1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: November 14, 1996
(date of earliest event reported): November 7, 1996
EPIC DESIGN TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 0-24756 77-0135608
-------------------- ----------- ---------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
310 North Mary Avenue
Sunnyvale, California 94086
(Address of principal executive offices)
(408) 988-2997
(Registrant's telephone number, including area code)
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 7, 1996, EPIC Design Technology, Inc. ("EPIC" or the
"Registrant") completed an acquisition through the merger (the "Merger") of its
wholly-owned subsidiary, EPC Acquisition Corporation ("Merger Sub"), with and
into CIDA Technology, Inc. ("CIDA") with CIDA being the surviving corporation.
At the effective time of the Merger ("Effective Time"), CIDA became a
wholly-owned subsidiary of EPIC.
The Merger occurred pursuant to an Agreement and Plan of
Reorganization, dated as of September 16, 1996, as amended (the "Reorganization
Agreement"), by and among EPIC, Merger Sub, CIDA, Wai-Yan Ho and Jin Ho Yang and
Chemical Trust Company of California (with respect to Article VII of the
Reorganization Agreement), and a related Merger Agreement between Merger Sub and
CIDA. Pursuant to the terms and conditions of the Reorganization Agreement and
the Merger Agreement, as of the Effective Time, by virtue of the Merger, the
following occurred:
Conversion of CIDA Common Stock. In consideration of the transactions
contemplated by the Reorganization Agreement, EPIC paid to certain shareholders
of CIDA an aggregate of $3,359,130.13 in exchange for a portion of their shares
of CIDA Common Stock. In addition, each share of CIDA Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
CIDA Common Stock converted into cash or held by any holder who exercised and
perfected appraisal or dissenters' rights for such shares) was canceled and
extinguished and converted automatically into the right to receive 0.20 shares
of EPIC Common Stock (the "Exchange Ratio"). An aggregate of 729,454 shares of
EPIC Common Stock were issued to CIDA shareholders in the Merger.
Share Options. At the Effective Time, each outstanding option to
purchase shares of CIDA Common Stock (a "CIDA Option") was assumed by EPIC and
converted into an option to acquire such number of shares of EPIC Common Stock
as the holder would have been entitled to receive had such holder exercised such
CIDA Option in full immediately prior to the Effective Time of the Merger, at an
exercise price per share equal to the exercise price per share of the CIDA
Common Stock under such CIDA Option immediately prior to the Effective Time of
the Merger divided by the Exchange Ratio. To avoid fractional shares, the number
of shares of EPIC Common Stock subject to an assumed CIDA Option was rounded
down to the nearest whole share. The vesting, duration and other terms of the
new option is the same as the CIDA Option, except to the extent that such
vesting, duration or other terms are modified pursuant to the terms of the plans
or outstanding options of EPIC. As soon as practicable after three days after
EPIC issues a press release disclosing its earnings for the quarter ended
December 31, 1996, EPIC will file a registration statement on Form S-8 with the
Securities and Exchange Commission with respect to the shares of EPIC Common
Stock subject to the assumed CIDA Options. 101,000 additional shares of EPIC
Common Stock are reserved for issuance to holders of CIDA Options in connection
with EPIC's assumption of such CIDA Options.
Escrow Fund. In connection with the Merger, at the Effective Time, 25%
of the shares of EPIC Common Stock issuable to certain holders of CIDA Common
Stock by virtue of the Merger (the "Escrow Shares") were deposited with Chemical
Trust Company of California, as escrow agent (the "Escrow Agent"), such deposit
to constitute the escrow fund (the "Escrow Fund"). The Escrow Shares will be
held in escrow as security for any losses that EPIC incurs or reasonably
anticipates incurring by reason of breaches by CIDA of covenants,
representations or warranties contained in the Merger Agreement. Subject to the
resolution of unsatisfied claims of EPIC, the Escrow Fund shall terminate upon
the earlier of twelve (12) months following the Effective Time of the Merger.
The Merger was consummated following approval of the Reorganization
Agreement by the shareholders of CIDA and shall constitute a tax-free
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended. For accounting purposes, the Merger was accounted for as a
purchase.
A copy of the Reorganization Agreement is attached hereto as Exhibit
2.1.
-2-
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
a. Financial Statements of Business Acquired.
Financial statements of business acquired, prepared
pursuant to Rule 3-05 of Regulation S-X:
Page
----
For the period ended September 30, 1995:
Independent Auditors' Report 5
Balance Sheet 6
Statement of Operations 7
Statement of Shareholders' Deficiency 8
Statement of Cash Flows 9
Notes to Financial Statements 10-12
For the periods ended June 30, 1996 and 1995:
Unaudited Condensed Balance Sheet 13
Unaudited Condensed Statements of Operations 14
Unaudited Condensed Statements of Cash Flows 15
Notes to Unaudited Condensed Financial Statements 16
b. Pro Forma Financial Information.
Pro forma financial information required pursuant to
Article 11 of Regulation S-X:
Page
----
Unaudited Pro Forma Consolidated Balance Sheet 17
Unaudited Pro Forma Consolidated Statements of Operations 18-19
Notes to Pro Forma Consolidated Financial Information 20-21
c. Exhibits in accordance with Item 601 of Regulation S-K:
The Following exhibits are filed in accordance with Item 601
of Regulation S-K as part of this report:
2.1 Agreement and Plan of Reorganization dated as of
September 16, 1996, as amended by Amendment No. 1
dated as of September 27, 1996, each entered into by
and among EPIC Design Technology, Inc., CIDA
Technology, Inc., EPC Acquisition Corporation,
Wai-Yan Ho and Jin Ho Yang and Chemical Trust Company
of California (with respect to Article VII of the
Agreement and Plan of Reorganization).
23.1 Consent of Deloitte & Touche LLP, Independent
Auditors.
-3-
4
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 hereunto duly authorized.
EPIC DESIGN TECHNOLOGY, INC.
Dated: November 14, 1996 By: /s/ Tammy S. Liu
-----------------------
Tammy S. Liu
Chief Financial Officer
-4-
5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of CIDA Technology, Inc.:
We have audited the accompanying balance sheet of CIDA Technology, Inc. (a
development stage company) as of September 30, 1995, and the related statements
of operations, shareholders' deficiency and cash flows for the period November
15, 1994 (inception) to September 30, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of CIDA Technology, Inc. at September 30,
1995, and the results of its operations and its cash flows for the period
November 15, 1994 (inception) to September 30, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
San Jose, California
October 25, 1996
-5-
6
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 1995
- ------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 633,692
Receivables from related parties 100,000
----------
Total current assets 733,692
PROPERTY AND EQUIPMENT, Net 115,065
OTHER ASSETS 13,207
----------
TOTAL $ 861,964
==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 21,238
Accrued liabilities 24,676
Deferred revenue 1,100,000
----------
Total current liabilities 1,145,914
----------
SHAREHOLDERS' DEFICIENCY:
Common stock, no par value: 5,000,000 shares
authorized; 4,172,237 shares outstanding 8,344
Note receivable (2,677)
Deficit accumulated during the development stage (289,617)
----------
Total shareholders' deficiency (283,950)
----------
TOTAL $ 861,964
==========
See notes to financial statements.
- 6 -
7
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
PERIOD FROM NOVEMBER 15, 1994 (INCEPTION)
TO SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
DEVELOPMENT REVENUES $ 100,000
---------
COSTS AND EXPENSES:
Research and development 296,343
General and administrative 95,667
---------
Total costs and expenses 392,010
---------
LOSS FROM OPERATIONS (292,010)
INTEREST INCOME 2,393
---------
NET LOSS $(289,617)
=========
See notes to financial statements.
- 7 -
8
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' DEFICIENCY
PERIOD FROM NOVEMBER 15, 1994 (INCEPTION)
TO SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
DEFICIT
ACCUMULATED
COMMON STOCK DURING THE
-------------------- NOTE DEVELOPMENT
SHARES AMOUNT RECEIVABLE STAGE TOTAL
--------- -------- ----------- ----------- -----------
November 1994 - issuance of common stock
at $0.002 per share for cash 1,500,000 $ 3,000 $ - $ - $ 3,000
December 1994 to July 1995 - issuance of common
stock at $0.002 per share for notes 2,672,237 5,344 (5,344) - -
September 1995 - collection of note receivable - - 2,667 - 2,667
Net loss - - - (289,617) (289,617)
--------- -------- --------- ----------- ----------
BALANCES, September 30, 1995 4,172,237 $ 8,344 $ (2,677) $ (289,617) $ (283,950)
========= ======== ========= =========== ==========
See notes to financial statements.
- 8 -
9
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM NOVEMBER 15, 1994 (INCEPTION)
TO SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (289,617)
Reconciliation of net loss to net cash provided by operating activities:
Depreciation and amortization 20,912
Changes in operating assets and liabilities:
Other assets (13,207)
Accounts payable 21,238
Accrued liabilities 24,676
Deferred revenue 1,100,000
----------
Net cash provided by operating activities 864,002
----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Property acquisitions (135,977)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 3,000
Loan to related parties (100,000)
Collection of note receivable 2,667
----------
Net cash used by financing activities (94,333)
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 633,692
CASH AND CASH EQUIVALENTS, Beginning of period -
----------
CASH AND CASH EQUIVALENTS, End of period $ 633,692
==========
NONCASH INVESTING AND FINANCING ACTIVITIES-
Issuance of common stock for note receivable $ 5,344
==========
See notes to financial statements.
- 9 -
10
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM NOVEMBER 15, 1994 (INCEPTION)
TO SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - CIDA Technology, Inc. (the Company) was founded in
November 1994 to develop and market integrated circuit verification and
extraction tools. The Company is in the process of developing full-chip
verification tools. Revenues generated to date are from a joint
development contract, which is not the Company's planned principal
operations.
CASH EQUIVALENTS are highly liquid debt instruments purchased with an
original maturity date of three months or less.
PROPERTY AND EQUIPMENT are stated at cost. Depreciation and amortization
is provided using the straight-line method over estimated useful lives of
three years.
DEFERRED REVENUE represents payments received from customers for future
services to be performed under a joint development agreement.
REVENUE RECOGNITION - Revenue consists of fees under a joint development
agreement and is recognized as services are performed using the
percentage of completion method.
INCOME TAXES - The Company accounts for income taxes using an asset and
liability approach for financial reporting of income taxes.
FAIR VALUE OF FINANCIAL INSTRUMENTS - In accordance with the provisions
of SFAS No. 107, "Disclosure About Fair Value of Financial Instruments,"
which requires the disclosure of fair value information about both on and
off balance sheet financial instruments where it is practicable to
estimate the value, the Company has estimated the fair value of its
financial instruments. The Company believes that carrying amounts
reported in the balance sheet for cash equivalents, at December 31, 1995
approximate fair market value.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES - The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The Company participates in a dynamic high technology industry and
believes that changes in any of the following areas, among others, could
have a material adverse affect on the Company's future financial position
or results of operations: ability to obtain additional financing;
increased competition; and the ability to attract and retain employees
necessary to support its growth.
- 10 -
11
RECENTLY ISSUED ACCOUNTING STANDARDS - In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." The new
standard defines a fair value method of accounting for stock options and
other equity instruments, such as stock purchase plans. Under this
method, compensation cost is measured based on the fair value of the
stock award when granted and is recognized as an expense over the service
period, which is usually the vesting period. The disclosure requirements
of this standard will be effective for the Company beginning in fiscal
1997 and requires measurement of awards made beginning in fiscal 1996.
The new standard permits companies to continue to account for equity
transactions with employees under existing accounting rules, but requires
disclosure in a note to the financial statements of the pro forma net
income as if the company had applied the new method of accounting. The
Company intends to implement these disclosure requirements for its
employee stock plans beginning in fiscal 1997. Based on the Company's
current use of equity instruments, adoption of the new standard will not
impact reported net income and will have no effect on the Company's cash
flows.
2. PROPERTY AND EQUIPMENT
At September 30, 1995, property and equipment consist of:
Computer equipment $118,207
Furniture and fixtures 11,770
Software 6,000
--------
Total 135,977
Accumulated depreciation and amortization (20,912)
--------
Property and equipment, net $115,065
========
3. RELATED PARTIES
At September 30, 1995, the Company had a total of $100,000 under two
different short-term notes receivable from related parties. These
noninterest-bearing notes were subsequently collected during fiscal 1996.
4. FACILITIES LEASE
The Company leases its facilities under a noncancellable rental agreement
expiring in 1996. Rent expense for fiscal year 1995 was $26,631. Future
minimum lease payments for fiscal years 1996 and 1997 are $36,093 and
$9,072, respectively.
5. INCOME TAXES
No income taxes were provided in fiscal 1995 due to the Company's net
losses.
At September 30, 1995, the Company has net operating loss carryforwards
of approximately $280,000 available to offset future federal and state
taxable income. Such federal and state carryforwards expire in 2011 and
2004, respectively. The deferred tax assets generated by loss
carryforwards have been fully reserved due to the uncertainty surrounding
the realization of such benefits.
- 11 -
12
The Tax Reform Act of 1986 and California Conformity Act of 1987 impose
substantial restrictions on the utilization of net operating loss and tax
credit carryforwards in the event of an "ownership change," as defined by
the Internal Revenue Code. Any such ownership change could significantly
limit the Company's ability to utilize its tax carryforwards.
6. MAJOR CUSTOMERS
The Company had one customer representing 100% of revenue in fiscal 1995.
7. SUBSEQUENT EVENT
In September 1996, the Company and its shareholders entered into an
agreement to sell their ownership interest in the Company to EPIC Design
Technology, Inc. in exchange for a total of 729,454 shares of EPIC Design
Technology, Inc.'s common stock, $3.4 million in cash and the assumption
of all the Company's outstanding stock options.
* * * * *
- 12 -
13
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED BALANCE SHEET
JUNE 30, 1996
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 415,357
Receivable from related party 159,032
Other current assets 41,577
----------
Total current assets 615,966
PROPERTY AND EQUIPMENT, Net 108,635
OTHER ASSETS 10,691
----------
TOTAL $ 735,292
==========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 14,400
Accrued liabilities 45,242
Deferred revenue 1,159,980
----------
Total current liabilities 1,219,622
----------
SHAREHOLDERS' DEFICIENCY:
Common stock, no par value: 5,000,000 shares
authorized; 4,172,237 shares outstanding 8,344
Note receivable (1,344)
Deficit accumulated during the development stage (491,330)
----------
Total shareholders' deficiency (484,330)
----------
TOTAL $ 735,292
==========
See notes to condensed financial statements.
- 13 -
14
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
PERIOD CUMULATIVE
FROM FROM
NOVEMBER 15, NOVEMBER 15,
NINE MONTHS 1994 1994
ENDED (INCEPTION) (INCEPTION)
JUNE 30, TO JUNE 30, TO JUNE 30,
1996 1995 1996
REVENUES $ 340,000 $ 60,000 $ 440,000
--------- --------- ---------
COSTS AND EXPENSES:
Research and development 422,110 217,973 718,453
General and administrative 135,935 46,858 231,602
--------- --------- ---------
Total costs and expenses 558,045 264,831 950,055
--------- --------- ---------
LOSS FROM OPERATIONS (218,045) (204,831) (510,055)
INTEREST INCOME 16,332 - 18,725
--------- --------- ---------
NET LOSS $(201,713) $(204,831) $(491,330)
========= ========= =========
See notes to condensed financial statements.
- 14 -
15
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
PERIOD CUMULATIVE
FROM FROM
NOVEMBER 15, NOVEMBER 15,
NINE MONTHS 1994 1994
ENDED (INCEPTION) (INCEPTION)
JUNE 30, TO JUNE 30, TO JUNE 30,
1996 1995 1996
--------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(201,713) $(204,831) $ (491,330)
Reconciliation of net loss to net cash provided by (used by)
operating activities:
Depreciation and amortization 48,499 5,024 69,411
Changes in operating assets and liabilities:
Other current assets (41,577) (12,800) (41,577)
Other assets 2,516 (10,677) (10,691)
Accounts payable (6,838 761 14,400
Accrued liabilities 20,566 16,644 45,242
Deferred revenue 59,980 740,000 1,159,980
--------- -------- ----------
Net cash provided by (used by) operating activities (118,567) 534,121 745,435
--------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Property acquisitions (42,069) (97,244) (178,046)
--------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 3,000 3,000
Collection of note receivable 1,333 2,000 4,000
Loan to related parties (159,032) (100,000) (259,032)
Collection of related party notes 100,000 - 100,000
--------- -------- ----------
Net cash used by financing activities (57,699) (95,000) (152,032)
--------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (218,335) 341,877 415,357
CASH AND CASH EQUIVALENTS, Beginning of period 633,692 - -
CASH AND CASH EQUIVALENTS, End of period $ 415,357 $ 341,877 $ 415,357
========= ========= =========
NONCASH INVESTING AND FINANCE ACTIVITIES -
Issuance of common stock for note receivable $ - $ 5,344 $ 5,344
========= ========= =========
See notes to condensed financial statements.
- 15 -
16
CIDA TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1996
1. BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared by
CIDA Technology, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). While the
financial information contained in this filing is unaudited, the
financial statements presented reflect all adjustments (consisting only
of normal recurring adjustments) which the Company considers necessary
for a fair presentation of the financial position at June 30, 1996, and
the results of operations and cash flows for the periods ended June 30,
1996 and 1995. The results for interim periods are not necessarily
indicative of the results to be expected for the entire year. These
financial statements should be read in conjunction with the Company's
financial statements for the period ended September 30, 1995.
2. SUBSEQUENT EVENT
In September 1996, the Company and its shareholders entered into an
agreement to sell their ownership interest in the Company to EPIC Design
Technology, Inc. in exchange for a total of 729,454 shares of EPIC Design
Technology, Inc.'s common stock, $3.4 million in cash and the assumption
of all the Company's outstanding stock options.
* * * * *
- 16 -
17
EPIC DESIGN TECHNOLOGY, INC.
AND CIDA TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996
(IN THOUSANDS)
ASSETS
HISTORICAL PRO FORMA
-------------------------- ---------------------------------
EPIC CIDA ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
Current assets:
Cash and equivalents $ 14,127 $ 415 $ (3,899)(1) $ 10,643
Short-term investments 22,578 - - 22,578
Accounts receivable 5,300 - - 5,300
Prepaid expenses and other assets 963 201 - 1,164
Deferred income taxes 978 - (8)(2) 89
--------- ---------- --------- ----------
Total current assets 43,946 616 (3,982) 40,580
Property and equipment - net 4,012 108 - 4,120
Other assets 791 11 1,178 (2) 1,980
--------- ---------- --------- ----------
TOTAL $ 48,749 $ 735 $ (2,804) $ 46,680
========== ========== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 839 $ 14 $ - $ 853
Income taxes payable 209 - - 209
Accrued liabilities 5,401 45 - 5,446
Deferred revenue and customer deposits 4,038 1,160 - 5,198
--------- ---------- --------- ----------
Total current liabilities 10,487 1,219 - 11,706
--------- ---------- --------- ----------
Shareholders' equity:
Common stock 29,672 8 14,505 (3) 44,185
Deferred stock compensation and
receivable (133) (1) - (134)
Retained earnings (accumulated
deficit) 8,745 (491) 491 (3) (9,055)
(17,800)(4)
Unrealized loss on investments, net (22) - - (22)
--------- ---------- --------- ----------
Total shareholders' equity 38,262 (484) (2,804) 34,974
--------- ---------- --------- ----------
TOTAL $ 48,749 $ 735 $ (2,804) $ 46,680
========== ========= ========== ==========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
- 17 -
18
EPIC DESIGN TECHNOLOGY, INC.
AND CIDA TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA
--------------------------- ---------------------------------
EPIC CIDA ADJUSTMENTS COMBINED
Revenue:
License $ 25,080 $ - $ - $ 25,080
Service 6,312 340 - 6,652
----------- -------- -------- ----------
Total revenue 31,392 340 - 31,732
----------- -------- -------- ----------
Costs and expenses:
Cost of license 1,307 - - 1,307
Cost of service 1,244 - - 1,244
Sales and marketing 9,630 - - 9,630
Research and development 7,366 422 - 7,788
General and administrative 2,374 136 177 (5) 2,687
----------- -------- -------- ----------
Total operating expenses 21,921 558 177 22,656
----------- -------- -------- ----------
Income (loss) from operations 9,471 (218) (177) 9,076
Interest income, net 832 16 - 848
----------- -------- -------- ----------
Income (loss) before income taxes 10,303 (202) (177) 9,924
Provision (benefit) for income taxes 3,812 - (93) (6) 3,719
----------- -------- -------- ----------
Net income (loss) $ 6,491 $ (202) $ (84) $ 6,205
=========== ========= ======== ==========
Net income per common and
equivalent share $ 0.47 $ 0.42
=========== ===========
Shares used in per share computation 13,804 14,630 (7)
=========== ===========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
- 18 -
19
EPIC DESIGN TECHNOLOGY, INC.
AND CIDA TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA
-------------------------- -----------------------------
EPIC CIDA ADJUSTMENTS COMBINED
---------- --------- ----------- --------
Revenue:
License $ 20,732 $ - $ - $ 20,732
Service 4,271 100 - 4,371
---------- -------- ------- ----------
Total revenue 25,003 100 - 25,103
---------- -------- ------- ----------
Costs and expenses:
Cost of license 1,315 - - 1,315
Cost of service 987 - - 987
Sales and marketing 8,771 - - 8,771
Research and development 5,886 296 - 6,182
General and administrative 2,325 96 206 (5) 2,627
Purchased in-process technology 3,261 - - 3,261
---------- -------- ------- ----------
Total operating expenses 22,545 392 206 23,143
---------- -------- ------- ----------
Income (loss) from operations 2,458 (292) (206) 1,960
Interest income, net 822 2 - 824
---------- -------- ------- ----------
Income (loss) before income taxes 3,280 (290) (206) 2,784
Provision (benefit) for income taxes 2,290 - (131) (6) 2,159
---------- -------- ------- ----------
Net income (loss) $ 990 $ (290) $ (75) $ 625
========== ======== ======= ==========
Net income (loss) per common and equivalent share $ 0.08 $ 0.04
========== ==========
Shares used in per share computation 13,198 13,921 (7)
========== ==========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
- 19 -
20
EPIC DESIGN TECHNOLOGY, INC.
NOTES TO PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
1. ACQUISITION
On November 7, 1996, EPIC Design Technology, Inc. (the Company or EPIC)
completed an acquisition, through a merger (the Merger) of its
wholly-owned subsidiary, EPC Acquisition Corporation, of CIDA Technology,
Inc. (CIDA) as contemplated under a purchase agreement and plan of
reorganization dated September 16, 1996.
The Company exchanged a total of $3.4 million in cash, 729,454 shares of
its common stock and options to acquire 101,000 shares of its common stock
for all outstanding shares of the common stock and options to purchase
common stock of CIDA.
For accounting purposes, the Merger was accounted for as a purchase.
2. PRO FORMA ADJUSTMENTS
The accompanying pro forma financial statements are presented in
accordance with Article 11 of Regulation S-X.
The aggregate purchase price, including costs directly attributable to
the completion of the acquisition (totaling $17.9 million), has been
allocated to the assets and liabilities acquired. The allocation of the
purchase price among the identifiable intangible assets was based on an
independent appraisal of the fair market value of those assets. Such
appraisal allocated $18.8 million to purchased in- process research and
development, which has not yet reached technological feasibility and does
not have alternative future uses. This amount has not been reflected in
the pro forma statement of operations as it represents a non-recurring
charge.
To prepare the pro forma unaudited condensed combining statement of
operations, the EPIC statement of operations for the year ended September
30, 1995 has been combined with the statement of operations of CIDA for
the period from November 15, 1994 (inception) to September 30, 1995.
Also, the EPIC statement of operations for the nine months ended June 30,
1996 has been combined with CIDA's statement of operations for the same
period. This method of combining the companies is for the presentation
of unaudited condensed combining financial statements only. Actual
statements of operations of the companies will be combined from the
effective date of the acquisition, with no retroactive restatement.
The unaudited pro forma condensed combining financial statements should
be read in conjunction with the historical financial statements of EPIC
and CIDA.
The following adjustments have been made to the pro forma condensed
combining financial statements:
(1) To record cash payments to be made in connection with the Merger
which include the aggregate $3,359,000 cash payments to CIDA
shareholders and $540,000 of Merger-related expenses.
- 20 -
21
(2) To record estimated fair value of acquired intangible assets
(excluding in-process technology) and the associated deferred tax
liability.
(3) To eliminate CIDA shareholders' deficiency and record the issuance of
EPIC common stock and stock options.
(4) To record adjustments to retained earnings for (1) charge for
acquired in-process technology of $18.8 million related to this
acquisition, and (2) CIDA losses from June 30, 1996 including the
acquisition of certain in-process technology rights.
(5) Reflects pro forma amortization of the purchased intangibles.
(6) Tax effect of pro forma adjustment (5) at the statutory rate and
to record the tax benefit of losses incurred.
(7) Reflects the shares issued and the impact of dilutive stock options
assumed in the acquisition.
* * * * *
- 21 -
22
EXHIBIT INDEX
Exhibit 2.1 Agreement and Plan of Reorganization dated as of September 16,
1996, as amended by Amendment No. 1 dated as of September 27,
1996, each entered into by and among EPIC Design Technology,
Inc., CIDA Technology, Inc., EPC Acquisition Corporation,
Wai-Yan Ho and Jin Ho Yang and Chemical Trust Company of
California (with respect to Article VII of the Agreement and
Plan of Reorganization).
Exhibit 23.1 Consent of Deloitte & Touche LLP, Independent