-----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, My6RypphSVPY6auBWEfEb6O66Uj5rjtP83901Rg07S4l390HADYZ4rebdGgMMnP4 frW+prL6qmOQ0YNp91wfhA== 0001047469-98-043754.txt : 19981214 0001047469-98-043754.hdr.sgml : 19981214 ACCESSION NUMBER: 0001047469-98-043754 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 ITEM INFORMATION: FILED AS OF DATE: 19981211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CADENCE DESIGN SYSTEMS INC CENTRAL INDEX KEY: 0000813672 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770148231 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-10606 FILM NUMBER: 98768344 BUSINESS ADDRESS: STREET 1: 2655 SEELY ROAD BLDG 5 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/A 1 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 --------------- FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 30, 1998 CADENCE DESIGN SYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation) 1-10606 77-0148231 (Commission File No.) (IRS Employer Identification No.) 2655 SEELY ROAD, BUILDING 5, SAN JOSE, CA 95134 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (408) 943-1234 --------------- Item 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired. Pursuant to paragraph (a)(4) of Item 7 of Form 8-K, the attached financial statements were omitted from the disclosure contained in the Registrant's Current Report on Form 8-K dated September 30, 1998 and filed with the Securities and Exchange Commission on October 13, 1998. Attached hereto as Exhibit 99.2 are the audited financial statements for the fiscal years ended June 30, 1998 and 1997 of Ambit Design Systems, Inc. (b) Pro Forma Financial Information. Pursuant to paragraph (b)(2) of Item 7 of Form 8-K, the following pro forma financial information was omitted from the disclosure contained in the Registrant's Current Report on Form 8-K dated September 30, 1998 and filed with the Securities and Exchange Commission on October 13, 1998. Attached hereto as Exhibit 99.4 are the unaudited pro forma condensed combined statements of operations for the fiscal year ended January 3, 1998 and the nine months ended October 3, 1998, reflecting the acquisition of Ambit Design Systems, Inc. and including the notes to the unaudited pro forma statements of operations. (c) Exhibits. + 2.01 Agreement and Plan of Reorganization, dated September 3, 1998, by and among the Registrant, Ambit Design Systems, Inc. and Adirondack Transaction Corp. +99.1 Press Release, dated September 30, 1998. 99.2 Audited Financial Statements of Ambit Design Systems, Inc. for the fiscal years ended June 30, 1998 and 1997. 99.3 Consent of PricewaterhouseCoopers LLP with respect to Ambit Design Systems, Inc. financial statements. 99.4 Unaudited pro forma condensed combined statements of operations for the fiscal year ended January 3, 1998 and nine months ended October 3, 1998, reflecting the acquisition of Ambit Design Systems, Inc. and including the notes to the unaudited condensed combined statements of operations.
- --------------- +Previously filed 2. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CADENCE DESIGN SYSTEMS, INC. Dated: December 10, 1998 By: /s/ R.L. SMITH MCKEITHEN ------------------------------ R.L. SMITH MCKEITHEN Senior Vice President, General Counsel and Secretary 3. INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT + 2.01 Agreement and Plan of Reorganization, dated September 3, 1998, by and among the Registrant, Ambit Design Systems, Inc. and Adirondack Transaction Corp. +99.1 Press Release, dated September 30, 1998. 99.2 Audited Financial Statements of Ambit Design Systems, Inc. for the fiscal years ended June 30, 1998 and 1997. 99.3 Consent of PricewaterhouseCoopers LLP with respect to Ambit Design Systems, Inc. financial statements. 99.4 Unaudited pro forma condensed combined statements of operations for the fiscal year ended January 3, 1998 and nine months ended October 3, 1998, reflecting the acquisition of Ambit Design Systems, Inc. and including the notes to the unaudited condensed combined statements of operations.
+Previously filed 4. EX-99.2 2 EX-99.2 Exhibit 99.2 AMBIT DESIGN SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1998 AND 1997 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders Ambit Design Systems, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Ambit Design Systems, Inc. and subsidiary at June 30, 1998 and 1997, and the results of their operations and their cash flows for the years ended June 30, 1998 and 1997, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers, LLP San Jose, California August 7, 1998 AMBIT DESIGN SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS June 30, 1998 and 1997
- ---------------------------------------------------------------------------------------------------------------------------------- 1998 1997 ---------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 10,062,271 $ 3,859,668 Accounts receivable, net of allowance for doubtful accounts of $150,000 and $0, respectively 3,802,007 201,739 Other receivables 79,869 Prepaid expenses and other assets 228,022 15,661 ---------------- -------------- Total current assets 14,172,169 4,077,068 Property and equipment, net 3,245,951 683,667 Other assets 132,838 141,065 ---------------- -------------- Total assets $ 17,550,958 $ 4,901,800 ---------------- -------------- ---------------- -------------- LIABILITIES Current liabilities: Accounts payable $ 661,588 $ 85,047 Accrued liabilities 1,317,117 846,375 Deferred revenue 2,018,175 862,909 Deferred rent 1,600 Current portion of notes payable 430,759 104,847 ---------------- -------------- Total current liabilities 4,429,239 1,899,178 Deferred rent 14,800 Notes payable, net of current portion 388,940 329,589 ---------------- -------------- Total liabilities 4,818,179 2,243,567 ---------------- -------------- Commitments and contingency (Note 4) MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK Mandatorily redeemable convertible preferred stock, no par value Series I: Authorized: 3,000,000 shares Issued and outstanding: 2,704,460 shares 10,572,267 (Liquidation value: $11,228,016 at June 30, 1998) Warrants 124,048 ---------------- -------------- 10,696,315 ---------------- -------------- SHAREHOLDERS' EQUITY Convertible preferred stock, (no par value) Authorized: 12,000,000 shares; Issued and outstanding: 9,371,497 shares in 1998 and 7,550,201 shares in 1997 14,120,575 8,046,513 (Liquidation value: $13,808,436 at June 30, 1998) Common stock, (no par value) Authorized: 25,000,000 shares; Issued and outstanding: 9,370,548 shares in 1998 and 7,255,637 shares in 1997 1,754,863 1,304,236 Notes receivable from shareholders (405,510) (214,990) Accumulated deficit (13,433,464) (6,477,526) ---------------- -------------- Total shareholders' equity 2,036,464 2,658,233 ---------------- -------------- Total liabilities, mandatorily redeemable convertible preferred stock and shareholders' equity $ 17,550,958 $ 4,901,800 ---------------- -------------- ---------------- --------------
The accompanying notes are an integral part of these financial statements. 2 AMBIT DESIGN SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended June 30, 1998 and 1997
- ------------------------------------------------------------------------------------------------------------------------ 1998 1997 --------------- --------------- Revenues License fees $ 8,849,202 $ 425,951 Services and other 1,382,521 177,839 --------------- --------------- Total revenues 10,231,723 603,790 Cost of revenues License fees 190,024 712 Services and other 1,318,270 32,237 --------------- --------------- Total cost of revenues 1,508,294 32,949 --------------- --------------- Gross profit 8,723,429 570,841 Operating expenses: Research and development 4,712,219 1,715,545 Sales and marketing 8,067,650 1,780,616 General and administrative 2,864,025 2,231,675 --------------- --------------- Total operating expenses 15,643,894 5,727,836 --------------- --------------- Loss from operations (6,920,465) (5,156,995) Interest and other income 470,578 188,587 --------------- --------------- Loss before provision for income taxes (6,449,887) (4,968,408) Provision for income taxes 25,256 --------------- --------------- Net loss $(6,475,143) $ (4,968,408) --------------- --------------- --------------- ---------------
The accompanying notes are an integral part of these financial statements. 3 AMBIT DESIGN SYSTEMS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the years ended June 30, 1998 and 1997
- ---------------------------------------------------------------------------------------------------------------------------------- CONVERTIBLE NOTES PREFERRED STOCK COMMON STOCK RECEIVABLE ----------------------- ---------------------- FROM ACCUMULATED SHARES AMOUNT SHARES AMOUNT SHAREHOLDERS DEFICIT TOTAL ---------- ----------- ---------- ---------- ------------ ----------- ----------- Balances, June 30, 1996 5,311,338 $ 2,868,430 4,037,670 $ 46,074 $ (30,000) $(1,509,118) $ 1,375,386 Cash received for note receivable from shareholder 30,000 30,000 Issuance of common stock for note receivable from shareholder 300,000 24,990 (24,990) Issuance of common stock, net of issuance costs 140,000 8,651 8,651 Exercise of stock options 2,366,012 125,106 125,106 Conversion of note payable to common stock 17,196 1,634 1,634 Repurchase of common stock (865,240) (5,298) (5,298) Conversion of Series D preferred stock to common stock (804,999) (670,829) 804,999 670,829 Conversion of note payable to shareholder to Series E preferred stock 108,790 103,351 103,351 Issuance of Series E preferred stock, net of issuance costs of $33,111 1,759,349 1,650,706 1,650,706 Conversion of Series E preferred stock to common stock (455,000) (432,250) 455,000 432,250 Issuance of Series F preferred stock for note receivable from shareholder 200,000 190,000 (190,000) Issuance of Series G preferred stock, net of issuance costs of $58,495 1,430,723 4,337,105 4,337,105 Net loss (4,968,408) (4,968,408) ---------- ----------- ---------- ---------- ------------ ----------- ----------- Balances, June 30, 1997 7,550,201 8,046,513 7,255,637 1,304,236 (214,990) (6,477,526) 2,658,233
The accompanying notes are an integral part of these financial statements. 4 AMBIT DESIGN SYSTEMS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, Continued for the years ended June 30, 1998 and 1997
- ---------------------------------------------------------------------------------------------------------------------------------- CONVERTIBLE NOTES PREFERRED STOCK COMMON STOCK RECEIVABLE ----------------------- ---------------------- FROM ACCUMULATED SHARES AMOUNT SHARES AMOUNT SHAREHOLDERS DEFICIT TOTAL ---------- ----------- --------- ----------- ------------ ------------ ----------- Balances, June 30, 1997 7,550,201 $ 8,046,513 7,255,637 $ 1,304,236 $ (214,990) $ (6,477,526) $ 2,658,233 Issuance of Series E preferred stock 157,894 631,577 631,577 Issuance of Series F preferred stock 329,991 313,491 313,491 Issuance of Series G preferred stock 200,443 615,820 615,820 Issuance of Series H preferred stock, net of issuance cost of $18,663 1,132,968 4,513,174 4,513,174 Exercise of stock options 873,547 264,124 264,124 Exercise of stock options for a note 153,650 46,095 (46,095) Issuance of common stock for a note 1,135,000 144,425 (144,425) Repurchase of common stock (47,286) (4,017) (4,017) Accretion of Series I preferred stock (480,795) (480,795) Net loss (6,475,143) (6,475,143) ---------- ----------- --------- ----------- ------------ ------------ ----------- Balances, June 30, 1998 9,371,497 $14,120,575 9,370,548 $ 1,754,863 $ (405,510) $(13,433,464) $ 2,036,464 ---------- ----------- --------- ----------- ------------ ------------ ----------- ---------- ----------- --------- ----------- ------------ ------------ -----------
The accompanying notes are an integral part of these financial statements. 5 AMBIT DESIGN SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended June 30, 1998 and 1997
1998 1997 ----------- ----------- CASH FLOWS FROM OPERATIONS Net loss $(6,475,143) $(4,968,408) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 667,169 111,912 Provision for doubtful accounts 150,000 Change in operating assets and liabilities: Accounts receivable (3,750,268) (201,739) Other receivables (79,869) 4,573 Prepaid expenses and other current assets (214,270) 4,641 Other assets 8,227 (47,974) Accounts payable 451,129 54,945 Accrued liabilities 1,043,665 721,194 Deferred rent (13,200) (6,800) Deferred revenue 1,155,266 862,909 ----------- ----------- Net cash used in operating activities (7,057,294) (3,464,747) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (3,102,132) (741,956) ----------- ----------- Net cash used in investing activities (3,102,132) (741,956) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 490,110 399,289 Principal payment on notes payable (104,847) (13,940) Proceeds from issuance of common stock 8,651 Proceeds from exercise of stock options 264,125 125,106 Repurchase of common stock (4,017) (5,298) Proceeds from repayment of note receivable from shareholder 30,000 Proceeds from issuance of mandatorily redeemable preferred stock 10,215,519 Proceeds from issuance of preferred stock, net of issuance costs 5,501,139 5,987,811 ----------- ----------- Cash provided by financing activities 16,362,029 6,531,619 ----------- ----------- Net increase in cash and cash equivalents 6,202,603 2,324,916 Cash and cash equivalents at beginning of period 3,859,668 1,534,752 ----------- ----------- Cash and cash equivalents at end of period $10,062,271 $ 3,859,668 ----------- ----------- ----------- ----------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for interest $ 71,216 $ 14,729 SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES: Conversion of Series D preferred stock to common stock $ 670,829 Conversion of Series E preferred stock to common stock $ 432,250 Conversion of notes payable to Series E preferred stock $ 103,351 Conversion of notes payable to common stock $ 1,634 Issuance of common stock for note receivable from shareholder $ 24,990 Issuance of Series F preferred stock for note receivable from shareholder $ 190,000 Issuance of note payable for rent deposit $ 49,087 Deposit capitalized into property and equipment $ 4,986 Conversion of accrued liability to Series E preferred stock $ 481,577 Acquisition of property, plant, and equipment through accounts payable $ 125,412 Accretion to redemption value of Series I mandatorily redeemable convertible preferred stock $ 480,795 Issuance of Series I preferred warrants $ 124,048 Liability in fiscal year 1997 for Series F preferred stock issued $ 91,346 Issuance of Series F preferred stock from subscribed Series F preferred $ 190,000 Exercise of stock options for a note from shareholder $ 46,095 Issuance of common stock for a note from shareholder $ 144,425
The accompanying notes are an integral part of these financial statements. 6 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 1. FORMATION AND BUSINESS OF THE COMPANY: Ambit Design Systems, Inc. is in the business of developing, manufacturing, and marketing specialized Electronic Design Automation (EDA) application software products. The Company was incorporated under the laws of the State of California on June 14, 1994. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of Ambit Design System, Inc. and its subsidiary (the Company). All significant intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements. USE OF ESTIMATES: Preparation of the accompanying financial statements in conformity with generally accepted accounting principles requires management to make certain 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 reported period. Actual results could differ from those estimates. CERTAIN RISKS AND UNCERTAINTIES: The Company's products and services are concentrated in a single segment in the EDA sector of the high technology industry which is characterized by rapid technological advances, changes in customer requirements and evolving regulatory requirements and industry standards. The success of the Company depends on the management's ability to anticipate or to respond quickly and adequately to technological developments in its industry, changes in customer requirements or changes in regulatory requirements or industry standards. Any significant delays in the development or introduction of products or services could have a material adverse effect on the Company's business and operating results. CONCENTRATION OF CREDIT RISK: The Company's cash and cash equivalents as of June 30, 1998 and 1997 are deposited with one U.S. financial institution and exceed federal insured amounts. The Company monitors customers' payment history and establishes reserves for bad debt as warranted. Continued 7 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: SIGNIFICANT CUSTOMERS: For the fiscal year ended June 30, 1998, one customer accounted for 25%, of the Company's consolidated revenue. For fiscal year ended June 30, 1997, another customer accounted for 55% of the Company's consolidated revenue. As of June 30, 1998, one customer accounted for 28% of accounts receivable. As of June 30, 1997, another customer accounted for 40% of accounts receivable. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of certain financial instruments including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, notes payable and other liabilities approximate fair value due to their short maturities. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets, generally three to five years. Leasehold improvements are depreciated over the lease term or the useful lives of assets, whichever is shorter. Gains and losses upon asset disposal are taken into income in the year of disposition. REVENUE RECOGNITION: Revenues from the sale of software products are recognized upon delivery of the product if remaining vendor obligations are insignificant and collection of the resulting receivable is probable. Services and other revenues include software maintenance revenues and other service revenues, primarily from consulting and training. Software maintenance revenues are deferred and recognized ratably over the life of the service contract. Other service revenues are recognized as the related services are performed. Continued 8 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: RESEARCH AND DEVELOPMENT COSTS: Costs related to research, design and development of products are charged to research and development expense as incurred. Software development costs are capitalized beginning when a product's technological feasibility has been established and ending when a product is available for general release to customers. To date, completing a working model of the Company's products and general release have substantially coincided. As a result, the Company has not capitalized any software development costs since such costs have not been significant. ADVERTISING: Advertising expenditures are charged to operations as incurred. Advertising costs for fiscal year 1998 and 1997 were $351,760 and $166,935, respectively. INCOME TAXES: The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between financial reporting and tax basis of assets and liabilities, measured at tax rates that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 130, "Reporting Comprehensive Income". This statement established requirements for disclosure of comprehensive income and is effective for financial statements issued for fiscal years beginning after December 15, 1997, with reclassification of earlier financial statements for comparative purposes. Comprehensive income generally represents all changes in shareholders' equity except those resulting from investments or contributions by shareholders. Also in June 1997, the FASB issued FASB No. 131, "Disclosures about Segments of an Enterprise and Related Information." This Statement will change the way companies report information about segments of their business in financial statements. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues, and its major customers. The Statement is effective for fiscal years beginning after December 15, 1997. Continued 9 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: RECENT ACCOUNTING PRONOUNCEMENTS, continued: In October 1997, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position No. 97-2, "Software Revenue Recognition." This statement provides recognition and measurement guidance in accounting for revenue from selling, leasing or licensing of software and is effective for transactions entered into in fiscal years beginning after December 15, 1997. In March 1998, AICPA issued Statement of Position No. 98-4, "Deferral of the Effective Date of a Provision of SOP 97-2." This statement applies to all multiple element software arrangement and is effective as of March 31, 1998. The Company is evaluating the impact, if any, of the above pronouncement on its financial statements. 3. PROPERTY AND EQUIPMENT, NET: Property and equipment consist of the following:
JUNE 30, ------------------------------- 1998 1997 --------------- ------------- Office furniture and equipment $ 307,148 $ 22,917 Communication equipment 165,591 46,823 Computer hardware 2,778,448 438,276 Computer software 655,173 283,136 Leasehold improvements 126,889 14,553 --------------- ------------- 4,033,249 805,705 Less accumulated depreciation and amortization (787,298) (122,038) --------------- ------------- $ 3,245,951 $ 683,667 --------------- ------------- --------------- -------------
Continued 10 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 4. COMMITMENTS AND CONTINGENCY: OPERATING LEASES: The Company leases various facilities under noncancelable operating lease agreements expiring through July 31, 2003. Future minimum lease payments under the non-cancelable operating leases as of June 30, 1998 are as follows:
YEAR ENDED JUNE 30, 1999 $ 758,623 2000 765,214 2001 139,567 2002 55,663 2003 4,000 ------------- Total minimum lease payments $ 1,723,067 ------------- -------------
Rent expense was $688,800 and $231,373 for the years ended June 30, 1998 and 1997, respectively. CONTINGENCY: In July 1997, a former officer filed suit against the Company and certain officers, alleging claims for breach of fiduciary duty and interference with contract. The Company accrued approximately $480,000 for the estimated cost to settle this litigation in fiscal year 1997. In fiscal year 1998, the Company entered into a settlement agreement with the former employee. Under the settlement agreement, the Company granted the employee the right to purchase 157,894 shares of Series E preferred stock at $0.95 per share. This purchase price was below the fair value of the Company's preferred stock of $4.00 per share at the date of grant. The excess of the fair value of the Series E preferred stock over the purchase price of $481,577 represents the actual cost to settle this litigation. In June 1998, the former employee exercised the right to purchase these shares. Continued 11 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 5. NOTES PAYABLE: In October 1996, the Company negotiated a $250,000 Equipment Line of Credit with Silicon Valley Bank. The terms of the agreement allowed the Company to make draws against the Equipment Line of Credit on an interest only basis until March 31, 1997 at which time the outstanding balance was converted to a term loan with monthly payments of principal and interest over 30 months. The interest rate on the loan as of June 30, 1998 was 10.25% (the bank's prime rate plus 2 1/2%). The outstanding balance on June 30, 1998 and 1997 on the term loan was $69,697 and $125,457, respectively. In June 1997, the Company negotiated an additional Equipment Line of Credit in the amount of $750,000 with Silicon Valley Bank. Under the terms of the agreement with the bank the Company is allowed to make draws against the increased Equipment Line of Credit on an interest only basis until June 30, 1998 at which time the outstanding balance will be converted to a term loan and to be repaid over 24 months. The interest rate on the equipment line of credit as of June 30, 1998 was 8.50% (the bank's prime rate plus 0.75%). The outstanding balance on June 30, 1998 and 1997 on the Equipment Line of Credit was $750,000 and $259,890, respectively. Future minimum payments are as follows:
YEAR ENDED JUNE 30, 1998 $ 430,759 1999 388,940 --------------- $ 819,699 --------------- ---------------
In June 1997, the Company negotiated a $1,000,000 Revolving Line of Credit which had not been used as of June 30, 1998. The interest rate on the Revolving Line of Credit will be the Bank's prime rate. Under the Revolving Line of Credit, the Company is eligible to be advanced funds on a monthly basis on Eligible Accounts Receivable based upon a Borrowing Base Formula. The Revolving Line of Credit expires in December 1998. Continued 12 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 6. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK: DIVIDENDS: The holders of Series I preferred shares in preference to holders of any junior shares shall be entitled to receive cumulative dividends at the annual rate of 7% of the Series I issue price plus all accrued and unpaid quarterly dividends on such Series I Preferred out of any funds legally available when as declared by the Board or in the event of liquidation or upon redemption of shares of Series I Preferred Stock. LIQUIDATION: Each of the Series I preferred shares will receive its full liquidation preference amount including any cumulative unpaid dividends thereon prior to any payments to a junior class. The liquidation value of Series I is $4.00 per share. CONVERSION: Each share of Series I preferred share is convertible, at the option of the holder, into such number of fully paid and non assessable shares of common stock as determined by dividing the applicable original price by the conversion price applicable to such shares in effect at the date of conversion. Each share of Series I preferred stock shall automatically be converted into shares of common stock immediately in the event of a written public offering of the Company's common stock in which the offering price per share is more than $9.00 and with $15,000,000 or more in gross proceeds or in the event that the holders of at least a majority of the Series I Preferred consent to conversion. REDEMPTION: One-third of the outstanding shares are redeemable prior to September 2003 at the option of the shareholders. The Company is required to redeem at minimum two-thirds of the outstanding shares by December 2004 and the remaining outstanding shares by December 2005. The redemption price is the greater of the issuance price adjusted for any stock dividends, combinations, splits, recapitalization plus all the accrued but unpaid dividends or the fair market value of such shares at redemption date. Continued 13 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 6. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK, continued: CONVERTIBLE PREFERRED STOCK WARRANTS: In December 1997, in conjunction in obtaining the Series I financing, the Company issued warrants to purchase 84,089 shares of Series I Preferred Stock at $4.00 per share. The warrants were granted at the fair market value of the underlying preferred stock at the date of grant and expire on December 19, 2001. 7. SHAREHOLDERS' EQUITY: CONVERTIBLE PREFERRED STOCK: All shares issued before May 7, 1996 have been presented to reflect the three-to-one stock split effective on that date. As of June 30, 1998, preferred stock consists of the following:
SHARES ISSUED AND PROCEEDS LIQUIDATION SERIES AUTHORIZED OUTSTANDING (NET) VALUE ------ ---------------- ---------------- --------------- ---------------- A 1,800,000 1,368,000 $ 186,107 $ 190,000 C 1,423,338 1,423,338 617,433 650,000 D 2,520,000 1,715,001 1,392,703 1,429,171 E 2,026,033 1,571,033 1,954,941 1,492,481 F 530,000 529,991 503,491 503,491 G 1,700,000 1,631,166 4,952,925 5,011,420 H 2,000,000 1,132,968 4,513,175 4,531,873 Undesignated 629 ---------------- ---------------- --------------- ---------------- 12,000,000 9,371,497 $14,120,775 $ 13,808,436 ---------------- ---------------- --------------- ---------------- ---------------- ---------------- --------------- ----------------
As of June 30, 1998, 21,250 shares of Series H preferred stock were subscribed. As of June 30, 1997, preferred stock consists of the following:
ISSUED AND PROCEEDS LIQUIDATION SERIES AUTHORIZED OUTSTANDING (NET) VALUE ------ ----------------- ------------ --------------- --------------- A 1,800,000 1,368,000 $ 186,107 $ 190,000 C 1,423,338 1,423,338 617,433 650,000 D 2,520,000 1,715,001 1,392,703 1,429,171 E 2,026,033 1,413,139 1,323,165 1,342,482 F - Subscribed 530,000 200,000 190,000 G 1,700,000 1,430,723 4,337,105 4,395,600 ----------------- ------------ --------------- --------------- 9,999,371 7,550,201 $ 8,046,513 $ 8,007,253 ----------------- ------------ --------------- --------------- ----------------- ------------ --------------- ---------------
Continued 14 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 7. SHAREHOLDERS' EQUITY, continued: CONVERTIBLE PREFERRED STOCK, continued: The Company issued Series B Preferred Stock during fiscal year 1995 and it was converted to Series C Preferred Stock in fiscal year 1996. The Company offered eligible employees the right to participate in an "Employee Only" Series F Preferred Stock offering during fiscal year 1997. Employees were eligible to participate up to twenty percent (20%) of their annual salary, reduced on a pro-rata basis if the offering was over subscribed. The Company has reserved 9,371,497 and 7,550,201 common shares for conversion of preferred stock for fiscal year 1998 and 1997, respectively. DIVIDENDS: The holders of the Series A, C, D, E, F, G, and H convertible preferred shares are entitled to receive, in any fiscal year, when and as declared by the Board of Directors, out of any assets legally available, dividends in the amount per share equal to $.0133, $.0457, $.0833, $.095, $.076, $.3072, and $.40, respectively, before and in preference to any dividends paid on common shares. LIQUIDATION: In the event of any liquidation, dissolution or winding up of the Company, after distribution has been made to Series I mandatorily redeemable preferred shares, the holders of Series E, G, H preferred shares shall be entitled to be paid at an amount equal to $0.95, $3.0722928, and $4.00 per share, respectively. After distributions have been made to Series I, E, G, and H preferred shares, the holders of Series A, C, and D preferred shares are entitled to be paid out at $0.1333, $0.4567, and $0.8333 per share, respectively. Series F is then entitled to be paid at $0.95 per share. Should there be any assets after providing for the full liquidation preference of the preferred shares, the remaining assets of the Company are to be distributed pro rata among the holders of the common shares. Continued 15 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 7. SHAREHOLDERS' EQUITY, continued: CONVERTIBLE PREFERRED STOCK, continued: CONVERSION: Each share of Series A, C, D, E, F, G, and H preferred stock is convertible, at the option of the holder, into such number of fully paid and nonassessable shares of common stock as determined by dividing the applicable original issue price (post-split) by the conversion price applicable to such shares in effect at the date of conversion. Each share of Series A, C, D, E, F, G, and H preferred stock shall automatically be converted into shares of common stock immediately in the event of a written public offerings in which the offering price per share is more than $9.00 and with $15,000,000 or more in gross proceeds or in the event that the holders of at least two-thirds of the A, C, D, E, F, G, and H Preferred consent to conversion. REDEMPTION: Series A, C, D, E, F, G, and H preferred stock are not redeemable. RESTRICTED STOCK PURCHASE AGREEMENT: On September 1, 1994, the Company issued 2,400,000 common shares to one of its two founders at a price of $0.001 per share in exchange for each founder's right, title and interest (rights) in and to the Company. Under the stock repurchase agreement, the Company has the option to repurchase the founder's unvested common shares should they cease to be employed at the founder's original purchase price. The Company's repurchase right lapses at a rate of 1/48 per month beginning on the date of grant. On February 4, 1997, the founder of the Company was terminated and the Company exercised its right to repurchase the unvested common shares as of that date. On September 1, 1994, the Company issued 1,320,000 common shares to the other founder at a price of $0.001 per share in exchange for the founder's right, title and interest (rights) in and to the Company. Under the stock repurchase agreement, the Company has the option to repurchase the unvested common shares should the founder cease to be employed at the founder's original purchase price. The Company's repurchase right lapses at a rate of 1/48 per month beginning on the date of grant. At June 30, 1998 and June 30, 1997, 24,605 and 354,786 outstanding common shares were subject to repurchase, respectively. Continued 16 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 7. SHAREHOLDERS' EQUITY, continued: RESTRICTED STOCK PURCHASE AGREEMENT, continued: The Company has issued 330,000 common shares to its directors at a price of $.083 per share. Under the stock repurchase agreement, the Company has the option to repurchase the unvested common shares should they cease to be directors at the director's original purchase price. The Company's repurchase right lapses at a rate of 1/48 per month beginning on the date of their first board of directors meeting. At June 30, 1998 and June 30, 1997, 79,359 and 154,400 outstanding common shares were subject to repurchase, respectively. The Company also has the right of first refusal for any common shares purchased under these agreements that are no longer subject to the Company's repurchase right should a holder desire to sell or transfer such common shares. STOCK OPTION PLAN: Under the 1994 Stock Option Plan (the Plan), the Company initially reserved 4,100,000, common shares for issuance to employees, officers, directors, and consultants of the Company. In fiscal year 1996 and 1998, the Company reserved an additional 900,000 and 1,500,000 shares, respectively, under the 1996 Stock Option Plan (as amended and restated) bringing the cumulative shares reserved for issuance to employees, officers, directors, and consultants of the Company to 6,500,000 shares. Options granted under the Plan generally are exercisable to the extent of 25% of the shares granted twelve months from the vesting commencement date and the remainder to the extent of 1/36th of the options granted each month thereafter, such that all options granted will be exercisable four years from the vesting commencement date. Options granted expire ten years from the date of grant. Under the Plan incentive options to purchase the Company's common stock may be granted to employees at prices not lower than fair market value at the date of grant, as determined by the Board of Directors. Nonqualified stock options (options that do not qualify as incentive stock option) may be granted to employees, directors, and consultants, at prices not lower than 85% of fair market value at the date of grant, as determined by the Board of Directors. The Board also has the authority to set the term of the options (no longer than ten years from date of grant). Options granted generally vest over four years. Continued 17 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 7. SHAREHOLDERS' EQUITY, continued: STOCK OPTION PLAN, continued: Activity under the 1994 and 1996 Stock Option Plan is as follows:
OUTSTANDING OPTIONS ---------------------------------------------------------------- WEIGHTED SHARES NUMBER AGGREGATE AVERAGE AVAILABLE OF PRICE PER EXERCISE EXERCISE FOR GRANT SHARES SHARE PRICE PRICE ---------------- ---------------- ------------------- ------------ ----------- Balances, June 30, 1996 2,273,999 2,672,001 $ 233,023 Options granted (1,218,000) 1,218,000 $0.0833-$0.30 255,790 $0.2106 Options exercised (2,366,012) $0.0133-$0.4567 (125,106) $0.0521 Options canceled 2,750 (2,750) $0.095 (262) $0.0950 ---------------- ---------------- ------------ Balances, June 30, 1997 1,058,749 1,521,239 363,445 Additional shares reserved by Plan 1,500,000 Options granted (1,650,597) 1,650,597 $0.30-$0.50 644,274 $0.3903 Options exercised (1,027,197) $0.0533-$0.50 (310,219) $0.3011 Options canceled 169,145 (169,145) $0.0233-$0.50 (58,845) $0.3477 ---------------- ---------------- ------------ Balances, June 30, 1998 1,077,297 1,975,494 $ 638,655 ---------------- ---------------- ------------ ---------------- ---------------- ------------
STOCK-BASED COMPENSATION: The Company has adopted the disclosure only provisions of Statement of Financial Accounting Standards No. 123 (SFAS No. 123) "Accounting for Stock-Based Compensation." Had compensation costs been determined based on the fair value at the grant date for awards in 1998 and 1997, consistent with the provisions of SFAS No. 123, the Company's net loss for the year ended June 30, 1998 and 1997 would not have been materially different from the reported net loss. As the provisions of SFAS No. 123 are only applied to stock options granted after January 1, 1995 in the above pro forma amounts, the impact of the pro forma stock compensation cost will likely continue to increase, assuming future option grants, as the vesting period for the Company's options and the period over which the stock compensation is charged to expense is generally four years. The fair value of each option grant has been estimated on the date of the grant using the minimum value method with the following weighted average assumptions for year ended June 30, 1998 and 1997.
1998 1997 ---------- ---------- Risk - free interest rates 5.74% 6.30% Expected life 4 years 4 years Expected dividend yield 0.00% 0.00%
The following table summarizes information about stock options outstanding at June 30, 1998. Continued 18 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 7. SHAREHOLDERS' EQUITY, continued: STOCK-BASED COMPENSATION, continued:
OUTSTANDING OPTIONS ------------------------------------------------- WEIGHTED AVERAGE WEIGHTED NUMBER REMAINING AVERAGE EXERCISE OF SHARES CONTRACTUAL EXERCISE NUMBER PRICE OUTSTANDING LIFE PRICE EXERCISABLE --------------------- -------------- -------------- ----------- -------------------- $0.0333-$0.0555 109,190 7.28 years $0.053 67,877 $ 0.0833-$0.1000 292,800 7.71 years $0.088 164,831 $0.1367 900 7.03 years $0.134 900 $0.3000 862,900 8.92 years $0.300 190,395 $0.4567-$0.5000 709,704 9.45 years $0.498 34,704 -------------- -------------------- 1,975,494 458,707 -------------- -------------------- -------------- --------------------
As of June 30, 1997, options to purchase 537,763 shares of common stock are exercisable. 8. INCOME TAXES: The Company's provision for income taxes for the year ended June 30, 1998 is as follows: Current provision: Federal $ - State 1,256 Foreign 24,000 ------------- $ 25,256 ------------- -------------
At June 30, 1998, the Company has federal and state net operating loss carryforwards of approximately $10,332,000 and $7,250,000, and federal and state credits of approximately $186,000 and $176,000 respectively, available to offset future regular and alternative minimum taxable income. The operating loss carryforwards and credits expire between 2003 to 2013, if not utilized. At June 30, 1997, the Company has federal and state net operating loss carryforwards of approximately $3,515,000 and $3,598,000, and federal and state credits of approximately $144,000 and $85,000 respectively, available to offset future regular and alternative minimum taxable income. The operating loss carryforwards and credits expire between 2002 to 2012, if not utilized. For federal and state tax purposes, a portion of the Company's net operating loss carryforwards may be subject to certain limitations on utilization in case of a change in ownership, as defined by federal and state tax law. Temporary differences which give rise to significant portions of deferred tax assets and liabilities at June 30, 1998 and 1997 are as follows: Continued 19 AMBIT DESIGN SYSTEMS, INC. NOTES CONSOLIDATED TO FINANCIAL STATEMENTS 8. INCOME TAXES, continued:
1998 1997 ---------------- ---------------- Deferred tax assets and liabilities: Net operating loss carry forwards $ 3,905,000 $ 1,415,000 Research and development credit 483,000 200,000 Depreciation and amortization 592,000 739,000 Accrued liabilities and other 253,000 203,000 ---------------- ---------------- 5,233,000 2,557,000 Valuation allowance (5,233,000) (2,557,000) ---------------- ---------------- $ - $ - ---------------- ---------------- ---------------- ----------------
The Company has established a 100% valuation allowance because at this time it appears more likely than not that no benefit will be realized for its deferred tax assets. 9. EMPLOYEE BENEFIT PLANS: The Company maintains a Profit Sharing Salary Deferral 401(k) Plan for all of its employees. This Plan allows eligible employees to defer up to 15%, but no greater than $9,500, of their pretax compensation in certain investments at the discretion of the employee. Under the 401(k) Plan the Company is not required to make Plan contributions. The Company has not made any contributions to the Plan as of June 30, 1998. 10. RELATED PARTY TRANSACTIONS: The Company earned revenues of $560,816 and $143,332 in fiscal year 1998 and fiscal 1997, respectively, from a customer who is also a holder of 1,430,723 shares of Series G preferred stock. In December 1997, the Company issued 500,000 shares of Series I preferred stock to a customer for $2,000,000 and recognized revenues of $2,595,524 from this customer in fiscal year 1998. In March 1998, the Company also issued 500,000 shares of Series H preferred stock to another customer and its affiliates for $2,000,000 and recognized revenues of $931,220 from this customer and its affiliates in fiscal year 1998. 20 EX-99.3 3 EX-99.3 Exhibit 99.3 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this Amendment No. 1 to Form 8-K filed by Cadence Design Systems, Inc. of our audit report dated August 7, 1998 on our audits of the consolidated financial statements of Ambit Design Systems, Inc. as of June 30, 1997 and 1998 and for the years then ended. /s/ PricewaterhouseCoopers LLP San Jose, California December 10, 1998 EX-99.4 4 EX-99.4 Exhibit 99.4 UNAUDITED PRO FORMA FINANCIAL INFORMATION CADENCE AND AMBIT UNAUDITED PRO FORMA FINANCIAL INFORMATION On September 30, 1998, Cadence Design Systems, Inc. ("Cadence") acquired Ambit Design Systems, Inc. ("Ambit"), a privately held California corporation that specializes in developing, manufacturing and marketing specialized Electronic Design Automation (EDA) application software products. The acquisition was accounted for as a purchase. The following unaudited pro forma combined financial statements give effect to the acquisition and should be read in conjunction with the historical financial statements and related notes thereto for both Cadence and Ambit. The unaudited pro forma condensed combined statements of operations for the fiscal year ended January 3, 1998 and the nine-month period ended October 3, 1998 give effect to the acquisition as if the acquisition was completed at the beginning of each period, and combines Cadence's and Ambit's statements of operations for each company's respective period. The required pro forma balance sheet with respect to the acquired business is incorporated by reference to Cadence's Quarterly Report on Form 10-Q for the period ended October 3, 1998 filed with the Commission on November 16, 1998. The pro forma combined results for the nine-month period ended October 3, 1998 excludes acquisition-related charges of $214.4 million for purchased in-process technology related to Ambit. This method of combining historical financial statements for the preparation of the pro forma condensed combined financial statements is for presentation only. Actual statements of operations of the companies will be combined from the acquisition date with no retroactive restatements. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or combined results of operations of future periods or the results that actually would have resulted had the acquisition occurred on the dates indicated. CADENCE DESIGN SYSTEMS, INC. AND AMBIT DESIGN SYSTEMS, INC. PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR NINE MONTHS ENDED OCTOBER 3, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
PRO FORMA CADENCE AMBIT ADJUSTMENTS BALANCES ------- ----- ----------- -------- Revenue: Product $ 489,865 $ 8,562 $ -- $ 498,427 Service 184,733 381 -- 185,114 Maintenance 196,020 1,873 -- 197,893 -------------- -------------- -------------- Total revenue 870,618 10,816 -- 881,434 -------------- -------------- -------------- Costs and Expenses: Cost of product 40,325 189 3,912 (a) 44,426 Cost of service 138,066 1,363 -- 139,429 Cost of maintenance 32,869 -- -- 32,869 Marketing and sales 216,663 8,432 -- 225,095 Research and development 129,522 4,519 -- 134,041 General and administrative 49,484 2,578 -- 52,062 Unusual items 149,890 -- -- 149,890 -------------- -------------- -------------- Total costs and expenses 756,819 17,081 3,912 777,812 -------------- -------------- -------------- Income (loss) from operations 113,799 (6,265) (3,912) 103,622 Other income, net 6,523 435 -- 6,958 -------------- -------------- -------------- Income (loss) before provision for income taxes 120,322 (5,830) (3,912) 110,580 Provision (benefit) for income taxes 57,776 25 (1,565) (c) 56,236 -------------- -------------- -------------- Net income (loss) $ 62,546 $ (5,855) $ (2,347) $ 54,344 -------------- -------------- -------------- -------------- -------------- -------------- Basic net income per share $ 0.30 $ 0.26 -------------- -------------- -------------- -------------- Diluted net income per share $ 0.27 $ 0.23 -------------- -------------- -------------- -------------- Weighted average common shares outstanding 211,505 211,505 -------------- -------------- -------------- -------------- Weighted average common and potential common shares outstanding-assuming dilution 234,385 234,385 -------------- -------------- -------------- -------------- The accompanying notes are an integral part of these condensed combined financial statements. CADENCE DESIGN SYSTEMS, INC. AND AMBIT DESIGN SYSTEMS, INC. PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR FISCAL YEAR ENDED JANUARY 3, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) PRO FORMA CADENCE AMBIT ADJUSTMENTS BALANCES ------- ----- ----------- -------- Revenue: Product $ 530,513 $ 2,361 $ -- $ 532,874 Service 160,890 14 -- 160,904 Maintenance 224,490 538 -- 225,028 -------------- -------------- ------------- Total revenue 915,893 2,913 -- 918,806 -------------- -------------- ------------- Costs and Expenses: Cost of product 41,509 119 5,216 (b) 46,844 Cost of service 114,747 439 -- 115,186 Cost of maintenance 26,840 -- -- 26,840 Marketing and sales 257,867 4,207 -- 262,074 Research and development 140,375 2,811 -- 143,186 General and administrative 56,495 2,814 -- 59,309 Unusual items 44,053 -- -- 44,053 -------------- -------------- ------------ Total costs and expenses 681,886 10,390 5,216 697,492 -------------- -------------- ------------ Income (loss) from operations 234,007 (7,477) (5,216) 221,314 Other income, net 25,624 294 -- 25,918 -------------- -------------- ------------ Income (loss) before provision for income taxes 259,631 (7,183) (5,216) 247,232 Provision (benefit) for income taxes 77,889 -- (2,086)(c) 75,803 -------------- -------------- ------------ Net income (loss) before cumulative effect of change in accounting method $ 181,742 $ (7,183) $ (3,130) $ 171,429 -------------- -------------- ------------- -------------- -------------- ------------- Basic net income per share, before cumulative effect of change in accounting method $ 0.93 $ 0.88 -------------- ------------- -------------- ------------- Diluted net income per share, before cumulative effect of change in accounting method $ 0.83 $ 0.78 -------------- ------------- -------------- ------------- Weighted average common shares outstanding 194,900 194,900 -------------- ------------- -------------- ------------- Weighted average common and potential common shares outstanding-assuming dilution 219,552 219,552 -------------- ------------- -------------- -------------
The accompanying notes are an integral part of these condensed combined financial statements. CADENCE DESIGN SYSTEMS, INC. AND AMBIT DESIGN SYSTEMS, INC. NOTES TO THE PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS (UNAUDITED) BASIS OF PRESENTATION The pro forma condensed combined 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 consolidated 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 condensed combined financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 and the Quarterly Report on Form 10-Q for the quarter ended October 3, 1998. The preparation of pro forma condensed combined 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 pro forma condensed combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PRO FORMA ADJUSTMENTS Certain pro forma adjustments have been made to the accompanying pro forma condensed combined Statements of Operations as described below: a) Reflects amortization of goodwill and identified intangible assets for nine month period ended October 3, 1998 ($5.2 million per year for 7 years). b) Reflects amortization of goodwill and identified intangible assets for twelve month period ended January 3, 1998 ($5.2 million per year for 7 years). c) Reflects tax benefit at the statutory rate of 40% relating to the pro forma adjustments. PURCHASE PRICE The purchase price for the acquisition of Ambit is computed as follows (in thousands): Cash payment to Ambit Shareholders $ 252,990 Cadence ownership prior to acquisition 2,000 -------------- Total purchase price $ 254,990 -------------- --------------
IN-PROCESS TECHNOLOGY The acquisition of Ambit was accounted for as a purchase, allocating the purchase price based upon the estimated fair value of the assets acquired and the liabilities assumed. In connection with the acquisition, net intangibles of $250.9 million were acquired. Management estimates that $214.4 million of the purchased intangibles was purchased in-process technology that had not yet reached technological feasibility and has no alternative future use. This amount was expensed in the period ended October 3, 1998 but is excluded from the pro forma condensed combined statement of operations for that period included herein. The value assigned to purchased in-process technology, based on a valuation prepared by a third-party appraisal company, was determined by identifying research projects in areas for which technological feasibility has not been established. The remaining intangible assets of $36.5 million were assigned to goodwill and identified intangible assets and will be amortized on a straight-line basis over their estimated useful lives of seven years. Management believes that the unamortized balance is recoverable through future operating results. If these projects are not successfully developed, business, operating results, and financial condition of the Company may be adversely affected. Additionally, the value of the other intangible assets acquired may become impaired. -----END PRIVACY-ENHANCED MESSAGE-----