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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 0-17191
WEITEK CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2709963
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2801 ORCHARD PARKWAY, SAN JOSE, CALIFORNIA, 95134
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 526-0300
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
8,654,156 shares of common stock at June 30, 1997
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WEITEK CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1997
PART I
FINANCIAL INFORMATION AND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF DISCONTINUED OPERATIONS
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WEITEK CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS OF DISCONTINUED OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
JUNE 30, 1997 DECEMBER 31, 1996
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ASSETS
Current assets:
Cash and cash equivalents ............................... $ 7,714 $ 2,878
Accounts receivable, net of allowances of $9 and $484 ... 40 556
Assets held for sale .................................... -- 595
Prepaid expenses and other .............................. -- 157
-------- --------
$ 7,754 $ 4,186
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................ $ 141 $ 211
Accrued compensation and employee benefits .............. -- 417
Other current liabilities ............................... 556 691
-------- --------
Total current liabilities ............................. 697 1,319
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Shareholders' equity:
Preferred stock, 1,000,000 shares authorized, no par
value, no shares outstanding .......................... -- --
Common stock, 50,000,000 shares authorized, no par value,
8,654,156 shares outstanding .......................... 23,141 23,141
Accumulated deficit ..................................... (16,084) (20,274)
-------- --------
Total shareholders' equity ........................ 7,057 2,867
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$ 7,754 $ 4,186
======== ========
See accompanying notes to consolidated condensed financial statements.
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WEITEK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF DISCONTINUED OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ----------------------------
JUNE 30, 1997 JUNE 29, 1996 JUNE 30, 1997 JUNE 29, 1996
------------- ------------- ------------- -------------
Net revenue .......................................... $ 630 $ 3,240 $ 4,834 $ 4,200
Cost of revenue ...................................... -- 2,095 83 6,130
------- ------- ------- -------
Gross margin ......................................... 630 1,145 4,751 (1,930)
Research and development ............................. -- 437 -- 2,317
Sales and marketing .................................. -- 224 -- 784
General and administrative ........................... 127 344 964 844
Severance costs ...................................... -- -- -- 410
------- ------- ------- -------
Income (loss) from discontinued operations ........... 503 140 3,787 (6,285)
Interest and other income (net) ...................... 121 65 403 125
------- ------- ------- -------
Income (loss) from discontinued operations
before income taxes ............................... 624 205 4,190 (6,160)
Provision for Income taxes ........................... -- -- -- --
------- ------- ------- -------
Net income (loss) from discontinued operations ....... $ 624 $ 205 $ 4,190 $(6,160)
======= ======= ======= =======
Earnings (loss) per share from discontinued operations .07 .02 .48 (.71)
======= ======= ======= =======
Weighted average common shares ....................... 8,654 8,675 8,654 8,648
======= ======= ======= =======
See accompanying notes to consolidated condensed financial statements.
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WEITEK CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS OF DISCONTINUED OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
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JUNE 30, 1997 JUNE 29, 1996
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Cash flows from discontinued operating activities:
Net income (loss) from discontinued operations ........................... $ 4,190 $(6,160)
Adjustments to reconcile net income (loss) from discontinued operations to
net cash used by discontinued operating activities:
Depreciation and amortization .......................................... -- 678
Changes in assets and liabilities:
Accounts receivable .................................................. 515 1,288
Inventories .......................................................... -- 1,730
Prepaid expenses and other assets .................................... 157 89
Accounts payable ..................................................... (70) (1,000)
Accrued compensation and employee benefits ........................... (417) (270)
Other liabilities .................................................... (134) 1,846
------- -------
Net cash provided (used) by discontinued operations .................... 4,241 (1,799)
------- -------
Cash flows from investing activities:
Proceeds from (purchase of) equipment and
leasehold improvements ................................................. 595 (362)
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Net cash provided (used) by investing activities ....................... 595 (362)
------- -------
Cash flows from financing activities:
Issuance of capital stock ................................................ -- 45
------- -------
Net cash provided by financing activities .............................. -- 45
------- -------
Net increase (decrease) in cash and cash equivalents ........................ 4,836 (2,116)
Cash and cash equivalents at beginning of period ............................ 2,878 6,028
------- -------
Cash and cash equivalents at end of period .................................. $ 7,714 $ 3,912
======= =======
See accompanying notes to consolidated condensed financial statements.
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WEITEK CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Interim Statements:
The accompanying unaudited consolidated condensed financial statements have been
prepared on the same basis as the audited consolidated financial statements and,
in the opinion of management, contain all adjustments necessary to fairly
present the financial information included therein. While the Company believes
that the disclosures are adequate to make the information not misleading, it is
suggested that this financial data be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1996 included in the Company's 1996 report to the Securities and Exchange
Commission on Form 10-K. Results for the interim period presented are not
necessarily indicative of results for the entire year.
Note 2 - Discontinued Operations:
As of June 30, 1997, the Company estimated that all future costs expected to be
incurred as a direct result of the discontinuance of its operations would amount
to approximately $556,000. The costs to be incurred are included in the
financial statements for the quarter ended June 30, 1997. The future costs to be
incurred as a direct result of the discontinuance of the Company's operations
consist of the following (in thousands):
QUARTER ENDED
JUNE 30, 1997
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Administrative costs ................................................. $455
Legal and professional fees associated with the bankruptcy proceedings 66
Other legal and professional costs ................................... 35
----
$556
====
Note 3 - Consolidated Condensed Balance Sheet Detail:
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
1997 1996
----- -----
Assets held for sale, net book value:
Machinery and equipment .................................................. $ -- $ 438
Furniture and fixtures ................................................... -- 343
Leasehold improvements ................................................... -- 159
----- -----
-- 940
Valuation allowance ...................................................... $ -- (345)
----- -----
$ -- $ 595
===== =====
Other current liabilities:
Legal and professional costs ............................................. $ 101 $ 691
Administrative costs ..................................................... 455 --
----- -----
$ 556 $ 691
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Note 4 - Earnings (Loss) per Share:
Earnings (loss) per share is computed using the weighted average number of
common shares and, where dilutive, common share equivalents outstanding during
the period.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share". SFAS
128 requires the disclosure of basic and diluted earnings per share data and is
effective for fiscal years ending after December 15, 1997. The adoption of SFAS
128 would have no effect on earnings per share data for the three and six months
ended June 30, 1997 and 1996.
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WEITEK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF DISCONTINUED OPERATIONS
RESULTS OF DISCONTINUED OPERATIONS
When used in the following report, the words "projects", "expects", "intends"
and similar expressions are intended to identify forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of the
following factors and those factors set forth elsewhere in this Form 10-Q. A
number of factors may impact the outcome of actual results, but in particular,
(i) the outcome of a pending employment claim against the Company and any other
claims which may be filed against the Company prior to its dissolution, (ii)
additional claims of which the Company is not currently aware and which the
Company may have to satisfy prior to any liquidating distribution to
shareholders and (iii) the administrative and other costs associated with
winding up the affairs of the Company.
OVERVIEW
On December 11, 1996 the Company filed a voluntary plan of reorganization (the
"Plan") under Chapter 11 of the U.S. Bankruptcy Code with the United States
Bankruptcy Court, Northern District of California, San Jose Division (the
"Bankruptcy Court"). The Company filed the Plan in connection with the signing
of an asset purchase agreement (the "Rockwell Agreement") with Rockwell
Semiconductor Systems, Inc. ("Rockwell"). Under the terms of the Rockwell
Agreement, Rockwell agreed to pay approximately $3,124,000 to acquire certain of
the Company's assets and a non-exclusive license to certain of the Company's
technology. The Plan, which includes the Rockwell Agreement as well as the
disposition of all other remaining assets and technology of the Company, was
approved by the Bankruptcy Court on March 20, 1997 and the Rockwell Agreement
was closed on April 1, 1997.
Pursuant to the approved Plan, the Company has sold substantially all of its
remaining assets and technology. Upon resolution of the outstanding claim
against the Company described below, the Company intends to wind up its affairs
and make a liquidating distribution to its shareholders.
The amount of the liquidating distribution to shareholders is estimated to be
between $0.65 and $0.80 per share. The actual amount of the liquidating
distribution may vary depending on several factors including, but not limited to
the following: (i) the outcome of a pending employment claim against the Company
and any other claims which may be filed against the company prior to its
dissolution, (ii) additional claims of which the Company is not currently aware
and which the Company may have to satisfy prior to any liquidating distribution
to shareholders and (iii) the administrative and other costs associated with
winding up the affairs of the Company.
A former employee of the Company is currently pursuing a claim against the
Company for alleged damages arising from her alleged job-related disability. The
former employee is seeking in excess of $600,000 in damages. Although the
Company's insurance policy will provide coverage for this claim up to $1
million, the outcome of any litigation matter is inherently uncertain and there
can be no assurance that the Company will not be obligated to pay the portion of
a judgment which exceeds the Company's insurance policy limits. The Company has
filed motions with the Bankruptcy Court seeking a determination that this
plaintiff's damages, if any, will not exceed the limit of the Company's
insurance coverage. Unless and until such a determination is made (or the claim
is tried or settled), the Company's ability to make liquidating distributions to
its shareholders may be impaired.
NET REVENUE
Net revenue in the second quarter and first half of 1997 was $0.6 million and
$4.8 million compared to $3.2 million and $4.2 million in the comparable periods
of 1996. Approximately 63% of the net revenue in the first half of 1997 was
derived from recognition of proceeds received under the terms of the Rockwell
Agreement with another 33% derived from technology licensing agreements. As of
June 30, 1997, the Company had disposed of substantially all of its assets and
technology, and does not anticipate having material revenues in any future
period.
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EXPENSES
In the fourth quarter of 1996, the Company decided to discontinue all its
operations. Expenses incurred in both the second quarter and first half of 1997
consist of expenses incurred by the Company in connection with winding-up its
affairs and disposing of its assets. Expenses for the first half of 1997 include
$0.6 million in estimated costs to be incurred during the phase out period and a
reduction of expenses of $0.7 million resulting from the elimination of a
previously recorded liability which has been assumed by the Company's insurance
carrier. Expenses for the first half of 1996 included severance costs of
approximately $0.4 million and costs related to the relocation of the Company's
headquarters of approximately $0.2 million. As of June 30, 1997, future charges
related to legal and other costs associated with bankruptcy proceedings, and the
windup of the Company's affairs were estimated to be approximately $556,000. The
future charges were included in net income for the second quarter of 1997.
Research and development expenses: There were no research and development
expenses in the second quarter or the first half of 1997. Research and
development expenses were $0.4 million in the second quarter and $2.3 million in
the first half of 1996. No employees were involved in research and development
activities in the first half of 1997.
Sales and marketing expenses: There were no sales and marketing expenses in the
second quarter or first half of 1997. Sales and marketing expenses were $0.2
million in the second quarter and $0.8 million in the first half of 1996. No
employees were involved in sales and marketing activities in the first half of
1997.
PROVISION FOR INCOME TAXES
The Company recorded no tax provision in the first half of 1997 due to
recognition of certain charges for tax purposes which were previously recorded
for financial reporting purposes. The Company recorded no tax benefit in the
first half of 1996. The Company has exhausted its ability to carry back losses
against prior years' income; however, the Company has the ability to carry
forward certain tax attributes to offset future regular federal and state income
taxes payable. In the event of a change in control as defined by the Internal
Revenue Code, the Company's utilization of its net operating loss carry forwards
and tax credits is subject to substantial annual limitations.
LIQUIDITY AND CAPITAL RESOURCES OF DISCONTINUED OPERATIONS
At June 30, 1997, the Company's cash and cash equivalents balance was $7.7
million and working capital was $7.7 million. At June 30, 1997 the Company had
no available credit facilities.
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WEITEK CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
June 30, 1997
PART II
Item 1. Legal Proceedings
See "Results of Discontinued Operations" for a description of a pending
employment claim against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Report on Form 8-K
None
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SIGNATURES
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.
WEITEK CORPORATION
Date: August 13, 1997 /s/ Richard H. Bohnet
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Richard H. Bohnet
* Responsible Person
* As of the date of this filing, the Registrant no longer has any persons
serving as executive officers or members of its board of directors. Pursuant to
the Registrant's Plan of Reorganization approved by the United States Bankruptcy
Court on March 20, 1997, Mr. Bohnet, the former President and Chief Executive
Officer of the Registrant, is designated as the Responsible Person empowered to
do all things necessary and appropriate to meet the Registrant's obligations.
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INDEX TO EXHIBITS
Exhibit
Number Exhibits
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27.1 Financial Data Schedule
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