Exhibit 99.2
Unaudited Pro Forma Condensed Combined Financial Information
On August 27, 2008, PDF Solutions, Inc. (“PDF” or the “Company”) announced that it had entered into an agreement to acquire substantially all of the assets of Triant Technologies (2005), Inc., (“Triant”) a company based in Vancouver, BC, Canada, pursuant to the terms of an asset purchase agreement (the “Purchase Agreement”). The transactions contemplated by the Purchase Agreement closed on October 7, 2008. Triant developed and licensed fault detection and classification software applications and services dedicated to the semiconductor industry to enable customers to rapidly identify sources of process variations and manufacturing excursions by monitoring equipment parameters through its proprietary data collection and analysis applications. Under the terms of the Purchase Agreement, PDF acquired substantially all of the assets of Triant’s Fault Detection & Classification business, excluding certain receivables, but including certain customer contracts and technologies in consideration for approximately $1.6 million in cash. The acquisition of substantially all the assets of Triant will provide the Company’s customers with greater capabilities for managing product yield improvements as a result of these process control solutions and services.
The Company has accounted for the acquisition as a business combination under the purchase method of accounting. Under the purchase method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based upon their estimated fair values. Estimates of the fair values of acquired assets and assumed liabilities of Triant have been combined with the recorded values of the assets and liabilities of PDF in the unaudited pro forma condensed combined financial information.
The following unaudited pro forma condensed combined financial information gives effect to the acquisition PDF and Triant. This unaudited pro forma condensed combined financial information is based upon the historical financial statements of PDF and Triant and is based on the assumptions and estimates set forth below in the notes to such information.
The unaudited pro forma condensed combined balance sheet information as of June 30, 2008 gives effect to the acquisition as if the acquisition had occurred on June 30, 2008. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2008 and the year ended December 31, 2007 give effect to the acquisition as if the acquisition had occurred at the beginning of the respective periods.
The unaudited pro forma condensed combined financial information, including the notes thereto, does not give effect to any potential cost savings or other synergies that could result from the acquisition. The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the financial position or results of operations in future periods or the results that would have been realized if the acquisition had been consummated on the dates indicated. The unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements of PDF contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2007, which was filed with the SEC on March 17, 2008, and in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, which was filed with the SEC on August 11, 2008, and the historical financial statements of Triant included elsewhere in this Amendment No. 1 to the Company’s Form 8-K.
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PDF Solutions, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
(In thousands)
June 30, 2008
Unaudited Pro Forma Condensed Combined Balance Sheet
(In thousands)
June 30, 2008
| Historical | Proforma | |||||||||||||||
| Triant | Adjustments | Combined | ||||||||||||||
Assets | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 30,487 | $ | 455 | $ | (1,604 | ) (1) | $ | 28,883 | |||||||
| (455 | ) (3) | |||||||||||||||
| Short-term investments | 12,708 | — | — | 12,708 | ||||||||||||
| Accounts receivable, net of allowance for doubtful accounts | 35,506 | 521 | (521 | ) (3) | 35,506 | |||||||||||
| Prepaid expenses and other current assets | 3,771 | 368 | 55 | (2) | 3,826 | |||||||||||
| (368 | ) (3) | |||||||||||||||
| Deferred tax asset, current | 1,514 | — | — | 1,514 | ||||||||||||
| Total current assets | 83,986 | 1,344 | (2,893 | ) | 82,437 | |||||||||||
| Property and equipment, net | 3,344 | 160 | 16 | (2) | 3,360 | |||||||||||
| (160 | ) (3) | |||||||||||||||
| Non-current investments | 1,262 | — | — | 1,262 | ||||||||||||
| Goodwill | 67,264 | — | 216 | (1) | 67,480 | |||||||||||
| Intangible assets, net | 11,184 | — | 1,650 | (1) | 12,834 | |||||||||||
| Deferred tax assets, non-current, and other assets | 10,825 | — | — | 10,825 | ||||||||||||
| Total assets | $ | 177,865 | $ | 1,504 | $ | (1,171 | ) | $ | 178,198 | |||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||
| Current portion of long-term debt | $ | 418 | $ | — | $ | — | $ | 418 | ||||||||
| Accounts payable | 2,378 | 19 | (19 | ) (3) | 2,378 | |||||||||||
| Accrued compensation and benefits | 6,574 | 280 | (280 | ) (3) | 6,574 | |||||||||||
| Other accrued liabilities | 2,253 | — | 315 | (6) | 2,568 | |||||||||||
| Taxes payable | 75 | — | — | 75 | ||||||||||||
| Deferred revenues | 3,600 | 202 | 18 | (2) | 3,618 | |||||||||||
| (202 | ) (3) | |||||||||||||||
| Billings in excess of recognized revenue | 110 | — | — | 110 | ||||||||||||
| Total current liabilities | 15,408 | 501 | (168 | ) | 15,741 | |||||||||||
| Long-term debt | 911 | — | — | 911 | ||||||||||||
| Long-term taxes payable | 5,670 | — | — | 5,670 | ||||||||||||
| Other liabilities | 724 | — | — | 724 | ||||||||||||
| Total liabilities | 22,713 | 501 | (168 | ) | 23,046 | |||||||||||
| Common stock | 4 | — | — | 4 | ||||||||||||
| Additional paid-in-capital | 185,333 | 36,404 | (36,404 | ) (3) | 185,333 | |||||||||||
| Treasury stock at cost, 1,670 shares at June 30, 2008 | (14,135 | ) | — | — | (14,135 | ) | ||||||||||
| Accumulated deficit | (21,345 | ) | (38,804 | ) | 38,804 | (3) | (21,345 | ) | ||||||||
| Cumulative other comprehensive income (loss) | 5,295 | 3,403 | (3,403 | ) (3) | 5,295 | |||||||||||
| Total stockholders’ equity | 155,152 | 1,003 | (1,003 | ) | 155,152 | |||||||||||
| Total liabilities and stockholders’ equity | $ | 177,865 | $ | 1,504 | $ | (1,171 | ) | $ | 178,198 | |||||||
See notes to unaudited pro forma condensed combined financial statements.
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PDF Solutions, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
(In thousands, except per share amounts)
Unaudited Pro Forma Condensed Combined Statement of Operations
(In thousands, except per share amounts)
| Six months ended June 30, 2008 | ||||||||||||||||
| Historical | Pro Forma | |||||||||||||||
| Triant | Adjustments | Combined | ||||||||||||||
| Design-to-silicon-yield solutions | $ | 30,476 | $ | 1,992 | $ | — | $ | 32,468 | ||||||||
| Gainshare performance incentives | 10,985 | — | 10,985 | |||||||||||||
| Revenues | 41,461 | 1,992 | 43,453 | |||||||||||||
| Costs and expenses: | ||||||||||||||||
| Costs of revenues | ||||||||||||||||
| Direct costs of design-to-silicon-yield solutions: | 15,033 | 564 | 15,597 | |||||||||||||
| Amortization of acquired core technology | 1,262 | — | 105 | (4) | 1,367 | |||||||||||
| Total cost of design-to-silicon-yield solutions | 16,295 | 564 | 105 | 16,964 | ||||||||||||
| Gross margin | 25,166 | 1,428 | (105 | ) | 26,489 | |||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 18,210 | 955 | 19,165 | |||||||||||||
| Selling, general and administrative | 11,945 | 1,257 | 13,202 | |||||||||||||
| Amortization of intangible assets | 389 | — | 206 | (4) | 595 | |||||||||||
| Restructuring charges | 1,471 | — | — | 1,471 | ||||||||||||
| Total operating expenses | 32,015 | 2,212 | 206 | 34,433 | ||||||||||||
| Income (loss) from operations | (6,849 | ) | (784 | ) | (311 | ) | (7,944 | ) | ||||||||
| Interest and other income, net | 740 | 26 | (24 | )(7) | 742 | |||||||||||
| Income (loss) before taxes | (6,109 | ) | (758 | ) | (335 | ) | (7,202 | ) | ||||||||
| Tax provision (benefit) | (1,656 | ) | — | (134 | )(5) | (1,790 | ) | |||||||||
| Net income (loss) | $ | (4,453 | ) | $ | (758 | ) | $ | (201 | ) | $ | (5,412 | ) | ||||
| Net income per share: | ||||||||||||||||
| Basic | $ | (0.16 | ) | $ | (0.20 | ) | ||||||||||
| Diluted | $ | (0.16 | ) | $ | (0.20 | ) | ||||||||||
| Weighted average common shares: | ||||||||||||||||
| Basic | 27,724 | 27,724 | ||||||||||||||
| Diluted | 27,724 | 27,724 | ||||||||||||||
See notes to unaudited pro forma condensed combined financial statements.
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PDF Solutions, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
(In thousands, except per share amounts)
Unaudited Pro Forma Condensed Combined Statement of Operations
(In thousands, except per share amounts)
| Year ended December 31, 2007 | ||||||||||||||||
| Historical | Pro Forma | |||||||||||||||
| Triant | Adjustments | Combined | ||||||||||||||
| Design-to-silicon-yield solutions | $ | 70,376 | $ | 3,434 | $ | — | $ | 73,810 | ||||||||
| Gainshare performance incentives | 24,087 | — | 24,087 | |||||||||||||
| Revenues | 94,463 | 3,434 | 97,897 | |||||||||||||
| Costs and expenses: | ||||||||||||||||
| Costs of revenues | ||||||||||||||||
| Direct costs of design-to-silicon-yield solutions: | 32,470 | 998 | 33,468 | |||||||||||||
| Amortization of acquired core technology | 5,148 | — | 210 | (4) | 5,358 | |||||||||||
| Total cost of design-to-silicon-yield solutions | 37,618 | 998 | 210 | 38,826 | ||||||||||||
| Gross margin | 56,845 | 2,436 | (210 | ) | 59,071 | |||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 36,074 | 1,892 | 37,966 | |||||||||||||
| Selling, general and administrative | 24,891 | 2,382 | 27,273 | |||||||||||||
| Amortization of intangible assets | 3,422 | — | 353 | (4) | 3,775 | |||||||||||
| Restructuring charges | — | — | — | — | ||||||||||||
| Total operating expenses | 64,387 | 4,274 | 353 | 69,014 | ||||||||||||
| Income (loss) from operations | (7,542 | ) | (1,838 | ) | (563 | ) | (9,943 | ) | ||||||||
| Interest and other income, net | 1,891 | 184 | (48 | )(7) | 2,027 | |||||||||||
| Income (loss) before taxes | (5,651 | ) | (1,654 | ) | (611 | ) | (7,916 | ) | ||||||||
| Tax provision (benefit) | (2,724 | ) | — | (244 | )(5) | (2,968 | ) | |||||||||
| Net income (loss) | $ | (2,927 | ) | $ | (1,654 | ) | $ | (367 | ) | $ | (4,948 | ) | ||||
| Net income per share: | ||||||||||||||||
| Basic | $ | (0.10 | ) | $ | (0.18 | ) | ||||||||||
| Diluted | $ | (0.10 | ) | $ | (0.18 | ) | ||||||||||
| Weighted average common shares: | ||||||||||||||||
| Basic | 28,066 | 28,066 | ||||||||||||||
| Diluted | 28,066 | 28,066 | ||||||||||||||
See notes to unaudited pro forma condensed combined financial statements.
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Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
NOTE 1. BASIS OF PRESENTATION
The unaudited 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. The Company believes that the disclosures are adequate to make the information not misleading. The Company remeasured Triant’s balance sheet at June 30, 2008 utilizing the closing spot US dollar to Canadian dollar exchange rate on that day. The Company remeasured Triant’s statements of operations and comprehensive loss for the six months ended June 30, 2008 and the year ended December 31, 2007 at the average exchange rates over the respective periods.
NOTE 2. DESCRIPTION OF THE TRIANT TECHNOLOGIES ACQUISITION
On August 27, 2008, PDF Solutions, Inc. (“PDF” or the “Company”) announced that it had entered into an agreement to acquire substantially all of the assets of Triant Technologies (2005), Inc., (“Triant”) a company based in Vancouver, BC, Canada, pursuant to the terms of a purchase agreement filed as exhibit 1.01 to the Company’s Form 8-K filed on September 2, 2008 (the “Purchase Agreement”). The transactions contemplated by the Purchase Agreement closed on October 7, 2008. Triant developed and licensed fault detection and classification software applications and services dedicated to the semiconductor industry to enable customers to rapidly identify sources of process variations and manufacturing excursions by monitoring equipment parameters through its proprietary data collection and analysis applications. Under the terms of the Purchase Agreement, PDF acquired substantially all of the assets of Triant’s Fault Detection & Classification business, excluding certain receivables, but including certain customer contracts and technologies in consideration for approximately $1.6 million in cash. This acquisition will provide the Company’s customers with greater capabilities for managing product yield improvement as a result of these process control solutions and services.
The structure and calculation of the purchase price has been calculated as follows (in thousands):
| Cash paid for purchase | $ | 1,604 | (a) | |
| Transaction costs | 315 | |||
| Total purchase price | $ | 1,919 | ||
(a) Cash paid for the purchase consists of (in thousands):
| Cash paid to Triant | $ | 1,230 | ||
| Cash paid to escrow account | 374 | |||
| Total cash paid for purchase | $ | 1,604 | ||
The excess of the purchase price over the fair value of the assets acquired and liabilities assumed has been recorded as goodwill. Contract backlog, customer relationships and developed/core technology were identified as intangible assets, which are recorded at estimated fair values, and are being amortized over their useful lives ranging from three months to four years.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 141,Business Combinations, the assets purchase is accounted for as a business combination. The purchase price has been allocated based upon the fair value of the assets acquired and liabilities assumed. The following table summarizes the components of the total purchase price and the allocation (in thousands):
| Estimated | ||||||||
| Preliminary Allocation of purchase price: | Useful Life (Yrs). | |||||||
| Allocation of purchase price: | ||||||||
| Fair value of tangible assets | $ | 71 | ||||||
| Developed / Core technology | 2 | 420 | ||||||
| Customer relationships | 4 | 1,170 | ||||||
| Contract backlog | .25 | 60 | ||||||
| Goodwill | N/A | 216 | ||||||
| Total assets acquired | 1,937 | |||||||
| Deferred revenue | (18 | ) | ||||||
| Total liabilities assumed | (18 | ) | ||||||
| Total consideration | $ | 1,919 | ||||||
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The following adjustments have been reflected in the unaudited pro forma condensed combined financial statements:
(1) To record cash paid and record applicable purchase accounting entries including intangible assets.
(2) To adjust acquired assets and assumed liabilities to fair market value.
(3) To eliminate Triant’s equity balances, asset and liability accounts that PDF did not acquire from Triant.
(4) Adjustment to record the amortization of identifiable intangible assets resulting from the allocation of the Triant purchase price. The pro forma adjustment assumes that the identifiable intangibles will be amortized on a straight-line basis over the following estimated lives (remaining intangibles including goodwill will be tested for impairment):
Identifiable Intangible
| Estimated Useful | ||||
| Life (years) | ||||
| Developed / Core technology | 2 | |||
| Customer relationships | 4 | |||
| Contract backlog | .25 | |||
(5) To record the income tax benefit of the net pro forma adjustments at PDF’s United States statutory rate of 40%. Triant did not record an income tax benefit for its losses as Triant recorded a full valuation allowance against its deferred tax assets.
(6) To record the estimated transaction costs associated with the acquisition not incurred as of June 30, 2008.
(7) Adjustment to record reduction in estimated interest income earned at assumed rates of 3% for the six months ended June 30, 2008, and the year ended December 31, 2007 on cash and cash equivalents as a result of paying cash proceeds of $1.6 million in connection with the purchase.
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