SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
June 18, 1999
- --------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
Macrovision Corporation
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 000-22023 77-0156161
- ------------------------ ------------------------ ----------------
(State of incorporation) (Commission file number) (I.R.S. Employer
Identification No.)
1341 Orleans Drive
Sunnyvale, California 94089
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
(408) 743-8600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements and exhibits are filed as part of this
report.
(a) Financial Statements of C -Dilla Limited.
The following financial statements of C-Dilla Limited are filed as part of
this report:
Independent Auditors' Report 3
Statement of Operations 4
Statement of Stockholders' Funds 5
Balance Sheet 6
Cash Flow Statement 7
Notes 8
2
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
C-Dilla Limited:
We have audited the accompanying balance sheet of C-Dilla Limited as of December
31, 1998, and the related statements of operations, shareholders' equity and
cash flow for the year ended December 31, 1998 ("financial statements"). These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United Kingdom which are substantially equivalent to auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free from 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
presentation of the financial statements. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material aspects, the financial position of C-Dilla Limited as of December 31,
1998, the results of its operations and its cash flow for the year ended
December 31, 1998 in conformity with accounting principles generally accepted in
the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected the results of operations for the year ended December
31, 1998 and shareholders equity at December 31, 1998 to the extent summarised
in Note 17 to the financial statements.
28 July 1999
/S/ KPMG
Chartered Accountants
Reading, United Kingdom
3
<PAGE>
C-Dilla Limited
STATEMENT OF OPERATIONS
Year ended
December 31, 1998
Note (pound)
Turnover 1 835,131
Cost of sales (94,447)
----------
Gross profit 740,684
Operating expenses
Research and development (741,615)
Sales and marketing (885,682)
General and administrative (975,688)
----------
Total operating expenses (2,602,985)
----------
Loss from operations (1,862,301)
Interest income, net 102,016
Foreign currency transaction gains 3,387
----------
Loss before income taxes (1,756,898)
Provision for income taxes 4 --
----------
Net loss (1,756,898)
Finance cost of non-equity stock
Accrued unpaid cumulative
preferred dividend 12 (90,000)
Additional finance cost being an
allocation of the future premium
on redemption (102,300)
----------
Net loss attributable to equity
stockholders (1,949,198)
==========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
C-Dilla Limited
STATEMENT OF STOCKHOLDERS' FUNDS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Cumulative Additional
Common redeemable paid-in Accumulated
stock preferred stock capital losses Total
(pound) (pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 70,000 1,200,000 447,910 (1,273,308) 444,602
Net loss -- -- -- (1,756,898) (1,756,898)
Issue of new stock
(see note 13) 24,750 -- 2,069,159 -- 2,093,909
------ --------- --------- ---------- -------
Balance at December 31, 1998 94,750 1,200,000 2,517,069 (3,030,206) 781,613
====== ========= ========= ========== =======
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Equity Non-equity Total
(pound) (pound) (pound)
<S> <C> <C> <C>
Balance at January 1998 (934,303) 1,378,905 444,602
Net loss (1,756,898) -- (1,756,898)
Issue of new stock 2,093,909 -- 2,093,909
Finance cost of non-equity stock (192,300) 192,300 --
-------- --------- -------
Balance at December 31, 1998 (789,592) 1,571,205 781,613
======== ========= =======
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
C-Dilla Limited
BALANCE SHEET
<TABLE>
<CAPTION>
At December 31,
Note 1998
(pound)
<S> <C> <C>
ASSETS
Current assets
Cash 1,140,999
Accounts receivable (includes provision for bad debts of(pound)3,331) 5 190,438
Related party assets 5 143,719
Other current assets 5 73,620
Inventories 6 750
----------
Total current assets 1,549,526
Non-current assets
Investment in subsidiary company 7 18
Property, plant and equipment, net 8 333,217
----------
Total non-current assets 333,235
----------
Total assets 1,882,761
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank loans and overdrafts 9 266,408
Trade accounts payable 9 76,947
Accrued payroll and related expenses 9 41,732
Other accrued expenses 9 670,358
Current instalment of obligations under capital leases 9 16,115
----------
Total current liabilities 1,071,560
Obligations under capital leases, excluding current instalments 29,588
----------
Total liabilities 1,101,148
Stockholders' funds
Common stock 13 94,750
Cumulative redeemable preferred stock 12 1,200,000
Additional paid-in capital 14 2,517,069
Accumulated losses 15 (3,030,206)
----------
Total stockholders' funds (comprising a deficit for the equity stockholders of
(pound)789,592 and non-equity stockholders' funds of(pound)1,571,205) 781,613
----------
Total liabilities and stockholders' funds 1,882,761
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
C-Dilla Limited
CASH FLOW STATEMENT
For the year ended December 31, 1998
1998
(pound)
Cash flows from operating activities
Net loss (1,756,898)
Adjustments to reconcile net income to net cash used in operating
activities
Depreciation 143,593
Loss on sale of assets 607
Changes in operating assets and liabilities
Accounts receivable (37,869)
Other debtors (174,896)
Accounts payable 9,254
Accrued expenses 653,555
----------
Net cash used in operating activities (1,162,654)
==========
Cash flows in investing activities
Capital expenditure (143,590)
Investment in subsidiary (18)
----------
Net cash used in investing activities (143,608)
==========
Cash flows from financing activities
Proceeds from issue of new shares 2,121,212
Share issue costs (27,303)
Repayment of finance leases (17,132)
Proceeds from bank overdraft facilities 126,671
----------
Net cash provided by financing activities 2,203,448
==========
Net increase in cash 897,186
Cash at beginning of period 243,813
----------
Cash at end of period 1,140,999
==========
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United Kingdom (UK GAAP). The accounting
principles differ in certain respects from accounting principles generally
accepted in the United States (US GAAP). The significant differences and the
approximate related effect on the financial statements are set out in note 17.
Accounting convention
The financial statements are prepared under the historical cost convention and
on a going concern basis notwithstanding the company's loss for the year ended
December 31, 1998, since the company's parent, Macrovision, Inc. has indicated
its intention to provide any necessary financial support for the foreseeable
future.
Consolidation
The financial statements present information about the company and not about the
group of which it is the parent because the directors have taken advantage of
the exemption available to a "small group" which is provided by Section 248 of
the Companies Act 1985.
Capital instruments
Common stock and cumulative preferred stock are treated in accordance with the
requirements of Financial Reporting Standard 4: Capital instruments. Each
instrument is classified as either equity or non-equity. The finance cost of
non-equity cumulative preferred stock (including dividends and premium on
redemption) is recognised in the profit and loss account via a reallocation
between equity and non-equity stockholders over the period to redemption. See
the Statement of Stockholders' Funds on page 3.
Property, plant and equipment
Depreciation is provided on cost in equal annual instalments over the estimated
lives of the assets. The rates of depreciation are as follows:
Leasehold property over the term of the lease
Computer equipment 33 1/3% per annum
Motor vehicles 25% per annum
Fixtures, fittings and office equipment 25% per annum
Inventory
Inventories are stated at the lower of cost and net realisable value. Cost
represents direct materials and labour and production overheads.
8
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES (continued)
Foreign exchange
Transactions denominated in foreign currencies are translated into sterling at
the rates ruling at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are
translated at the rates ruling at that date. These translation differences are
dealt with in the income statement.
Leasing and hire purchase commitments
Assets held under finance leases and hire purchase contracts are capitalised at
their fair value on the inception of the leases and depreciated over their
estimated useful lives. The finance charges are allocated over the period of the
lease in proportion to the capital amount outstanding.
Rental costs under operating leases are charged to the income statement in equal
annual amounts over the period of the leases.
Deferred taxation
Deferred taxation is provided at the anticipated tax rates on differences
arising from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in the
financial statements to the extent that it is probable that a liability or asset
will crystallise in the future.
Advertising costs
Advertising costs are charged to the income statement when the cost is incurred.
Research and development
Research and development costs are charged to the income statement when the
costs are incurred.
Pension costs
The company operates a defined contribution scheme. The assets of the scheme are
held separately from those of the company in an independently administered fund.
Annual contributions payable are charged to the income statement.
Turnover
Turnover represents licences, support fees and royalties and is stated exclusive
of value added tax.
9
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES (continued)
Revenue Recognition
The company's software licence revenues are recognized when there is a signed
licence agreement, delivery has occurred, the fee is fixed or determinable, and
collectibility is probable. All maintenance revenue relating to contracts, which
entitle the customer to receive technical support and/or future enhancements of
the software, is deferred and recognised ratably over the maintenance period.
Consulting revenues are recognised as the services are performed.
2. OPERATING LOSS
Operating loss is stated after charging/(crediting): 1998
(pound)
Staff pension contributions 26,023
Depreciation 143,593
Auditors' fees 6,889
Foreign currency transaction gains (3,387)
=======
3. DIRECTORS' EMOLUMENTS
The directors' aggregate emoluments in respect of qualifying 1998
services were: (pound)
Aggregate emoluments 96,816
Company pension contributions 2,450
-------
99,266
=======
4. INCOME TAXES
The company has trading losses available to carry forward of approximately
(pound)3,000,000 which may, subject to certain conditions, be set against future
taxable profits arising from the same trade.
10
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
5. DEBTORS
1998
(pound)
Trade debtors 190,438
Amounts owed by subsidiary undertaking 143,719
VAT recoverable 7,535
Other debtors 66,085
-------
407,777
========
6. INVENTORIES
1998
(pound)
Finished goods 750
========
7. INVESTMENTS
1998
(pound)
Cost and net book value:
At January 1, 1998 --
Additions 18
--------
At December 31, 1998 18
========
The company owns 100% of the issued common stock of C-Dilla, Inc. a company
newly incorporated in the USA for the development of secure software products.
11
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
8. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Leasehold Computer Motor Fixtures, fittings
improvements equipment vehicles & office equipment Total
<S> <C> <C> <C> <C> <C>
Cost:
At January 1, 1998 115,840 206,213 75,771 92,328 490,152
Additions 6,983 122,657 -- 13,950 143,590
Disposals -- (956) -- -- (956)
------- ------- ------ ------- -------
At December 31, 1998 122,823 327,914 75,771 106,278 632,786
------- ------- ------ ------- -------
Accumulated depreciation:
At January 1, 1998 26,640 91,763 17,773 20,149 156,325
Charge for year 24,508 75,241 18,942 24,902 143,593
Disposals -- (349) -- -- (349)
------- ------- ------ ------- -------
At December 31, 1998 51,148 166,655 36,715 45,051 299,569
------- ------- ------ ------- -------
Net book value
December 31, 1998 71,675 161,259 39,056 61,227 333,217
======= ======= ====== ======= =======
</TABLE>
9. CURRENT LIABILITIES
1998
(pound)
Bank loans and overdrafts 266,408
Trade creditors 76,947
Other creditors including:
PAYE and social security 41,732
Finance leases 16,115
------
57,847
Accruals and deferred income 670,358
---------
1,071,560
=========
The bank loan is secured on the assets of the company.
12
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
10. COMMITMENTS UNDER OPERATING LEASES
At December 31, 1998 the company had aggregate annual commitments under
non-cancellable operating leases as set out below:
1998
(pound)
Operating leases which expire:
Within 2 to 5 years 37,400
======
11. RELATED PARTY TRANSACTIONS
Management fees of (pound)12,000 were paid to IPR Industries Limited (which
during 1998 controlled 29.0725% of the voting rights).
MJ Brooke is a director of Coinshire Limited which, during 1998, owned 4.21% of
the voting rights. During the year Coinshire Limited received (pound)25,563 in
respect of Mr M Brooke's services and expenses as director.
Quester Services Limited, which during 1998 owned 10.69% of the voting rights,
received (pound)13,202 in respect of Mr S Acland's services and expenses as
director.
Macrovision, Inc. which during 1998 acquired 19.8% of the voting rights and
which has subsequently acquired 100% of the voting rights, received
(pound)10,428 in respect of expenses and services of Messrs Dunn and Viegas as
directors.
12. CUMULATIVE REDEEMABLE PREFERRED STOCK
Number 1998
(pound)
Cumulative redeemable preferred stock 1,200,000 1,200,000
========= =========
The preferred cumulative redeemablestock (which are not convertible into common
stock) have the following rights attached to them:
1. The stock is redeemable at a premium of 30%, amounting to (pound)1,560,000
in total (including a redemption premium of (pound)360,000), on the
following dates unless the company issues a redemption notice to redeem
the shares at an earlier date:
- 33.33% on April 1, 2000
- 50% of the balance in issue on April 1, 2001
- The remainder of the preferred stock in issue on April 1, 2002
13
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
12. CUMULATIVE REDEEMABLE PREFERRED STOCK (continued)
2. The stock accrues dividends at a rate of 10% starting from April 1, 1998.
The dividends are in arrears by (pound)60,000 for the period April 1, 1998
to September 30, 1998. Including this amount, the accrued dividends to
December 31, 1998 are (pound)90,000.
3. The articles of the company state that should preference dividends fall
into arrears then the holders may serve notice to have all or part of the
preference shares redeemed. Upon serving notice the holders would also be
entitled, on a show of hands, to one vote, and on a poll in aggregate, 75%
of voting rights conferred by all the equity share capital. No notice has
been served.
4. In the event of a winding up, the preferred stock ranks ahead of the
ordinary stockholders with regard to payment of all accrued dividends and
repayment of a sum equal to the issue price of the stock. In the event of
a winding up the stockholders are not entitled to a premium.
13. COMMON STOCK
1998 1998
Number (pound)
Authorised:
Ordinary A stock of 10p each 28,847 2,885
Ordinary B stock of 10p each 150,000 15,000
Ordinary C stock of 10p each 21,153 2,115
Ordinary D stock of 10p each 500,000 50,000
Ordinary E stock of 2p each 1,562,500 31,250
Ordinary F stock of 10p each 247,500 24,750
-------
126,000
=======
14
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
13. COMMON STOCK (continued)
1998 1998
Number (pound)
Issued, called up and fully paid
Ordinary A stock of 10p each 28,847 2,885
Ordinary B stock of 10p each 150,000 15,000
Ordinary C stock of 10p each 21,153 2,115
Ordinary D stock of 10p each 500,000 50,000
Ordinary F stock of 10p each 247,500 24,750
------- ------
947,500 94,750
======= ======
During the year an Ordinary Resolution was passed by the Board for each E class
ordinary stock of 10p to be sub-divided into 5 E class ordinary stock of 2p
each.
The authorised capital of the company was increased during the year to include
247,500 F class ordinary stock of 10p each. These were allotted for a
consideration of (pound)2,121,212.
Ordinary stock ranks pari-passu with regard to dividends and surplus assets in
the event of a winding up. Voting rights are as follows with no ordinary E stock
allotted:
% voting
Ordinary A 13.2330
Ordinary B 29.0725
Ordinary C 5.8145
Ordinary D 32.0800
Ordinary F 19.8000
14. ADDITIONAL PAID IN CAPITAL
1998
(pound)
Balance brought forward 447,910
Premium on stock issued in the year 2,069,159
---------
Balance carried forward 2,517,069
=========
15
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
15. ACCUMULATED LOSSES
1998
(pound)
Balance brought forward (1,273,308)
Net loss for the financial year (1,756,898)
----------
Balance carried forward (3,030,206)
==========
16. POST BALANCE SHEET EVENTS
In June 1999 the company's issued share capital was acquired by Macrovision,
Inc. a company incorporated in the U.S.A.
17. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
As stated in note 1, the financial statements of C-Dilla Limited have been
prepared in accordance with UK GAAP which differs in certain significant
respects from US GAAP. A description of the major differences between UK GAAP
and US GAAP affecting C-Dilla Limited follows:
(a) Employee stock options
In 1996, the Company adopted a stock option plan ("the Plan") pursuant to which
the Company's Board of Directors may grant stock options to eligible employees.
Prior to 1998 stock options were granted with an exercise price equal to the
fair value of the stock. During 1998 options were granted with the stock option
price at a discount from fair value. This discount is considered to be part of
the employees compensation.
All stock options must be exercised during the period which commences on the
latest of either:
- the third anniversary of the relevant date of grant; or
- the date by which all the preference shares have been redeemed; and,
which ends on the day prior to the seventh anniversary of the date
of grant.
The financial statements do not reflect a charge in relation to the issue of
employee stock options.
Accounting Practices Board Opinion 25: Accounting for Stock issued to Employees,
requires companies to recognise an expense where there is a difference between
the stock option price and the market value of the stock at the time the option
is granted. The expense is amortised on a straight line basis over the period
from the date the options are granted to the date they are first exercisable,
that is, the vesting date. April 1, 2002, the date of the final tranche of the
16
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
17. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
cumulative redeemable preferred stock is due to be redeemed, has been taken as
the vesting date.
Details in respect of employee stock options are set out below.
<TABLE>
<CAPTION>
=======================================================================================================================
Options Exercise price Options Exercise price Options Exercise price
Number ((pound)) Number ((pound)) Number ((pound))
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 740,000 0.16 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Granted 216,000 0.16 234,175 1.08 20,000 2.50
- -----------------------------------------------------------------------------------------------------------------------
Exercised -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Outstanding at end of period 956,000 0.16 234,175 1.08 20,000 2.50
- -----------------------------------------------------------------------------------------------------------------------
Exercisable at end of period -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Fair value of options granted during
period 216,000 1.35 234,175 1.35 20,000 3.13
=======================================================================================================================
</TABLE>
17
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
17. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
(b) Deferred taxation
UK GAAP requires deferred taxation to be computed using the liability method
with no deferred tax accounted for to the extent that it is probable that a
liability or asset will not crystallise. A prudent view should be taken in the
assessment of whether a liability or asset will crystallise. Under US GAAP,
deferred taxation is recognised under the full liability method which permits
deferred tax assets to be recognised if their realisation is considered more
likely than not. The ultimate realisation of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which the net
operating losses causing the deferred tax asset to arise become deductible. The
tax effects of temporary differences that give rise to significant portions of
the deferred tax assets and deferred tax liabilities at December 31, 1998 are
presented below:
1998
(pound)
Deferred tax assets:
Net operating loss carry forwards 930,204
--------
Total gross deferred tax assets 930,204
Less: Offset against deferred tax liabilities (8,860)
Valuation allowance (921,344)
--------
Net deferred tax assets --
========
Deferred tax liabilities:
Plant and equipment, principally due to differences in
accounting and tax depreciation (8,860)
Less: Offset against deferred tax assets 8,860
--------
Net deferred tax liabilities --
========
Based upon the level of past net operating losses, projections for future
taxable income, and the uncertainty surrounding the criteria under which
operating losses may be carried forward, management believes it is more likely
than not that the net tax assets will not be realised.
18
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
17 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
(c) US GAAP reconciliations and presentational issues relating to the income
statement and balance sheet
The following reconciliations have been provided to give additional information
as required under US GAAP.
1998
(pound)
I. Net loss:
Net loss as reported for UK GAAP (1,756,898)
Share option expense (60,110)
------------
Net loss under US GAAP (1,817,008)
Redemption and finance costs of cumulative redeemable preference
stock (192,300)
------------
Net loss attributable to common stockholders under US GAAP (2,009,308)
============
Net loss per share - basic and diluted ((pound)2.22)
============
Number of shares
Shares used to compute basic and diluted net loss per share 906,250
============
Under UK GAAP distributions (including finance costs of non-equity stock) are
presented at the foot of the income statement. Under US GAAP increases or
decreases in the carrying amount of redeemable securities reduce or increase
income applicable to common stockholders.
1998
(pound)
II. Stockholders' equity:
Stockholders' funds as reported for UK GAAP 781,613
Non-equity interests included within stockholders' funds (1,571,205)
----------
Stockholders' deficit under US GAAP (789,592)
==========
UK GAAP requires all stock to be reported as part of stockholders' funds even
where a class of stock has features that make it economically similar to debt.
Such a class of stock is classified as a non-equity interest and additional
disclosure is required of the split of total stockholders' funds between equity
and non-equity interests. Under US GAAP such stock is reported as a separate
balance sheet caption and is neither included within liabilities nor
stockholders' equity. The company's cumulative redeemable preferred stock is
presented as a non-equity interest under UK GAAP but would be reported as a
separate caption under US GAAP between debt and equity.
19
<PAGE>
C-Dilla Limited
NOTES TO THE FINANCIAL STATEMENTS
17 UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
(d) Consolidation
US GAAP requires consolidation of material subsidiaries. C-Dilla has a wholly
owned subsidiary, C-Dilla, Inc. which is not being consolidated as it is not
considered material for the purposes of these financial statements. Details of
the subsidiary at December 31, 1998, are as follows:
The company has paid all the expenses relating to the set up of its subsidiary
company, C-Dilla, Inc.
1998
(pound)
Balance sheet components:
Cash 78,639
Plant and equipment, net 8,729
Accrued expenses (4,464)
Owing to parent company (143,719)
Share capital 18
Losses for the period (60,797)
========
Analysis of losses for the period:
Staff costs 36,246
Depreciation 974
Professional fees 12,220
Other expenses 11,357
--------
60,797
========
(e) Additional disclosures
Major customer information:
One customer exceeded 10% of total net sales during the year ended December 31,
1998. The net sales for the year and the amount due from this customer as of
December 31, 1998, are as follows:
Net sales Accounts receivable
(pound) (pound)
Autodesk 95,885 34,200
====== ======
(b) Pro Forma Financial Information.
20
<PAGE>
The following unaudited pro forma condensed financial statements are filed
as part of this report:
Pro Forma Condensed Statement of Operations for the three months
ended March 31, 1999 22
Pro Forma Condensed Statement of Operations for the year ended
December 31, 1998 23
Notes to Pro Forma Condensed Financial Statements 24
The following unaudited pro forma condensed financial statements give effect to
the acquisition of C-Dilla Limited ("C-Dilla") by Macrovision Corporation
("Macrovision") in a transaction to be accounted for under the purchase method
of accounting in accordance with APB Opinion No. 16. Under the purchase method
of accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values at the date of
acquisition. The estimated fair values and related purchase price allocation
contained herein are prepared based on management's estimates in conjunction
with a third party valuation consultant.
The unaudited pro forma condensed statements of operations reflect the combined
results of operations of Macrovision and C-Dilla for the three months ended
March 31, 1999, derived from unaudited financial statements, and year ended
December 31, 1998, derived from audited financial statements, as if the
acquisition occurred January 1, 1998.
The unaudited pro forma condensed financial statements are presented for
illustrative purposes only and are not necessarily indicative of the condensed
financial position or results of operations in future periods or the results
that actually would have been realized had Macrovision and C-Dilla been a
combined company during the specified periods. The unaudited pro forma condensed
financial statements including the notes thereto, are qualified in their
entirety by reference to, and should be read in conjunction with, the historical
consolidated financial statements of Macrovision, included in its Annual Report
on Form 10-K for the year ended December 31, 1998, its Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1999 and its Current Report on Form
8-K filed July 6, 1999.
The amounts presented in the unaudited pro forma condensed financial statements
for C-Dilla have been derived from the translated historical British pound
sterling denominated results of operations for the year ended December 31, 1998
and the three months ended March 31, 1999 prepared in accordance accounting
principles generally accepted in the United States. The historical statements of
operations of C-Dilla has been converted to U.S. dollars at the weighted average
exchange rate for the period presented. Certain amounts have been reclassified
to conform to the Macrovision's presentation.
Macrovision's Quarterly Report on Form 10-Q for the period ended June 30, 1999
captures the effect of the C-Dilla acquisition, and accordingly no pro forma
condensed balance sheet is presented herein.
21
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Macrovision C-Dilla Pro Forma
Actual Actual Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 7,163 $ 433 $ (102) (A) $ 7,494
Costs and expenses:
Cost of revenues 671 23 (102) (A) 592
Research and development 631 418 1,049
Selling and marketing 1,882 280 2,162
General and administrative 1,381 469 1,850
Amortization of intangibles -- -- 678 (B) 678
------------ ------------ ------------ ------------
Total costs and expenses 4,565 1,190 576 6,331
------------ ------------ ------------ ------------
Operating income 2,598 (757) (678) 1,163
Interest and other income, net 418 10 (123) (C) 305
------------ ------------ ------------ ------------
Income before income taxes 3,016 (747) (801) 1,468
Income taxes 1,158 -- 1,158
------------ ------------ ------------ ------------
Net income (loss) $ 1,858 $ (747) $ (801) $ 310
============ ============ ============ ============
Computation of basic and diluted earnings per share:
Basic earnings per share $ .21 $ .03
============ ============
Shares used in computing basic earnings per share 8,887 109 (D) 8,996
============ ------------ ============
Diluted earnings per share $ .20 $ .03
============ ============
Shares used in computing diluted earnings per share 9,339 109 (D) 9,448
============ ------------ ============
</TABLE>
22
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Macrovision Pro Forma
Actual C-Dilla Actual Adjustments Pro Forma
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues $ 24,434 $ 1,378 $ (84) (A) $ 25,728
Costs and expenses:
Cost of revenues 2,081 156 (84) (A) 2,153
Research and development 2,578 1,224 3,802
Selling and marketing 5,985 1,462 7,447
General and administrative 4,621 1,709 6,330
Amortization of intangibles -- -- 2,712 (B) 2,712
------------ ------------ ------------ ------------
Total costs and expenses 15,265 4,551 2,628 22,444
------------ ------------ ------------ ------------
Operating income (loss) 9,169 (3,173) (2,712) 3,284
Interest and other income, net 1,102 174 (493) (C) 783
------------ ------------ ------------ ------------
Income (loss) before income taxes 10,271 (2,999) (3,205) 4,067
Income taxes 3,929 -- 3,929
------------ ------------ ------------ ------------
Net income (loss) $ 6,342 $ (2,999) $ (3,205) $ 138
============ ============ ============ ============
Computation of basic and diluted earnings per share:
Basic earnings (loss) per share $ .79 $ .02
============ ============
Shares used in computing basic earnings per share 8,004 109 (D) 8,113
============ ------------ ============
Diluted earnings per share $ .74 $ .02
------------ ------------
Shares used in computing diluted earnings per share 8,553 109 (D) 8,662
============ ------------ ============
</TABLE>
23
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
In June 1999, the Company acquired the remaining shares of C-Dilla Limited of
Woodley, UK, developers of copy protection and rights management technologies
for CD-ROM and internet-delivered software products. The Company paid
approximately $12,810,000 in cash and acquisition costs and 109,199 shares of
Macrovision stock valued at $5,073,000. The transaction has been accounted for
under the purchase method. The excess purchase price over the net tangible
assets acquired was $20,689,000 of which, based on management's estimates
prepared in conjunction with a third party valuation consultant was allocated as
follows:
(In thousands)
In-process research and development $ 4,286
Developed technology 3,824
Core technology 7,844
Acquired workforce 497
Covenant not to compete 1,788
Goodwill 2,450
---------------
$ 20,689
===============
The expense related to purchased in-process research and development has not
been reflected in the accompanying unaudited pro forma condensed statements of
operations as the charge will not have a continuing impact.
PRO FORMA ADJUSTMENTS FOR C -DILLA
(A) To eliminate intercompany transactions. Under an agreement with C-Dilla,
Macrovision had exclusive marketing rights for consumer multimedia
software applications of certain copy protection technologies developed by
C-Dilla for CD-ROM. Under this agreement Macrovision paid royalties to
C-Dilla of between 30% and 45% of revenues from sales of software products
incorporating C-Dilla's technology.
(B) To record the amortization related to the excess purchase price over the
estimated fair value of assets and liabilities acquired in connection with
the C-Dilla acquisition. The book value of the tangible assets acquired
and liabilities are assumed to approximate fair value. The estimated
useful life of the goodwill and other purchased intangibles range from
three to seven years
(C) To reflect forgone interest income associated with the cash used to
acquire C-Dilla, assuming a weighted average 3.8% rate of return
(D) Basic pro forma earnings per share is computed using the weighted average
number of Macrovision shares outstanding during the periods plus shares of
Common Stock assumed to be issued as part of the acquisition. Diluted pro
forma earnings per share is computed using the weighted average number of
common and common equivalent shares outstanding during the periods plus
shares of Common Stock and common equivalent shares assumed to be issued
as part of the acquisition. Common equivalent shares consist of common
stock issuable upon exercise of stock options using the treasury stock
method. Shares and options issued pursuant to the acquisition are assumed
outstanding at the beginning of the periods presented.
(c) Exhibits
24
<PAGE>
The following exhibit is filed herewith:
2.01 Agreement For Sale of Shares relating to C-Dilla Limited dated as of
June 18, 1999 by and among Registrant and the shareholders of
C-Dilla Limited. Pursuant to Item 601(b)(2) of Regulation of S-K,
certain schedules have been omitted but will be furnished
supplementally to the Commission upon request. ** (1)
23.02 Consent of KPMG, Independent Auditors
** Confidential treatment has been requested with respect to certain portions
of this exhibit. Such portions have been omitted from this filing and have
been filed separately with the Securities and Exchange Commission.
(1) Previously filed with the Form 8-K filed on July 6, 1999.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to report to be signed on its
behalf by the undersigned thereunto duly authorized.
MACROVISION CORPORATION
By: /s/ Michael J. Peters
------------------------------------
Date: September 1, 1999 Michael J. Peters
Controller, Chief Accounting Officer
26
Exhibit 23.02
CONSENT OF KPMG, INDEPENDENT AUDITORS
The Board of Directors
C-Dilla Limited
Woodley House
Crockhamwell Road
Woodley
RG5 3JP
We consent the inclusion of our report dated July 28, 1999, with respect to the
balance sheet of C-Dilla Limited as of December 31, 1998, and the related
statements of operations, stockholders' funds and cash flows for the year ended
December 31, 1998, which report appears in the Form 8-K of Macrovision
Corporation dated June 18, 1999.
/s/KPMG
Reading, United Kingdom
September 1, 1999
