-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Ma7K9D9y9zSxeFYtjZnL6L/SEbYI0RUeNj7i/QJOwXA6QxZAK8zyIum0I2+6FXEz vnCmk98O936wHoMacV8xlg== 0000891618-94-000231.txt : 19941117 0000891618-94-000231.hdr.sgml : 19941117 ACCESSION NUMBER: 0000891618-94-000231 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940831 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CADENCE DESIGN SYSTEMS INC CENTRAL INDEX KEY: 0000813672 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 770148231 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10606 FILM NUMBER: 94559620 BUSINESS ADDRESS: STREET 1: 555 RIVER OAKS PKWY CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4089431234 MAIL ADDRESS: STREET 1: 555 RIVER OAKS PARKWAY CITY: SAN JOSE STATE: CA ZIP: 95134 FORMER COMPANY: FORMER CONFORMED NAME: ECAD INC /DE/ DATE OF NAME CHANGE: 19880609 8-K 1 FORM 8-K FOR REDWOOD DESIGN 1 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): August 31, 1994 CADENCE DESIGN SYSTEMS, INC. - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-10606 77-0148231 - - ------------------------------- ------------ ------------------- (State or other jurisdiction of (Commission (IRS Employer incorporation) File Number) Identification No.) 555 River Oaks Parkway, San Jose, CA 95134 ----------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (408) 943-1234 -------------- 2 ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS. Note 11 of Item 1 of the Form 10-Q of Cadence Design Systems, Inc. (the "Registrant") for the quarter ended June 30, 1994, and item 5 of the Form 10-Q/A, Amendment No. 1 to the Form 10-Q for the quarter ended June 30, 1994 filed on November 14, 1994 (together, the "Second Quarter 1994 Form 10-Q") is incorporated herein by reference. The acquisition of Redwood Design Automation, Inc. ("Redwood") by the Registrant, as described therein, was closed on August 31, 1994. ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Businesses Acquired. Pursuant to paragraph (a)(4) of Item 7 of Form 8-K, the following financial statements were omitted from the disclosure contained in the Second Quarter 1994 Form 10-Q but are filed herewith: (i) Audited balance sheets of Redwood as of January 31, 1993 and 1994, the related audited statements of operations, stockholders' equity and cash flows of Redwood for the years ended January 31, 1992, 1993 and 1994 and a manually signed report of Arthur Andersen LLP with respect to the balance sheets of Redwood as of January 31, 1993 and 1994 and the statements of operations, stockholders' equity and cash flows for the years ended January 31, 1992, 1993 and 1994, which are attached as Exhibit 99.01 hereto; (ii) Unaudited balance sheet of Redwood as of July 31, 1994 and the related unaudited statements of operations and cash flows of Redwood for the six month periods ended July 31, 1993 and 1994, which are attached as Exhibit 99.02 hereto. (b) Pro Forma Financial Information. Pursuant to paragraph (b)(2) of Item 7, the unaudited pro forma condensed combined balance sheet of the Registrant and Redwood as of June 30, 1994 and the unaudited pro forma condensed combined statements of operations of the Registrant and Redwood for the year ended December 31, 1993 and for the six months ended June 30, 1994 are attached as Exhibit 99.03 hereto. The unaudited pro forma condensed combined financial statements give effect to the merger of the Registrant and Redwood on a purchase accounting basis. The pro forma condensed combined balance sheet assumes the merger took place on June 30, 1994 and combines the June 30, 1994 balance sheet of the Registrant with the July 31, 1994 balance sheet of Redwood. The pro forma combined statements of income assume that the merger took place as of the beginning of each company's most recently completed fiscal year and combine the Registrant's historical results for the year ended December 31, 1993 and the six months ended June 30, 1994 with the corresponding results for Redwood for its fiscal year ended January 31, 1994 and the six months ended July 31, 1994, respectively. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the acquisition of Redwood by the Registrant been consummated at the beginning of the periods presented, nor is it necessarily indicative of future operating results or financial position. These pro forma financial statements are based on and should be read in conjunction with the historical consolidated financial statements and the related notes thereto of the Registrant and Redwood. 2 3 (c) Exhibits. 2.01 Agreement of Merger and Plan of Reorganization by and among Registrant, Simon Software, Inc. and Redwood dated as of July 8, 1994. (Filed as Exhibit 2.01 to the Registrant's Form 10-Q/A, Amendment No. 1 to the Registrant's Form 10-Q, filed November 14, 1994 (the "Form 10-Q/A"), and incorporated herein by reference). 2.02 Agreement of Merger dated as of August 1, 1994 between Redwood and CDS Acquisition Corporation. (Filed as Exhibit 2.02 to the Registrant's Form 10-Q/A, Amendment No. 1 to the Registrant's Form 10-Q and incorporated herein by reference). 23.01 Consent of Arthur Andersen LLP. 99.01 Audited balance sheets of Redwood as of January 31, 1993 and 1994, the related audited statements of operations, stockholders' equity and cash flows of Redwood for the years ended January 31, 1992, 1993 and 1994 and a manually signed report of Arthur Andersen LLP with respect to the balance sheets of Redwood as of January 31, 1993 and 1994 and the statements of operations, stockholders' equity and cash flows for the years ended January 31, 1992, 1993 and 1994. 99.02 Unaudited balance sheet of Redwood as of July 31, 1994 and the related unaudited statements of operations and cash flows of Redwood for the six month periods ended July 31, 1993 and 1994. 99.03 Unaudited pro forma condensed combined balance sheet of the Registrant and Redwood as of June 30, 1994 and the unaudited pro forma condensed combined statements of operations of the Registrant and Redwood for the year ended December 31, 1993 and for the six months ended June 30, 1994. 3 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 14, 1994 CADENCE DESIGN SYSTEMS, INC. By: /s/ H. Raymond Bingham --------------------------- H. RAYMOND BINGHAM Executive Vice President and Chief Financial Officer 4 5 INDEX TO EXHIBITS Exhibit Number Description of Exhibit - - ------- ---------------------- 2.01 Agreement of Merger and Plan of Reorganization by and among Registrant, Simon Software, Inc. and Redwood dated as of July 8, 1994. (Filed as Exhibit 2.01 to the Registrant's Form 10-Q/A, Amendment No. 1 to the Registrant's Form 10-Q, filed November 14, 1994 (the "Form 10-Q/A"), and incorporated herein by reference). 2.02 Agreement of Merger dated as of August 1, 1994 between Redwood and CDS Acquisition Corporation. (Filed as Exhibit 2.02 to the Registrant's Form 10-Q/A, Amendment No. 1 to the Registrant's Form 10-Q and incorporated herein by reference). 23.01 Consent of Arthur Andersen LLP. 99.01 Audited balance sheets of Redwood as of January 31, 1993 and 1994, the related audited statements of operations, stockholders' equity and cash flows of Redwood for the years ended January 31, 1992, 1993 and 1994 and a manually signed report of Arthur Andersen LLP with respect to the balance sheets of Redwood as of January 31, 1993 and 1994 and the statements of operations, stockholders' equity and cash flows for the years ended January 31, 1992, 1993 and 1994. 99.02 Unaudited balance sheet of Redwood as of July 31, 1994 and the related unaudited statements of operations and cash flows of Redwood for the six month periods ended July 31, 1993 and 1994. 99.03 Unaudited pro forma condensed combined balance sheet of the Registrant and Redwood as of June 30, 1994 and the unaudited pro forma condensed combined statements of operations of the Registrant and Redwood for the year ended December 31, 1993 and for the six months ended June 30, 1994. 6 EXHIBIT 23.01 Consent of Arthur Andersen LLP 7 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report on the financial statements of Redwood Design Automation, Inc. included in this Form 8-K, into the previously filed Registration Statements of Cadence Design Systems, Inc. on Forms S-8 and S-3 (File Nos. 33-36110, 33-43025, 33-45001, 33-48371, 33-53875 and 33-53913). /s/ ARTHUR ANDERSEN LLP ----------------------------- ARTHUR ANDERSEN LLP San Jose, California November 11, 1994 EX-99.01 2 AUITED BALANCE SHEETS OF REDWOOD 1 EXHIBIT 99.01 Audited balance sheets of Redwood as of January 31, 1993 and 1994, the related audited statements of operations, stockholders' equity and cash flows of Redwood for the years ended January 31, 1992, 1993 and 1994 and a manually signed report of Arthur Andersen LLP with respect to the balance sheets of Redwood Design Automation, Inc. as of January 31, 1993 and 1994 and the statements of operations, stockholders' equity and cash flows for the years ended January 31, 1992, 1993 and 1994. 2 REDWOOD DESIGN AUTOMATION, INC. (A development stage company) CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JANUARY 31, 1994, 1993 AND 1992 TOGETHER WITH AUDITORS' REPORT 3 Report of Independent Public Accountants To Redwood Design Automation, Inc.: We have audited the accompanying consolidated balance sheets of Redwood Design Automation, Inc. (a California corporation in the development stage) and subsidiaries as of January 31, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended January 31, 1994, and for the period from inception (January 2, 1991) to January 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Redwood Design Automation, Inc. and subsidiaries as of January 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 1994, and for the period from inception to January 31, 1994, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP --------------------------------------- Arthur Andersen LLP San Jose, California November 11, 1994 4 REDWOOD DESIGN AUTOMATION, INC. (A development stage company) CONSOLIDATED BALANCE SHEETS JANUARY 31, 1994 AND 1993 ASSETS
1994 1993 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $ 1,114,809 $ 1,503,392 Accounts receivable, trade 151,842 - Prepaid expenses and other 122,934 61,946 ----------- ----------- Total current assets 1,389,585 1,565,338 ----------- ----------- PROPERTY AND EQUIPMENT, at cost: Equipment 792,234 531,671 Furniture and fixtures 188,656 99,410 Purchased software 283,994 152,435 Leasehold improvements 23,665 16,792 ----------- ----------- 1,288,549 800,308 Less- Accumulated depreciation and amortization (601,721) (262,925) ----------- ----------- Net property and equipment 686,828 537,383 ----------- ----------- OTHER ASSETS 51,354 10,682 ----------- ----------- $ 2,127,767 $ 2,113,403 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of capital lease obligations $ 327,705 $ 198,967 Accounts payable 89,157 65,321 Accrued compensation and related expenses 115,525 54,637 Deferred revenues 17,411 100,000 ----------- ----------- Total current liabilities 549,798 418,925 ----------- ----------- DEFERRED RENT 6,042 15,506 ----------- ----------- CAPITAL LEASE OBLIGATIONS, net of current portion 432,934 386,076 ----------- ----------- COMMITMENTS (Note 4) STOCKHOLDERS' EQUITY: Convertible preferred stock- Authorized--13,000,000 shares Series A, aggregate liquidating preference ($370,000)- Authorized and outstanding--740,000 shares in 1994 and 1993 363,550 363,550 Series B, aggregate liquidating preference ($5,075,000)- Authorized and outstanding--5,516,306 shares in 1994 and 1993 5,050,677 5,050,677 Series C, aggregate liquidating preference ($5,095,000)- Authorized and outstanding--4,469,302 shares in 1994 5,062,446 - Common stock, no par value Authorized--25,000,000 shares Outstanding--2,212,850 and 2,156,700 shares in 1994 and 1993 79,845 75,915 Notes receivable from stockholders (20,125) (20,125) Deficit accumulated during development stage (9,397,400) (4,177,121) ----------- ----------- Total stockholders' equity 1,138,993 1,292,896 ----------- ----------- $ 2,127,767 $ 2,113,403 =========== ===========
The accompanying notes are an integral part of these balance sheets. 5 REDWOOD DESIGN AUTOMATION, INC. (A development stage company) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JANUARY 31, 1994, 1993 AND 1992 AND FOR THE PERIOD FROM INCEPTION (JANUARY 2, 1991) TO JANUARY 31, 1994
Inception 1994 1993 1992 to Date ----------- ----------- ----------- ----------- REVENUES $ 311,524 $ - $ - $ 311,524 ----------- ----------- ----------- ----------- COSTS AND EXPENSES: Cost of revenues 286,549 - - 286,549 Research and development 2,379,727 1,548,390 667,072 4,595,189 Sales and marketing 2,273,025 935,856 348,500 3,557,381 General and administrative 557,888 528,283 361,791 1,447,962 ----------- ----------- ----------- ----------- Total operating expenses 5,497,189 3,012,529 1,377,363 9,887,081 ----------- ----------- ----------- ----------- Loss from operations (5,185,665) (3,012,529) (1,377,363) (9,575,557) ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest expense (130,774) (85,774) (27,925) (244,473) Interest income 80,038 109,656 216,814 406,508 Other income 16,122 - - 16,122 ----------- ----------- ----------- ----------- Total other income (expense) (34,614) 23,882 188,889 178,157 ----------- ----------- ----------- ----------- Net loss $(5,220,279) $(2,988,647) $(1,188,474) $(9,397,400) =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 6 REDWOOD DESIGN AUTOMATION, INC. (A development stage company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION (JANUARY 2, 1991) TO JANUARY 31, 1994
Convertible Preferred Stock Common Stock ----------------------------- ------------------------- Shares Amount Shares Amount ---------- ---------- ---------- ---------- Issuance of common stock at $.0318 per share to founders for cash and notes receivable (January 1991) - $ - 2,460,700 $78,295 Issuance of Series A convertible preferred stock at $.50 per share, net of issuance costs of $6,450 (January 1991) 740,000 363,550 - - Issuance of Series B convertible preferred stock at $.92 per share, net of issuance costs of $24,325 (April 1991) 5,516,306 5,050,677 - - Repurchase of common stock at $.0318 per share from founders (May 1991) - - (495,000) (15,750) Exercises of stock options at $.07 per share (September 1991) - - 1,000 70 Issuance of common stock at $.07 per share for cash to consultants under the 1991 Employee Stock Plan (August - October 1991) - - 190,000 13,300 Net loss - - - - ---------- ----------- --------- ------- BALANCE, JANUARY 31, 1992 6,256,306 5,414,227 2,156,700 75,915 Net loss - - - - ---------- ----------- --------- ------- BALANCE, JANUARY 31, 1993 6,256,306 5,414,227 2,156,700 75,915 Issuance of Series C convertible preferred stock at $1.14 per share, net of issuance costs of $32,554 (March 1993) 4,469,302 5,062,446 - - Exercises of stock options at $.07 per share (February - December 1993) - - 56,150 3,930 Net loss - - - - ---------- ----------- --------- ------- BALANCE, JANUARY 31, 1994 10,725,608 $10,476,673 2,212,850 $79,845 ========== =========== ========= ======= Deficit Notes Accumulated Receivable During the Total From Development Stockholders' Stockholders Stage Equity ------------ ------------ ------------- Issuance of common stock at $.0318 per share to founders for cash and notes receivable (January 1991) $(35,875) $ - $ 42,420 Issuance of Series A convertible preferred stock at $.50 per share, net of issuance costs of $6,450 (January 1991) - - 363,550 Issuance of Series B convertible preferred stock at $.92 per share, net of issuance costs of $24,325 (April 1991) - - 5,050,677 Repurchase of common stock at $.0318 per share from founders (May 1991) 15,750 - - Exercises of stock options at $.07 per share (September 1991) - - 70 Issuance of common stock at $.07 per share for cash to consultants under the 1991 Employee Stock Plan (August - October 1991) - - 13,300 Net loss - (1,188,474) (1,188,474) -------- ----------- ---------- BALANCE, JANUARY 31, 1992 (20,125) (1,188,474) 4,281,543 Net loss - (2,988,647) (2,988,647) -------- ----------- ---------- BALANCE, JANUARY 31, 1993 (20,125) (4,177,121) 1,292,896 Issuance of Series C convertible preferred stock at $1.14 per share, net of issuance costs of $32,554 (March 1993) - - 5,062,446 Exercises of stock options at $.07 per share (February - December 1993) - - 3,930 Net loss - (5,220,279) (5,220,279) -------- ----------- ---------- BALANCE, JANUARY 31, 1994 $(20,125) $(9,397,400) $1,138,993 ======== =========== ==========
The accompanying notes are an integral part of these financial statements. 7 REDWOOD DESIGN AUTOMATION, INC. (A development stage company) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JANUARY 31, 1994, 1993 AND 1992 AND FOR THE PERIOD FROM INCEPTION (JANUARY 2, 1991) TO JANUARY 31, 1994
Inception 1994 1993 1992 to Date ----------- ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(5,220,279) $(2,988,647) $(1,188,474) $(9,397,400) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization 340,094 187,594 78,036 605,724 Deferred rent (9,464) 6,151 9,355 6,042 Changes in net assets and liabilities- Accounts receivable, trade (151,842) - - (151,842) Prepaid expenses and other (60,988) (43,062) (18,884) (122,934) Other assets (40,672) 400 (7,296) (47,568) Accounts payable 23,836 47,761 17,560 89,157 Accrued compensation and related expenses 60,888 24,289 30,348 115,525 Deferred revenues (82,589) 100,000 - 17,411 ----------- ----------- ----------- ----------- Net cash used in operating activities (5,141,016) (2,665,514) (1,079,355) (8,885,885) ----------- ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (63,078) (14,267) (63,375) (140,720) Organization costs - - (6,491) (6,491) ----------- ----------- ----------- ----------- Net cash used in investing activities (63,078) (14,267) (69,866) (147,211) ----------- ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital lease obligations (250,865) (108,692) (28,931) (388,488) Net proceeds from sale of preferred stock 5,062,446 - 5,414,227 10,476,673 Net proceeds from sale of common stock 3,930 - 55,790 59,720 ----------- ----------- ----------- ----------- Net cash provided by (used in) financing activities 4,815,511 (108,692) 5,441,086 10,147,905 ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (388,583) (2,788,473) 4,291,865 1,114,809 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,503,392 4,291,865 - - ----------- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,114,809 $ 1,503,392 $ 4,291,865 $ 1,114,809 =========== =========== =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest expense paid $ 130,774 $ 85,774 $ 27,925 $ 244,473 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 8 REDWOOD DESIGN AUTOMATION, INC. (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 1994 1. ORGANIZATION AND OPERATIONS OF THE COMPANY: Redwood Design Automation, Inc. (the "Company") was incorporated on January 2, 1991 for the purpose of designing, developing and marketing software for use in Electronic System Design. The Company's products are software tools which allow engineers to use visualization technologies to analyze and verify the design of hardware and software for integrated circuits and printed circuit boards. To date, the Company's efforts have been focused on raising capital of approximately $10.5 million, developing its products and applications, establishing marketing channels and recruiting personnel. The Company is in the development stage and, consequently, is subject to risks associated with a development stage company, including reliance on key individuals, competition from larger, more established entities, continued need for additional financing and rapid technological changes. During fiscal 1993, the Company changed its fiscal year from December 31 to January 31. Although the Company was incorporated on January 2, 1991, its activities during the first month were limited; consequently, the financial statements for the year ended January 31, 1992, are for the period from inception. In August 1994, all of the Company's outstanding stock was acquired by Cadence Design Systems, Inc.(see Note 10). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The consolidated financial statements include the accounts of the Company and its two wholly-owned subsidiaries after elimination of intercompany transactions and balances. Cumulative gains and losses from the translation of the foreign subsidiaries' financial statements, which were insignificant, have been included in other income in the accompanying consolidated statements of operations. Cash and Cash Equivalents For purposes of the statements of cash flows, the Company considers all investments with an original maturity of three months or less to be cash equivalents. As of January 31, 1994 and 1993, all of the Company's cash was deposited in checking, money market accounts and in short-term certificates of deposit. 9 - 2 - Supplemental Disclosure of Non-Cash Investing and Financing Activities The Company acquired property and equipment by entering into capital lease obligations in the amounts of approximately $480,000, $370,000 and $350,000 in fiscal 1994, 1993 and 1992, respectively. Software Development Costs In accordance with Statement of Financial Accounting Standards No. 86, the Company capitalizes eligible computer software development costs upon the establishment of technological feasibility, which it has defined as completion of a working model. As of January 31, 1994, the amount of eligible costs to be capitalized has been minimal and, accordingly, the Company has not capitalized any software development costs. Depreciation and Amortization Property and equipment are stated at cost. Depreciation and amortization is provided using the straight-line method over the estimated useful lives of the assets (two to three years) or the term of the lease. Revenue Recognition Revenues from software licenses are recognized upon shipment of the software if there are no, or insignificant, post-delivery obligations and payment is due within one year. The Company's support agreements generally call for the Company to provide technical support and certain updates to customers. Revenue on support and software update rights is recognized ratably over the term of the support agreement. 3. CAPITAL LEASE OBLIGATIONS: The Company leases certain equipment, software, furniture and fixtures under capital lease agreements with a net book value of approximately $615,000 at January 31, 1994. Future minimum lease payments at January 31, 1994 are summarized as follows:
Year Ending January 31, ----------- 1995 $ 399,555 1996 356,166 1997 156,426 1998 17,262 --------- Total minimum lease payments 929,409 Less- Amount representing interest (14% to 18%) (168,770) --------- Present value of minimum lease payments 760,639 Less- Current portion (327,705) --------- Long-term portion $ 432,934 =========
10 - 3 - In connection with the above leases, the Company has issued warrants to purchase 74,728 and 71,739 shares of common stock at $.92 and $.836 per share, respectively. These warrants may be exercised at any time and expire on the earlier of the effective date of an initial public offering or ten years from the execution of the warrant agreements (April 2002 and July 2001). No value has been assigned to these warrants in the accompanying consolidated financial statements. 4. COMMITMENTS: The Company leases three office facilities under operating leases that extend through August 1996. One lease agreement contains a provision that allows the Company to terminate the lease by providing six months notice. However, in the event the Company does terminate the lease before the full term of such lease, the Company must pay the balance on certain leasehold improvements (at January 31, 1994, the balance was approximately $28,300). In addition, the lease agreement provides for graduated rental payments. The Company has recorded rent expense on a straight-line basis and, as a result, the Company has recorded deferred rent in the accompanying consolidated balance sheets of $6,042 and $15,506 as of January 31, 1994 and 1993, respectively. The minimum future lease commitments are approximately:
Year Ending January 31, ----------- 1995 $196,000 1996 152,000 1997 88,000 -------- $436,000 ========
Rent expense for the years ended January 31, 1994, 1993 and 1992 and the period from inception to January 31, 1994 was approximately $180,000, $88,000, $50,000 and $318,000, respectively. 5. CONVERTIBLE PREFERRED STOCK: The relative rights, preferences, privileges and restrictions granted to or imposed on the respective classes of the shares of capital stock or the holders thereof are as follows: Dividends The holders of Series B and C preferred stock are entitled to receive dividends at a rate of $.092 and $.114 per share per annum, respectively payable in preference to any payment of dividends on Series A or common stock. In turn, holders of Series A preferred stock are entitled to receive dividends at a rate of $.05 per share per annum, payable in preference to any payment of dividends on common stock. The dividends are not cumulative and do not accrue unless declared by the Board of Directors. 11 - 4 - Liquidation Preference In the event of any liquidation, dissolution or winding up of the Company, or any merger or sale of all or substantially all the assets of the Company, holders of Series B and Series C preferred stock are entitled to receive, in preference to holders of Series A and common stock, the amount of $.92 and $1.14 per share, respectively. Such amounts will be adjusted for any recapitalization as defined, plus all declared but unpaid dividends. In turn, holders of Series A are entitled to receive, in preference to holders of common stock, the amount of $.50 per share for each share of Series A, adjusted for any recapitalization as defined, plus all declared but unpaid dividends. After payment of the above amounts first to the Series B and C stockholders and then to the Series A stockholders, any remaining assets would then be distributed ratably between the Series A, B and C stockholders and the common stockholders on an as-converted basis. Voting Rights The holders of the Series A, B and C preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such preferred stock is convertible as of the record date. Conversion Each share of Series A, B and C preferred stock is convertible into 1.1, 1.1 and 1 share, respectively, of common stock, subject to adjustment for dilution, at the option of the holder thereof, at any time after the date of issuance. In addition, each share of preferred stock will automatically convert into common stock at the then conversion price upon a majority vote by the holders of each series of preferred stock or upon the closing of an initial public offering of the Company's common stock at not less than $5.00 per share and an aggregate offering price of not less than $10,000,000. Right to Purchase Additional New Securities The holders of Series B and C preferred stock are entitled to purchase a portion of certain new securities, which the Company may propose to issue, in order that the holders of Series B and C may maintain a pro rata ownership interest in the Company. Registration Rights The Series B and C stockholders are entitled to certain demand registration rights (if at least 40% of the Series B and Series C stockholders so request) or to certain piggyback registration rights (in the event the Company elects to register additional securities after the completion of an initial public offering). 12 - 5 - 6. COMMON STOCK: The Company has authorized 25,000,000 shares of common stock. In July 1991, the Company effected a 1.1 for 1 stock split whereby each outstanding share of common stock was split and converted into 1.1 shares of common stock. All common stock shares and per share prices have been adjusted for this stock split. 1991 Employee Stock Plan In 1991, the Company adopted the 1991 Employee Stock Plan (the "Plan") to provide additional incentives for employees and consultants and authorized the issuance of 1,925,000 shares thereunder. During March 1993, the Board of Directors authorized an increase of 500,000 shares to be issued under the Plan. Under the Plan, the Board of Directors may grant incentive stock options, nonstatutory stock options, or stock purchase rights to employees or consultants. The price per share is to be determined by the Board of Directors and may not be less than 85% of the fair market value on the date of grant for nonstatutory stock options or stock purchase rights and not less than fair value for incentive stock options. The options and stock purchase rights generally vest ratably over a five-year period from the commencement date in the case of new employees or from the grant date for existing employees or consultants. The stock options or stock purchase rights expire after 10 years if not exercised. Below is a summary of activity under the above plan for the period from inception to January 31, 1994:
Shares Plan Per Share Available for Activity Price Future Grant ---------- --------- ------------- Authorized 1,925,000 Granted - Options 609,500 $.07 (609,500) - Stock purchase rights 190,000 .07 (190,000) Exercised - Options (1,000) .07 - - Stock purchase rights (190,000) .07 - --------- --------- Balance, January 31, 1992 608,500 1,125,500 Granted - Options 536,500 .07 (536,500) --------- --------- Balance, January 31, 1993 1,145,000 589,000 Authorized 500,000 Granted - Options 485,000 .07 (485,000) Exercised - Options (56,150) .07 - Cancelled - Options (27,350) .07 27,350 --------- --------- Balance, January 31, 1994 1,546,500 631,350 ========= =========
As of January 31, 1994, options for 512,825 shares are exercisable at $.07 per share. 13 - 6 - Founders Stock Common stock issued to the founders and to certain employees/consultants vest over five years and are subject to certain repurchase rights. The Company has the right of first refusal to repurchase any vested shares at the then fair value, or repurchase unvested shares, at the original purchase price. In the event the Company is unable to or elects not to exercise such rights, the holders of the Series B and Series C preferred stock have a right of first refusal, subordinate to the Company's right, to purchase on a pro rata basis shares not repurchased by the Company. Of the 2,212,850 shares of common stock outstanding as of January 31, 1994, 773,833 unvested shares are subject to repurchase at the original purchase price. As of January 31, 1994, the Company has reserved shares of common stock for future issuance as follows:
Number of Shares ---------- Conversion of Series A 814,000 Conversion of Series B 6,067,937 Conversion of Series C 4,469,302 Exercise of stock options 2,177,850 Exercise of stock purchase warrants 146,467 ---------- 13,675,556 ==========
7. 401(K) RETIREMENT SAVINGS PLAN: During 1991, the Company adopted a 401(k) Retirement Savings Plan (the "Retirement Plan") which plan allows employees to contribute a percentage of their annual compensation on a pretax basis to the Retirement Plan. All employees over 21 years of age are eligible to participate. The Retirement Plan includes a provision through which the Company may contribute to the Retirement Plan. For the years ended January 31, 1994, 1993 and 1992, no contributions to the Retirement Plan were made by the Company. 8. RELATED PARTY TRANSACTIONS: A vendor of the Company, which is a preferred stockholder, received approximately $24,000, $60,000 and $16,000 for services during fiscal 1994, 1993 and 1992, respectively. In addition, four consultants to the Company, who are also stockholders, were paid a total of approximately $21,000 during fiscal 1994, $65,000 during fiscal 1993 and $20,000 during fiscal 1992 for services rendered. 9. INCOME TAXES: Through January 31, 1993, the Company accounted for income taxes pursuant to Accounting Principles Board Opinion No. 11 (APB 11). Effective February 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. 14 - 7 - A valuation allowance is recognized to the extent that deferred tax assets are not likely to be realized. The adoption of SFAS 109 did not have a material impact on current or prior year financial statements. Deferred tax assets under SFAS 109 were comprised of the following:
February 1, January 31, 1993 1994 ----------- ----------- Net operating loss carryforwards $ 340,867 $ 1,355,081 Temporary book to tax timing differences, net 1,445,253 2,304,622 General business credit carryforwards 168,003 168,003 ----------- ----------- Total deferred tax assets 1,954,123 3,827,706 Deferred tax assets valuation allowance (1,954,123) (3,827,706) ----------- ----------- Net deferred tax assets $ - $ - =========== ===========
The Company had net operating loss carryforwards of $4,828,302 at January 31, 1994. The Company also had general business credit carryforwards of $168,003 at January 31, 1994. These carryforwards expire through the year 2008. Under current tax law, net operating loss carryforwards available in any given year may be limited upon the occurrence of certain events, including significant changes in ownership interests. 10. ACQUISTION OF THE COMPANY: On August 31, 1994, the Company was acquired by Cadence Design Systems, Inc. ("Cadence"). Cadence issued approximately 419,000 shares of its common stock for all of the shares of the Company's common and preferred stock outstanding. In addition, Cadence advanced to the Company $2.5 million in cash prior to the effectiveness of the acquisition; upon completion of the merger, repayment of the $2.5 million advance was waived. All of the Company's outstanding stock options were canceled and were not assumed by Cadence. Subsequent to the date of acquisition, the Company's operations were merged into those of Cadence. EX-99.02 3 UNAUDITED BALANCE SHEET OF REDWOOD 1 EXHIBIT 99.02 Unaudited balance sheet of Redwood as of July 31, 1994 and the related unaudited statements of operations and cash flows of Redwood for the six month periods ended July 31, 1993 and 1994. 2 REDWOOD DESIGN AUTOMATION, INC. CONDENSED CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
July 31, 1994 ----------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 1,751 Accounts receivable 392 Prepaid expenses and other current assets 103 -------- Total current assets 2,246 Property and equipment, net 531 Other assets 50 -------- Total assets $ 2,827 ======== LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Current portion of capital lease obligations $ 329 Accounts payable 207 Accrued liabilities 134 Deferred revenue 331 -------- Total current liabilities 1,001 Long-term obligations 2,817 Stockholders' Deficit: Convertible preferred stock 10,900 Common stock 80 Notes receivable from stockholders (20) Accumulated deficit (11,951) -------- Total stockholders' deficit (991) -------- Total liabilities and stockholders' deficit $ 2,827 ========
The accompanying notes are an integral part of these statements. 3 REDWOOD DESIGN AUTOMATION, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED)
Six Months Ended ---------------- July 31, July 31, Inception to 1994 1993 July 31, 1994 ---- ---- ------------- REVENUE $ 434 $ 100 $ 745 ------- ------- --------- OPERATING EXPENSES: Cost of revenue 208 117 495 Market development 1,181 1,114 4,738 Product development 1,225 1,150 5,820 General and administrative 325 305 1,773 ------- ------- --------- Total operating expenses 2,939 2,686 12,826 ------- ------- --------- Operating loss (2,505) (2,586) (12,081) Other income (expense), net (49) - - - 130 ------- ------- --------- NET LOSS $(2,554) $(2,586) $ (11,951) ======= ======= =========
The accompanying notes are an integral part of these statements. 4 REDWOOD DESIGN AUTOMATION, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Six Months Ended ---------------- July 31, July 31, Inception to 1994 1993 July 31, 1994 -------- -------- ------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 1,115 $ 1,503 $ - - - ------- ------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss (2,554) (2,586) (11,951) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 197 155 802 Deferred rent (5) (4) 1 Net changes in current assets and liabilities: Increase in accounts receivable (240) - - - (392) Decrease (increase) in prepaid expenses and other assets 20 (35) (103) Increase in accrued liabilities and payables 136 9 341 Increase (decrease) in deferred revenue 314 (50) 331 ------- ------- -------- Net cash used for operating activities (2,132) (2,511) (10,971) ------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (5) (7) (146) Increase in other assets (1) (41) (55) ------- ------- -------- Net cash used for investing activities (6) (48) (201) ------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of secured debt 2,500 - - - 2,500 Principal payments on capital leases (149) (112) (537) Proceeds from sale of convertible preferred stock 423 5,062 10,900 Proceeds from sale of common stock - - - 3 60 ------- ------- -------- Net cash provided by financing activities 2,774 4,953 12,923 ------- ------- -------- INCREASE IN CASH AND CASH EQUIVALENTS 636 2,394 1,751 ------- ------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,751 $ 3,897 $ 1,751 ======= ======= ========
The accompanying notes are an integral part of these statements. 5 REDWOOD DESIGN AUTOMATION, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included elsewhere within this filing. 2. In June and July, 1994 Cadence Design Systems, Inc. (Cadence) loaned the Company $2.5 million in the form of a $1.0 million secured note payable due August 30, 1996 and a $1.5 million secured note payable due September 30, 1996. Interest on both notes is compounded monthly at a prime rate. In July 1994, the Company and Cadence entered into a definitive merger agreement which provides that all of the Company's outstanding stock will be exchanged for approximately 419,000 shares of common stock of Cadence. In addition, upon completion of the merger, repayment of the $2.5 million advanced to the Company will be waived. The acquisition was completed during the third quarter of 1994. 3. Effective February 1, 1994 the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". There was no effect on the Company's prior or current year's financial statements due to the adoption of this statement. EX-99.03 4 UNAUDITED PRO FORMA CONDENSED 1 EXHIBIT 99.03 Unaudited pro forma condensed combined balance sheet of the Registrant and Redwood as of June 30, 1994 and the unaudited pro forma condensed combined statements of operations of the Registrant and Redwood for the year ended December 31, 1993 and for the six months ended June 30, 1994. 2 PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following unaudited pro forma combined condensed financial statements reflect the acquisition by Cadence Design Systems, Inc. ("the Company") of Redwood Design Automation, Inc. ("Redwood") in exchange for approximately 419,000 shares of the Company's common stock. The acquisition was accounted for using the purchase method of accounting. The pro forma condensed combined balance sheet assumes the merger took place on June 30, 1994 and combines the June 30, 1994 balance sheet of the Company with the July 31, 1994 balance sheet of Redwood. The pro forma combined statements of operations assume that the merger took place as of the beginning of each company's most recently completed fiscal year and combines the Company's statements of operations for the year ended December 31, 1993 and the six months ended June 30, 1994 with Redwood's statements of operations for the year ended January 31, 1994 and the six months ended July 31, 1994, respectively. The pro forma statements of operations do not include the effect of any nonrecurring charges directly attributable to the acquisition. The pro forma combined statements of operations are not necessarily indicative of operating results which would have been achieved had the merger been consummated as of the beginning of such periods and should not be construed as representative of future operations. The pro forma combined condensed financial statements should be read in conjunction with the historical consolidated financial statements and the related notes thereto of the Company for the year ended December 31, 1993, previously filed on Form 10-K and for the six months ended June 30, 1994, previously filed on Form 10-Q and the financial statements of Redwood which are included elsewhere herein. 3 CADENCE DESIGN SYSTEMS, INC. AND REDWOOD DESIGN AUTOMATION, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 30, 1994 (IN THOUSANDS) (UNAUDITED)
ADJUSTMENTS FOR PURCHASE PRO FORMA CADENCE REDWOOD DEBIT CREDIT BALANCES ------- -------- ------- ------- -------- ASSETS: CURRENT ASSETS: CASH AND CASH INVESTMENTS $ 68,387 $ 1,751 $ 0 $ 0 $ 70,138 SHORT-TERM INVESTMENTS 28,412 0 0 0 28,412 ACCOUNTS RECEIVABLE, NET 74,156 392 0 0 74,548 INVENTORIES 5,204 0 0 0 5,204 OTHER CURRENT ASSETS 15,185 103 0 0 15,288 -------- -------- ------- ------- -------- TOTAL CURRENT ASSETS 191,344 2,246 0 0 193,590 NET PROPERTY & EQUIPMENT 93,421 531 0 0 93,952 OTHER ASSETS 11,227 50 0 2,500 (2) 8,777 PURCHASED SOFTWARE & INTANGIBLES 10,189 0 6,755 (1,3,4) 4,653 (5) 12,291 CAPITALIZED SOFTWARE 30,484 0 0 0 30,484 -------- -------- ------- ------- -------- TOTAL ASSETS $336,665 $ 2,827 $ 6,755 $ 7,153 $339,094 ======== ======== ======= ======= ======== LIABILITIES: ACCOUNTS PAYABLE $13,598 $ 207 $ 0 $ 0 $ 13,805 LOANS & LEASES - CURRENT 2,792 329 0 0 3,121 ACCRUED LIABILITIES 52,317 134 0 1,214 (4) 53,665 DEFERRED REVENUE 52,731 331 0 0 53,062 INCOME TAXES PAYABLE 5,548 0 0 0 5,548 -------- -------- ------- ------- -------- TOTAL CURRENT LIABILITIES 126,986 1,001 0 1,214 129,201 -------- -------- ------- ------- -------- LOANS & LEASES - LONG TERM 2,292 2,817 2,500 (2) 0 2,609 DEFERRED INCOME TAXES 2,202 0 0 0 2,202 LEASE LIABILITIES 9,819 0 0 0 9,819 OTHER LONG TERM LIABILITIES 2,558 0 0 0 2,558 -------- -------- ------- ------- -------- TOTAL LONG TERM LIABILITIES 16,871 2,817 2,500 0 17,188 -------- -------- ------- ------- -------- PUT WARRANTS 44,270 0 0 0 44,270 -------- -------- ------- ------- -------- STOCKHOLDERS' EQUITY (DEFICIT): PREFERRED STOCK 0 10,900 10,900 (3) 0 0 COMMON STOCK 465 80 80 (3) 4 (1) 469 STOCK NOTES RECEIVABLE (3) (20) 0 20 (3) (3) PAID-IN CAPITAL 209,602 0 0 4,546 (1) 214,148 TREASURY STOCK (76,750) 0 0 0 (76,750) RETAINED EARNINGS (DEFICIT) 14,292 (11,951) 4,653 (5) 11,951 (3) 9,639 ACCUMULATED TRANSLATION ADJUSTMENT 932 0 0 0 932 -------- -------- ------- ------- -------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 148,538 (991) 15,633 16,521 148,435 -------- -------- ------- ------- -------- TOTAL LIABILITIES & EQUITY $336,665 $ 2,827 $18,133 $17,735 $339,094 ======== ======== ======= ======= ======== (1) ENTRY TO RECORD THE ACQUISITION OF REDWOOD BY THE ISSUANCE OF APPROXIMATELY 419,000 SHARES OF THE COMPANY'S COMMON STOCK (2) ENTRY TO ELIMINATE NOTE RECEIVABLE AND LOAN (3) ENTRY TO ELIMINATE THE STOCKHOLDERS' DEFICIT OF REDWOOD (4) ENTRY TO RECORD OBLIGATIONS OF REDWOOD TO STOCKHOLDERS AND OTHERS PAYABLE PRIOR TO THE CLOSING OF THE ACQUISITION AND FACILITY RELOCATION COSTS (5) ENTRY TO WRITE-OFF IN-PROCESS RESEARCH AND DEVELOPMENT AS IT HAD NOT REACHED TECHNOLOGICAL FEASIBILITY
4 CADENCE DESIGN SYSTEMS, INC. AND REDWOOD DESIGN AUTOMATION, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993 (IN THOUSANDS) (UNAUDITED)
PRO FORMA ADJUSTMENTS PRO FORMA CADENCE REDWOOD DEBIT CREDIT RESULTS ------- ------- ----- ------ --------- REVENUE: PRODUCT $241,011 $ 312 $ 0 $ 0 $241,323 MAINTENANCE 127,612 0 0 0 127,612 -------- ------- ------- ----- -------- TOTAL REVENUE 368,623 312 0 0 368,935 -------- ------- ------- ----- -------- COST OF REVENUE: PRODUCT 73,594 287 1,051 (1) 0 74,932 MAINTENANCE 15,757 0 0 0 15,757 -------- ------- ------- ----- -------- TOTAL COST OF REVENUE 89,351 287 1,051 0 90,689 -------- ------- ------- ----- -------- GROSS MARGIN 279,272 25 (1,051) 0 278,246 -------- ------- ------- ----- -------- OPERATING EXPENSES: ENGINEERING EXPENSES 69,088 2,380 0 0 71,468 SALES & MARKETING EXPENSES 160,212 2,273 0 0 162,485 GENERAL & ADMINISTRATIVE EXPENSES 38,737 558 0 0 39,295 RESTRUCTURE EXPENSES 13,450 0 0 0 13,450 -------- ------- ------- ----- -------- TOTAL OPERATING EXPENSES 281,487 5,211 0 0 286,698 -------- ------- ------- ----- -------- LOSS FROM CONTINUING OPERATIONS (2,215) (5,186) (1,051) 0 (8,452) OTHER INCOME (EXPENSE) 1,608 (35) 0 0 1,573 -------- ------- ------- ----- -------- NET LOSS FROM CONTINUING OPERATIONS (607) (5,221) (1,051) 0 (6,879) -------- ------- ------- ----- -------- DISCONTINUED OPERATIONS: LOSS FROM OPERATIONS (6,200) 0 0 0 (6,200) LOSS ON DISPOSAL (5,972) 0 0 0 (5,972) -------- ------- ------- ----- -------- LOSS FROM DISCONTINUED OPERATIONS (12,172) 0 0 0 (12,172) -------- ------- ------- ----- -------- NET LOSS $(12,779) $(5,221) $(1,051) $ 0 $(19,051) ======== ======= ======= ===== ======== NET LOSS PER SHARE FROM CONTINUING OPERATIONS $ (0.02) $ (0.16) FROM DISCONTINUED OPERATIONS (0.28) (0.28) -------- -------- NET LOSS PER SHARE $ (0.30) $ (0.44) ======== ======== WEIGHTED AVERAGE SHARES 43,060 419 43,479 ======== ======= ======== (1) ENTRY TO RECORD ONE YEAR'S AMORTIZATION OF CAPITALIZED PURCHASED INTANGIBLES BASED ON AN ESTIMATED LIFE OF TWO YEARS.
5 CADENCE DESIGN SYSTEMS, INC. AND REDWOOD DESIGN AUTOMATION, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1994 (IN THOUSANDS) (UNAUDITED)
PRO FORMA ADJUSTMENTS PRO FORMA CADENCE REDWOOD DEBIT CREDIT RESULTS -------- ------- ----- ------ --------- REVENUE: PRODUCT $123,832 $ 419 $ 0 $ 0 $124,251 MAINTENANCE 73,989 15 0 0 74,004 -------- ------- ----- ---- -------- TOTAL REVENUE 197,821 434 0 0 198,255 -------- ------- ----- ---- -------- COST OF REVENUE: PRODUCT 38,976 208 525 (1) 0 39,709 MAINTENANCE 7,134 0 0 0 7,134 -------- ------- ----- ---- -------- TOTAL COST OF REVENUE 46,110 208 525 0 46,843 -------- ------- ----- ---- -------- GROSS MARGIN 151,711 226 (525) 0 151,412 -------- ------- ----- ---- -------- OPERATING EXPENSES: ENGINEERING EXPENSES 35,288 1,225 0 0 36,513 SALES & MARKETING 78,442 1,181 0 0 79,623 GENERAL & ADMINISTRATIVE EXPENSES 20,406 325 0 0 20,731 PROVISION FOR SETTLEMENT OF LITIGATION 10,054 0 0 0 10,054 -------- ------- ----- ---- -------- TOTAL OPERATING EXPENSES 144,190 2,731 0 0 146,921 -------- ------- ----- ---- -------- INCOME (LOSS) FROM OPERATIONS 7,521 (2,505) (525) 0 4,491 OTHER INCOME (EXPENSE) 790 (49) 0 0 742 -------- ------- ----- ---- -------- NET INCOME (LOSS) BEFORE INCOME TAXES 8,311 (2,554) (525) 0 5,233 PROVISION FOR INCOME TAXES (2,078) 0 0 769 (2) (1,309) -------- ------- ----- ---- -------- NET INCOME (LOSS) $ 6,233 $(2,554) $(525) $769 $ 3,924 ======== ======= ===== ==== ======== NET INCOME PER SHARE $ 0.14 $ 0.09 ======== ======== WEIGHTED AVERAGE SHARES 44,973 419 45,392 ======== ===== ======== (1) ENTRY TO RECORD SIX MONTHS AMORTIZATION OF CAPITALIZED PURCHASED INTANGIBLES BASED ON AN ESTIMATED LIFE OF TWO YEARS. (2) ENTRY TO ADJUST CONSOLIDATED TAX PROVISION TO THE COMPANY'S ANNUAL EFFECTIVE RATE.
6 NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS 1. In August 1994 the Company acquired all of the outstanding stock of Redwood Design Automation, Inc. ("Redwood") for approximately 419,000 shares of the Company's common stock. The purchase price also includes $2.5 million of advances made to Redwood, prior to the acquisition, of which $.7 million was offset against the cash of Redwood as of the closing date and the remaining amount of $1.8 million was not repaid. Redwood was a development stage company formed to design, develop and market software for use in electronic system design. The acquisition was accounted for as a purchase. In connection with the acquisition, net intangibles of $6.8 million were acquired of which $4.7 million was allocated to research and development in process and will be charged to operations as the technology had not achieved technological feasibility and had no alternative future use. The remaining $2.1 million will be amortized over a useful life of two years. The pro forma combined condensed financial statements reflect the combined operations of the two companies. The pro forma combined condensed statements of operations for the year ended December 31, 1993 and six months ended June 30, 1994 exclude the impact of the one-time charge associated with expensing in-process research and development as it had not reached technological feasibility. The charge is included in the Company's results of operations for the quarter in which the transaction closed which was the third quarter of 1994. 2. The pro forma combined condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These pro forma combined condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1993 and the financial statements of Redwood included in this filing. 7 3. Net income per share for each period is calculated by dividing net income by the weighted average number of common stock and common stock equivalents out standing during the period plus approximately 419,000 shares of the Company's common stock which was exchanged for all outstanding shares of Redwood common and preferred stock. Common stock equivalents consist of dilutive shares issuable upon the exercise of outstanding common stock options and warrants. Net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock. Fully diluted net income (loss) per share is substantially the same as primary net income (loss) per share. -----END PRIVACY-ENHANCED MESSAGE-----