<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 28, 1997
(Dated of Earliest Event Reported)
SPLASH TECHNOLOGY HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
Delaware 000-21171 77-0418472
<S> <C> <C>
(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
555 Del Rey Avenue
Sunnyvale, California 94086
(408) 328-6300
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
1
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
FORM 8K-A
AMENDMENT OF CURRENT REPORT
TABLE OF CONTENTS
ITEM 7 FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors................................................................... 3
Balance Sheets as of December 31, 1995 and 1996.................................................. 4
Consolidated Statements of Operations for the years ended December 31, 1995 and 1996............. 5
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1995 and 1996 .. 6
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1996............. 7
Notes to Consolidated Financial Statements....................................................... 8
Condensed Consolidated Balance Sheet as of March 31, 1997 (unaudited)............................ 13
Condensed Consolidated Statements of Operations for the three months ended
March 31, 1996 and 1997 (unaudited)......................................................... 14
Condensed Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1997 (unaudited)......................................................... 15
Notes to Condensed Consolidated Financial Statements............................................. 16
Introductory paragraph to Pro Forma Combined Condensed Statements of Operations (unaudited)...... 17
Pro Forma Combined Condensed Statement of Operations for the year ended
September 30, 1996 (unaudited).............................................................. 18
Pro Forma Combined Statement of Operations for the nine months ended June 30, 1997 (unaudited)... 19
Notes to Unaudited Pro Forma Financial Information............................................... 20
</TABLE>
2
<PAGE>
THE UNDERSIGNED REGISTRANT HEREBY AMENDS THE FOLLOWING ITEMS, FINANCIAL
STATEMENTS, EXHIBITS, OR OTHER PORTIONS OF ITS CURRENT REPORT ON FORM 8-K
ORIGINALLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 1997
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statements
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Quintar Holdings Corporation
We have audited the accompanying consolidated balance sheets of Quintar
Holdings Corporation as of December 31, 1995 and 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our 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 consolidated financial position
of Quintar Holdings Corporation at December 31, 1995 and 1996, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
Ernst & Young LLP
March 27, 1997, except for Note 8, as to which the
date is May 6, 1997
3
<PAGE>
QUINTAR HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 709,000 $ 976,000
Accounts receivable, net of an allowance for
doubtful accounts of $36,000 in 1995 and $158,000
in 1996........................................... 667,000 604,000
Inventories........................................ 535,000 517,000
Prepaid expenses and other current assets.......... 55,000 56,000
----------- -----------
Total current assets............................. 1,966,000 2,153,000
----------- -----------
Property and equipment:
Machinery and equipment............................ 706,000 535,000
Furniture and fixtures............................. 64,000 64,000
Leasehold improvements............................. 45,000 52,000
----------- -----------
815,000 651,000
Accumulated depreciation and amortization.......... 673,000 537,000
----------- -----------
Property and equipment, net.......................... 142,000 114,000
Other assets, net.................................... 246,000 39,000
----------- -----------
Total assets..................................... $ 2,354,000 $ 2,306,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 537,000 $ 731,000
Deferred revenue................................... 426,000 464,000
Accrued warranty expense........................... 40,000 90,000
Other accrued expenses............................. 432,000 504,000
----------- -----------
Total current liabilities........................ 1,435,000 1,789,000
Deferred revenue, long-term.......................... -- 350,000
Stockholders' Equity:
Series A convertible preferred stock, no par value:
Authorized shares--4,200,000
Issued and outstanding shares--4,160,445 in 1995
and 1996.......................................... 4,641,000 4,641,000
Series C convertible preferred stock, no par value:
Authorized shares--2,166,668
Issued and outstanding shares--833,333 in 1995 and
1,500,001 in 1996 1,250,000 2,250,000
Common stock, no par value:
Authorized shares--10,000,000
Issued and outstanding shares--972,541 in 1995 and
1996.............................................. 49,000 49,000
Additional paid in capital........................... 85,000 85,000
Stock subscription................................... 250,000 --
Accumulated deficit.................................. (5,356,000) (6,858,000)
----------- -----------
Total stockholders' equity....................... 919,000 167,000
----------- -----------
Total liabilities and stockholders' equity....... $ 2,354,000 $ 2,306,000
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
QUINTAR HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
REVENUES:
Product sales...................................... $ 3,117,000 $ 4,361,000
Engineering and royalty revenues................... 1,389,000 1,022,000
----------- -----------
Total revenues................................... 4,506,000 5,383,000
COST AND EXPENSES:
Cost of revenues
Product........................................... 2,183,000 3,327,000
Engineering....................................... 1,033,000 568,000
Engineering expense................................ 756,000 1,293,000
Selling, general and administrative expenses....... 1,582,000 1,714,000
Interest (income) expense, net..................... 32,000 (17,000)
----------- -----------
Total costs and expenses......................... 5,586,000 6,885,000
----------- -----------
Net loss............................................. $(1,080,000) $(1,502,000)
=========== ===========
Net loss per share................................... $ (1.11) $ (1.54)
=========== ===========
Shares used in computing net loss per share.......... 972,541 972,541
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
QUINTAR HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A SERIES C
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- -------------------- --------------- PAID IN STOCK ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL SUBSCRIPTIONS DEFICIT TOTAL
--------- ---------- --------- ---------- ------- ------- ---------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994... 3,200,000 $3,200,000 833,333 $1,250,000 972,541 $49,000 $ -- $ -- $(4,276,000) $ 223,000
Conversion of bridge
loan into equity... 960,445 1,441,000 -- -- -- -- -- -- -- 1,441,000
Stock options and
subscriptions...... -- -- -- -- -- -- 85,000 250,000 -- 335,000
Net loss............ -- -- -- -- -- -- -- -- (1,080,000) (1,080,000)
--------- ---------- --------- ---------- ------- ------- ------- --------- ----------- -----------
Balance at
December 31, 1995... 4,160,445 4,641,000 833,333 1,250,000 972,541 49,000 85,000 250,000 (5,356,000) 919,000
Issuance of
preferred stock.... -- -- 666,668 1,000,000 -- -- -- (250,000) -- 750,000
Net loss............ -- -- -- -- -- -- -- -- (1,502,000) (1,502,000)
--------- ---------- --------- ---------- ------- ------- ------- --------- ----------- -----------
Balance at
December 31, 1996... 4,160,445 $4,641,000 1,500,001 $2,250,000 972,541 $49,000 $85,000 $ -- $(6,858,000) $ 167,000
========= ========== ========= ========== ======= ======= ======= ========= =========== ===========
</TABLE>
See accompanying notes.
6
<PAGE>
QUINTAR HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................ $(1,080,000) $(1,502,000)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... 148,000 99,000
Discontinued product line......................... -- 368,000
Change in operating assets and liabilities:
Accounts receivable.............................. (319,000) 63,000
Inventories...................................... (3,000) (132,000)
Prepaid expenses and other assets................ 114,000 38,000
Accounts payable................................. (55,000) 194,000
Deferred revenue................................. (113,000) 388,000
Accrued warranty expense......................... -- 50,000
Other accrued expenses........................... 201,000 22,000
----------- -----------
Net cash used in operating activities............... (1,107,000) (412,000)
INVESTING ACTIVITIES
Purchase of property and equipment.................. (21,000) (71,000)
FINANCING ACTIVITIES
Issuance of preferred stock......................... -- 750,000
Stock options and subscriptions..................... 335,000 --
Repayment of line-of-credit......................... (100,000) --
----------- -----------
Net cash provided by financing activities........... 235,000 750,000
----------- -----------
Increase (decrease) in cash and cash equivalents.... (893,000) 267,000
Cash and cash equivalents at beginning of year...... 1,602,000 709,000
----------- -----------
Cash and cash equivalents at end of year............ $ 709,000 $ 976,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid....................................... $ 5,000 $ 900
Taxes paid.......................................... 800 800
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Conversion of notes payable and accrued interest
into common stock.................................. $ 1,441,000
</TABLE>
See accompanying notes.
7
<PAGE>
QUINTAR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Quintar Holdings Corporation (the "Company") is a California corporation,
established in November 1989 to design, manufacture and market computer
presentation graphics and image processing products. The Company generates
revenues primarily in the United States and Japan through product sales,
engineering fees and software licensing agreements.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Quintar Company. All significant
intercompany balances and transactions have been eliminated in consolidation.
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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates. Significant estimates
made in preparing these financial statements include inventory reserves,
deferred revenue and the allowance for doubtful accounts.
Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents.
Concentration of Credit Risks
Certain financial instruments potentially subject the Company to
concentrations of credit risk. These financial instruments consist primarily of
accounts receivable. The Company performs credit evaluations and generally does
not require collateral. Credit losses have traditionally been minimal and such
losses have been within management's expectations.
Three customers accounted for 14%, 12% and 10% of net revenues in 1995 and
23%, 13% and 11% of net revenues in 1996. Export sales in 1995 and 1996 were
$1,239,000 and $2,106,000, respectively. Concentrations of credit risk with
respect to accounts receivable are limited due to the high credit quality of
the Company's customer base and the customers geographic dispersion.
Inventories
Inventories are stated at the lower of cost (average costs method) or market.
At December 31, 1995 and 1996, inventories consisted of the following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Raw materials and purchased parts......................... $484,000 $307,000
Work-in-process........................................... 36,000 152,000
Finished goods............................................ 15,000 58,000
-------- --------
$535,000 $517,000
======== ========
</TABLE>
8
<PAGE>
QUINTAR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over estimated useful lives of one to five years.
Leasehold improvements are amortized over the shorter of their estimated five-
year life or the related lease term.
Other Assets
Other assets consist primarily of prepaid license fees, which are amortized
using the straight-line method over the estimated one-year to ten-year lives of
the related licenses.
Revenue Recognition
The Company records revenues from product sales upon shipment. Revenues from
engineering and license fees related to the modification of existing products
to meet particular customer requirements are recognized on a percentage of
completion basis. Amounts received from customers in excess of revenues
recognized to date are recorded as deferred revenues.
Research and Development Expenses
Research and Development expenses represent the costs of modifying and
testing products and are expensed as incurred. 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 has not
capitalized any production costs of computer software, as the technological
feasibility of the related products is established concurrently with the sale
of such products to customers. These costs have been expensed as incurred and
are included in engineering expenses in the accompanying statements of
operations.
Net Loss Per Share
Net loss per share is computed using the weighted average number of shares of
common stock outstanding during the year.
2. INCOME TAXES
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31, 1995
and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Tax operating loss carryforwards.................. $ 2,025,000 $ 2,352,000
Research and development credit carryforwards..... 386,000 481,000
Accruals not currently deductible................. 100,000 254,000
Inventory reserves................................ 44,000 143,000
Depreciation...................................... 29,000 30,000
----------- -----------
Total deferred tax assets...................... 2,584,000 3,260,000
Valuation reserve................................. (2,584,000) (3,260,000)
----------- -----------
Net deferred tax assets........................ $ -- $ --
=========== ===========
</TABLE>
9
<PAGE>
QUINTAR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A valuation allowance has been established to fully reserve deferred tax
assets because the Company cannot yet determine if the asset will be realized.
At December 31, 1996, the Company had net operating loss carryforwards of
$6,070,000 and $2,544,000 available to reduce future federal and state taxable
income, respectively. The federal carryforwards expire in 2004 through 2011,
and the state carryforwards began to expire in 1996. The ultimate realization
of the benefit of these carryforwards is dependent on future profitable
operations. In addition, their utilization may also be limited on an annual
basis if a cumulative change in ownership of more than 50% occurs within any
three-year period.
3. STOCK WARRANTS
In connection with a credit facility which expired in December 1995, the
Company granted the bank a warrant to purchase 20,000 shares of common stock at
a price of $2.00 per share, which exceeded the fair market value at the date of
the grant. The warrant, which expires on December 13, 1998, is exercisable, at
the bank's option, in whole or in part, and is subject to certain anti-dilution
provisions.
In addition, the Company granted the holders of certain subordinated notes
(later converted to Series A preferred stock) warrants to purchase a variable
number of shares of the Company's common stock for an aggregate purchase price
of $62,500. On a monthly basis, from the date of issuance through October 1,
1994, the aggregate purchase price increased by 2% of the notes payable balance
outstanding to $362,500. The warrants are exercisable, at the holders' option,
from time to time, in whole or in part. The exercise price is the lesser of
$1.00 per share or the price of the stock at the date of the exercise, as
determined in conjunction with an initial public offering, a private placement
exceeding $500,000, or the acquisition of the Company by a third party. The
number of shares exercisable is determined by dividing the aggregate purchase
price balance by the exercise price per share at the time of exercise. The
warrants, which expire on October 17, 1998, are subject to certain anti-
dilution provisions.
4. CONVERTIBLE PREFERRED STOCK
During 1994, the Company issued 833,333 shares of Series C preferred stock at
a purchase price of $1.50 per share. In addition, the preferred shareholder
paid $85,000 for an option to acquire additional shares of preferred stock
which expired on May 31, 1995.
In 1996, the Company issued an additional 666,668 shares of Series C
Convertible preferred stock at $1.50 per share. The purchaser made an advance
payment of $250,000 which has been reflected as a stock subscription in the
consolidated balance sheet in 1995. The remaining payment of $750,000 was made
during 1996.
Each share of the Company's Series A and Series C preferred stock is, at the
holder's option, convertible into one share of common stock, subject to
adjustment for dilution. If 75% of previously issued shares of preferred stock
are converted into common stock, conversion of the remaining outstanding shares
of preferred stock is mandatory. Conversion of outstanding preferred stock into
common stock is also mandatory if the Company issues common stock in an
underwritten public offering registered under the Securities Act of 1933 in
which the per share and aggregate public offering price equals or exceeds $5.00
and $5,000,000, respectively.
Holders of preferred stock are entitled to vote on all matters based upon the
number of shares of common stock into which the preferred stock may be
converted. The Company is authorized to seat five directors on its board, three
of whom are elected by holders of the preferred stock and two of whom
10
<PAGE>
QUINTAR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
are elected by holders of the common stock. Among other provisions, the
Company is restricted from amending any of the rights, preferences or
privileges of the preferred stock, issuing other preferred equity securities,
or transferring substantially all of the Company's assets to others without
the consent of a majority of the holders of preferred stock.
Upon the declaration of cash dividends on common stock, the Company is
required to declare cash dividends on the preferred stock. The preferred stock
dividend must at least equal the per share amount of the common stock dividend
and must be paid prior to the payment of any common stock dividends. As of
December 31, 1996, the Company had not declared any dividends. The Series A
and Series C preferred stock also carries a liquidation preference equal to
$1.00 and $1.50 per share, respectively, ($6,891,000 in the aggregate) plus an
amount equal to unpaid preferred stock dividends.
5. COMMON STOCK AND STOCK OPTION PLAN
Pursuant to the Company's Restricted Stock Plan, common stock is held solely
by Company officers, employees and former employees and vests ratably over
forty-eight months. Common stock is subject to certain restrictions which
relate principally to the transfer of ownership. Shares may be sold to third
parties, but only after first being offered to the Company at prevailing
market prices as determined in accordance with the Company's stock
subscription agreement.
On April 29, 1993, the board of directors and stockholders of the Company
approved the 1993 Stock Option Plan (the Plan). Under the Plan as amended,
1,510,500 shares of common stock have been reserved for issuance to eligible
employees, directors, consultants and advisors, subject to certain
limitations, as defined in the Plan. Incentive stock options may be granted at
prices not less than 100% of the fair market value at the date of the grant.
All options granted expire ten years after the date of the grant.
Information regarding options outstanding under the Plan is summarized
below:
<TABLE>
<CAPTION>
1995 1996
----------------- --------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE
------- --------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year..... 349,500 $0.08 349,500 $0.08
Granted.............................. -- -- 1,188,500 0.15
Terminated........................... -- -- (27,500) 0.10
------- ---------
Outstanding at end of year........... 349,500 0.08 1,510,500 0.13
======= =========
Exercisable at end of year........... 259,250 $0.08 749,250 $0.13
======= ===== ========= =====
Weighted-average fair value of
options granted during the year..... $0.08 $0.13
===== =====
</TABLE>
Exercise prices on options outstanding at December 31, 1996 ranged from
$0.05 to $0.15. The weighted average remaining contractual life of the options
is eight and one half years.
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for
the Plan. Accordingly, no compensation expense has been recognized for the
Plan. The impact on the Company's net loss would have been insignificant had
compensation cost for the Plan been determined consistent with the methodology
prescribed under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation.
11
<PAGE>
QUINTAR HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. PROFIT SHARING PLAN
The Company's 401(k) savings and profit sharing plan is available to
substantially all of its employees. Company contributions to the plan are made
at the discretion of the Board of Directors. The Company contributed $5,000 to
the plan during both 1995 and 1996.
7. DISCONTINUED PRODUCT LINE
The Company has adopted a plan to cease production of one of its product
lines. The Company will complete its contractual obligations through fiscal
1997, and cease production of the products by December 1997. In connection with
the decision, the Company charged $368,000 to 1996 operations, consisting of
inventory write-downs, warranty costs, and the accelerated amortization of
intangible assets.
8. PROPOSED CHANGE IN OWNERSHIP
The Company has agreed to be acquired by Splash Technology Holdings, Inc. for
$11.5 million plus additional compensation based on future operations. The
proposed transaction is expected to be completed in the second quarter of 1997.
The Company's financial position and results of operations reflect the
operating plans of current management without consideration of strategic
changes which may take place upon consummation of the change in ownership.
12
<PAGE>
QUINTAR HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
(UNAUDITED)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 799,000
Accounts receivable, net of an allowance for doubtful accounts
of $158,000.................................................. 108,000
Inventories................................................... 373,000
Prepaid expenses and other current assets..................... 154,000
------------
Total current assets........................................ 1,434,000
------------
Property and equipment, net................................... 66,000
Other assets, net............................................. 73,000
------------
Total assets................................................ $ 1,573,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................. $ 576,000
Deferred revenue.............................................. 227,000
Accrued warranty expense...................................... 105,000
Other accrued expenses........................................ 647,000
------------
Total current liabilities................................... 1,555,000
------------
Deferred revenue, long term................................... 350,000
------------
Stockholders' Equity:
Series A convertible preferred stock, no par value:
Authorized shares--4,200,000; Issued and outstanding
shares--4,160,445.......................................... 4,641,000
Series C convertible preferred stock, no par value:
Authorized shares--2,166,668; Issued and outstanding
shares--1,500,001.......................................... 2,250,000
Common stock, no par value:
Authorized shares--10,000,000; Issued and outstanding
shares--972,541............................................ 49,000
Additional paid in capital.................................... 85,000
Accumulated deficit........................................... (7,358,000)
------------
Total stockholders' equity.................................. (333,000)
------------
Total liabilities and stockholders' equity.................. $ 1,572,000
============
</TABLE>
The accompanying notes are an integral part of these financial statements
13
<PAGE>
QUINTAR HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Product sales........................................ $ 706,000 $ 771,000
Engineering and royalty revenues..................... 314,000 193,000
---------- ----------
Total revenues................................... 1,020,000 964,000
Cost and expenses:
Cost of revenues
Product............................................ 412,000 474,000
Engineering........................................ 176,000 83,000
Engineering expense.................................. 544,000 641,000
Selling, general and administrative expenses......... 304,000 258,000
Interest (income) expense, net....................... (5,000) 8,000
---------- ----------
Total costs and expenses......................... 1,431,000 1,464,000
---------- ----------
Net loss............................................. $ (411,000) $ (500,000)
========== ==========
Net loss per share................................... $ (0.42) $ (0.51)
========== ==========
Shares used in computing net loss per share.......... 973,000 973,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
14
<PAGE>
QUINTAR HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................... $(411,000) $(500,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 54,000 73,000
Change in operating assets and liabilities:
Accounts receivable................................. (106,000) 496,000
Inventories......................................... 4,000 144,000
Prepaid expenses and other assets................... (50,000) (132,000)
Accounts payable.................................... 287,000 (156,000)
Deferred revenue.................................... (16,000) (243,000)
Accrued warranty expense............................ 41,000 80,000
Other accrued expenses.............................. 50,000 86,000
--------- ---------
Net cash used in operating activities.................. (147,000) (152,000)
INVESTING ACTIVITIES
Purchase of property and equipment..................... (12,000) (25,000)
FINANCING ACTIVITIES
Issuance of preferred stock............................ 249,000 --
--------- ---------
Increase (decrease) in cash and cash equivalents....... 90,000 (177,000)
Cash and cash equivalents at beginning of the period... 709,000 976,000
--------- ---------
Cash and cash equivalents at end of the period......... $ 799,000 $ 799,000
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
15
<PAGE>
QUINTAR HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial information has been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial statements. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all normal, recurring adjustments necessary to present
fairly the Company's consolidated financial position as of March 31, 1997 and
the results of operations and cash flows for the three months ended March 31,
1997 and 1996, which results are not necessarily indicative of results on an
annual basis. Such consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Company's financial statements for the year ended December 31,
1996.
2. INVENTORIES
Substantially all of the Company's inventories at March 31, 1997 are composed
of raw materials and purchased parts.
16
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
The Company consummated the acquisition of Quintar Holdings
Corporation on May 28, 1997. The accompanying unaudited pro forma combined
condensed statement of operations for the year ended September 30, 1996
includes the historical consolidated statement of operations of the Company's
predecessor business for the four months ended January 31, 1996, the
historical consolidated statement of operations of the Company for the eight
months ended September 30, 1996 and the historical consolidated statements of
operations of Quintar for the year ended December 31, 1996, as if the
acquisition had occurred on October 1, 1995. The accompanying unaudited pro
forma combined condensed statements of operations for the nine months ended
June 30, 1997 includes the historical consolidated statements of operations of
the Company and of Quintar for the nine months ended June 30, 1997, as if the
acquisition had occurred on October 1, 1995. The unaudited pro forma combined
condensed statements of operations give effect to the Quintar acquisition
using the purchase method of accounting, and are based upon allocation of the
Quintar purchase price, and includes the adjustments described in the notes
set forth below.
The unaudited pro forma combined condensed statements of operations do
not purport to represent what the Company's results of operations would have
been had the Quintar acquisition occurred on the date indicated or for any
future period or date. The pro forma adjustments give effect to available
information and assumptions that the Company believes are reasonable. The
unaudited pro forma combined condensed statements of operations should be read
in conjunction with the Company's historical consolidated financial statements
and the historical consolidated financial statements of Quintar and the notes
thereto included elsewhere herein.
17
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Splash Splash Quintar
Predecessor Technology Technology Holdings
Business Holdings, Inc. Holdings, Inc. Corporation
----------- -------------- -------------- -----------
Four Months Eight Months Pro Forma
Ended Ended Year Ended Year Ended Pro Forma
January 31, September 30, September 30, December 31, Adjustments Pro Forma
1996 1996 1996 1996 Amount Key Combined
----------- ------------- ------------- ------------ ------ --- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $13,008 $34,713 $47,721 $5,383 $53,104
Cost of revenue 8,427 19,381 27,808 3,895 31,703
------- ------- ------- ------ ----- --- -------
Gross profit 4,581 15,332 19,913 1,488 21,401
------- ------- ------- ------ ----- --- -------
Operating expenses:
Research and development 1,498 2,627 4,125 1,293 5,418
Selling, general and 975 3,032 4,007 1,714 5,721
administrative expenses
Amortization and write-off
of technology 22,803 22,803 22,803
------- ------- ------- ------ ----- --- -------
Total operating expenses 2,473 28,462 30,935 3,007 33,942
------- ------- ------- ------ ----- --- -------
Income (loss) from operations 2,108 (13,130) (11,022) (1,519) (12,541)
Interest expense, net 18 575 593 (17) $ 690 i 1,266
------- ------- ------- ------ ----- --- -------
Income (loss) before 2,090 (13,705) (11,615) (1,502) (690) (13,807)
provision for income taxes
Provision for (benefit from)
income taxes 836 (5,509) (4,673) (604) ii (5,277)
------- ------- ------- ------ ----- --- -------
Net income $1,254 $(8,196) $(6,942) $(1,502) $ (86) $(8,530)
======= ======= ======= ======= ===== === =======
Net income (loss) per share $ (0.89)
=======
Shares used in per share
calculation 9,583
=======
</TABLE>
See accompanying notes
18
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(DOLLAR AMOUNT IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Splash Quintar
Technology Holdings Pro Forma Adjustments Pro Forma
Holdings, Inc. Corporation Amount Key Combined
-------------- ----------- -------- ----- ---------
<S> <C> <C> <C> <C> <C>
Net revenue $51,227 $ 2,595 $53,822
Cost of revenue 24,864 1,819 26,683
------- ------- ------- ------ -------
Gross profit 26,363 776 27,139
------- ------- ------- ------ -------
Operating expenses:
Research and development 3,972 1,329 5,301
Selling, general and administrative 6,071 895 6,966
Amortization and write-off of technology 11,039 (11,039) iii
------- ------- ------- ------ -------
Total operating expenses 21,082 2,224 (11,039) 12,267
------- ------- ------- ------ -------
Income (loss) from operations 5,281 (1,448) 11,039 14,872
Interest and other income (expense), net 979 (539) (346) i 94
------- ------- ------- ------ -------
Income (loss) before provision for income taxes 6,260 (1,987) 10,693 14,966
Provision for (benefit from) income taxes 6,447 (869) ii 5,578
------- ------- ------- ------ -------
Net income (loss) $ (187) $(1,987) $ 11,562 $ 9,388
======= ======= ======== ====== =======
Net income per share $ (0.02) $ 0.77
======= ======= ======== ====== =======
Shares used in per share calculation 11,903 12,251
======= ======= ======== ====== =======
</TABLE>
See accompanying notes
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
On May 28, 1997, the Company acquired the shares of Quintar Holdings
Corporation ("Quintar") for an aggregate purchase price of $13,532,000 plus
contingent earn-out payments of up to $3,200,000, subject to achieving certain
net revenue and operating income targets. The purchase price was comprised of
a cash payment of $11,519,000, issuance of Company stock options valued at
$1,588,000 in exchange for Quintar stock options and net acquisition costs of
$425,000.
Key i To record effect on interest income as a result of cash
used to purchase Quintar.
ii To record tax benefit of Quintar Holdings Corporation loss
iii Nonrecurring Transaction:
The Company recorded the expense related to purchased
in-process technology of approximately $11 million upon the
consummation of the Quintar Acquisition. This amount has been excluded
from the pro forma statements of operations due to its non-recurring
nature.
See accompanying notes
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPLASH TECHNOLOGY HOLDINGS, INC.
(Registrant)
Date: August 11, 1997 /s/ Joan P. Platt
-----------------
Chief Financial Officer and
Vice President, Finance and Administration
21
