SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 31, 2000
GlobeSpan, Inc.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 000-26401 75-2658218
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
100 Schulz Drive
Red Bank, New Jersey 07701
- ----------------------- ---------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (732) 345-7500
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
This Amendment No. 1 to Form 8-K is being filed in order to include
certain financial statements for Ficon Technology, Inc. and certain unaudited
pro forma condensed combined financial information as of December 31, 1999 and
for the year ended December 31, 1999 reflecting the acquisition by Globespan,
Inc. ("Globespan") of Ficon Technology, Inc. ("Ficon"), which closed on January
31, 2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Ficon Technology, Inc. Financial Statements for the Year Ended December
31, 1999
<PAGE>
Ficon Technology, Inc.
Financial Statements
For the year ended December 31, 1999
and Report Thereon
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
Ficon Technology, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of cash flows and of changes in stockholders' equity present fairly,
in all material respects, the financial position of Ficon Technology, Inc. at
December 31, 1999 and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States. 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 of these
statements in accordance with generally accepted auditing standards in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
January 14, 2000
except as to Note 10 which is as of February 25, 2000
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<PAGE>
Ficon Technology, Inc.
Balance Sheet
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<TABLE>
<CAPTION>
December 31,
1999
<S> <C>
Assets
Current assets
Cash and cash equivalents $ 899,223
Accounts receivable 786,882
Prepaid expenses and other current assets 135,802
----------
Total current assets 1,821,907
Property and equipment, net 241,322
----------
Total assets $2,063,229
==========
Liabilities and Stockholders' Equity
Current liabilities
Borrowings under line of credit $ 200,000
Accounts payable 35,796
Payroll and benefit related liabilities 374,187
Accrued expenses and other liabilities 205,587
Current tax liabilities 166,168
Current portion of capital lease obligations 12,351
----------
Total current liabilities 994,089
Deferred tax liabilities 149,894
Deferred revenue 230,800
Capital lease obligations, less current portion 13,116
----------
Total liabilities 1,387,899
----------
Commitments and contingencies (Note 7)
Stockholders' equity
Class A common stock, no par value; 7,000,000 shares authorized; 6,790,000
shares issued and outstanding 970
Class B common stock, no par value; 1,433,735 share authorized; 210,000 shares
issued and outstanding 30
Additional paid-in capital 106,277
Retained earnings 568,053
----------
Total stockholder's equity 675,330
----------
Total liabilities and stockholders' equity $2,063,229
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Ficon Technology, Inc.
Statement of Operations
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<TABLE>
<CAPTION>
For the Year
Ended
December 31,
1999
<S> <C>
Revenues
Development and other revenues $4,719,402
----------
Total revenues 4,719,402
----------
Expenses
Research and development (including related party amount of $504,000) 4,078,800
Selling, general and administrative 556,099
----------
Total operating expenses 4,634,899
----------
Income from operations 84,503
Interest expense (3,862)
----------
Income before income taxes 80,641
Income tax provision 34,384
----------
Net income $ 46,257
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Ficon Technology, Inc.
Statement of Changes in Stockholders' Equity
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<TABLE>
<CAPTION>
Class A Class B Additional Retained Total
Common Stock Common Stock Paid-in Earnings Stockholders'
Shares Amount Shares Amount Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 (unaudited) 6,790,000 $ 970 210,000 $ 30 $ 106,277 $ 521,796 $ 629,073
Net income -- -- -- -- -- 46,257 46,257
--------- ----- ------- ---- --------- --------- ---------
Balance at December 31, 1999 6,790,000 $ 970 210,000 $ 30 $ 106,277 $ 568,053 $ 675,330
========= ===== ======= ==== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Ficon Technology, Inc.
Statement of Cash Flows
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For the Year
Ended
December 31,
1999
------------
Cash flows provided by operating activities
Net income $ 46,257
Adjustments to reconcile net income to cash (used in)
provided by operating activities
Deferred income taxes (139,925)
Amortization and depreciation 90,785
Changes in assets and liabilities
(Increase) decrease in accounts receivable 603,731
(Increase) in prepaid expenses and other current assets (102,952)
Increase (decrease) in accounts payable (42,874)
Decrease in deferred revenue (58,737)
Increase in accrued expenses and other current liabilities 344,754
Increase in current tax liabilities 166,168
---------
Net cash provided by operating activities 907,207
---------
Cash flows used in investing activities
Purchase of equipment (222,846)
---------
Net cash used in investing activities (222,846)
---------
Cash flows provided by financing activities
Proceeds from borrowings under line of credit 200,000
Repayment of capital lease obligation (9,689)
---------
Net cash provided by financing activities 190,311
---------
Net increase in cash and cash equivalents 874,672
Cash and cash equivalents at beginning period 24,551
---------
Cash and cash equivalents at end of period $ 899,223
=========
Supplemental disclosure of cash flow information
Cash paid
Interest $ 3,317
=========
Income taxes $ 15,391
=========
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Ficon Technology, Inc.
Notes to Financial Statements
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1. Nature of Business and Basis of Presentation
Ficon Technology, Inc. (the "Company") was incorporated in October 1996
under the laws of the State of New Jersey. The Company is a leading
provider of communication software, testing tools and services for the
packet switching, Digital Subscriber Line (DSL) and cable markets,
primarily in the United States. The Company develops products that are
used by manufacturers in various products including IP edge switches and
routers, ATM edge and core switches, Voice Gateways, DSL modems, cable
modem and termination systems.
In January 2000, the Company was acquired by GlobeSpan, Inc. in a
purchase transaction. See Note 10.
2. Summary of Significant Accounting Policies
The significant accounting principles and practices used in the
preparation of the accompanying financial statements are summarized below:
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 and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods presented. Actual results could differ from
those estimates. The markets for the Company's products are characterized
by intense competition, rapid technological development and frequent new
product introductions, all of which could impact the future value of the
Company's assets.
Revenue Recognition
Revenues from development fees, which amounted to approximately $2,700,000
for the year ended December 31, 1999, are recognized upon customer
acceptance or over the period in which services are provided if customer
acceptance is not required. Service revenues consist of customer support
and maintenance fees. Service revenues are recognized ratably over the
term of the agreement, which is typically one year.
Revenue from the sale of software is recognized when persuasive evidence
of an arrangement exists, delivery has occurred, the vendor's fee is fixed
and determinable and collectibility is probable. When a software
arrangement includes multiple elements, the Company allocates the revenue
to each component of the arrangement based on vendor-specific objective
evidence of value ("VSOE") and recognizes the revenue for each component
as appropriate. Where sufficient VSOE does not exist, the Company defers
revenue recognition for the entire arrangement until all elements of the
arrangement have been delivered. Revenues from license fees amounted to
approximately $1,500,000 for the year ended December 31, 1999.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.
Property and Equipment
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<PAGE>
Ficon Technology, Inc.
Notes to Financial Statements
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Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the related assets,
ranging from three to five years. Leasehold improvements are amortized on
a straight-line basis over the lesser of the terms of the leases or the
estimated useful lives of the assets. Gains or losses on disposals of
property and equipment are recorded in current operations.
Long-Lived Assets
The impairment of long-lived assets is assessed by Management using
factors including probable comparable fair market values, anticipated
future cash flows, and the aggregate value of the related businesses taken
as a whole. These factors are periodically reviewed to determine whether
current events or circumstances require adjustments to carrying values or
estimated useful lives of fixed or intangible assets in accordance with
the provisions of FAS No. 121, "Accounting for the Impairment of
Long-Lived Assets."
Financial Instruments
The carrying value of accounts receivable, accounts payable and borrowings
under the revolving credit agreement approximate their fair values due to
the relatively short-term nature of these instruments.
Research and Development Costs
Costs in connection with the development activities performed for others
are expensed over the period services are provided or deferred until
customer acceptance, if required by the development agreement.
Costs incurred in connection with the research and development of the
Company's products and enhancements to existing products are expensed as
incurred unless technological feasibility has been established. Based on
the Company's product development process, technological feasibility is
established upon completion of a working model. Costs incurred by the
Company between completion of the working model and the point at which the
product is ready for general release have not been material. Accordingly,
research and development costs have been expensed as incurred.
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which requires use of the asset and liability method. Deferred income
taxes are recorded for temporary differences between financial statement
carrying amounts and the tax bases of assets and liabilities. Deferred tax
assets and liabilities reflect the tax rates expected to be in effect for
the years in which the differences are expected to reverse. A valuation
allowance is provided if it is more likely than not that some or all of
the deferred tax assets will not be realized.
-7-
<PAGE>
Ficon Technology, Inc.
Notes to Financial Statements
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3. Property and Equipment
Property and equipment at December 31, 1999 consists of the following:
Computer equipment $ 376,450
Office furniture and fixtures 30,978
Office equipment 14,380
---------
421,808
Less, accumulated depreciation (180,486)
---------
$ 241,322
=========
Included in operating expenses is depreciation expense of approximately
$91,000 for the year ended December 31, 1999. Included in accumulated
depreciation is $12,000 related to amounts under capitalized leases.
4. Revolving Credit Agreement
In April 1999, the Company entered into a credit agreement with Summit
Bank pursuant to which the Company may borrow up to $300,000. Outstanding
borrowings under this credit agreement bear interest, payable on a monthly
basis, at rate of 1.0% in excess of Summit Bank's prevailing base rate
(9.5% at December 31, 1999). Interest and fees related to this credit
agreement amounted to approximately $3,000 for the year ended December 31,
1999. The credit agreement expires in April 2000.
Substantially all of the Company's assets are pledged as collateral under
the credit agreement. Under the terms of the credit agreement, the
Company's deposits with Summit Bank may be used to offset outstanding
borrowings. The Company's president and principal stockholder has
personally guaranteed the credit agreement. The credit agreement also
contains various covenants, which, among other things, restrict certain
corporate actions including, but not limited to, mergers, acquisitions and
sales of assets.
5. Stockholders' Equity
In October 1999, the Company amended its certificate of incorporation and
authorized 7,000,000 shares of Class A common stock, no par value ("Class
A Stock"), and 1,433,735 shares of Class B common stock, no par value
("Class B Stock"). The Class A Stock and the Class B Stock are identical
in all respects except that the Class B Stock does not carry voting rights
in the Company.
-8-
<PAGE>
Ficon Technology, Inc.
Notes to Financial Statements
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6. Income Taxes
Deferred tax liabilities at December 31, 1999 are comprised of the
following:
Change in tax accounting method $(156,012)
Depreciation (5,366)
Other 11,484
---------
Deferred tax liability $(149,894)
=========
The components of the provision for income taxes for the year ended
December 31, 1999 are as follows:
Current
Federal $ 135,030
State 39,279
---------
174,309
---------
Deferred
Federal (108,395)
State (31,530)
---------
(139,925)
---------
Income tax provision $ 34,384
=========
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. income tax rate to income
before taxes as follows:
U.S. statutory rate 34%
State taxes 6
Other 3
----
Effective tax rate 43%
====
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<PAGE>
Ficon Technology, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. Commitments and Contingencies
The Company leases its office facilities under a noncancelable operating
lease that expires June 30, 2000. In addition, the Company leases certain
computer and office equipment under both capital and operating leases
agreements. Minimum required future lease payments under the Company's
operating and capital leases at December 31, 1999 are as follows:
Operating Capital
Leases Leases
Year ended December 31,
2000 $ 96,386 $ 16,954
2001 19,290 14,306
2002 14,845 3,485
2003 -- --
2004 -- --
Thereafter -- --
--------- ---------
Total minimum lease payments $ 130,521 34,745
=========
Less, amount representing interest (9,278)
---------
Present value of minimum lease payments 25,467
Less: current portion (12,351)
---------
$ 13,116
=========
Rent expense for the year ended December 31, 1999 approximated $164,000.
8. Related Party Transactions
The Company outsources certain development activities to Ficon
Technology India, Pty. The father of the Company's President and Chief
Executive Officer is the principal shareholder of Ficon India. Ficon India
charges the Company for development services on a cost plus a basis.
During the year ended December 31, 1999, the Company recorded development
expenses of $504,000, relating to development services provided by Ficon
India.
9. Concentration of Risk and Customer Information
Sales to four individual customers amounted to 14.8%, 12.6%, 12.0% and
11.3% of net sales in 1999.
10. Subsequent Events
-10-
<PAGE>
Ficon Technology, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
On January 12, 2000, as amended on January 28, 2000, the Company entered
into a definitive merger agreement with GlobeSpan, Inc. ("GlobeSpan")
pursuant to which the Company shall be merged with and into a wholly owned
subsidiary of GlobeSpan. In exchange for the outstanding shares of the
Company, the shareholders' will receive a pro-rata share of $5,000,000,
the right to receive up to an aggregate of 960,000 shares of GlobeSpan
common stock and the right to receive contingent shares up to an aggregate
of 999,999 shares of GlobeSpan common stock.
The 999,999 shares represent additional shares of GlobeSpan common stock
to be distributed to the shareholders of the Company upon the completion
of certain development activities as provided in the merger agreement.
On January 21, 2000, GlobeSpan's board of directors approved a 3-for-1
stock split applicable to all issued and outstanding shares of its common
stock, par value $0.001. The 3-for-1 stock split was effected in the form
of a stock dividend and became effective on February 25, 2000 when
stockholders of record received two additional shares of common stock for
each outstanding share of common stock held on the record date. The shares
to be paid in consideration for the acquisition of Ficon by GlobeSpan have
been restated for all periods to reflect the stock split.
On January 30, 2000, the Company entered into a Share Purchase Agreement
(the "Agreement") with the four stockholders of Ficon Technology India,
Pty ("Ficon India"). The Agreement calls for the Ficon India stockholders
to transfer to the Company and the Company shall purchase and accept from
Ficon India stockholders all of the Ficon India shares. In consideration
of the transfer of the Ficon India shares, the Company shall pay the Ficon
India stockholders approximately $330,000. The Agreement is subject to
Indian government and regulatory approval and is expected to close during
the second quarter of 2000.
The merger with GlobeSpan closed on January 31, 2000.
(b) GlobeSpan, Inc. Unaudited Pro Forma Condensed Combined Financial
Statements
-11-
<PAGE>
GlobeSpan, Inc.
Unaudited Pro Forma Condensed Combined Financial Statements
- --------------------------------------------------------------------------------
Unaudited Pro Forma Condensed Combined Financial Statements
The accompanying unaudited pro forma condensed combined Statement of Operations
(the "Pro Forma Statement of Operations") for the year ended December 31, 1999
gives effect to the Ficon Technology, Inc. (Ficon) acquisition as if it had
occurred on January 1, 1999, accounted for as a purchase business combination.
The Pro Forma Statement of Operations is based on historical results of
operations of GlobeSpan, Inc. (GlobeSpan) and Ficon for the year ended December
31, 1999.
The Unaudited Pro Forma Condensed Combined Balance Sheet (the "Pro Forma Balance
Sheet") gives effect to the acquisition of Ficon as if the acquisition had
occurred on December 31, 1999. The Pro Forma Statement of Operations and Pro
Forma Balance Sheet and accompanying notes (the "Pro Forma Financial
Information") should be read in conjunction with and are qualified by the
historical financial statements of GlobeSpan and Ficon and notes thereto.
The Pro Forma Financial Information is intended for informational purposes only
and is not necessarily indicative of the future financial position or future
results of operations of GlobeSpan after the acquisition of Ficon, or of the
financial position or results of operations of GlobeSpan that would have
actually occurred had the acquisition of Ficon been effected on January 1, 1999.
It is GlobeSpan's current intention to not enter into new development contracts
for others and incorporate Ficon's technology into its on-going product
offerings.
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<PAGE>
GlobeSpan, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
December 31, 1999
(In thousands, except share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ficon
GlobeSpan, Technology,
Inc. Inc. Adjustments Pro Forma
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $24,657 $ 899 $(5,000)(a) $20,556
Short-term investments 12,011 -- 12,011
Accounts receivable, net 9,160 787 9,947
Accounts receivable from affiliates 146 -- 146
Inventories 10,656 -- 10,656
Prepaid income taxes 190 -- 190
Prepaid expenses and other current assets 2,911 136 3,047
------- ------- ------- -------
Total current assets 59,731 1,822 (5,000) 56,553
Property and equipment, net 5,853 241 6,094
Goodwill, net -- -- 10,025 (a) 10,025
Other assets 5,407 -- 5,407
------- ------- ------- -------
Total assets $70,991 $ 2,063 $ 5,025 $78,079
======= ======= ======= =======
Liabilities and Stockholders' Equity
Current liabilities
Borrowings under line of credit $ -- $ 200 $ $ 200
Accounts payable 4,333 36 4,369
Accounts payable to affiliates 80 -- 80
Accrued expenses and other liabilities 2,049 206 2,255
Payroll and benefit related liabilities 7,688 374 800 (b) 8,862
Current tax liabilities -- 166 166
Current portion of capital lease obligations 965 12 977
------- ------- ------- -------
Total current liabilities 15,115 994 800 16,909
------- ------- ------- -------
Deferred tax liabilities -- 150 150
Deferred revenue -- 231 231
Capital lease obligations, less current portion 443 13 456
------- ------- ------- -------
Total liabilities 15,558 1,388 800 17,746
------- ------- ------- -------
(675)(a)
(1,350)(a)
7,050 (a)
Total stockholders' equity 55,433 675 (800)(b) 60,333
------- ------- ------- -------
Total liabilities and stockholders' equity $70,991 $ 2,063 $ 5,025 $78,079
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma
condensed combined financial information.
-13-
<PAGE>
GlobeSpan, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 1999
(In thousands, except share and per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ficon
GlobeSpan, Inc. Technology, Inc. Adjustments Pro Forma
<S> <C> <C> <C> <C>
Statement of operations data
Net revenues $ 56,220 $ -- $ $ 56,220
Cost of sales 20,879 -- 20,879
Cost of sales related to termination
charge 1,119 -- 1,119
------------ ------------ ------------ ------------
Gross profit 34,222 -- 34,222
Development and other revenues -- 4,719 4,719
Operating expenses
Research and development 26,531 4,079 674 (b) 31,284
Selling, general and administrative 14,389 556 9,833 (c)
126 (b) 24,904
Amortization 3,645 (a) 3,645
------------ ------------ ------------ ------------
Total operating expenses 40,920 4,635 14,278 59,833
------------ ------------ ------------ ------------
(Loss) income from operations (6,698) 84 (14,278) (20,892)
Interest income (expense), net 1,133 (4) 1,129
------------ ------------ ------------ ------------
(Loss) income before income taxes (5,565) 80 (14,278) (19,763)
Provision (benefit) for income taxes -- 34 34
------------ ------------ ------------ ------------
Net (loss) income $ (5,565) $ 46 $ (14,278) $ (19,797)
============ ============ ============ ============
Preferred stock deemed dividend and
accretion (3,466) -- $ -- (3,466)
------------ ------------ ------------ ------------
Net loss attributable to common
stockholders $ (9,031) $ 46 $ (14,278) $ (23,263)
============ ============ ============ ============
Other comprehensive loss
Unrealized loss on marketable
securities 22 -- $ -- 22
------------ ------------ ------------ ------------
Comprehensive loss $ (9,053) $ 46 $ (14,278) $ (23,285)
============ ============ ============ ============
Loss per share
Basic and diluted $ (0.19) $ (0.50)
============ ============ ============ ============
Shares used in computing net loss
per share
Basic and diluted 46,612,752 444,160 (d) 47,056,912
</TABLE>
See accompanying notes to unaudited pro forma
condensed combined financial information.
-14-
<PAGE>
GlobeSpan, Inc.
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In thousands, except share and per share data)
- --------------------------------------------------------------------------------
1. Pro Forma Adjustments and Assumptions
(a) The following represents the preliminary allocation of the purchase
price over the historical net book values of the acquired assets and
assumed liabilities of Ficon at December 31, 1999, and is for
illustrative pro forma purposes only. Actual fair values will be
based on financial information as of the acquisition date. Assuming
the transaction had occurred on December 31, 1999, the preliminary
allocation would have been as follows:
Assets acquired
Cash $ 899
Accounts receivable 787
Prepaids and other current assets 136
Property and equipment 241
Goodwill and intangibles 10,025
--------
12,088
In-process technology 1,350
Liabilities assumed (1,388)
--------
Purchase price $ 12,050 (1)
========
(1) The purchase price consists of 186,240 shares of common stock valued
at $7,050 based upon GlobeSpan's stock price a few days before and
after the companies reached agreement and the proposed transaction
was announced and $5,000 in cash. Also included in adjustment (a),
in accordance with purchase business acquisition accounting, the
total stockholders equity of Ficon, of $675, has been eliminated for
pro forma presentation.
This allocation is preliminary and may be subject to change upon the
completion of an independent third party valuation of the fair value of
Ficon's acquired assets and liabilities as of the acquisition date as well
as the potential identification of certain intangible assets.
o The pro forma adjustments reflect twelve months of
amortization expense for the year ended December 31, 1999
assuming the transaction had occurred on January 1, 1999. The
preliminary value of the goodwill and intangible assets at
January 1, 1999 would have been approximately $10,070.
Goodwill and other intangible assets will be amortized over
the expected estimated period of benefit ranging from two to
four years. Such amount would approximate $3,645 per year;
o For purposes of the pro forma financial information, the
estimated amount of the in-process technology is $1,350, which
is based upon a preliminary analysis. Because such in-process
technology is not expected to reach the stage of technological
feasibility by the anticipated acquisition date and is
expected to have no alternative future use, this amount shall
be immediately written-off by GlobeSpan and has been reflected
in the pro forma balance sheet as a charge to stockholders'
equity; and
If GlobeSpan is unable to write-off any of the in-process
technology and, accordingly, the dollar amount of the purchase
price allocated to in-process technology was determined to be
zero, the effect would result in (i) an $1,350 increase in
both goodwill and other intangible assets and stockholders'
equity presented in the unaudited pro forma condensed combined
balance sheet as of December 31, 1999; and (ii) $490 of
incremental goodwill and other intangible amortization or
$0.03 per share increase in the
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<PAGE>
GlobeSpan, Inc.
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In thousands, except share and per share data)
- ------------------------------------------------------------------------------
net loss attributable to common stockholders and net loss per
common share presented in the unaudited pro forma condensed
consolidated combined statement of operations for the year
ended December 31, 1999. As a result, the annual amortization
of goodwill and other intangible assets would increase from
$3,645 per year to $4,135 per year based upon an expected
estimated period of benefit ranging from two to four years.
o The pro forma adjustment reconciles the historical balance
sheet of Ficon at December 31, 1999 to the allocated purchase
price of Ficon of $12,050 assuming the transaction had
occurred on December 31, 1999.
(b) In connection with the merger agreement, Ficon paid its
employees a bonus in amounts not to exceed $60 for any
employee or $800 in the aggregate, allocated between research
and development and selling, general and administrative
expenses, based on Ficon's historical allocation of employee
salaries.
(c) In connection with the acquisition of Ficon by GlobeSpan,
773,760 shares of restricted common stock were issued to Ficon
employees and its principal shareholder, contingent upon
continued employment with the merged companies. GlobeSpan will
record deferred compensation of approximately $29,522 to be
amortized as compensation expense over the vesting period in
accordance with EITF 95-8, "Accounting for Contingent
Consideration Paid to Shareholders of an Acquired Enterprise
in a Purchase Business Combination," generally three years, or
$9,833 per year. Such compensation expense has been included
as a proforma adjustment and 257,920 shares of the original
773,760 are assumed to be outstanding at December 31, 1999.
In addition, up to an additional 999,999 shares of common
stock ("Contingent Shares") may be issuable six months after
GlobeSpan has validated release 3 of the Ficon software (the
"Milestone Date"). In the event that the Milestone Date is
achieved more than 12 months after the closing date, then the
number of Contingent Shares to be issued is reduced, as
provided in the merger agreement. The Contingent Shares will
be released to the named Ficon employees and principal
shareholder over a period of 42 months, upon completion of
certain development activities as provided in the merger
agreement. No amounts have been included in these pro forma
financial statements related to the Contingent Shares.
(d) The pro forma basic and diluted net loss per common share is
computed by dividing the net loss attributable to common
stockholders by the weighted average number of common shares
outstanding. The 444,160 shares consist of 186,240 shares of
GlobeSpan's common stock issued in connection with its
acquisition of Ficon and is assumed to be outstanding for the
entire period; and 257,920 (equivalent to one year's vesting)
shares earned in connection with the continued employment of
certain Ficon employees and its principal shareholder.
-16-
<PAGE>
(c) Exhibits.
Exhibit
No. Description
------- -----------
2.1+ Agreement and Plan of Merger, dated January 12, 2000, among
GlobeSpan, Inc., FTI Acquisition Corp. and Ficon Technology,
Inc.
2.2+ Asset Purchase Agreement, dated January 21, 2000, among
GlobeSpan, Inc. and PairGain Technologies, Inc.*
10.1+ Registration Rights Agreement, dated February 24, 2000, among
GlobeSpan, Inc. and PairGain Technologies, Inc.
10.2+ Subordinated Redeemable Convertible Promissory Note, issued
February 24, 2000
23.1 Consent of PricewaterhouseCoopers LLP
99.1+ Press Release, dated January 31, 2000
99.2+ Press Release, dated February 24, 2000
- --------
* Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission as part of a confidential treatment request.
+ Previously filed.
<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 hereunto duly authorized.
GLOBESPAN, INC.
By: /s/ Robert McMullan
-------------------------------------
Name: Robert McMullan
Title: Chief Financial Officer, Vice
President, Treasurer and Secretary
Date: April 14, 2000
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
2.1+ Agreement and Plan of Merger, dated January 12, 2000, among
GlobeSpan, Inc., FTI Acquisition Corp. and Ficon Technology,
Inc.
2.2+ Asset Purchase Agreement, dated January 21, 2000, among
GlobeSpan, Inc. and PairGain Technologies, Inc.*
10.1+ Registration Rights Agreement, dated February 24, 2000, among
GlobeSpan, Inc. and PairGain Technologies, Inc.
10.2+ Subordinated Redeemable Convertible Promissory Note, issued
February 24, 2000
23.1 Consent of PricewaterhouseCoopers LLP
99.1+ Press Release, dated January 31, 2000
99.2+ Press Release, dated February 24, 2000
- --------------
+ Previously filed.
- --------
* Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission as part of a confidential treatment request.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Registration Nos. 333-81711 and 333-92057) of GlobeSpan,
Inc. of our report dated January 14, 2000, except as to the Note 10 which is as
of February 25, 2000 relating to the financial statements of Ficon Technology,
Inc. which appears in the Current Report on Form 8-K/A of GlobeSpan, Inc. dated
April 14, 2000.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
April 14, 2000
