<PAGE> 1
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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 (Date of Earliest Event Report): December 30, 1997
HAYES CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 0-21697 52-1987873
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation or Identification No.)
organization)
</TABLE>
5854 PEACHTREE CORNERS EAST
NORCROSS, GEORGIA 30092
(Address of principal executive offices, including zip code)
(770) 840-9200
(Registrant's telephone number, including area code)
ACCESS BEYOND, INC.
1300 QUINCE ORCHARD BOULEVARD
GAITHERSBURG, MARYLAND 20878
(Former name and former address from last report)
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 29, 1997, the shareholders of Access Beyond, Inc. ("Access
Beyond") approved the merger of H&A Merger Sub, Inc., a wholly-owned subsidiary
of Access Beyond, Inc. with Hayes Microcomputer Products, Inc. ("Hayes") and the
merger was closed on December 30, 1997.
As a result of the merger and the conversion ratio set forth in the
Merger Agreement, the holders of Hayes common stock will have the right to
receive an aggregate of 23,106,433 shares of Access Beyond common stock, the
holders of Hayes Series A Preferred Stock will have the right to receive
22,681,729 shares of Access Beyond common stock and the holders of Hayes Series
B Preferred Stock will have the right to receive 1,217,930 shares of Access
Beyond Series A Preferred Stock. The shareholders of Hayes at the effective time
of the merger owned approximately 79% of the outstanding equity securities of
Access Beyond excluding stock options and certain convertible stock of Access
Beyond. In connection with the merger, Access Beyond changed its name to Hayes
Corporation, increased the number of its authorized shares of common stock and
increased its board of directors to seven members, five of whom were designated
by the former Hayes shareholders. The transaction is valued at approximately
$250 million based on the shares issued in the merger to Hayes shareholders and
Access Beyond's recent closing prices on NASDAQ/NMS.
On December 30, 1997, Access Beyond acquired all of the outstanding shares
of Hayes Microcomputer Products, Inc. ("Hayes") capital stock. For accounting
purposes, the acquisition has been treated as the acquisition of Access Beyond
by Hayes with Hayes as the acquiror. The historical financial statements of
Access Beyond prior to December 30, 1997 will be those of Hayes Microcomputer
Products, Inc.
Based in Gaithersburg, Maryland, Access Beyond is in the business of
developing and marketing products which enable local, remote or mobile users to
access network resources.
Based in Norcross, Georgia, Hayes is in the business of designing,
manufacturing, marketing and supporting computer communications products for
business, government, small office, professional and individual consumers
worldwide through the sales of modem, network and broadband products.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The required financial statements for Hayes Microcomputer Products,
Inc. relative to the merger as required by Article 11 of Regulation S-X and this
Item 7 of Form 8-K are included below.
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Hayes Microcomputer Products, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Hayes
Microcomputer Products, Inc. and subsidiaries as of December 31, 1995 and 1996
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the years ended September 30, 1994 and 1995, the
three months ended December 31, 1995, and the year ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hayes
Microcomputer Products, Inc. and subsidiaries as of December 31, 1995 and 1996
and the results of their operations and their cash flows for the years ended
September 30, 1994 and 1995, the three months ended December 31, 1995, and the
year ended December 31, 1996 in conformity with generally accepted accounting
principles.
Atlanta, Georgia
April 30, 1997, except for
Note 18, as to which the date
is November 12, 1997.
<PAGE> 4
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 2,435 $5,687 $ 6,497
Restricted cash............................................ 3,501 594 2
Accounts receivable, less allowance for doubtful accounts
and product returns of $5,424 in 1995, $8,115 in 1996
and $5,916 in 1997...................................... 27,489 16,060 40,624
Receivables from related parties........................... 6,828 8,219
Inventories................................................ 38,304 25,422 26,763
Refundable income taxes.................................... 1,344 16
Prepaid expenses and other current assets.................. 2,187 4,437 4,031
------- ------- ---------
Total current assets............................... 75,260 59,044 86,136
Property and equipment, net.................................. 6,207 7,387 8,549
Computer software costs, net................................. 813 307 401
Land held for sale........................................... 6,139 328
Intangibles and other long-term assets....................... 3,277 2,149 6,862
------- ------- ---------
Total assets....................................... $ 91,696 $69,215 $ 101,948
======= ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current debt............................................... $ 11,134 $13,973 $ 31,729
Accounts payable........................................... 4,307 10,414 28,376
Amounts due to related parties............................. 6,918 13,147
Accrued liabilities........................................ 34,549 23,221 26,311
Income taxes payable....................................... 864 1,017
------- ------- ---------
Total current liabilities.......................... 49,990 55,390 100,580
Long-term debt, less current................................. 6,881 4,502
Liabilities subject to compromise............................ 44,581
Other long-term liabilities.................................. 137 1,203 1,014
------- ------- ---------
Total liabilities.................................. 94,708 63,474 106,096
Commitments and contingencies
Redeemable preferred stock, Series B, no par value,
authorized 263,113 shares; issued and outstanding 263,113
at June 30, 1997........................................... 5,455
Stockholders' equity (deficit):
Common stock, $.01 par value; authorized 100,000,000
shares; issued and outstanding 17,328,479 shares at
December 31, 1995, 4,991,750 shares at December 31,
1996, and 4,991,098 shares at September 30, 1997........ 173 50 47
Preferred stock, Series A, no par value, authorized
10,000,000 shares; issued and outstanding 4,900,000
shares at December 31, 1996 and September 30, 1997...... 35,000 35,000
Paid-in capital............................................ 496
Accumulated deficit........................................ (4,299) (30,312) (44,834)
Foreign currency translation adjustment.................... 308 1,003 184
Unrealized gain on marketable securities................... 310
------- ------- ---------
Total stockholders' equity (deficit).................... (3,012) 5,741 (9,603)
------- ------- ---------
Total liabilities and stockholders' equity......... $91,696 $69,215 $ 101,948
======= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1995 1996 1996 1997
------------- ------------- ------------ ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Sales....................... $ 246,277 $ 269,155 $ 70,111 $257,452 $ 201,434 $ 146,701
Cost of sales................... 195,188 204,787 51,765 195,918 152,831 111,819
-------- -------- -------- -------- -------- --------
Gross profit............... 51,089 64,368 18,346 61,534 48,603 34,882
-------- -------- -------- -------- -------- --------
Operating expenses:
Sales and marketing........... 41,278 33,364 8,867 42,757 32,244 28,308
General and administrative.... 23,908 22,223 5,100 18,970 15,079 13,058
Research and development...... 16,153 10,713 2,281 9,640 7,047 8,992
Amortization and write-off of
intangibles................ 6,463 5,907
Restructuring charges......... 3,600 4,100
-------- -------- -------- -------- -------- --------
Total operating expenses... 87,802 72,207 16,248 74,967 58,470 50,358
-------- -------- -------- -------- -------- --------
Operating (loss) income......... (36,713) (7,839) 2,098 (13,433) (9,867) (15,476)
Interest expense, net........... (1,928) (6,605) (1,807) (5,056) (4,105) (3,541)
Gain on sale of investment...... 666 2,157
Gain on sale of land............ 8,153 8,153
Gain on patent infringement
settlement.................... 3,993
Other income (expense), net..... 4,893 4,155 (24) 2,279 1,916 2,491
-------- -------- -------- -------- -------- --------
(Loss) income before
reorganization expense
and income tax expense
(benefit)................ (29,755) (10,289) 267 (7,391) (3,903) (14,369)
Reorganization expense.......... 5,026 4,301 5,378 5,378
-------- -------- -------- -------- -------- --------
Loss before income tax
expense (benefit)........ (29,755) (15,315) (4,034) (12,769) (9,281) (14,369)
Income tax expense (benefit).... (1,689) (932) 603 385 383 153
-------- -------- -------- -------- -------- --------
Net loss................... $ (28,066) $ (14,383) $ (4,637) $(13,154) $ (9,664) $ (14,522)
-------- -------- -------- -------- -------- --------
Net loss per share.............. $ (4.98) $ (2.56) $ (0.82) $ (2.52) $ (1.82) $ (2.91)
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN UNREALIZED TOTAL
COMMON STOCK PREFERRED STOCK ACCUMULATED CURRENCY GAIN ON STOCKHOLDERS'
----------------- ---------------- PAID-IN EARNINGS TRANSLATION MARKETABLE EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT SECURITIES (DEFICIT)
------- -------- ------- ------- -------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance September 30,
1993.................. 17,418 $ 174 $ 998 $ 42,787 $ 166 $ 44,125
Stock repurchased from
profit sharing...... (90) (1) (502) (503)
Net loss.............. (28,066) (28,066)
Foreign currency
translation......... 340 340
------- ---- ----- --------- ----- --------
Balance September 30,
1994.................. 17,328 $ 173 496 14,721 506 15,896
Net loss.............. (14,383) (14,383)
Foreign currency
translation......... (96) (96)
Unrealized gain on
securities held for
sale................ $ 266 266
------- ---- ----- --------- ----- -------- --------
Balance September 30,
1995.................. 17,328 173 496 338 410 266 1,683
Net loss.............. (4,637) (4,637)
Foreign currency
translation......... (102) (102)
Unrealized gain on
securities held for
sale................ 44 44
------- ---- ----- --------- ----- -------- --------
Balance December 30,
1995.................. 17,328 173 496 (4,299) 308 310 (3,012)
Net loss.............. (13,154) (13,154)
Stock repurchased and
retired............. (1,737) (17) (602) (12,859) (13,478)
Preferred stock
issued.............. 4,900 $35,000 35,000
Reverse split of
common stock........ (10,599) (106) 106
Foreign currency
translation......... 695 695
Unrealized gain on
securities held for
sale................ (310) (310)
------- ---- ----- -------- ----- --------- ----- -------- --------
Balance December 31,
1996.................. 4,992 50 4,900 35,000 (30,312) 1,003 5,741
Net loss
(unaudited)......... (14,522) (14,522)
Repurchase of stock
(unaudited)......... (3) (3)
Foreign currency
translation
(unaudited)......... (819) (819)
------- ---- ----- -------- ----- --------- ----- -------- --------
Balance September 30,
1997 (unaudited)...... 4,992 $ 47 4,900 $35,000 $ $ (44,834) $ 184 $ $ (9,603)
======= ==== ===== ======== ===== ========= ===== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 7
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1995 1996 1996 1997
------------- ------------- ------------ ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net (loss) income................. $ (28,066) $ (14,383) $ (4,637) $(13,154) $ (9,664) $ (14,522)
-------- -------- -------- -------- -------- --------
Adjustments to reconcile net
(loss) income to net cash (used
in) provided by operating
activities:
Depreciation and amortization... 5,795 5,989 1,301 4,799 3,739 4,799
Amortization and write-off of
intangibles................... 6,463 5,543
Provision for doubtful accounts
receivable.................... (140) 2,390 (20) 345 259 (92)
Provision for inventory
write-downs................... 3,832 12,727 575 5,440 4,470 2,704
Deferred income taxes........... 3,034
Gain on sale of investment...... (666)
Gain on sale of land............ (8,153) (8,153) (2,157)
Changes in assets and
liabilities, net of effects of
acquisition:
Accounts receivable........... (2,114) (11,513) 6,079 4,256 2,150 (21,698)
Inventories................... (18,448) 3,541 (161) 7,442 3,011 929
Refundable income taxes....... (3,741) 3,011 1,328 1,328 16
Prepaid expenses and other
current assets.............. (415) 1,043 (14) (1,338) (811) (791)
Accounts payable.............. 25,448 (47,850) 1,057 6,107 4,343 9,770
Amounts due to related
parties..................... 6,496 4,816 6,229
Accrued liabilities........... 1,373 8,441 7,605 (10,464) (7,148) (4,446)
Income taxes payable.......... 153
Liabilities subject to
compromise.................. 33,275 3,147 (44,581) (44,581)
Other long-term liabilities... (753) (701) 3 1,066 1,192 (189)
-------- -------- -------- -------- -------- --------
Total adjustments........... 20,334 15,896 19,572 (27,923) (35,385) (4,773)
-------- -------- -------- -------- -------- --------
Net cash (used in) provided
by operating activities... (7,732) 1,513 14,935 (41,077) (45,049) (19,295)
-------- -------- -------- -------- -------- --------
Cash flows from investing
activities:
Capital expenditures.............. (4,915) (1,805) (453) (5,028) (2,673) (3,056)
Proceeds from sale of land........ 14,317 14,317
Payment for acquisition of
Cardinal, net of cash acquired
of $3,057....................... (38)
Proceeds from sale of
investment...................... 798 2,357
Proceeds from sale of property and
equipment....................... 759 73 782 255
Changes in other long-term
assets.......................... (3,167) 2,636 189 333 382 (88)
Changes in escrowed and restricted
funds........................... (3,036) (465) 2,907 3,131 592
-------- -------- -------- -------- -------- --------
Net cash provided by (used
in) investing
activities................ (8,082) (1,446) (656) 14,109 15,412 (233)
-------- -------- -------- -------- -------- --------
Cash flows from financing
activities:
Issuance of preferred stock....... 35,000 35,000 5,455
Payments on debt.................. (7,624) (28,685) (16,318) (17,915) (13,114) (4,281)
Proceeds from debt................ 26,256 26,266 22,057 21,637 15,311
Issuance of convertible notes..... 6,000 6,000 4,000
Repurchase of stock............... (504) (13,478) (13,485) (3)
Payment of debt issuance costs.... (618) (625) (2,139) (1,877) 675
-------- -------- -------- -------- -------- --------
Net cash provided by (used
in) financing
activities................ 18,128 (3,037) (16,943) 29,525 34,161 21,157
-------- -------- -------- -------- -------- --------
Effect of exchange rate changes on
cash.............................. 340 (96) (102) 695 395 (819)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents.................. 2,654 (3,066) (2,766) 3,252 4,919 810
Cash and cash equivalents at
beginning of period............... 5,613 8,267 5,201 2,435 2,435 5,687
-------- -------- -------- -------- -------- --------
Cash and cash equivalents at end of
period............................ $ 8,267 $ 5,201 $ 2,435 $ 5,687 $ 7,354 $ 6,497
-------- -------- -------- -------- -------- --------
Supplemental information:
Interest paid..................... $ 896 $ 3,221 $ 1,203 $ 11,811 $ 8,917 $ 2,042
Income taxes paid................. 3 15 7 658 144 414
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 8
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
(IN THOUSANDS)
1. NATURE OF BUSINESS AND PLAN OF REORGANIZATION
Hayes Microcomputer Products, Inc. ("Hayes") along with its wholly owned
subsidiaries (collectively, the "Company"), is engaged in the development,
production and marketing of telecommunications equipment and software and sells
primarily to personal computer and peripheral distributors and resellers.
Reorganization
On November 15, 1994, Hayes filed a petition for relief under Chapter 11 of
the United States Bankruptcy Code due to its inability to pay its debts on a
current basis. Under Chapter 11, certain claims against the debtor in existence
prior to the filing of the petition for relief under the federal bankruptcy laws
were stayed while the Debtor continued business as a debtor-in-possession
("DIP"). These claims were reflected in the consolidated December 31, 1995
balance sheet as liabilities subject to compromise.
Hayes filed amended and restated plans of reorganization, the most recent
dated February 9, 1996 (the "Plan"). The Plan was confirmed by the U.S.
Bankruptcy Court on March 8, 1996 and became effective on April 16, 1996. From
November 1994 through April 1996, the Company operated as the DIP. The Plan
provided for the payment in full of all prepetition creditors on the effective
date, plus interest on such creditors' claims, except where such creditors have
agreed to accept payments over a period of time. Funding of the plan was
provided through three major sources. First, pursuant to an agreement and plan
of merger dated April 12, 1996 (the "Agreement") and entered into by and between
Rinzai Limited ("ACMA"), Kaifa Technology (H.K.) Limited, Rolling Profit
Holdings, Ltd., Lao Hotel (H.K.), Limited, Saliendra Pte Ltd., and S.P. Quek
Investments Pte. Ltd. (collectively, the "Investors"), certain subsidiaries were
created by the investors which collectively contributed $35.0 million and merged
with Hayes. The Investors received preferred stock representing a 49 percent
voting interest in the Company. Second, the Company entered into an agreement
with The CIT Group/Credit Finance, Inc. ("CIT") to borrow up to a total of $64.5
million through three separate debt instruments collateralized by the Company's
intellectual property, certain equipment, and accounts receivable and inventory
balances. Third, pursuant to the Plan, the Company sold certain parcels of real
property classified as land held for sale on the accompanying consolidated
balance sheets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Hayes
Microcomputer Products Inc. and its wholly owned subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation.
The Company's investments in 20 to 50 percent owned companies in which it has
the ability to exercise significant influence over operating and financial
policies are accounted for on the equity method. Accordingly, the Company's
share of the earnings of these companies and any realized gains and losses are
included in the consolidated statements of operations. Investments in other
companies are carried at cost. The cost of securities sold is based on the
specific identification method.
Effective October 1, 1995, the Company changed its year end from September
30 to December 31. Certain reclassifications have been made to prior period
financial statements in order to conform to the 1996 presentation.
Interim Financial Statements
The interim financial data as of and for the nine months ended September
30, 1996 and 1997 is unaudited; however, in the opinion of the Company's
management, the interim data includes all adjustments,
<PAGE> 9
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consisting only of normal recurring adjustments necessary for a fair statement
of results for the interim period. The interim period results of operations are
not necessarily indicative of results for the entire year.
Use of Estimates
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 at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from these
estimates.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Restricted cash at December 31, 1996 and at September 30, 1997 is based on a
Bankruptcy Court mandate to escrow funds. Restricted cash at December 31, 1995
is based on the Company's previous debt facility requirements.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and include labor and related manufacturing overhead. Market with respect to raw
materials is replacement cost and for work in process and finished goods is net
realizable value. Inventories are presented net of the reserve for obsolescence.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is calculated for financial reporting purposes using
the straight-line method based on the estimated useful life of the assets (three
to five years). Leasehold improvements are depreciated over the shorter of the
lease term or useful life.
Maintenance and repairs are charged to expense as incurred. Upon sale,
retirement or other disposition of these assets, the cost and the related
accumulated depreciation are removed from the respective accounts and any gain
or loss on the disposition is included in the consolidated statements of
operations
Computer Software Costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," the Company capitalizes costs incurred for the development of
computer software to be sold. Costs are capitalized upon the establishment of
technical feasibility of the product. Capitalized costs are being amortized
based on current and future projected revenues for each product with an annual
minimum equal to the straight-line amortization over the five year estimated
economic useful life of the product.
Intangibles and Other Long-Term Assets
The Company evaluates the recoverability of all long-lived assets including
related intangible assets and goodwill based upon a comparison of discounted
estimated future cash flows from the related operations with the then
corresponding carrying values of those assets. Realizability of non-related
goodwill is evaluated based on non-discounted future cash flow and operating
income.
Intangible assets consist principally of purchased software and goodwill
which is being amortized using the straight-line method over five years and ten
years, respectively. Accumulated amortization was $11.7 million, $12.2 million
and $12.5 million at December 31, 1995 and 1996 and at September 30, 1997,
respectively.
<PAGE> 10
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Company's policy is to record revenue upon shipment of related goods to
customers. Sales to certain distributors are under terms which allow for those
distributors to receive price protection based on future price reductions. Some
sales made to distributors allow limited rights of return. The Company provides
an allowance for returns and price reductions based on historical experience.
Income Taxes
Income taxes have been provided using the asset and liability method in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Under SFAS 109, deferred tax liabilities and assets are
determined based on temporary differences between the bases of certain assets
and liabilities for income tax and financial reporting purposes. The differences
are primarily attributable to reserves on inventory and accounts receivable.
Future tax benefits, such as net operating loss carryforwards, are recognized to
the extent that realization of such benefits is more likely than not. The effect
of a change in the valuation allowance that results from a change in
circumstances that causes a change in judgment about the realizability of the
related deferred tax asset in future years would be included in income in that
period.
Advertising
All advertising costs are expensed when incurred. Advertising expenses were
approximately $11.1 million, $9.9 million, $3.4 million and $18.0 million for
the years ended September 30, 1994 and 1995, the three months ended December 31,
1995, and the year ended December 31, 1996, respectively.
Foreign Currency Translation
The financial statements of subsidiaries of the Company outside the United
States are measured using the local currency as the functional currency.
Translation adjustments result from the process of translating those
subsidiaries' financial statements from functional currency into U.S. dollars.
Translation adjustments are reported separately and accumulated in a separate
component of equity. Assets and liabilities of these subsidiaries are translated
at the rates of exchange at the balance sheet dates. Income and expense items
are translated at monthly weighted average rates.
Future Adoption of Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), No. 130, "Reporting Comprehensive Income"
("SFAS 130"), No. 129, "Disclosure of Information About Capital Structure"
("SFAS 129"), and No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 131 specifies
revised guidelines for determining an entity's operating segments and the type
and level of financial information to be disclosed. SFAS 130 establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. SFAS 129 provides increased disclosure about an entity's
capital structure, and SFAS 128 specifies the computation, presentation, and
disclosure requirements for earnings per share. These standards are effective
for periods ending after December 15, 1997.
The Company believes that the impact of these standards, when adopted, will
not have a material impact on the Company's consolidated financial statements.
<PAGE> 11
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash Equivalents
The Company estimates that the fair value of cash equivalents approximates
carrying value due to the relatively short maturity of these instruments.
Notes Payable
The Company estimates that the fair value of notes payable approximates
carrying value based upon its effective current borrowing rate for issuance of
debt with similar terms and remaining maturities.
Liabilities Subject to Compromise
The Company estimates that the fair value of prepetition liabilities
approximates carrying value based upon its effective borrowing rate for issuance
of debt with similar terms and remaining maturities.
4. SUPPLEMENTAL BALANCE SHEET INFORMATION
Inventories consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials...................................... $18,781 $ 9,199 $ 8,359
Work in process.................................... 3,728 4,728 4,278
Finished goods..................................... 15,795 11,495 14,126
------- ------- -------
$38,304 $25,422 $ 26,763
======= ======= =======
</TABLE>
Property and equipment consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(IN THOUSANDS)(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment.......................... $ 17,939 $ 19,735 $ 19,781
Data processing equipment........................ 14,164 15,069 15,830
Furniture and fixtures........................... 6,585 6,662 6,506
Leasehold improvements........................... 4,427 4,738 3,873
Construction in progress......................... 42 448 1,307
------- ------- -------
43,157 46,652 47,297
Less accumulated depreciation and amortization... (36,950) (39,265) (38,748)
------- ------- -------
$ 6,207 $ 7,387 $ 8,549
======= ======= =======
</TABLE>
<PAGE> 12
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accrued liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(IN THOUSANDS)(UNAUDITED)
<S> <C> <C> <C>
Accounts payable................................... $ 7,394 $ 8,444 $ 8,943
Payroll and benefits............................... 4,827 2,643 2,564
Vendor obligations................................. 777 2,348 2,348
Restructuring...................................... 2,058 4,879
Professional fees.................................. 7,571 333 577
Interest........................................... 6,383
Promotional and marketing.......................... 2,901 1,497 1,456
Other.............................................. 4,696 5,898 5,544
------- ------- -------
$34,549 $23,221 $26,311
======= ======= =======
</TABLE>
The liability for restructuring at September 30, 1997 includes liabilities
assumed in the Cardinal transaction and accordingly are not included in the
Company's statement of operations.
5. WRITE-OFF OF INTANGIBLES
In accordance with the Company's policy, management assessed the value of
the goodwill that was recorded as a result of the July 1989 acquisition of
Practical Peripherals, Inc., a computer products manufacturer with operations in
Thousand Oaks, California. As a result of changes in events and circumstances
related to the business, management determined that the goodwill should be
reduced significantly given the expected value that would be derived from these
intangible assets in the future. The Company recorded a charge to write-off
goodwill totaling $5.5 million in the year ended September 30, 1995.
6. RESTRUCTURING
In September 1996, the Company announced the closure of its Thousand Oaks,
California operations. During the year ended December 31, 1996, the Company
recorded a restructuring charge of $3.6 million related to exiting these
operations. The restructuring charge consists of the following items:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Lease obligation............................................... $1,700
Employee severance............................................. 965
Equipment disposals............................................ 705
Other.......................................................... 230
------
$3,600
======
</TABLE>
At December 31, 1996, the remaining restructuring reserve totaled $3.3
million of which $2.1 million is included in accrued liabilities and $1.2
million is included in other long-term liabilities. In addition, cost of sales
for the year ended December 31, 1996 includes $2.4 million of additional
inventory obsolescence charges associated with the termination of products
produced at the Thousand Oaks facility and the resulting disposal of excess
inventory. At September 30, 1997, the remaining restructuring reserve totaled
$1.2 million of which $373,000 is included in accrued liabilities and $814,000
is included in other long-term liabilities.
<PAGE> 13
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
GECC DIP financing............................... $ 11,134
CIT line of credit............................... $ 6,035 $ 20,141
CIT term loan "A," due April 1, 2002............. 1,802 1,248
CIT term loan "B," due April 1, 2002............. 6,667 4,842
Convertible notes from Investors................. 6,000 10,000
Other............................................ 350 --
--------- --------- ---------
11,134 20,854 36,231
Less current maturities.......................... (11,134) (13,973) (31,729)
--------- --------- ---------
Total long-term debt............................. $ $ 6,881 $ 4,502
========= ========= =========
</TABLE>
Prior to April 16, 1996, the Company completed a $45.0 million court
approved DIP financing with General Electric Capital Corporation ("GECC") under
which amounts owed to NationsBank of Georgia, N.A. were paid in full. In
accordance with the Plan, this financing agreement was paid in full and replaced
by the CIT agreements.
On April 16, 1996, the Company entered into two term loans and a revolving
loan facility (the "Line of Credit") with CIT which provide for maximum
borrowings of $64.5 million. The Line of Credit provides for financing based on
eligible accounts receivable and inventory, as defined in the agreement, and
expires April 16, 2000 unless otherwise renewed. The term loans are based on
eligible equipment and intangibles. Based on the applicable calculations, the
total available borrowings under the term loans and the Line of Credit are
approximately $17.2 million as of December 31, 1996. The term loans and the Line
of Credit bear interest at prime plus 1.625 percent (9.875 percent at December
31, 1996). Dennis C. Hayes, Chairman of the Company, has provided to CIT a $5.0
million guarantee of the outstanding Line of Credit. The Line of Credit has
covenants requiring minimum levels of tangible net worth and net income, as
defined. If these minimum levels are not met, CIT may raise the interest rate to
prime plus 2.125 percent and can accelerate the existing loan amortization on
the term facilities. The Company did not meet the minimum levels at December 31,
1996 and at June 30, 1997 and September 30, 1997. The interest rate was raised
effective January 1, 1997 and the loan amortization on the term facilities was
accelerated effective July 1, 1997.
In April 1996, the Company entered into convertible subordinated promissory
notes (the "Convertible Notes") totaling $6.0 million with certain investors.
The Convertible Notes bear interest at prime plus 1.625 percent and are due on
December 31, 1997. The Convertible Notes have conversion features whereby they
may be converted into shares of the Company's Series A preferred stock if not
paid in full by the maturity date. The Company has reserved authorized shares of
Series A Preferred stock for the Convertible Notes totaling 840,000 shares.
The Company's weighted average interest rate on short-term borrowings was
approximately 9.3%, 9.9%, and 10.5% at December 31, 1995 and 1996 and at
September 30, 1997, respectively.
During March 1997, the Company issued additional Convertible Notes totaling
$4.0 million with certain investors. These Convertible Notes bear interest at
prime plus 1.625 percent and are due on December 31, 1997. The Convertible Notes
have conversion features whereby they may be converted into shares of the
Company's Series A preferred stock if not paid in full by the maturity date. The
Company has reserved 560,000 authorized shares of such stock.
<PAGE> 14
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate maturities of debt for the next five years are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fiscal year:
1997............................................ $ 13,973
1998............................................ 1,588
1999............................................ 1,588
2000............................................ 1,588
2001............................................ 1,588
Thereafter...................................... 529
-------
$ 20,854
=======
</TABLE>
8. INCOME TAXES
The differences between the federal statutory income tax rate and the
Company's effective tax rate were as follows for the years ended September 30,
1994 and 1995, the three months ended December 31, 1995, and the year ended
December 31, 1996:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Federal statutory rate........... (34.00)% (34.00)% (34.00)% (34.00)%
State income taxes, net of
federal benefit................ (4.00) (4.00) (4.00) (4.00)
Amortization and write-off of
intangibles.................... 13.74
Taxes on foreign income.......... (0.20) 3.20 14.95 3.00
Provision for valuation
allowance...................... 34.53 29.20 63.74 35.86
Equity in foreign subsidiaries
and foreign sales
corporation.................... 5.00 (0.41) (19.61) (3.43)
Other, net....................... (7.01) (13.82) (6.13) 5.59
---- ----- ----- -----
Total....................... (5.68)% (6.09)% 14.95% 3.02%
==== ===== ===== =====
</TABLE>
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
(in thousands)
Current:
Federal........................ $(4,723) $(1,359)
Foreign........................ 427 $603 $385
State..........................
------- ------- ---- ----
(4,723) (932) 603 385
Deferred:
Federal........................ 2,967
Foreign........................ 67
State..........................
------- ------- ---- ----
3,034
------- ------- ---- ----
$(1,689) $ (932) $603 $385
======= ======= ==== ====
</TABLE>
<PAGE> 15
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of deferred income taxes as of December 31, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards.............................. $ 781 $ 12,183
Inventory obsolescence reserves............................... 6,358 2,915
Accrued employee benefits..................................... 828 519
Allowance for doubtful accounts and product returns........... 2,059 3,170
Reserves for warranty claims.................................. 854 856
Accrued advertising........................................... 468 568
Accrued reorganization expenses............................... 3,320 96
Other......................................................... 2,827 1,623
Valuation allowance........................................... (17,312) (21,892)
-------- --------
Total deferred tax assets.................................. 183 38
-------- --------
Deferred income tax liabilities:
Computer software costs....................................... (183) (38)
-------- --------
Total deferred tax liabilities............................. (183) (38)
-------- --------
Net deferred tax asset.......................................... $ $
======== ========
</TABLE>
Due to the Company's filing of a voluntary petition for bankruptcy in 1994,
subsequent emergence from bankruptcy proceedings in April 1996, and the results
of operations for the year ended December 31, 1996, the Company has recorded a
valuation allowance equal to the amount of its net deferred tax assets. The loss
carryforwards as of December 31, 1995 and 1996, are subject to annual
limitations and will expire in 2010 and 2011, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company leases office, plant, and warehouse facilities and certain
vehicles and equipment under noncancelable operating leases. As of December 31,
1996, the approximate future minimum lease payments for noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fiscal year:
1997........................................... $ 3,399
1998........................................... 3,055
1999........................................... 2,241
2000........................................... 461
2001........................................... 461
Thereafter..................................... 1,318
-------
$ 10,935
=======
</TABLE>
The above payments for noncancelable operating leases includes $1.7 million
associated with the Thousand Oaks facility which has been accrued as part of the
restructuring.
Rental expense was approximately $4.5 million, $3.7 million, $1.0 million,
and $3.9 million for the twelve months ended September 30, 1994 and 1995, the
three months ended December 31, 1995, and the twelve months ended December 31,
1996, respectively.
<PAGE> 16
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There are various litigation proceedings and claims arising in the ordinary
course of business. The Company believes it has meritorious defenses and is
vigorously defending these matters. The Company believes that the resolution of
such contingencies will not have a material adverse effect on the consolidated
financial position, results of operations, or cash flows of the Company.
During 1994, resultant of patent infringement suits, the Company completed
the negotiation of patent license agreements with certain customers and
suppliers. These agreements provide for royalties to be paid by the customers
and suppliers to the Company on both past and future sales. In settlement of
past sales, the Company recorded approximately $4.0 million as an unusual gain
in 1994.
The Company has employment agreements with a stockholder and certain
management personnel with terms from six months to five years.
The Company has an agreement with a supplier of modem chips, under which
the Company committed, under certain circumstances, to purchase a minimum number
of modem chips during 1996. The Company did not purchase the required number of
modem chips and has accrued a potential estimated penalty due the supplier. The
Company and supplier are in negotiations to resolve the matter.
10. PROFIT SHARING AND 401(k) PLANS
Prior to October 1, 1994, the Company maintained a separate defined
contribution profit-sharing plan (the "Profit-Sharing Plan") covering
substantially all of the Company's full-time employees.
On June 22, 1995, the Company authorized an amendment of the Profit Sharing
Plan to allow the Profit-Sharing Plan to be split into separate 401(k) and
profit-sharing components, whereby the profit-sharing component was frozen
retroactive to October 1, 1994 and all balances immediately vested. The 401(k)
component began functioning as a separate plan as of July 1, 1995, and provides
for eligibility for substantially all employees after six months of service and
vesting of matching contributions ratably over a five-year period. The Company
contributed $0.2 million, $0.1 million and $0.3 million for the year ended
September 30, 1995, the three months ended December 31, 1995 and the year ended
December 31, 1996, respectively.
The Company contributions to the Profit-Sharing Plan were determined at the
discretion of the board of directors. The Company made no contributions to the
Profit-Sharing Plan for the periods presented.
Terminated employees are required to sell their stock to the Profit-Sharing
Plan at the appraised value of the stock. Under the terms of the Profit-Sharing
Plan, the Company had the right to repurchase any shares acquired by the
Profit-Sharing Plan at their appraised value. The Company repurchased and
retired 76,053 shares for $1.7 million in 1996. There were no shares repurchased
in 1995.
As part of the Plan, the Profit-Sharing Plan was amended to provide for a
one-time election whereby all active participants could convert all or part of
their Hayes Microcomputer Products, Inc. stock to cash. In 1996, the Company
paid approximately $0.7 million to the Profit-Sharing plan to repurchase and
retire 32,197 shares of its common stock.
11. CAPITAL STRUCTURE
(a) Common and Preferred Stock
The Company's Restated Articles of Incorporation authorize the issuance of
up to 100,000,000 shares of one cent ($.01) par value common stock. In
accordance with the Plan, the Company effected a 3.078-to-one reverse stock
split which reduced the number of outstanding shares by 10,599,595 shares.
In fiscal 1996, the Company authorized a new class of no par value Series A
Preferred Stock consisting of 10,000,000 shares. The Board of Directors is
authorized to issue the preferred stock in one or more series and to fix the
rights, preferences, privileges, and restrictions of such stock, including
dividend rights, preferences
<PAGE> 17
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and the number of shares constituting any series or the designation of such
series, without further vote or action by the shareholders. During 1997, the
Company authorized a new class of no par value Series B Preferred Stock
consisting of 263,113 shares.
As of December 31, 1996, the Company had issued and outstanding 4,900,000
shares of Series A Preferred Stock. These preferred shares have no dividend
rights but do have preference and priority payment of any dividends on Common
Stock if declared by the Board of Directors. Any such dividends are
noncumulative. The preferred shares also have voting rights and are convertible
by a stated formula at the option of the shareholder and are automatically
converted upon an Initial Public Offering.
(b) Stock Redemption Agreements
In 1988, the Company entered into an agreement with a stockholder whereby
the Company could be required to purchase 1,628,884 shares of common stock at
the option of the stockholder at any time after January 1, 1999 through June
2008. In April 1996, in accordance with the Plan, the Company repurchased all of
the common shares held by a stockholder for $11.0 million and subsequently
retired these shares. In conjunction with this payment, the shareholder
agreement was terminated.
12. REDEEMABLE PREFERRED STOCKS
During April 1997, the Company completed an agreement with Vulcan Ventures,
Inc. to issue 263,113 shares of Series B Preferred Stock for $5.5 million which
includes $45,000 of issuance costs. The stockholders are entitled to receive
cumulative compounding dividends at the rate of 10% per annum of the original
issue price per share of Series B Preferred Stock. Series B dividends have
preference and priority payment over Series A Preferred Stock and Common Stock.
These preferred shares have no voting rights except as required under applicable
law or as expressly stated in the agreement relating to the Series B Preferred
Stock. The Company could be required to redeem these preferred shares by a
stated formula at the option of the more than 50% of the stockholders at any
time after November 1, 1999. The Series B Preferred Stock also is convertible
into shares of common stock by a stated formula if the Company's share are
publicly traded at a stated value per share or in the aggregate or if the Series
B stockholders obtain an affirmative majority vote.
13. STOCK-BASED COMPENSATION
In connection with the Plan, the Company authorized 600,000 warrants to
purchase shares for the fair value at the date of grant. The Company issued
400,000 warrants during April 1996 at an exercise price of $0.714 per share. The
warrants will become exercisable and fully vested on the date the Company files
a registration statement for an Initial Public Offering with the Securities and
Exchange Commission or closes a significant transaction, as defined in the
warrant agreement. The warrants expire five years after the date on which they
become exercisable. The warrants were issued to Directors and are valued and
presented as options in the information below.
In addition, one of the holders of the preferred stock received an
anti-dilution warrant enabling the holder to purchase sufficient quantity to
maintain a 20.2 percent ownership interest of the Company at a price of $14.28
per share.
The Hayes Microcomputer Products, Inc. Stock Option Plan (the "Stock Option
Plan") was adopted by the Company's stockholders in June 1996. No options were
granted prior to that date. Options granted under the Stock Option Plan may be
either (i) options intended to qualify as incentive stock options ("ISO's")
under Section 422 of the Internal Revenue Code or (ii) non-qualified stock
options. None of the options granted in 1996 were intended to qualify as ISO's.
The Stock Option Plan allows for three types of grants: Executive, Management,
and Performance Grants. The Stock Option Plan, as amended in October 1996,
<PAGE> 18
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
allows for a total of 800,000 shares to be granted for Executive and Management
Grants and 1,000,000 shares to be granted for Performance Grants.
An explanation of each type of grant and a description of the options
awarded under each type of grant are as follows:
Executive Grant
During 1996, the Company granted 310,000 options to purchase shares as
Executive Grants at an exercise price of $0.714 per share. The options will
become exercisable on the first to occur of (i) the date on which the company
files a registration statement for an Initial Public Offering with the
Securities and Exchange Commission, or (ii) the date of a significant corporate
transaction, as defined, such as a merger, consolidation or sale. The options
expire five years after the date on which they become exercisable.
Management Grant
During 1996, the Company granted 282,500 options to purchase shares as
Management Grants at exercise prices ranging from $0.714 to $1 per share. The
options will become exercisable on the first to occur of (i) the date on which
the Company files a registration statement for an Initial Public Offering with
the Securities and Exchange Commission, or (ii) the date of a significant
corporate transaction, as defined, such as a merger, consolidation or sale. The
options expire ten years after the date of grant. Upon the date the options
first become exercisable, the amount vested at that time will be determined
based on a five-year ratable vesting schedule beginning at the date of grant.
Performance Grant
During 1996, the Company granted 600,000 options to purchase shares as
Performance Grants at an exercise price of $1 per share. The options begin
vesting on the date the Company completes an Initial Public Offering with the
Securities and Exchange Commission. Vesting will be determined based on the
attainment of specified average share prices as defined in the Stock Option
Plan. The average share prices range from $24.19 to $60.47. The number of
shares, if any, that may be vested will be based solely upon events occurring in
the first five years after the date of grant. The options expire ten years after
the date of grant.
Options historically have been granted based on an amount greater than or
equal to the fair value of the shares at the date of grant. Since no quoted
market price was available, the best estimate of the fair value of the stock was
determined by the Board of Directors.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in 1996: dividend yield of 0%, expected volatility of 0%, risk-free
interest rate of 6.38%, and an expected term of 5.3 years.
The Company did not grant stock options prior to April 1996 and as of
December 31, 1996 no options are exercisable. A summary of the Company's stock
option plan activity and related information for the year ended December 31,
1996 is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Options granted................................... 1,592,500 $0.835
Options canceled.................................. (71,500) $0.714
---------
Options outstanding at December 31, 1996.......... 1,521,000 $0.841
=========
Weighted average fair value of options granted
during the year at the share's fair value....... $ 0.23
</TABLE>
<PAGE> 19
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about the stock options
outstanding at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF OPTIONS AVERAGE
OUTSTANDING AT REMAINING
DECEMBER 31, CONTRACTUAL
EXERCISE PRICES 1996 LIFE
----------------------------------------------- -------------- -----------
<S> <C> <C>
$0.714......................................... 844,500 7.5 years
$1.000......................................... 676,500 6.7 years
</TABLE>
The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. For the fiscal year ended December 31, 1996, no
compensation expense was recognized for its stock option plans, since certain
events have not occurred. Had compensation expense for the Company's stock-based
compensation plans been determined under the provisions consistent with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss for the year ended December 31, 1996,
would have been the pro forma amounts indicated below (in thousands):
<TABLE>
<CAPTION>
NET LOSS LOSS PER SHARE
-------- --------------
<S> <C> <C>
As reported...................................... $(13,154) $(2.52)
Pro forma........................................ $(13,246) $(2.54)
</TABLE>
14. GEOGRAPHIC SEGMENTS
The Company operates in several geographic areas worldwide. Revenues can be
grouped into three primary geographic segments: Domestic including immaterial
Canadian amounts, Europe and Asia. Selected financial data by primary geographic
area for the periods ended September 30, 1994 and 1995 and December 31, 1995 and
1996 follow:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1994
--------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
AND
DOMESTIC EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers..................... $219,962 $19,591 $12,464 $ (5,740) $246,277
Operating profit (loss)......... (35,822) (1,674) 650 133 (36,713)
Identifiable assets............. 128,617 10,678 2,393 (16,724) 124,964
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
--------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
AND
DOMESTIC EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers..................... $228,983 $22,893 $18,315 $ (1,036) $269,155
Operating profit (loss)......... (7,098) (1,492) 751 (7,839)
Identifiable assets............. 99,919 8,656 7,687 (15,298) 100,964
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1995
--------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
AND
DOMESTIC EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers..................... $ 54,409 $ 8,102 $ 7,600 $ 70,111
Operating profit (loss)......... (445) 852 1,691 2,098
Identifiable assets............. 82,944 10,675 6,309 $ (8,232) 91,696
</TABLE>
<PAGE> 20
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1996
-----------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
AND
DOMESTIC EUROPE ASIA ELIMINATIONS CONSOLIDATED
----------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers................... $ 202,001 $24,516 $38,800 $ (7,865) $257,452
Operating profit (loss)....... (10,118) (2,536) (856) 77 (13,433)
Identifiable assets........... 69,943 8,824 7,966 (17,518) 69,215
</TABLE>
Operating profit (loss) is calculated as total revenue less total operating
expenses. In calculating operating profit, none of the following items have been
added or deducted: net interest expense, net miscellaneous income,
reorganization items, or income taxes. Identifiable assets are those assets of
the Company that are identified with the operations in each geographic area,
including goodwill.
The Company generates significant sales outside the United States and is
subject to risks generally associated with international operations. The foreign
operations of the Company accounted for approximately 13%, 15%, 22% and 25% of
the Company's net sales for the years ended September 30, 1994 and 1995, the
three months ended December 31, 1995, and the year ended December 31, 1996,
respectively. Accordingly, the Company's financial results from international
operations may be affected by the economic, political, and regulatory climates
prevailing in the respective foreign countries and by fluctuations in currency
exchange rates.
15. ACQUISITION OF CARDINAL TECHNOLOGIES, INC.
During April 1997, the Company acquired 100% of the outstanding common
stock of Cardinal Technologies, Inc. ("Cardinal"), a private manufacturer of
modems and ISDN adapters, for $2.5 million. The acquisition has been accounted
for utilizing the purchase method of accounting. The estimated fair values
assigned to the assets and liabilities acquired were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Total consideration paid (including acquisition costs of
$595)........................................................ $ 3,095
Fair value of tangible and identifiable assets acquired........ (15,350)
Fair value of liabilities assumed.............................. 17,055
--------
Estimated goodwill........................................ $ 4,800
========
</TABLE>
The results of operations of Cardinal from the beginning of the period
through the acquisition date are not significant to the Company's consolidated
results of operations.
16. SIGNIFICANT RISKS AND UNCERTAINTIES
The communications industry is highly competitive and competition is
expected to intensify. There are numerous companies competing in various
segments of the market in which the Company does business. Competitors include
organizations significantly larger and with more development, marketing and
financial resources than the Company. The Company's success is dependent on its
ability to develop and market products that are innovative, cost-competitive and
meet customer expectations.
The markets for the Company's products are characterized by rapid
technological developments resulting in short product life cycles. The market
for modems is primarily dependent upon the market for personal computers. From
diminished product demand, production overcapacity, and resultant accelerated
erosion of average selling prices, the Company's business could be materially
and adversely affected by industry-wide
<PAGE> 21
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fluctuations in the personal computer marketplace in the future. The Company's
ten largest customers account for approximately 62%, 57%, 56% and 73% of net
sales for the years ended September 30, 1994 and 1995, the three months ended
December 31, 1995, and the year ended December 31, 1996, respectively.
The Company's accounts receivable are concentrated with a limited number of
customers. The amounts owed by the largest ten customers represented
approximately 48% and 55% of the total accounts receivable balances as of
December 31, 1995 and 1996, respectively.
17. RELATED PARTY TRANSACTIONS
As of December 31, 1996, the Company has the following related party
transactions:
The Company has a split-dollar life insurance policy on a shareholder of
the Company with the Company as the beneficiary. The split-dollar agreement is
included in other long-term assets in the amount of $1.1 million and $0.6
million as of December 31, 1995 and 1996, respectively. The cash surrender
value, included in prepaids and other current assets, is $0.3 million as of
December 31, 1995 and 1996, respectively.
A shareholder of the Company has a revolving credit arrangement with the
Company stating a maximum draw of $0.3 million. The balance outstanding,
included in prepaids and other current assets, is $0.2 million as of December
31, 1995 and 1996, respectively.
The Company has manufacturing subcontractor agreements with two of its
stockholders. During 1996, and as of September 30, 1997 the Company purchased
$44.8 million, and $33.4 million, respectively, of finished goods from such
manufacturers.
The Company believes that these transactions were all negotiated at arms
length.
18. SUBSEQUENT EVENTS (UNAUDITED)
On July 29, 1997, the Company signed a definitive merger agreement with
Access Beyond, Inc., a provider of remote access connectivity products. Under
the terms of the agreement, the merged company will be renamed Hayes Corporation
Access Beyond will issue approximately 45.0 million shares of common stock for
100% of the outstanding stock of Hayes. Subsequent to the merger, Access Beyond
shareholders will own approximately 21% of the combined company. The combination
will be accounted for using the purchase method and is subject to the completion
of due diligence and regulatory approvals.
On July 16, 1997, the Company signed a letter of commitment with a
potential investor, whereby the Company would receive approximately $30.0
million in exchange for shares of Hayes Preferred Stock. However, as a result of
Access Beyond's agreement, on November 12, 1997, to sell $45.0 million of 6%
Preferred Stock, Hayes terminated the letter of commitment.
On October 9, 1997, Hayes received the final decree bringing its Chapter 11
case to a close.
<PAGE> 22
(b) Pro Forma Financial Information
The pro forma information relative to the merger as required by Article
11 of Regulation S-X and this Item 7 of Form 8-K is included below.
-2-
<PAGE> 23
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements have been
derived from the historical consolidated financial statements of Access Beyond
(the "Company") and Hayes and give effect to (i) the Merger as a reverse
acquisition and a purchase for accounting purposes, and (ii) costs associated
with the consummation of the Merger. The unaudited pro forma condensed combined
balance sheet gives effect to the combination as if it had occurred on September
30, 1997 using the Company's October 31, 1997 financial statements and the 1997
consolidated financial statements of Hayes. The unaudited pro forma condensed
combined statements of operations give effect to the combination as if it had
occurred at the beginning of the earliest period presented. The pro forma
adjustments are based on preliminary estimates, available information and
certain assumptions that management deems appropriate. The pro forma financial
data does not purport to represent what the combined Company's financial
position or results of operations would actually have been if such transactions
in fact had occurred on those dates or to project the combined Company's
financial position or results of operations for any future period.
<PAGE> 24
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
HAYES THE COMPANY ACQUISITION
SEPTEMBER 30, 1997 OCTOBER 31, 1997 ADJUSTMENTS PRO FORMA
------------------ ---------------- --------------------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents....................... $ 6,499 $ 147 $ 6,646
Accounts receivable............................. 40,624 3,535 44,159
Receivables from related parties................ 8,219 8,219
Inventories..................................... 26,763 5,647 749(1) 33,159
Prepaids and other(6)........................... 4,031 399 4,430
Total Current Assets................... 86,136 9,728 749 96,613
Property and equipment.......................... 8,549 3,107 11,656
Intangibles and other........................... 7,263 763 8,026
Acquired technology............................. 4,010(2) 4,010
Acquired in process research and development.... 46,398(3) (46,398)(3)
Excess of cost over identifiable assets
acquired...................................... 9,817(8) 9,817
Total Assets........................... 101,948 13,598 60,974 (46,398) 130,122
LIABILITIES:
Current debt.................................... 31,729 773 32,502
Accounts payable................................ 28,376 5,877 4,000(7) 38,253
Accrued liabilities............................. 26,311 1,557 27,868
Amounts due related parties..................... 13,147 13,147
Income taxes.................................... 1,017 1,017
Total current liabilities.............. 100,580 8,207 4,000 112,787
Long-term debt, less current.................... 4,502 373 4,875
Other long-term liabilities..................... 1,014 297 1,311
Total Liabilities...................... 106,096 8,877 4,000 118,973
Redeemable preferred stock, series B............ 5,455 5,455
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock.................................... 47 125 (47)(4) 458(4) 583
Preferred stock, series A....................... 35,000 (35,000)(4) 12 12
Additional paid in capital...................... 46,414 (46,414)(5) 96,147(4) 96,147
Accumulated deficit............................. (44,834) (41,803) 41,803(5) (46,398)(3) (91,232)
Other adjustments............................... 184 (15) 15(5) 184
Total stockholders' equity (deficit)... (9,603) 4,721 (39,643) 50,219 5,694
Total liabilities and stockholders'
equity............................... 101,948 13,598 (35,643) 50,219 130,122
</TABLE>
- ---------------
(1) Adjustment to reflect fair value of the Company's inventory less estimated
selling costs.
(2) Adjustment to capitalize the acquired product line technology using the
income forecast method.
(3) Adjustment to capitalize and expense the acquired in process research and
development based on an appraisal of the product line technology that has
not yet reached technological feasibility using the income forecast method.
(4) Adjustment to reflect the exchange of Hayes common and preferred stock for
common and preferred stock of the Company.
(5) Adjustment to reflect the elimination of additional paid in capital,
accumulated deficit and other equity adjustments account balances of the
Company.
(6) Consistent with the Company's historical financial statements for which
amounts have been fully reserved, the purchase allocation does not include
the $980,000 note receivable from Technipower, Inc. and the $1,950,000 note
receivable from Electro-Metrics, Inc. Repayment of these notes cannot be
assured beyond a reasonable doubt.
(7) Adjustment to record the estimate of costs associated with the consummation
of the Merger.
(8) The fair value of stock issued was based on the outstanding shares at the
average market price of $4.94 five days before and after the announcement
date of July 29, 1997. The unaudited and estimated fair value of assets
acquired and liabilities assumed is summarized as follows:
<TABLE>
<S> <C>
Fair value of stock issued........................................... $ 61,695
Other acquisition costs.............................................. 4,000
Fair value of liabilities assumed.................................... 8,877
Fair value of tangible and identifiable assets acquired.............. (14,347)
Acquired product line technology..................................... (4,010)
Acquired in process research and development......................... (46,398)
--------
Excess of cost over identifiable assets acquired..................... $ 9,817
=========
</TABLE>
<PAGE> 25
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
HAYES THE COMPANY(2)
NINE MONTHS ENDED NINE MONTHS ENDED PRO FORMA
SEPTEMBER 30, 1997 OCTOBER 31, 1997 ADJUSTMENTS PRO FORMA
------------------ ----------------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues from continuing
operations......................... $146,701 $ 10,354 $ 157,055
Cost of Revenues..................... 111,819 6,590 118,409
Gross profit......................... 34,882 3,764 38,646
Selling, general and
administrative..................... 41,366 7,784 49,150
Research and development............. 8,992 3,996 12,988
Amortization......................... 1,814(1) 1,814
Merger related expense............... 629 629
Restructuring charges................ 238 238
Write-down of assets................. 864 864
Operating loss from continuing
operations......................... (15,476) (9,747) (1,814) (27,037)
Interest (expense) income, net....... (3,541) 108 (3,433)
Other income......................... 4,648 423 5,071
Loss before tax expense.............. (14,369) (9,216) (1,814) (25,399)
Income tax expense................... (153) (153)
Loss before unusual items,
reorganization expenses,
discontinued operations, and
non-recurring gains................ (14,522) (9,216) (1,814) (25,552)
Loss per common share................ (0.44)
Shares used in per share
calculation........................ 58,283,453
</TABLE>
- ---------------
(1) Adjustment to recognize amortization of acquired product technology over its
estimated life of three to thirty-six months and to recognize amortization
of excess of cost over identifiable assets acquired over seven years.
(2) Includes revenues of $4,593,000 and loss before unusual items,
reorganization expenses, discontinued operations, and non-recurring gains of
$6,232,000 for the three month period ended January 31, 1997, which were
also presented within the unaudited pro forma condensed combined statement
of operations that included the Company's operations for the twelve month
period ended January 31, 1997
<PAGE> 26
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY
HAYES TWELVE MONTH
YEAR ENDED PERIOD ENDED PENRIL THE COMPANY PRO FORMA
DECEMBER 31, 1996 JANUARY 31, 1997 ADJUSTMENTS AS ADJUSTED ADJUSTMENTS PRO FORMA
----------------- ---------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues from
continuing
operations.......... $ 257,452 $ 33,596 $ (12,366)(1) $ 21,230 $ 278,682
Cost of Revenues...... 195,918 20,416 (8,683)(1) 11,733 207,651
Gross profit.......... 61,534 13,180 (3,683) 9,497 71,031
Selling, general and
administrative...... 61,727 17,239 (2,147)(2) 15,092 76,819
Research and
development......... 9,640 7,358 (1,400)(3) 5,958 15,598
Amortization.......... 367 367 3,389(4) 3,756
Restructuring
charges............. 3,600 9,718 9,718 13,318
Merger related
expenses............ 4,576 4,576 4,576
Operating loss from
continuing
operations.......... (13,433) (26,078) (136) (26,214) (3,389) (43,036)
Interest expense,
net................. (5,056) (150) (150) (5,206)
Other income.......... 2,279 3,885 3,885 6,164
Loss before tax
expense............. (16,210) (22,343) (136) (22,479) (3,389) (42,078)
Income tax expense.... (385) (385)
Loss before unusual
items,
reorganization
expenses,
discontinued
operations, and non-
recurring gains..... (16,595) (22,343) (136) (22,479) (3,389) (42,463)
Loss per common share... (0.73)
Shares used in per
share calculation... 58,283,453
</TABLE>
- ---------------
(1) Adjustments to exclude the modem business revenues and associated costs of
sales; the adjustments to Penril are only for those items that can be
directly attributed to the modem business sold to Bay.
(2) Adjustment to eliminate rent expense related to the modem business product
development and engineering, to exclude marketing and advertising expenses
related to the modem business and related depreciation, amortization and
other operating expense.
(3) Adjustment to eliminate modem business related engineering labor.
(4) Adjustment to recognize amortization of acquired product technology over its
estimated life of three to thirty-six months and to recognize amortization
of excess of cost over identifiable assets acquired over seven years.
<PAGE> 27
(c) Exhibits
*2.1 Agreement and Plan of Reorganization between Access Beyond, Inc. (the
"Company") and Hayes Microcomputer Products, Inc. ("Hayes") dated July
29, 1997 (the "Merger Agreement") (filed as Exhibit 10.1 to the
Company's Form 8-K filed August 7, 1997).
2.2 First Amendment to the Merger Agreement, dated as of November 7, 1997.
2.3 Second Amendment to the Merger Agreement dated as of November 21, 1997.
99.1 Press Releases.
Item 8. Change In Fiscal Years.
On January 2, 1998, the Company changed its fiscal year to a 52/53 week
year with the year ending on the Saturday closest to December 31. As a result
of this change, the 1997 fiscal year ended on January 3, 1998. Since the
registrant has adopted the fiscal year end of the accounting acquiror a
transition report will not be filed. A Form 10-K covering the full year ending
January 3, 1998 will be filed covering the 3 day transition period.
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.
HAYES CORPORATION
Date: January 9, 1998 /s/ Ronald A. Howard
----------------------------------------
Ronald A. Howard, Vice Chairman and Chief
Executive Officer
- 3 -
<PAGE> 1
EXHIBIT 2.2
FIRST AMENDMENT TO AGREEMENT AND PLAN
OF REORGANIZATION BETWEEN ACCESS BEYOND, INC.
AND HAYES MICROCOMPUTER PRODUCTS, INC.
This First Amendment to the Agreement and Plan of Reorganization
between Access Beyond, Inc. and Hayes Microcomputer Products, Inc. (this
"Amendment") is entered into as of November 7, 1997, by and between Access
Beyond, Inc., a Delaware corporation ("Access Beyond"), and Hayes Microcomputer
Products, Inc., a Georgia corporation ("Hayes") (and individually referred to
as "Party" and jointly and severally referred to herein as "Parties"). This
Amendment will be effective as of the Effective Date (as defined below).
RECITALS
A. The Parties previously entered into an Agreement and Plan of
Reorganization on July 29, 1997 (the "Merger Agreement") pursuant to which,
subject to the terms and conditions set forth therein, a new corporation that
will be organized in Georgia as a wholly owned subsidiary of Access Beyond
("Newco") will merge with and into Hayes in a reverse triangular merger (the
"Merger"), with Hayes to be the surviving corporation of the Merger.
Capitalized terms used but not otherwise defined in this Agreement have the
meanings ascribed to such term in the Merger Agreement.
B. Elliott Associates, L.P., Westgate International, L.P.,
Montrose Investments, Ltd., Westover Investments, L.P., Stark International,
Ltd., Shepard Investment International, Ltd., Ramius Fund, Ltd., Gam Arbitrage
Investments, Inc., Leonardo, L.P., Raphael, L.P., and AG Super Fund
International Partners, L.P. (the "Investors") have agreed with Access Beyond
to purchase up to 45,000 shares of Access Beyond's 6% Cumulative Convertible
Preferred Stock, with a $1,000 per share liquidation preference, for the price
of $1,000 per share (the "Preferred Stock Investment").
C. As a part of the Preferred Stock Investment, Access Beyond
will be required to create and issue shares of 6% Cumulative Convertible
Preferred Stock, with a $1,000 per share liquidation preference.
D. Certain other amendments to the Merger Agreement are now
necessary.
NOW, THEREFORE, in reliance upon the recitals set forth above, the
Parties hereto agree as follows:
1. Access Beyond shall create a class of preferred stock known as "6%
Cumulative Convertible Preferred Stock" which class of preferred stock shall
have an initial liquidation preference of $1,000 per share and is more fully
described in a Certificate of Designations substantially in the form attached
hereto as Exhibit A to this Amendment. Without violating the
<PAGE> 2
Merger Agreement, Access Beyond may enter into a Preferred Stock Investment
Agreement, a Registration Rights Agreement and such other agreements as are
necessary and appropriate to effectuate the sale by Access Beyond to Investors
of up to 45,000 shares of the newly-created 6% Cumulative Convertible Preferred
Stock for up to $45,000,000 with the sale of 10,000 of the said shares for
$10,000,000 taking place prior to the Closing of the Merger Agreement and the
sale of up to 35,000 additional shares of the 6% Cumulative Convertible
Preferred Stock taking place after Closing of the Merger Agreement. In the
event the Investors convert any of 6% Cumulative Convertible Preferred Stock
prior to the Closing of the Merger Agreement, then each Party agrees that it
will be proportionately diluted by the common stock required to be issued to
Investors, and that the respective percentages of the shares of Access Beyond
to be held immediately after the Effective Time by the Access Beyond and Hayes
shareholders as contemplated by Section 1.1.5 of the Merger Agreement shall be
appropriately adjusted to accommodate the dilution occasioned by conversion of
the 6% Cumulative Convertible Preferred Stock.
2. Recital D (i) of the Merger Agreement is hereby stricken in its
entirety and replaced with the following:
(i) Chestnut Capital Limited Partnership, Rinzai Limited
and Vulcan Ventures Incorporated, who together hold a majority or more
of the issued and outstanding shares of each class or series of Hayes
capital stock, and a sufficient number of shares of Hayes capital
stock to approve the Merger (the "Principal Hayes Shareholders"), are
each executing and delivering to Access Beyond a fully signed copy of
a certain Voting Agreement substantially in the form of Exhibit C-1
voting a sufficient number of shares of Hayes capital stock to
constitute a vote of sixty-nine and five tenths percent (69.5%) of the
issued and outstanding shares of Hayes capital stock in favor of the
Merger, containing a market standoff agreement, an agreement to vote
in favor of the Merger, this Agreement, the Certificate of Merger and
the transactions provided for herein and against any transaction that
could adversely affect the Merger (collectively, the "Voting
Agreements").
3. Section 5.3.3 of the Merger Agreement is hereby stricken in its
entirety.
4. Section 7.13 of the Merger Agreement is hereby stricken in its
entirety and replaced with the following:
7.13 Access Beyond Restated Certificate. The stockholders
of Access Beyond shall have approved and the Secretary of State of
Delaware shall have accepted for filing the Amended and Restated
Certificate of Incorporation substantially in the form attached hereto
as Exhibit 7.13 (the "Restated Certificate") in order to (a) change
Access Beyond's name to Hayes Communications Inc.; (b) create the
Access Beyond Series A Stock in an amount sufficient to provide for
conversion of the Hayes Series B Stock; and (c) increase the number of
shares of all classes of Access Beyond stock to 160,000,000.
<PAGE> 3
5. Section 9.1 (b) of the Merger Agreement is hereby stricken in its
entirety and replaced with the following:
(b) by either Access Beyond or Hayes if the Merger shall not
have been consummated by 5:00 p.m. (Eastern Time) on March 1, 1998
(unless the failure to consummate the Merger is attributable to a
failure on the part of the Party seeking to terminate this Agreement
to perform any material obligation required to be performed by such
Party at or prior to the Effective Time);
6. Section 9.3.1 of the Merger Agreement is hereby stricken in its
entirety and replaced with the following:
9.3.1 Allocation. Except as set forth in this Section 9.3,
each Party will bear its respective expenses and fees of its own
accountants, attorneys, investment bankers and other professionals
incurred with respect to this Agreement and the transactions
contemplated hereby; provided, however, that Hayes and Access Beyond
shall share equally all fees and expenses other than attorneys' fees,
incurred in connection (i) with the printing and filing of the Form
S-4 and the Prospectus/Proxy Statement and amendments or supplements
thereto; (ii) any filings required of Hayes or Access Beyond pursuant
to the HSR Act; and (iii) any filings required of Hayes or Access
Beyond pursuant to NASDAQ requirements. Each Party shall promptly
reimburse its principal shareholders, stockholders, officers and
directors for amounts paid by them as filing fees to governmental
agencies and other reasonable and necessary expenses that are incurred
by such persons to comply with any consent or approval required to be
obtained in order to perform this Agreement.
7. Exhibit 1.5B (Certificate of Officer of Hayes Microcomputer Products,
Inc.) to the merger Agreement is hereby stricken in its entirety and replaced
with the new Exhibit 1.5B, set forth as Exhibit B to this Amendment.
8. Exhibit C-4 (Executive Employment Agreement of Ronald A. Howard) to
the Merger Agreement is hereby stricken in its entirety and replaced with the
new Exhibit C-4, set forth as Exhibit C to this Amendment.
9. Exhibit C-5 (Executive Employment Agreement of Dennis C. Hayes) to the
Merger Agreement is hereby stricken in its entirety and replaced with the new
Exhibit C-5, set forth as Exhibit D to this Amendment.
10. All other provisions of the Merger Agreement shall remain unchanged
and are hereby declared to be in full force and effect, except as expressly
amended hereby.
11. By executing this Amendment, Hayes represents that the Amendment and
the actions contemplated hereby have been duly authorized by the Hayes
Transaction Committee and Access
<PAGE> 4
Beyond represents that the Amendment and the actions contemplated hereby have
been duly authorized by the Access Beyond Board of Directors.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
ACCESS BEYOND, INC. HAYES MICROCOMPUTER PRODUCTS, INC.
BY:/s/ Ronald A. Howard By:/s/ Dennis C. Hayes
--------------------------------- --------------------------------
Ronald A. Howard, President Dennis C. Hayes, Chairman
<PAGE> 5
EXHIBIT B
CERTIFICATE OF OFFICER
OF HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned officer of Hayes Microcomputer Products, Inc., a
Georgia corporation ("Hayes"), on behalf of the management of Hayes, after
consulting with legal counsel and financial auditors regarding the meaning of
and the factual support for the following representations, hereby represent, in
connection with the proposed merger of Hayes with and into _________________, a
Georgia corporation ("Newco"), a wholly owned subsidiary of Access Beyond,
Inc., a Delaware corporation ("Acquiror"), with Hayes surviving the merger and
with Hayes shareholders receiving solely Acquiror voting stock in the merger,
intended to qualify as a reorganization described in Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), by virtue of the
provisions of Section 368(a)(2)(E), collectively referred to as the "Merger,"
pursuant to that certain Agreement and Plan of Reorganization by and between
Acquiror, Newco and Hayes, dated as of _____________, 1997, and Exhibits
thereto (collectively the "Agreement"),(1) that to the best of their knowledge
and belief the following facts are now true, correct and complete; and will
continue to be true, correct and complete as of the Effective Time for the
Merger and thereafter, as relevant.
1. At least 90% of the fair market value of its net assets and
at least 70% of the fair market value of the gross assets held by Hayes
immediately before the Merger during the Pre-Merger Period will be held by
Hayes immediately after the Merger. For the purpose of determining the
percentage of the net and gross assets held by Hayes immediately before the
Merger for purposes of this representation, the following assets will be
treated as property held by Hayes immediately prior but not subsequent to the
Merger: (a) assets disposed of by Hayes prior to the Merger and in
contemplation thereof (including without limitation any asset disposed of by
Hayes, other than in the ordinary course of business, during the period ending
on the Effective Time of the Merger and beginning with the commencement of
negotiations (whether formal or informal) between Hayes and Acquiror regarding
the merger (the "Pre-Merger Period"), (b) assets used by Hayes to pay expenses
or liabilities incurred in connection with the Merger, and (c) assets used to
make distributions (except for regular and normal dividends), redemption or
other payments in respect of Hayes stock or rights to acquire such stock
(including payments treated as such for tax purposes) that are made in
contemplation of the merger or related thereto.
2. Hayes has made no transfer of any of its assets (including
any distribution of assets with respect to, or in redemption of, stock) in
contemplation of the Merger or during the Pre-Merger Period other than (a) in
the ordinary course of business, and (b) payments for expenses incurred in
connection with the Merger.
- ----------------------------
(1) Unless otherwise indicated, all capitalized terms shall have the
meaning defined in the Agreement.
<PAGE> 1
Exhibit 2.3
SECOND AMENDMENT TO AGREEMENT AND PLAN
OF REORGANIZATION BETWEEN ACCESS BEYOND, INC.
AND HAYES MICROCOMPUTER PRODUCTS, INC.
This Second Amendment to the Agreement and Plan of Reorganization between
Access Beyond, Inc. and Hayes Microcomputer Products, Inc. (the "Second
Amendment") is entered into as of November 21, 1997, by and between Access
Beyond, Inc., a Delaware corporation ("Access Beyond"), and Hayes
Microcomputer Products, Inc., a Georgia corporation ("Hayes") (and individually
referred to as "Party" and jointly and severally referred to herein as
"Parties"). This Second Amendment will be effective as of the Effective Date
(as defined below).
RECITALS
A. The Parties previously entered into an Agreement and Plan of
Reorganization on July 29, 1997 (the "Merger Agreement") pursuant to which,
subject to the terms and conditions set forth therein, a new corporation that
will be organized in Georgia as a wholly owned subsidiary of Access Beyond
("Newco") will merge with and into Hayes in a reverse triangular merger (the
"Merger"), with Hayes to be the surviving corporation of the Merger, and the
Merger Agreement was amended pursuant to that certain First Amendment to the
Agreement and Plan of Reorganization between Access Beyond, Inc. and Hayes
Microcomputer Products, Inc. on November 7, 1997 (the "First Amendment").
Capitalized terms used but not otherwise defined in this Second Amendment have
the meanings ascribed to such term in the Merger Agreement and the First
Amendment. (As used herein, the term "Merger Agreement, as amended" means the
Merger Agreement and the First Amendment.)
B. Certain other amendments to the Merger Agreement, as amended, are now
necessary.
NOW, THEREFORE, in reliance upon the recitals set forth above, the Parties
hereto agree as follows:
1. The last sentence of paragraph 1 of the First Amendment is hereby deleted
and the following sentence is inserted in lieu thereof:
In the event the Investors convert any of 6% Cumulative
Convertible Preferred Stock prior to the Closing of the
Merger Agreement, then each Party agrees that it will be
proportionately diluted by the common stock required to be
issued to Investors, as if such common stock were issued
after the Closing of the Merger Agreement and that the
respective percentages of the shares of Access Beyond to be
held immediately after the Effective Time by the Access
Beyond and Hayes shareholders as contemplated by Section
1.1.5 of the Merger Agreement shall be calculated without
regard to the issuance of the common shares occasioned by
conversion of the 6% Cumulative Convertible Preferred Stock.
<PAGE> 2
2. Section 1.1.5 of the Merger Agreement is hereby amended in the
definition of "C", in the Conversion Ratio, by adding after the words
"Effective Time", the following:
calculated without regard to the issuance of common stock upon
conversion prior to the Effective Time of any of the 6% Cumulative
Convertible Preferred Stock issued to the Investors pursuant to
the Preferred Stock Investment.
3. Section 8.16 of the Merger Agreement is hereby amended by deleting
in the fourth line thereof the words "at the Closing", and inserting in lieu
thereof the following: "not more than five (5) days prior to the Effective Date
of the registration statement on Form S-4".
4. Exhibit 7.13 to the Merger Agreement, as amended, is hereby deleted
and a new Exhibit 7.13 is inserted in lieu thereof, as set forth on Exhibit
"A" attached to this Second Amendment and made a part hereof by this
reference. The purpose of this substituted Restated Certificate is to provide
the completed information left blank in the original Restated Certificate
attached to the Merger Agreement.
5. All other provisions of the Merger Agreement, as amended, shall
remain unchanged and are hereby declared to be in full force and effect, except
as expressly amended hereby.
6. By executing this Amendment, Hayes represents that the Second
Amendment and the actions contemplated hereby have been duly authorized by the
Hayes Transaction Committee and Access Beyond represents that the Second
Amendment and the actions contemplated hereby have been duly authorized by the
Access Beyond Board of Directors.
IN WITNESS WHEREOF, the Parties hereto have executed this Second Amendment
as of the date first above written.
ACCESS BEYOND, INC. HAYES MICROCOMPUTER PRODUCTS, INC.
BY: /s/ Ronald A. Howard By: /s/ Dennis C. Hayes
_______________________________ _______________________________
Ronald A. Howard, President Dennis C. Hayes, Chairman
<PAGE> 1
EXHIBIT 99.1
CORPORATE NEWS
ACCESS BEYOND'S SHAREHOLDERS APPROVE MERGER WITH HAYES
MICROCOMPUTER PRODUCTS
GAITHERSBURG, MD, December 30, 1997 -- Access Beyond, Inc. (Nasdaq: ACCB) today
announced that at its annual shareholder meeting, a total of 67% of outstanding
holders of Access Beyond stock voted in favor of the planned merger agreement
with Hayes Microcomputer Products, Inc. In addition, 67 % of Access Beyond
shareholders also ratified the $35 million private placement of convertible
preferred stock. Hayes' shareholders previously approved the merger on December
24, 1997.
The closing of the merger is expected on December 30, 1997. The combined new
company will be renamed Hayes Corporation and will trade on Nasdaq under the
symbol "HAYZ".
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995: This release contains forward looking statements that are subject to risks
and uncertainties, including, but not limited to, the impact of competitive
products and pricing, product demand and market acceptance, new product
development, reliance on key strategic alliances, availability of raw materials,
the regulatory environment, fluctuations in operating results and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission.
###
Media contact:
Kerri Dimke
Hayes Microcomputer Products, Inc.
Public Relations Manager
Phone: 770/840-9200 ext. 6091
Facsimile: 770/840-6825
Internet Address: [email protected]
Investors:
Donna N. Stein
APR/Dan Durkin
(212)850-5600
Press:
Stan Froelich
(212)850-5600
<PAGE> 2
HAYES MICROCOMPUTER PRODUCTS AND ACCESS BEYOND MERGE
FORMING HAYES CORPORATION
ATLANTA, GA, December 31, 1997 -- Hayes Corporation (Nasdaq: HAYZ) announced
that effective today it would begin trading on Nasdaq under its new symbol
"HAYZ". Hayes Corporation is the result of the merger between Hayes
Microcomputer Products, Inc., the company that invented personal computer
communications via the modem, and Access Beyond (formerly Nasdaq: ACCB), a maker
of remote access products. The enlarged new company will enable the virtual
workplace by carrying the strong Hayes brand into high tech-growth markets such
as lower-cost remote access communications servers, cable modems and ADSL. Based
on Access Beyond's closing price yesterday, the combined company's market
capitalization is approximately $250 million.
Dennis Hayes, 47, founder and Chairman of Hayes, has been named Chairman of
Hayes Corporation, with Ron Howard, 42, Chairman and Chief Executive Officer of
Access Beyond, being appointed Vice-Chairman and Chief Executive Officer of
Hayes Corporation. P.K. Chan, 57, President and Chief Operating Officer of Hayes
Microcomputer Products, has been named to the same posts for the new company.
Mr. Hayes commented, "I can't think of a better way to commemorate our 20th
anniversary than with the completion of our merger with Access Beyond and our
entry into the public markets. While core competitors have weakened considerably
in the last year, Hayes Corporation begins life as the number two world wide
supplier of analog modems, in a market that the December 1997 issue of Data
Communications Magazine projects to grow world-wide 23% next year. We are also
very well positioned to become a strong provider of next generation cable modems
and ADSL products that will make the internet fly for an enormous market of
bandwidth hungry users. And our new remote access products, which received top
honors in Network Computing's December 15th 1997 issue, will provide us with
superb technology to reach the rapidly-growing broad business market."
Mr. Howard said, "I am excited about the extraordinary opportunities available
to Hayes Corporation. Armed with superb brand names, global
<PAGE> 3
retail and corporate distribution channels and least cost manufacturing
capabilities, Hayes represents an engine capable of commercializing a broad
range of communications products to mass markets. Combining aggressive market
development with strong financial controls will be management's strategy to
achieve increased shareholder value."
Also announced today, Hayes Corporation closed on the $35 million portion of a
two-phased private placement totaling $45 million of Hayes Corporation
convertible preferred stock. The first $10 million portion closed on November
12, 1997, while the funding of the second phase was contingent upon the closing
of Access Beyond's merger with Hayes Microcomputer Products.
Jim Jones, Chief Financial Officer of Hayes Corporation, commented, "The
additional capital greatly strengthens the financial resources of Hayes and will
significantly decrease interest expenses. Having additional financial resources
will also enable us to more effectively plan inventory needs to maximize order
shipments."
Based in Norcross, Georgia, Hayes markets its ULTRA*, ACCURA*, OPTIMA*,
Practical Peripherals*, Cardinal(tm) and CENTURY* brands of cable, digital and
analog modems, remote access servers and terminal adapters along with Smartcom*
communications software worldwide. Hayes introduced the PC modem in 1981 and
celebrates its 20-year anniversary in 1998. Today, with distributors in more
than 45 countries, it is one of the largest manufacturers of modems in the
world. For more information about Hayes and the company's award-winning product
lines, visit the Hayes Web site at http://www.hayes.com.
###
Hayes, the Hayes logo, ULTRA, ACCURA, OPTIMA, Practical Peripherals, Smartcom
and CENTURY are trademarks or registered trademarks of Hayes Microcomputer
Products, Inc. Cardinal is a trademark of Cardinal Technologies, Inc. Other
trademarks are trademarks of their respective companies.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995: This release contains forward looking statements that are subject to risks
and uncertainties, including, but not limited to, the impact of competitive
products and pricing, product demand and market acceptance, new product
development, reliance on key strategic alliances, availability of raw materials,
the regulatory environment, fluctuations in operating results and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission.
Media contact:
Kerri Dimke
Hayes Microcomputer Products, Inc.
Public Relations Manager
Phone: 770/840-9200 ext. 6091
Facsimile: 770/840-6825
Internet Address: [email protected]
Investors:
Donna N. Stein
APR/Dan Durkin
(212)850-5600
Press:
Stan Froelich
(212)850-5600
