-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K6PzW1NA2uiaxuVUYbu7/KAY++qBUWQ0jMbmDhd0AbW67b8HY8cztGxzsoPCaBKO maU52lydio2BfLZxqWnLSA== 0000950005-97-000962.txt : 19971121 0000950005-97-000962.hdr.sgml : 19971121 ACCESSION NUMBER: 0000950005-97-000962 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970831 ITEM INFORMATION: FILED AS OF DATE: 19971120 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PINNACLE SYSTEMS INC CENTRAL INDEX KEY: 0000774695 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 943003809 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-24784 FILM NUMBER: 97725046 BUSINESS ADDRESS: STREET 1: 280 N BERNARDO AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 6502371600 MAIL ADDRESS: STREET 1: 280 N BERNARDO AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 8-K/A AMENDMENT NO. 2 TO CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 31, 1997 Pinnacle Systems, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) California 0-24784 94-3003809 - ---------------------------- ------------ ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 280 North Bernardo Avenue, Mountain View, California 94043 - ----------------------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (650) 237-1600 The undersigned Registrant hereby amends the following items, financial statements, exhibits, or other portions of its Current Report on Form 8-K, originally filed with the Securities and Exchange Commission on September 12, 1997 (the "Form 8-K") as set forth in the pages attached hereto: Item 7. Financial Statements and Exhibits. a. Financial Statements of Business Acquired. The following financial statements of the business acquired are attached hereto: 1. Digital Video Editing (DVE) Division of Miro Computer Products AG, Braunschweig, Auditors' Report on the Examination of the Combined Statements of Certain Assets and Liabilities as of December 31, 1996 and 1995 and Related Statements of Revenues and Expenses and Cash Flows for the Years then Ended .......................... F-1 Report of Independent Public Accountants................. F-2 Combined Statements of Certain Assets and Liabilities as of December 31, 1996 and 1995............................ F-3 Combined Statements of Income and Expenses for the Three Years in the Period Ended December 31, 1996, 1995 and 1994..................................................... F-4 Statements of Cash Flow for the Years Ended December 31, 1996, 1995 and 1994...................................... F-5 Notes to the Combined Financial Statements............... F-6 2. Digital Video Editing (DVE) Division of Miro Computer Products AG, Braunschweig, Unaudited Interim Financial Statements. Combined Condensed Statements of Certain Assets and Liabilities (unaudited) as of June 30, 1997............ F-14 Combined Condensed Statements of Income and Expenses (unaudited) for the Six Months Ended June 1997 and 1996.. F-15 Combined Condensed Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 1997 and 1996.......... F-16 Notes to Unaudited Combined Condensed Financial Statements .............................................. F-17 b. Pro Forma Financial Information. The following unaudited pro forma combined condensed financial statements are attached hereto: Pro Forma Combined Condensed Financial Information (Unaudited) ............................................. F-18 Unaudited Pro Forma Combined Condensed Balance Sheet June 30, 1997 ................................................ F-19 Unaudited Pro Forma Combined Condensed Statement of Operations Year Ended June 30, 1997 ..................... F-20 Notes to Unaudited Pro Forma Combined Condensed Financial Statements............................................... F-21 -2- c. Exhibits. 2.1* Asset Purchase Agreement dated August 29, 1997 by and between Pinnacle Systems, Inc., Pinnacle Systems GmbH, Pinnacle Systems C.V., Pinnacle Systems Ltd., Miro Computer Products AG, Miro Computer Products, Inc. and Miro Computer Products Ltd. 23.1 Consent of Arthur Andersen GmbH, Independent Public Accountants - --------------------------- * Previously filed. -3- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to its Report to be signed on its behalf by the undersigned, thereunto duly authorized. PINNACLE SYSTEMS, INC. Dated: November 19, 1997 By: /S/ ARTHUR D. CHADWICK ------------------------------------- Arthur D. Chadwick, Vice President, Finance and Administration and Chief Financial Officer -4- ARTHUR ANDERSEN ARTHUR ANDERSEN ----------------------------------- Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft mbH ----------------------------------- Sophienstrasse 5 30159 Hannover DIGITAL VIDEO EDITING (DVE) DIVISION OF MIRO COMPUTER PRODUCTS AG BRAUNSCHWEIG AUDITORS' REPORT ON THE EXAMINATION OF THE COMBINED STATEMENTS OF CERTAIN ASSETS AND LIABILITIES AS OF DECEMBER 31, 1996 AND 1995 AND RELATED STATEMENTS OF REVENUES AND EXPENSES AND CASH FLOWS FOR THE YEARS THEN ENDED F-1 ARTHUR ANDERSEN REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the shareholders of miro Computer Products AG: We have audited the accompanying combined statements of certain assets and liabilities of the Digital Video Editing (DVE) division of miro Computer Products AG (the "Division", as described in Footnote 1) as of December 31, 1995 and 1996 and the related combined statements of revenues and expenses and cash flows for the three years then ended. These statements are the responsibility of the management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audit provides a reasonable basis for our opinion. As discussed more fully in Note 3, the Division was sold on August 29, 1997 to Pinnacle Systems, Inc., a California corporation. In our opinion, the statements referred to above present fairly, in all material respects, certain assets and liabilities of the Division as of December 31, 1995 and 1996 and its statements of revenues and expenses and cash flows for the three years then ended in conformity with U.S. generally accepted accounting principles. ARTHUR ANDERSEN Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft /s/ Dr. Maiss - -------------------- Dr. Maiss Stieve Wirtschaftsprufer Wirtschaftsprufer Hanover, Germany November 18, 1997 F-2 DIGITAL VIDEO EDITING (DVE) DIVISION OF MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG COMBINED STATEMENTS OF CERTAIN ASSETS AND LIABILITIES AS OF DECEMBER 31, 1996 AND 1995 1996 1995 U.S. $ U.S. $ ------------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents 1,566,918 629,755 Accounts receivables, net 11,439,237 4,320,773 Inventories 5,795,399 5,247,054 Other current assets 405,598 903,848 Prepaid expenses 312,127 209,136 ------------- -------------- 19,519,279 11,310,566 ------------- -------------- PROPERTY, PLANT AND EQUIPMENT Machinery and equipment 77,031 106,435 Furniture and fixtures 1,154,350 1,009,046 Less-accumulated depreciation (434,109) (400,230) ------------- -------------- 797,272 715,251 ------------- -------------- INTANGIBLE ASSETS, NET 1,595,787 1,456,019 ------------- -------------- TOTAL ASSETS 21,912,338 13,481,836 ============= ============== 1996 1995 U.S. $ U.S. $ ------------- ------------- LIABILITIES AND INTERDIVISIONAL EQUITY CURRENT LIABILITIES Short-term borrowings 9,059,934 7,733,436 Accounts payable trade 3,703,785 2,410,366 Other liabilities 721,246 417,519 Accrued income taxes 2,988,487 981,286 Other accrued liabilities 836,529 400,416 -------------- ------------- 17,309,981 11,943,023 -------------- ------------- LONG-TERM LIABILITIES Deferred income taxes 523,704 522,010 -------------- ------------- ASSETS EXCEEDING LIABILITIES 4,078,653 1,016,803 -------------- ------------- TOTAL LIABILITIES AND INTERDIVISIONAL EQUITY 21,912,338 13,481,836 ============== ============= The accompanying notes are an integral part of these combined statements of certain assets and liabilities. F-3 DIGITAL VIDEO EDITING (DVE) DIVISION OF MICRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG COMBINED STATEMENTS OF INCOME AND EXPENSES FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996, 1995 AND 1994 1996 1995 1994 U.S. $ U.S. $ U.S. $ ---------- ---------- --------- Revenues 41,517,098 20,677,002 10,264,219 Cost of sales 22,761,660 14,083,045 6,493,408 ---------- ---------- --------- Gross profit 18,755,438 6,593,957 3,770,811 ---------- ---------- --------- Selling expenses 8,952,256 3,174,761 1,806,188 Research and development expenses 2,395,541 1,897,777 968,439 General administrative expenses 2,042,904 927,058 310,297 Other revenues and gains (570,148) (114,620) (151,520) Other expenses and losses 100,362 5,335 16,027 ---------- ---------- --------- Operating income 5,834,523 703,646 821,380 Interest income 11,251 2,932 4,477 Interest expense 852,325 663,189 300,306 ---------- ---------- --------- Income before taxes 4,993,449 43,389 525,551 Income taxes 2,273,247 113,302 371,748 ---------- ---------- --------- Net income (loss) 2,720,202 (69,913) 153,803 ========== ========== ========= The accompanying notes are an integral part of these combined statements of income and expenses. F-4 DIGITAL VIDEO EDITING (DVE) DIVISION OF MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG STATEMENTS OF CASH FLOW
For the Years Ended December 31 ---------------------------------------------------- 1996 1995 1994 U.S. $ U.S. $ U.S. $ ---------- --------- ------- Cash flows from operating activities: Net income/-Net Loss 2,720,202 (69,913) 153,803 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 846,315 698,461 622,595 Change in operating assets and liabilities Increase in inventory, net (548,346) (1,910,916) (3,336,137) Increase in trade accounts receivable (7,118,465) (2,914,847) (1,405,926) Change in other assets 395,259 (837,629) (275,355) Increase in accruals for taxes 2,008,895 85,776 1,417,519 Increase in other accruals 436,112 192,064 208,353 Increase in trade accounts payable 1,293,419 (695,676) 3,106,042 Increase in other accounts payable 303,727 122,567 294,952 ---------- --------- ----------- Total adjustments (2,383,084) (5,260,200) 632,043 ---------- --------- ----------- Net cash provided by (used in) operating activities 337,118 (5,330,113) 785,846 ---------- ---------- ----------- Cash flows from investing activities: Intangible asset additions (568,736) (718,612) (943,119) Tangible fixed asset additions (493,524) (793,127) (1,037,468) Financial fixed asset additions (5,844) -- -- ---------- --------- ----------- Net cash used in investing activities (1,068,104) (1,511,739) (1,980,587) ---------- --------- ----------- Cash flows from financing activities: Advances from miro AG 0 0 1,002,782 Increase in short-term borrowings, net 1,326,498 7,514,951 218,485 Dividends paid 0 (503,616) 0 ---------- --------- ----------- Net cash provided by financing activities 1,326,498 7,011,335 1,221,267 ---------- --------- ----------- Effect of exchange rate changes 341,651 228,304 205,442 Net increase in cash and cash equivalents 937,163 397,787 231,968 Cash and cash equivalents at beginning of year 629,755 231,968 0 ---------- --------- ----------- Cash and cash equivalents at end of year 1,566,918 629,755 231,968 ========== ========= =========== The tax is only calculated on the basis of DVE income for the years, no tax payments had occurred in these years. The cash amounts paid for interest are the following: 1996: U.S. $852,325; 1995: U.S. $663,189; 1994: U.S. $300,306 The accompanying notes are an integral part of these statements of cash flow.
F-5 MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG DIGITAL VIDEO EDITNG (DVE) DIVISION (As described in footnote 1) Notes to the Combined Financial Statements NOTE 1 Principles of Combination The combined statements of certain assets and liabilities include certain assets and liabilities of the Digital Video Editing (DVE) Division (the "Division" or "DVE") of miro Computer Products AG ("miro AG") and miro AG's wholly owned subsidiaries in the United States, France, The Netherlands and United Kingdom. All significant intercompany transactions have been eliminated. Refer to Note 2, Basis of Presentation. Company The DVE Division of miro AG designs, develops, manufactures and sells certain digital video products. NOTE 2 Basis of Presentation The combined statements are presented in accordance with U.S. generally accepted accounting principles and are stated in U.S. dollars. 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. As a result of the DVE's relationship with miro AG the financial position and results of operations are not necessarily indicative of what actually would have occurred, had the Division been a stand-alone entity. Additionally, these financial statements are not necessarily indicative of future financial position or results of operations. F-6 ARTHUR ANDERSEN Combined statement of certain assets and liabilities The combined statements of certain assets and liabilities consist of the items being sold to or assumed by Pinnacle and other assets and liabilities specifically identifiable or allocable to the DVE Division, but that are not being sold to Pinnacle. The assets and liabilities sold to or assumed by Pinnacle include: o all tangible property (such as machinery, equipment, inventory, raw materials, supplies, manufactured and purchased parts, work in progress, finished goods, furniture, automobiles and tools), relating to the Digital Video Group Assets; o the capital stock of (i) miro Computer Products SARL, a corporation organized under the laws of France and a wholly-owned subsidiary of miro AG, and (ii) miro Computer Products BV, a corporation organized under the laws of The Netherlands and a wholly-owned subsidiary of miro AG; o certain accounts receivable of miro Computer Products Inc., USA, pertaining to the Digital Video Group Assets in an amount equal to U.S. $150,000. The liabilities sold or assumed by Pinnacle are limited to: o all liabilities of miro AG under certain employee benefit plans to the extent such contracts are assumed by the buyers; and o existing obligations of the sellers to perform end user warranty repair and replacement services for products sold on or prior to the effective date. The agreement states that the liabilities of the acquired subsidiaries shall remain liabilities of these subsidiaries. Other specifically identifiable assets and liabilities related to miro AG but not being sold to Pinnacle mainly include: land, buildings and related property owned by miro AG in Braunschweig, furniture and fixtures of miro AG's Braunschweig facilities, remaining accounts receivable in excess of U.S. $150,000 and other miscellaneous assets and the majority of all liabilities. Combined statement of revenues and expenses The combined statements of revenue and expenses reflect substantially all of the DVE Division's revenues and expenses associated with the normal course of business. These costs include direct expenses and certain expenses incurred by miro AG on the DVE Division's behalf. Refer to Note 5, Supplementary Information on the Basis of Allocation, for further details. Expenses that are not incurred for the benefit of the DVE Division are not allocated. F-7 ARTHUR ANDERSEN NOTE 3 Asset Purchase Agreement On August 29, 1997, miro AG entered into an agreement (the "Agreement") to sell certain assets, liabilities and obligations of the DVE division to Pinnacle including all of the issued and outstanding stock of miro Computer Products SARL, a corporation organized under the laws of France and miro Computer Products BV, a corporation organized under the law of The Netherlands. The assets sold included, among other things, various machinery, equipment, inventory, books and records, intellectual and intangible property. miro AG has no financial interest in the DVE division after the date of sale to Pinnacle except to settle outstanding liabilities and collect outstanding receivables which were not sold to Pinnacle. In addition, miro AG may remain liable after the sale to Pinnacle for certain known and unknown existing obligations and liabilities that are not transferred to and assumed by Pinnacle. In connection with the Asset Purchase Agreement Pinnacle signed a service and rent agreement with miro AG for certain service and office facilities at Braunschweig. NOTE 4 Summary of Significant Accounting Policies Cash and cash Equivalents For purposes of the Statement of Cash Flow, the Division considers all highly liquid financial investments purchased with an original maturity of three months or less to be cash equivalents. Valuation of Inventories Inventories are stated at the lower of cost or market. Cost is determined by the moving average method for all inventories. Inventory costs consist of materials, labor and factory overhead. Fixed assets, amortization and maintenance Fixed assets, consisting of machinery and equipment, are stated at cost. The company computes depreciation on fixed assets using principally the straight-line method. The estimated useful lives used in computing depreciation range from 3 to 10 years for machinery and office equipment. Expenditures for maintenance and repairs are expensed; expenditures for renewals and improvements are generally capitalized. Upon sale or retirement of an asset, the related cost and accumulated depreciation or amortization are removed from the accounts and any gain or loss is recognized. In the event that facts and circumstances indicate that assets may be impaired, an evaluation of recoverability would be performed. F-8 ARTHUR ANDERSEN Intangible assets Research and development costs, including costs incurred to establish the technological feasibility of computer software products to be sold, are charged to income as incurred. Once the technological feasibility of a software product has been established, costs of coding, testing and producing product masters are capitalized. Capitalization ceases and amortization begins when the product is available for release. Amortization generally is based on the straight line method over periods ranging from 1 to 3 years. The net realizable value of unamortized costs is evaluated based on the estimated future revenues from the software product, net of estimated future costs of completing and disposing of the software product. Unamortized software costs were $1,047,000 and $1,044,000 at the end of 1996 and 1995, respectively. Amortization was $ 919,607, $ 790,182 and $ 669,459 in 1996, 1995 and 1994, respectively. Foreign currency translation For the European operations of the Company, the functional currency is the applicable local currency. The accounts of these operations are translated into United States dollars as follows: all asset and liability accounts are translated at year-end exchange rates; income and expense items are translated at the average exchange rates during the year. Cumulative translation adjustments resulting from such translation of the financial statements of these operations to United States dollars are included in assets exceeding liabilities. Income taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". This standard requires an asset and liability approach for financial accounting and income tax reporting based on enacted tax rates. Revenue recognition The company`s revenues are composed of product sales and other revenues. The Company records product sales when the goods are sold to a customer. Service and other revenues are recorded at the time the services are performed. Highly liquid financial investments The carrying values of cash and cash equivalents, receivables, accounts payable and short-term debt approximate the fair market values due to the short-term maturities of these instruments. F-9 ARTHUR ANDERSEN NOTE 5 Supplementary information on the basis of allocation Generally, miro AG had not prepared separate financial statements for the DVE division in the past. miro's operations are composed of the display, the multimedia/graphics and the DVE division. The accompanying statements of certain assets, liabilities, revenues and expenses relating to the DVE division had to be identified on an item-by-item basis or allocated to the DVE division from miro AG by a reasonable method. Inventories, sales and cost of sales relating to the DVE division were individually identifiable whereas the remaining assets and liabilities and the remaining operating, general and administrative expenses of the DVE division had to be allocated. The method of allocation mainly used the following criteria: Accounts receivables of the DVE division are derived from the related identified sales portion of consolidated miro sales. Fixed assets of miro AG are allocated to the DVE division using the percentage of DVE employees compared to total headcount at Braunschweig based on the assumption that most of the fixed assets can be allocated based on the usage by the divisions' employees. For subsidiaries for which the business is only the distribution of products, the DVE sales portion had been used. Although specific identification of the assets to be sold has not been completed and is therefore subject to change, management estimates that the book value of such assets will approximate the amount determined in the manner described above. Depreciation expense related to fixed assets of miro AG that are used by the DVE division but not being sold and interest expense on debt secured by such assets are allocated to the DVE division but not being sold and interest expense on debt secured by such assets are allocated to the DVE division using the approach described above. Accounts payable are allocated in relation to the percentage of DVE inventories to total inventories. Short-term borrowings are allocated to the DVE division in relation to the financial structure of miro AG as it is assumed that the DVE division would be financed in the same way as the miro AG was financed during the years. Certain payroll related accruals are allocated by the headcount portion of DVE employees. All other assets and liabilities are allocated to the DVE Division in view of the portion of DVE sales. NOTE 6 Accounts Receivables Accounts receivables amount to U.S. $11,439,000 and U.S. $4,321,000 respectively, at December 31, 1996 and 1995 net of allowances for doubtful accounts of U.S. $21,000 and U.S. $10,000 and net of accruals for credit notes still to be issued of U.S. $215,000 and U.S. $56,000, respectively. F-10 ARTHUR ANDERSEN NOTE 7 Inventories Inventories consist of the following at December 31: 1996 1995 U.S. $ U.S. $ --------- --------- Raw materials 2,043,000 1,251,000 Work-in-process 895,000 953,000 Finished goods 2,857,000 3,043,000 --------- --------- 5,795,000 5,247,000 ========= ========= NOTE 8 Other current assets The other assets mainly contain VAT refunds. NOTE 9 Debts The interest rates for the short-term borrowings range from 4.3 percent up to 9 percent. The short-term borrowings were collateralized by mortgage bonds on the company's premises in Braunschweig as well as bank assignment of receivables and chattel mortgage of inventories. The fair value of the borrowings approximates the carrying value. NOTE 10 Business Segment Information Group's revenues are made in the following areas: 1996 1995 1994 U.S. $ U.S. $ U.S. $ ---------- ---------- ---------- Germany 14,768,000 13,109,000 9,085,000 Other Europe 9,903,000 2,574,000 0 USA 16,846,000 4,994,000 1,179,000 ---------- ---------- ---------- 41,517,000 20,677,000 10,264,000 ========== ========== ========== F-11 ARTHUR ANDERSEN NOTE 11 Income taxes The income tax provision are summarized as follows: 1996 1995 1994 U.S. $ U.S. $ U.S. $ ---------- ---------- ---------- Current 2,229,000 21,000 338,000 Deferred 44,000 92,000 34,000 ---------- ---------- ---------- 2,273,000 113,000 372,000 ========== ========== ========== Miro AG and all its subsidiaries presently prepare individual tax returns; no tax pooling or consolidated tax returns had been filed in the past. Accordingly, the DVE division calculated the current and deferred taxes, for purposes of these statements, as if it filed individual tax returns for each consolidated DVE entity regardless to the fact that certain legal entities realized losses in 1995 and subsequent years. Corporate income tax rate on miro AG's results in Germany are depending on the actual decision to distribute or retain earnings; these rates are 30 percent or 45 percent, respectively. Considering also the municipal trade tax the Company has assumed an income tax rate of 50 percent for the income of the DVE division in Germany and its European subsidiaries and 40 percent for the income of miro Inc., USA. Deferred tax assets have been considered for miro Inc. on its losses in 1994 and 1995. Differences between the 50 percent tax rate in Germany and the consolidated effective tax rates are due to differences between the German tax rate and the tax rates in other countries. Deferred income taxes were provided when tax laws and financial accounting standards differ with respect to the amount of income calculated for a given year and the basis of assets and liabilities. Generally, income taxes are ultimately paid by and are the responsibility of miro AG and each of its legal subsidiaries. In fact, as a result of the losses in 1995 and 1996, no income taxes had to be paid by miro AG. Deferred income taxes of U.S. $524,000 and U.S. $522,000 at December 31, 1996 and 1995, respectively, relate to the amortization of software development cost. F-12 ARTHUR ANDERSEN NOTE 12 Related companies The Company holds shares in the following companies:
Net income Portion of of DVE Division share capital in 1996 in % U.S. $ ------------- ---------------- miro Computer Products Inc., Palo Alto, USA 100 1,322,000 miro Computer Products Limited, Cambridge, England 100 95,000 miro Computer Products SARL, Paris, France 100 287,000 miro Computer Products BV, Eindhoven, The Netherlands 100 72,000 Entities not consolidated miro Computer Products AG, Dietikon, Switzerland 99.5(1) miro Computer Products GmbH, Schwechat, Austria 100 - ------------------------- 1) The remaining 0.5 percent of shares are held by a third person in trust for the Company.
F-13 DIGITAL VIDEO EDITING (DVE) DIVISION OF MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG COMBINED CONDENSED STATEMENTS OF CERTAIN ASSETS AND LIABILITIES (unaudited) June 30, 1997 U.S. $ -------------- (in thousands) Current assets: Cash and cash equivalents $ 563 Accounts receivable, net 7,546 Inventories 3,736 Other current assets 204 Prepaid expenses 412 -------- Total current assets 12,461 Property and equipment, net 725 Intangibles, net 1,178 -------- Total assets $ 14,364 ======== Current liabilities: Accounts payable $ 4,053 Accrued expenses 1,465 Short-term borrowings 1,682 Accrued income taxes 2,497 Other current liabilities 680 -------- Total current liabilities 10,377 Long-term obligations 405 Deferred income taxes 520 -------- Total liabilities 11,302 -------- Total interdivisional equity $ 3,062 -------- Total liabilities and interdivisional equity $ 14,364 ======== The accompanying notes are an integral part of the combined condensed financial statements. F-14 DIGITAL VIDEO EDITING (DVE) DIVISION OF MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG COMBINED CONDENSED STATEMENTS OF INCOME AND EXPENSES (unaudited) Six months ended June 30, ------------------------- 1997 1996 U.S. $ U.S. $ ------------------------ (in thousands) Revenue $ 14,839 $ 19,583 Cost of sales 8,092 10,859 -------- -------- Gross profit 6,747 8,724 Operating expenses: Selling expenses 5,345 4,461 Research and development 843 1,062 General and administrative 1,018 926 -------- -------- Total operating expenses 7,206 6,449 -------- -------- Operating income (459) 2,275 Other income (expense): Interest income 117 7 Interest expense (222) (322) -------- -------- Total other income (expense) (105) (315) -------- -------- Income (loss) before taxes (564) 1,960 Income tax benefit (expense) 188 (936) -------- -------- Net income (loss) $ (376) $ 1,024 ======== ======== The accompanying notes are an integral part of the combined condensed financial statements. F-15 DIGITAL VIDEO EDITING (DVE) DIVISION OF MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG COMBINED CONDENSED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended June 30, --------------------- 1997 1996 U.S. $ U.S. $ --------------------- (in thousands) Cash flows from operating activities: Net income (loss) $ (376) 1,024 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 730 223 Change in operating assets and liabilities: Change in inventory, net 2,059 (218) Change in trade accounts receivable 3,893 (4,201) Decrease in other assets 102 635 Change in accruals for taxes (495) 707 Increase in other accruals 629 900 Increase in trade accounts payable 349 159 Decrease in other accounts payable (41) (49) ------- ------- Total adjustments 7,226 (1,844) ------- ------- Net cash provided by (used in) operating activities 6,850 (820) ------- ------- Cash flows from investing activities: Intangible asset additions (221) (284) Tangible fixed asset additions (19) (117) ------- ------- Net cash used in investing activities (240) (401) ------- ------- Cash flows from financing activities: Increase (decrease) in short term borrowings, net (6,973) 2,581 ------- ------- Net cash provided (used in) by financing activities (6,973) 2,581 ------- ------- Effect of exchange rate changes (641) (902) Net increase (decrease) in cash and cash equivalents (1,004) 458 Cash and cash equivalents at beginning of period 1,567 630 ------- ------- Cash and cash equivalents at end of period $ 563 $ 1,088 ======= ======= Supplemental disclosures of cash paid during period: Interest 222 322 ======= ======= The accompanying notes are an integral part of the combined condensed financial statements. F-16 DIGITAL VIDEO EDITING (DVE) DIVISION OF MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG NOTES TO UNAUDITED COMBINED CONDENSED FINANCIAL STATEMENTS June 30, 1997 1. Basis of Presentation The interim financial statements are unaudited and reflect all adjustments (consisting only of normal recurring accruals) that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the current interim period are not necessarily indicative of results to be expected for the current year or any other period. These financial statements should be read in conjunction with the Company's annual financial statements for the year ended December 31, 1996. 2. Inventories Inventories as of June 30, 1997, consisted of the following (in thousands): Raw materials............................. $1,377 Work-in-process........................... 632 Finished goods............................ 1,727 ------ Total..................................... $3,736 ====== F-17 Pro Forma Combined Condensed Financial Information (Unaudited) The following unaudited pro forma condensed financial statements give effect to the acquisition by Pinnacle Systems, Inc. ("Pinnacle" or the "Company") of certain assets and assumption of certain liabilities of the miro Digital Video Editing Division ("Miro") from Miro Computer Products AG in a business combination accounted for by the purchase method. The unaudited pro forma combined condensed financial statements are based on historical financial statements of Pinnacle as of June 30, 1997. The unaudited pro forma combined condensed balance sheet gives effect to the business combination as if it had occurred on June 30, 1997. The unaudited pro forma combined condensed statement of operations gives effect to the business combination as if it had occurred on July 1, 1996. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable under the circumstances. In the opinion of management, all adjustments have been made that are necessary to present fairly the pro forma data. Final amounts could differ from those set forth below. In the quarter ended September 30, 1997, the Company recorded a charge of $16,960,000 representing the fair value of in process research and development acquired from Miro. Such charge has not been included in the unaudited pro forma combined condensed statement of operations. The following unaudited pro forma condensed financial statements are not necessarily indicative of the future results of operations of the Company or the results of operations which would have resulted had the Company and Miro been combined during the period presented. In addition, the pro forma results are not intended to be a projection of future results. The unaudited pro forma combined condensed financial statements should be read in conjunction with the consolidated financial statements of Pinnacle for the year ended June 30, 1997, and the financial statements of Miro appearing elsewhere in this Form 8-K/A. F-18 UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET June 30, 1997 (in thousands)
Historical Pro Forma Pinnacle Adjustments Pro Forma ----------------------------------------------------- Current assets: Cash and cash equivalents 32,788 51 17,689 (15,150) Marketable securities 15,024 15,024 Accounts receivable 10,646 234 10,880 Inventories 5,497 1,767 7,264 Prepaid expenses and other current assets 528 54 582 -------- -------- Total current assets 64,483 51,439 Property and equipment, net 4,395 342 4,737 Intangibles -- 3,903 3,903 Other assets 1,129 1,129 -------- -------- Total assets 70,007 61,208 ======== ======== Current liabilities: Accounts payable 3,955 135 4,090 Accrued expenses and other 2,584 2,569 6,258 1,105 Deferred revenue 282 282 -------- -------- Total current liabilities 6,821 10,630 Long-term obligations 475 475 -------- -------- Total liabilities 7,296 11,105 Stockholders' equity: Common stock 75,316 4,352 79,668 Retained earnings (deficit) (12,605) (16,960) (29,565) -------- -------- Total stockholders' equity 62,711 50,103 -------- -------- Total liabilities and stockholders' equity 70,007 61,208 ======== ========
See notes to unaudited pro forma combined condensed financial statements. F-19 UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS Year Ended June 30, 1997 (in thousands, except per share data)
Historical Historical Pro Forma Pinnacle Miro Adjustments Pro Forma -------------- ------------------------------------------------ Net sales 37,482 36,773 74,255 Cost of sales 23,997 19,995 43,992 ----------- --------- ------- Gross profit 13,485 16,778 30,263 Operating expenses: Sales and marketing 12,667 9,836 624 23,127 Engineering and product development 7,579 2,177 9,756 General and administrative 3,702 1,664 114 5,480 In-process research and development 4,894 -- 4,894 ----------- --------- ------- Total operating expenses 28,842 13,677 43,257 ----------- --------- ------- Operating income (expense) (15,357) 3,101 (12,994) ----------- --------- ------- Other income (expense): Interest income 2,867 121 2,988 Interest expense -- (753) (753) ----------- --------- ------- Total other income (expense) 2,867 (632) 2,235 ----------- --------- ------- Income before taxes (12,490) 2,469 (10,759) Income tax expense 2,445 1,149 3,594 ----------- --------- ------- Net income (loss) (14,935) 1,320 (14,353) ============ ========= ======== Net loss per share $ (2.02) $ (1.89) ======== ======== Shares used to compute net loss per share 7,402 7,606 ======== ========
See notes to unaudited pro forma combined condensed financial statements. F-20 NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS Note 1. Basis of Presentation On August 31, 1997, Pinnacle completed the purchase of certain assets and the assumption of certain liabilities of Miro, pursuant to an Asset Purchase Agreement dated August 29, 1997 (the Agreement). Under the terms of the Agreement, the Company will pay approximately $15.2 million in cash and issue approximately 203,565 shares of common stock valued at $4.4 million. The Agreement also includes an "earnout" in which Miro will receive additional consideration if the acquired operating group achieves certain sales and profit levels during the earnout period, which is the first twelve full months following the acquisition. Specifically, the earnout consideration will equal 50% of sales generated in excess of $37 million during the earnout period, as long as operating profit exceeds 3% of sales, increasing to 85% of sales for those sales which exceed $59 million during the earnout period, as long as operating profit exceeds 3% of sales. In the event such amounts are earned, such earnout payments will be paid in common stock of the Company, and additional goodwill will be recorded. The Pinnacle statement of operations for the year ended June 30, 1997, has been combined with the Miro statement of operations for the twelve-month period ended June 30, 1997, giving effect to the business combination as if it had occurred on July 1, 1996. The pro forma combined condensed balance sheet as of June 30, 1997, gives effect to the business combination as if it had occurred on June 30, 1997. Note 2. Pro Forma Adjustments Under purchase accounting, the total purchase price will be allocated to the Company's assets and liabilities based on their relative fair values. Allocations are subject to valuations as of the date of the purchase transaction. The amount and components of the estimated purchase price along with the preliminary allocation of the estimated purchase price to assets purchased are as follows (in thousands): Cash.................................................................. $15,150 Common stock.......................................................... 4,352 Transaction costs..................................................... 1,105 ------- Total purchase price......................................... $20,607 ======= Cash.................................................................. $51 Receivables........................................................... 234 Inventory............................................................. 1,767 Prepaid expenses and other current assets............................. 54 Property, plant, and equipment........................................ 342 Goodwill and other intangibles........................................ 3,903 In-process research and development................................... 16,960 Assumed liabilities................................................... (2,704) ------- Net assets acquired........................................... $20,607 ======= F-21 The Company recorded a charge of $16,960,000 for the fair value of acquired in process research and development related to the net assets acquired. Such charge has not been included in the unaudited pro forma combined condensed statement of operations. The pro forma adjustments applied to the historical statement of operations to arrive at the pro forma combined condensed statement of operations reflects amortization expense of $624,000 related to goodwill and other intangibles. The pro forma adjustments also reflect incremental depreciation expense of $114,000 associated with the adjustment in basis of fixed assets acquired from Miro. F-22 INDEX TO EXHIBITS Exhibit No. Description - ------------------ ------------------------------------------------------- 2.1* Asset Purchase Agreement dated August 29, 1997 by and between Pinnacle Systems, Inc., Pinnacle Systems GmbH, Pinnacle Systems C.V., Pinnacle Systems Ltd., Miro Computer Products AG, Miro Computer Products, Inc. and Miro Computer Products Ltd 23.1 Consent of Arthur Andersen GmbH, Independent Public Accountants - --------------------------- *Previously filed. EX-23.1 2 CONSENT OF ARTHUR ANDERSEN GMBH CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- The Board of Directors Pinnacle Systems, Inc.: We consent to incorporation by reference in the Registration Statement (No. 333-38999) on Form S-3 of Pinnacle Systems, Inc., of our report dated November 18, 1997, relating to the combined statements of certain assets and liabilities of the Digital Video Editing division of miro Computer Products AG ("Miro") as of December 31, 1996 and 1995, and the related combined statements of revenues and expenses and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the Form 8-K of Pinnacle Systems, Inc. filed in connection with the acquisition of certain assets of Miro. /s/ Arthur Andersen ------------------------------- Hanover, Germany November 18, 1997 ARTHUR ANDERSEN Wirtschaftsprufungsgesellschaft SteuerberatungsgesellschaftmbH /s/ Dr. Maiss Dr. Maiss Stieve Wirtschaftsprufer Wirtschaftsprufer -----END PRIVACY-ENHANCED MESSAGE-----