-----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, Vly3JI92NmRx1v4clmV6xnZxkvB9EtMHe4OQfy7EAXVwWIWGkeOKspZRdqiNHkgv LW3OToBoqWHzlwOUR32yUA== 0000891618-96-001572.txt : 19960808 0000891618-96-001572.hdr.sgml : 19960808 ACCESSION NUMBER: 0000891618-96-001572 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960524 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960807 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRACTAL DESIGN CORP CENTRAL INDEX KEY: 0000930884 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770276903 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26822 FILM NUMBER: 96604988 BUSINESS ADDRESS: STREET 1: 335 SPRECKLES DRIVE CITY: APTOS STATE: CA ZIP: 95003 BUSINESS PHONE: 4086885300 MAIL ADDRESS: STREET 1: 335 SPRACKELS DR CITY: APTOS STATE: CA ZIP: 95003 8-K/A 1 AMENDMENT #1 TO THE FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) MAY 24, 1996 ------------ FRACTAL DESIGN CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) CALIFORNIA 000-26822 77-0276903 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 335 SPRECKELS DRIVE, APTOS, CALIFORNIA 95003 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408) 688-5300 -------------------------- N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 The Undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its current report on Form 8-K, originally filed with the Securities and Exchange Commission on June 6, 1996 (the "Form 8-K") as set forth in the pages attached hereto. ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS A. Item 7(a) of Registrant's Current Report on Form 8-K is amended to add the required financial statements of the business acquired, including the unaudited balance sheet as of March 31, 1996 and unaudited statements of operations and cash flows for the three months ended March 31, 1996 and March 31, 1995. 3 RAY DREAM, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
(Unaudited) March 31, December 31, Assets 1996 1995 ------ ---- ---- Current assets: Cash and cash equivalents $ 1,731,300 $ 1,938,600 Trade receivables, less allowance for returns and bad debts of $965,300 at March 31, 1996 and $584,500 at December 31, 1995 2,536,500 1,647,300 Inventories 416,300 387,100 Prepaid expenses and other assets 510,300 271,700 ----------- ----------- Total current assets 5,194,400 4,244,700 Property and equipment 370,700 304,400 Other assets 182,900 191,300 ----------- ----------- $ 5,748,000 $ 4,740,400 =========== =========== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Current portion of long-term debt $ 166,700 $ 166,700 Accounts payable 1,197,800 828,800 Accrued expenses 868,300 546,600 Deferred revenue 768,300 13,900 ----------- ----------- Total current liabilities 3,001,100 1,556,000 Long-term debt 250,000 291,700 ----------- ----------- Total liabilities 3,251,100 1,847,700 Shareholders' equity: Preferred stock (aggregate liquidation preference of $5,392,500) 5,296,900 5,296,900 Common stock, no par, 7,000,000 shares authorized; 1,862,336 and 1,808,336 shares issued and outstanding at March 31, 1996 and December 31, 1995, respectively 733,700 726,300 Deferred stock compensation (322,200) (407,500) Cumulative translation adjustment (49,700) (80,500) Accumulated deficit (3,161,800) (2,642,500) ----------- ----------- Total shareholders' equity 2,496,900 2,892,700 ----------- ----------- $ 5,748,000 $ 4,740,400 =========== ===========
4 RAY DREAM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three months ended ------------------ March 31, March 31, 1996 1995 ---- ---- Revenue: Product sales $2,979,500 $1,474,600 License revenue -- 86,800 ---------- ---------- Total revenue 2,979,500 1,561,400 Costs and expenses: Cost of revenues 607,400 141,000 Research and development 486,500 263,000 Sales and marketing 1,850,200 1,008,000 General and administrative 453,500 217,000 ---------- ---------- Total costs and expenses 3,397,600 1,629,000 ---------- ---------- Operating loss (418,100) (67,600) Interest income, net 23,100 30,000 ---------- ---------- Net (loss) before income taxes (395,000) (37,600) Income taxes 124,300 7,000 ---------- ---------- Net loss $ (519,300) $ (44,600) ========== ========== Net loss per share $ (0.28) $ (0.02) ========== ========== Shares used in computing net loss per share 1,835,000 1,791,000 ========== ==========
See accompanying Notes to Consolidated Financial Statements 5 RAY DREAM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three months ended ------------------ March 31, March 31, 1996 1995 ---- ---- Cash flows from operating activities: Net loss $ (519,300) $ (44,600) Adjustments to reconcile net income to net cash used for operating activities: Depreciation 39,000 29,900 Stock compensation expense 85,300 -- Allowance for returns and bad debts 380,800 20,400 Changes in operating assets and liabilities: Trade receivables (1,270,000) (381,300) Inventories (29,200) (11,800) Prepaid expenses and other assets (238,600) (81,200) Accounts payable 369,000 84,000 Accrued expenses 321,700 78,900 Deferred revenue 754,400 (500) ----------- ---------- Net cash used for operating activities (106,900) (306,200) ----------- ---------- Cash flows from investing activities: Purchases of property and equipment (105,300) (66,100) Other assets 8,400 (8,000) ----------- ---------- Net cash used for investing activities (96,900) (74,100) ----------- ---------- Cash flows from financing activities: Principal payments on note payable (41,700) -- Issuance of common stock from exercise of stock options 7,400 -- ----------- ---------- Net cash used for financing activities (34,300) -- ----------- ---------- Effect of exchange rate changes on cash 30,800 41,500 ----------- ---------- Net decrease in cash and cash equivalents (207,300) (338,800) Cash and cash equivalents at beginning of period 1,938,600 2,217,000 ----------- ---------- Cash and cash equivalents at end of period $ 1,731,300 $1,878,200 =========== ==========
See accompanying Notes to Consolidated Financial Statements 6 RAY DREAM, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 AND DECEMBER 31, 1995 (1) BASIS OF PRESENTATION The financial information contained herein has been prepared without audit in accordance with the Company's accounting policies as described in its Registration Statement filed with the Securities and Exchange Commission on Form S-4, declared effective on April 26, 1996. In the opinion of management, all adjustments, including normal recurring accruals, necessary for a fair presentation of the Company's financial position, results of operation and cash flows for the interim periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted where such disclosure would substantially duplicate previous disclosures. These financial statements should be read in conjunction with the financial statements and related notes included in the Company's Registration Statement on Form S-4, declared effective on April 26, 1996. The interim results are not necessarily indicative of the results to be expected for the entire year. (2) SHORT-TERM INVESTMENTS Short-term investments have been classified as available-for-sale securities, and as of March 31, 1996 and December 31, 1995, consisted of the following:
(Unaudited) March 31, December 31, 1996 1995 ----------- ------------ U.S. Government agencies $ -- $ 149,300 Commercial paper 1,191,700 1,238,300 ---------- ---------- $1,191,700 $1,387,600 ========== ==========
All securities were due in 90 days or less, and are included in cash and cash equivalents. The estimated fair value of these investments approximated cost as of March 31, 1996 and December 31, 1995. (3) INVENTORIES A summary of inventories as of March 31, 1996 and December 31, 1995 follows:
(Unaudited) March 31, December 31, 1996 1995 ----------- ------------ Raw materials and work-in-process $194,500 $188,500 Finished goods 221,800 198,600 -------- -------- $416,300 $387,100 ======== ========
(4) ACCRUED EXPENSES A summary of accrued expenses as of March 31, 1996 and December 31, 1995 follows:
(Unaudited) March 31, December 31, 1996 1995 ----------- ------------ Accrued payroll and employee benefits $472,900 $220,400
7 Other 395,400 326,200 -------- -------- $868,300 $546,600 ======== ========
(5) PROPERTY AND EQUIPMENT A summary of property and equipment as of March 31, 1996 and December 31, 1995 follows:
(Unaudited) March 31, December 31, 1996 1995 ----------- ------------ Computer equipment $556,300 $536,300 Furniture and fixtures 194,600 109,300 -------- -------- 750,900 645,600 Less accumulated depreciation 380,200 341,200 -------- -------- $370,700 $304,400 ======== ========
(6) PREPAID EXPENSES AND OTHER ASSETS A summary of prepaid expenses and other assets as of March 31, 1996 and December 31, 1995 follows:
(Unaudited) March 31, December 31, 1996 1995 ----------- ------------ Prepaid expenses $194,600 $168,400 Prepaid merger expenses 263,500 -- Other assets 52,200 $103,300 -------- -------- $510,300 $271,700 ======== ========
8 B. Item 7(b) of Registrant's Current Report on Form 8-K is amended to add the required pro forma financial information. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION The following unaudited pro forma combined condensed financial information assumes a business combination between Fractal and Ray Dream accounted for on a pooling of interests basis. The pro forma unaudited combined condensed financial statements are based on the respective historical financial statements of Fractal and Ray Dream and should be read in conjunction with such financial statements and the notes thereto. Fractal's fiscal year ends March 31, and Ray Dream's fiscal year ends December 31. The unaudited pro forma combined condensed balance sheet combines Fractal's March 31, 1996 consolidated balance sheet with Ray Dream's March 31, 1996 unaudited consolidated balance sheet. The unaudited pro forma combined condensed statements of operations combine Fractal's historical consolidated statements of operations for the three fiscal years ended March 31, 1996 with corresponding Ray Dream historical consolidated statements of operations for the three years ended December 31, 1995. The unaudited pro forma combined condensed information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger had been consummated at the beginning of the periods presented, nor is it necessarily indicative of future operating results or financial position. 9 UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET (IN THOUSANDS)
March 31, 1996 -------------------------------------------- Pro Forma Pro Forma Fractal Ray Dream Adjustments Combined ------- --------- ----------- --------- ASSETS Current assets: Cash and cash equivalents..................... $ 5,422 $1,731 $ -- $ 7,153 Short-term investments........................ 23,683 -- -- 23,683 Accounts receivable, net...................... 4,070 2,537 713(3) 7,320 Inventories................................... 804 416 -- 1,220 Deferred income taxes......................... 1,446 -- -- 1,446 Other current assets.......................... 1,462 510 -- 1,972 ------- ------ ------- ------- Total current assets................... 36,887 5,194 713 42,794 ------- ------ ------- ------- Property and equipment, net....................... 587 371 -- 958 Other assets...................................... -- 183 -- 183 ------- ------ ------- ------- Total assets........................... $37,474 $5,748 $ 713 $43,935 ======= ====== ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.............................. $ 2,482 $1,197 $ -- $ 3,679 Accrued liabilities........................... 4,482 1,637 278(3) 8,709 713(3) 1,865(4) (266)(4) Current portion of long-term debt............. -- 167 -- 167 ------- ------ ------- ------- Total current liabilities.............. 6,964 3,001 2,590 12,555 ------- ------ ------- ------- Long-term debt.................................... -- 250 -- 250 ------- ------ ------- ------- Shareholders' equity.............................. 30,510 2,497 (1,877)(3,4) 31,130 ------- ------ ------- ------- Total liabilities and shareholders' equity $37,474 $5,748 $ 713 $43,935 ======= ====== ======= =======
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Information. 10 UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended March 31, ---------------------------------------- 1996 1995 1994 -------- -------- -------- Net revenues $ 29,529 $ 18,476 $ 10,002 Cost of net revenues 5,146 3,124 2,524 -------- -------- -------- Gross profit 24,383 15,352 7,478 -------- -------- -------- Operating expenses: Research and development 4,073 2,509 1,372 Sales and marketing 13,512 8,992 6,038 General and administrative 2,612 1,684 1,166 -------- -------- -------- 20,197 13,185 8,576 -------- -------- -------- Income (loss) from operations 4,186 2,167 (1,098) Interest income (expense), net 567 65 (64) -------- -------- -------- Income (loss) before income taxes 4,753 2,232 (1,162) Provision for income taxes (1,827) (473) -- -------- -------- -------- Net income (loss) $ 2,926 $ 1,759 $ (1,162) ======== ======== ======== Net income (loss) per share $ 0.25 $ 0.17 $ (0.14) ======== ======== ======== Shares used to compute net income (loss) per share 11,603 10,485 8,240 ======== ======== ========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Information. 11 NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION NOTE 1 - BASIS OF COMBINATION: The pro forma combined condensed financial information reflects the issuance of 3,165,660 shares of Fractal Common Stock for an aggregate of 5,600,470 shares of Ray Dream Common Stock in connection with the Merger based on an exchange ratio of 0.565249 shares of Fractal for each share of Ray Dream Common Stock. Fractal's fiscal year ends on March 31 and Ray Dream's fiscal year ends on December 31. The unaudited pro forma combined condensed balance sheet combines Fractal's March 31, 1996 consolidated balance sheet with Ray Dream's March 31, 1996 unaudited consolidated balance sheet. The unaudited pro forma combined condensed statements of operations combine Fractal's historical consolidated statements of operations for the three fiscal years ended March 31, 1996 with corresponding Ray Dream historical consolidated statements of operations for the three years ended December 31, 1995. As a result of the above noted presentation, Ray Dream's net change in equity for the three months ended March 31, 1996, is reflected as an adjustment to retained earnings. Net revenues and net loss of Ray Dream for the three months ended March 31, 1996 were $2,979,500 and $(519,300), respectively. NOTE 2 - PRO FORMA NET INCOME (LOSS) PER SHARE: The unaudited pro forma combined net income (loss) per share is based upon the weighted average number of shares of common stock and, when dilutive, common equivalent shares outstanding of Fractal and Ray Dream for each period using an exchange ratio of 0.565249 shares of Fractal for each share of Ray Dream Common Stock. Fractal was exempt from the payment of U.S. federal and certain state income taxes prior to October 1, 1993, as a result of its shareholders electing to be taxed as a Subchapter S Corporation. Effective October 1, 1993 the Company's shareholders terminated their Subchapter S election. As a result of pro forma combined pre-tax losses for the year ended March 31, 1994, there is no pro forma benefit for income taxes. Therefore, the fact that Fractal was a Subchapter S corporation during part of this period does not require any additional pro forma presentations of net income or net income per share as was necessary for Fractal's historical consolidated financial statements. As the unaudited pro forma combined condensed statements of operations combines the historical results of operations of Fractal and Ray Dream, no income tax benefit has been recognized in the unaudited pro forma combined condensed statements of operations for any periods in which Ray Dream had losses from operations and Fractal had income from operations. NOTE 3 - CONFORMING ADJUSTMENTS & INTERCOMPANY TRANSACTIONS: There are no material transactions between Fractal and Ray Dream included in the unaudited pro forma combined financial information for any period presented. The following pro 12 forma adjustments were made to conform Ray Dream financial reporting with the financial reporting presentations of Fractal: - Reclassify the $713,000 sales returns reserve of Ray Dream from accounts receivable reserves to an accrued liability. - Reclassify the $278,000 cumulative amortization of deferred compensation related to stock options from shareholders' equity to an accrued liability. NOTE 4 - TRANSACTION COSTS AND RESTRUCTURING EXPENSES: Total costs associated with the Merger are expected to be approximately $1,865,000, including approximately, $450,000 for payments under transition and severance agreements, $135,000 related to closing duplicate facilities, $950,000 of transaction costs and $330,000 of other costs. Transaction costs to be incurred by Fractal and Ray Dream include fees to financial advisors and legal, accounting, printing and other related expenses. Such costs will be expensed in the quarter ended June 30, 1996, the quarter in which the Merger is expected to be consummated. Accordingly, the unaudited pro forma combined condensed statements of operations do not reflect such costs and expenses. The unaudited pro forma combined condensed balance sheet gives effect to such expenses, net of income taxes of $266,000, as if they had been incurred as of March 31, 1996. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Fractal Design Corporation (Registrant) Dated: August 7, 1996 By: /s/ LESLIE WRIGHT ----------------- Leslie Wright Chief Operating Officer, Chief Financial Officer and Assistant Secretary -----END PRIVACY-ENHANCED MESSAGE-----