loss, diluted earnings per share is calculated in the same manner as basic earnings per share.
Common shares relating to stock options where the exercise prices exceeded the average market price of our common shares during the period were excluded from the diluted earnings per share computation as the related impact was anti-dilutive.
8
3. Line of Credit
The company has no line of credit as of December 31, 2005 and December 31, 2006.
4. Long-Term Obligations
In December 2005, the Company had an obligation toward OSEO ANVAR related to an innovation project. OSEO ANVAR is a public organisation which finance the development of new technology.
The Company reimbursed the last instalment of the repayable loan from OSEO ANVAR for an amount of $ 138,184 (€ 110,000) in 2006.
5. Stockholders Equity
There are no shares of preferred stock and no option to purchase common shares.
As at December 31, 2006, there were 119,900 Common Shares of the Company owned by:
Dividend policy : the Company has paid dividends on its common shares:
6. Commitments and Contingencies
Legal Proceedings The Company and its subsidiaries are defendants from time to time in actions for matters arising out of their business operations. The Company does not believe that any matters or proceedings presently pending will have a material adverse effect on its financial position, results of operations or liquidity.
Operating Leases The Company leases building, vehicles and equipment under operating leases. Rental expense under such operating leases was $ 60,364 and $ 52,212 in fiscal 2006 and 2005 respectively.
7. Major Customers and Foreign Sales
Two customers accounted for 10% or more of net revenue during fiscal 2006: one accounted for 14% and the other for 10.2 %. Two customers accounted for 10% or more of net revenue during fiscal 2005: one accounted for 16% and the other for 14 %.
Net revenues for fiscal 2006 and 2005 were to customers in the following geographic regions:
Years Ended December 31, | |||
2006 | 2005 | ||
France | $1,447,882 | $1,200,169 | |
Foreign countries | 3,434,770 | 1,979,784 | |
$4,882,652 | $3,179,953 |
9
Years Ended December 31, | ||||
2006 | 2005 | |||
Net income for the period | $451,603 | $ 461,664 | ||
Other comprehensive income: | ||||
Currency Translation | 165,823 | (262,922 | ) | |
Total comprehensive income for the period | $617,426 | $ 198,742 |
Cumulative | ||||||
currency translation | Total | |||||
Balance, December 31, 2004 | $ 392,139 | $ 392,139 | ||||
Change during the year | (262,921 | ) | (262,921 | ) | ||
Balance, December 31, 2005 | 129,218 | 129,218 | ||||
Change during the year | 165,823 | 165,823 | ||||
Balance, December 31, 2006 | $ 295,041 | $ 295,041 |
Years Ended December 31, | |||||
2006 | 2005 | ||||
Current: | |||||
Domestic state | $197,580 | $205,758 | |||
Deferred: | |||||
Domestic state | (18,120 | ) | 111 | ||
$179,460 | $205,869 |
Net result | Income | |||||||
Tax proof 2006 | before tax | Tax rate | tax | |||||
Income tax at national tax rate | $631,062 | 33.33 | % | $210,333 | ||||
Income tax credit for research expenses | (3.09 | %) | (19,528 | ) | ||||
Income tax at reduced rate(15% instead of 33,33%) | ||||||||
on an amount of 38,120 | (1.37 | %) | (8,620 | ) | ||||
Other items | (0.43 | %) | (2,726 | ) | ||||
Income tax provision | $631,062 | 28.44 | % | $179,459 | ||||
Net result | Income | |||||||
Tax proof 2005 | before tax | Tax rate | tax | |||||
Income tax at national tax rate | $667,533 | 33.33 | % | $222,489 | ||||
Income tax credit for research expenses | (1.88 | %) | (12,582 | ) | ||||
Income tax at reduced rate(15% instead of 33,33%) | ||||||||
on an amount of 38,120 | (1.28 | %) | (8,546 | ) | ||||
Other items | 0.68 | % | 4,508 | |||||
Income tax provision | $667,533 | 30.84 | % | $205,869 |
10
10. Related Party transactions
The Company is controlled by Mr DI CESARE which owns 50.01% of the Companys shares. The remaining 49.99% of the shares are owned by Mrs DI CESARE.
The following transactions were carried out with related parties:
(a) | Current account from related parties: |
Years Ended December 31, | ||||||||
2006 | 2005 | |||||||
(in USD) | ||||||||
Beginning balance | $ | 27,274 | $ | 221,116 | ||||
Change in balance: | ||||||||
i. dividends declared | 1,255,100 | 241,320 | ||||||
ii. dividends paid to shareholders | (418,321 | ) | (480,074 | ) | ||||
iii. amounts received from shareholders | 30,043 | 57,846 | ||||||
USD translation difference | 48,523 | (12,933 | ) | |||||
Ending Balance | $ | 942,619 | $ | 27,274 | ||||
Interests paid to related parties | $ | 5,933 | $ | 3,176 |
(b) | Office rent from non-trading real estate investment company (Société Civile Immobilière SCI) owned by the shareholders of the Company: |
Years Ended December 31, | ||||
2006 | 2005 | |||
(in USD) | ||||
Yearly rental | $35,732 | $32,302 | ||
Rental charges | $ 4,824 | $ 4,653 |
11. Subsequent Event
No subsequent event occurred since December 31, 2006.
11