<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 31, 1998
SILICON VALLEY RESEARCH, INC.
(Exact name of registrant as specified in charter)
California 0-13836 94-2743735
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
or incorporation) Identification No.)
6360 San Ignacio Avenue, San Jose, California 95119-1231
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (408) 361-0333
----------------------------
(Former name or former address, if changed since last report)
This Current Report, including exhibits, contains 14 pages.
1
<PAGE> 2
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
March 31, 1998 as set forth in the pages attached hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements and pro forma financial information are filed
as part of this report.
(a) AUDITED FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Quality IC Corporation
We have audited the accompanying balance sheet of Quality IC Corporation, (a
Texas Corporation), a wholly-owned subsidiary of Silicon Valley Research, Inc.,
as of March 31, 1998, and the related statements of income, retained earnings,
and cash flows for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quality IC Corporation as of
March 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/Faske Lay & Co., L.L.P.
Austin, Texas
May 22, 1998
2
<PAGE> 3
QUALITY IC CORPORATION
BALANCE SHEET
March 31, 1998
ASSETS
<TABLE>
<S> <C>
Current assets
Cash $ 122,773
Trade accounts receivable 62,830
Deferred tax benefit 24,739
Prepaid expenses 4,753
---------
Total current assets 215,095
---------
Property and Equipment
Furniture and equipment 39,136
Computer equipment 78,081
Accumulated depreciation (33,782)
---------
Total property and equipment 83,435
---------
Other assets
Deposit 3,000
---------
$ 301,530
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 28,920
Accrued payroll expenses 104,581
Federal income tax payable 38,683
Franchise tax payable 292
---------
Total current liabilities 172,476
---------
Deferred federal income tax liability 16,588
---------
Stockholders' equity
Common stock, $1 par, 1000 shares authorized and outstanding 1,000
Additional paid-in capital 4,858
Retained earnings 106,608
---------
Total stockholders' equity 112,466
---------
Total liabilities and stockholders' equity $ 301,530
=========
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
<PAGE> 4
QUALITY IC CORPORATION
STATEMENT OF INCOME
Year Ended March 31, 1998
<TABLE>
<S> <C>
Revenues
Consulting/Engineering Revenues $1,196,293
Expenses
Advertising 2,972
Communication 15,315
Depreciation expense 17,267
Insurance 13,871
Office expenses 6,295
Payroll expenses 1,027,156
Professional fees 23,616
Rent expense 27,335
Software 3,619
Taxes 4,613
Utilities 2,285
Other general and administrative expenses 8,400
----------
Total expenses 1,152,744
----------
Income before income taxes 43,549
Income Tax Expense 15,309
----------
NET INCOME $ 28,240
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE> 5
QUALITY IC CORPORATION
STATEMENT OF RETAINED EARNINGS
Year Ended March 31, 1998
<TABLE>
<S> <C>
Retained earnings at beginning of year $ 78,368
Net income 28,240
--------
Retained earnings at end of year $106,608
========
</TABLE>
The accompanying notes are an integral part of this financial statement.
5
<PAGE> 6
QUALITY IC CORPORATION
STATEMENT OF CASH FLOWS
Year Ended March 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities
Net income $ 28,240
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 17,267
Increase in deferred tax benefit (24,739)
Decrease in deferred tax liability (5,449)
Decrease in trade accounts receivable 98,277
Increase in prepaid expenses (2,718)
Increase in deposits (2,435)
Increase in trade accounts payable 27,884
Decrease in accrued liabilities (30,293)
Increase in income taxes payable 36,412
---------
Net cash provided by operating activities 142,446
Cash flows from investing activities
Purchase of property and equipment (59,091)
---------
Net cash used by investing activities (59,091)
---------
Net increase in cash 83,355
Cash at beginning of year 39,418
---------
Cash at end of year $ 122,773
=========
Cash paid for taxes $ 9,085
=========
Cash paid for interest $ --
=========
</TABLE>
The accompanying notes are an integral part of this financial statement.
6
<PAGE> 7
QUALITY IC CORPORATION
NOTES TO FINANCIAL STATEMENTS
Year Ended March 31, 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Quality IC Corporation (the
Company) is presented to assist in understanding the Company's financial
statements.
1. Nature of Operations
The Company, a Texas Corporation, was formed in 1992. The Company provides
engineering and consulting services to companies in the micro-electronics
industry. As of March 31, 1998, the Company is a wholly-owned subsidiary
of Silicon Valley Research, Inc. (a California corporation).
2. Basis of Presentation
The accompanying financial statements have been prepared in conformance
with generally accepted accounting principles that have been consistently
applied.
3. Property and Equipment
Property and equipment is recorded at cost and depreciated over their
estimated useful lives, using the straight-line method. Upon sale or
retirement, the cost and related accumulated depreciation are eliminated
from the respective accounts, and the resulting gain or loss is included
in the results of operations.
Repairs and maintenance charges which do not increase the useful lives of
the assets are charged to operations as incurred.
4. Revenue Recognition
Revenues are recognized in the period in which the services are provided.
The Company bills customers on a weekly basis for work performed in the
previous week. Due to the nature of the customers, the Company has
experienced no significant losses due to uncollectible accounts receivable
in recent years. No allowance is included in the accompanying financial
statements as management believes all the receivables outstanding at March
31, 1998 will be fully collected.
5. Cash
Cash consists only of a single non-interest-bearing checking account.
6. Income Taxes
The Company is on a calendar year basis for Federal income tax purposes.
An estimate of the tax provision and the taxes due for the period April 1,
1997 through March 31, 1998 is included in the financial statements. The
Company accounts for income taxes under the liability method which
requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the
carrying amounts and tax bases of assets and liabilities.
Deferred taxes are provided for temporary differences between financial
and tax accounting, principally for differences in the basis of property
and equipment and in the differences between the cash basis of accounting
used for tax purposes and the accrual basis of accounting used for
financial reporting purposes.
7
<PAGE> 8
7. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.
8. Advertising
The Company expenses the cost of advertising as incurred. Advertising
expenses were $2,972 for the year ended March 31, 1998.
9. Concentration of Risks
The Company's services are provided to companies primarily located in
Austin, Texas. For the year ended March 31, 1998, one company accounted
for over 90% of the Company's revenues.
At March 31, 1998, and other times throughout the year, the Company may
maintain balances in its bank accounts in excess of the FDIC insured
limits.
NOTE B - INCOME TAXES
The provision for income taxes for the period ended March 31, 1998 consists of
the following:
<TABLE>
<S> <C>
Current tax expense $ 45,494
Deferred income tax benefit (30,185)
-----------
Total provision for income taxes $ 15,309
===========
</TABLE>
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities. The temporary differences that give rise to deferred tax assets and
liabilities are as follows:
<TABLE>
<S> <C>
Assets
Accounts receivable $ (62,829)
Accounts payable 28,920
Accrued expenses 104,581
-----------
$ 70,672
===========
Deferred tax asset $ 24,739
===========
Liabilities
Depreciation $ (47,394)
===========
Deferred tax liability $ 16,588
===========
</TABLE>
At March 31, 1998, it is reasonably certain that all the temporary differences
will reverse in future years. Therefore, no valuation allowance is needed.
NOTE C - COMMITMENTS
The Company rents office suites under a long term operating lease which began in
November 1997. The lease term expires October 31, 2000.
8
<PAGE> 9
The following is a schedule of future minimum rental payments under the above
operating lease as of March 31, 1998:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
<S> <C>
1999 $37,992
2000 37,992
2001 22,162
</TABLE>
During the year ended March 31, 1998, rentals under all leases were $27,335.
NOTE D - ACQUISITION BY SILICON VALLEY RESEARCH, INC.
On March 31, 1998, 100% of the shares of outstanding stock of the Company were
acquired by Silicon Valley Research, Inc. (SVR) from the former shareholders.
Under the terms of an Agreement and Plan of Reorganization, the Company merged
with QIC Acquisition Corporation, a Texas Corporation and wholly owned
subsidiary of SVR. The Company will be the surviving Corporation. For federal
income tax purposes, it is intended that the Merger shall qualify as
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended.
In accordance with terms of the agreement, the former owners and officers of the
Company entered into Non-Competition, Non-Solicitation and Non-Disclosure
Agreements which preclude them from performing or providing specified services
for a period of two years from the effective date of the agreement.
9
<PAGE> 10
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION:
The following unaudited pro forma combined condensed financial information has
been prepared to illustrate the effect of Silicon Valley Research, Inc.'s
("SVR") March 31, 1998 acquisition of Quality I.C. Corporation ("QIC"), which
was accounted for using the purchase method of accounting. The unaudited pro
forma combined condensed financial statements are based on the respective
historical financial statements of SVR and QIC. In the opinion of management,
the accompanying combined condensed financial statements contain all normal,
recurring adjustments necessary to present fairly the Company's financial
position as of March 31, 1998 and the results of operations for the year ended
March 31, 1998.
The unaudited pro forma combined condensed balance sheet accounts for the
acquisition on March 31, 1998 and combines SVR's March 31, 1998 unaudited
consolidated condensed balance sheet with QIC's March 31, 1998 condensed balance
sheet. The unaudited pro forma combined condensed statement of operations
assumes that the acquisition took place as of the beginning of the period
presented and combines SVR's unaudited consolidated condensed statement of
operations for the year ended March 31, 1998 and QIC's condensed statement of
operations for the year ended March 31, 1998.
The unaudited pro forma combined condensed financial information is presented
for illustrative purposes only and is not necessarily indicative of the
operating results or financial position that would have occurred if the
acquisition had been consummated at the beginning of the period presented, nor
is it necessarily indicative of future operating results or financial position.
Silicon Valley Research, Inc.
Pro Forma Combined Condensed Consolidated Balance Sheet
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1998
------------------
SVR QIC Adjustments(2) Pro Forma
------- ------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets $ 2,490 $ 215 $ (38)(b) $ 2,667
Fixed assets, net 584 83 0 667
Other assets, net 1,583 3 0 1,586
Goodwill 0 0 345 (a) 345
------- ------- ------- -------
$ 4,657 $ 301 $ 307 $ 5,265
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 2,273 $ 172 $ 200 (a) $ 2,607
(38)(b)
Long-term obligations, less
current portion 77 17 0 94
------- ------- ------- -------
2,350 189 162 2,701
(112)(a)
2,737 (a)
Shareholders' equity 2,307 112 (2,480)(a) 2,564
------- ------- ------- -------
$ 4,657 $ 301 $ 307 $ 5,265
======= ======= ======= =======
</TABLE>
10
<PAGE> 11
Silicon Valley Research, Inc.
Pro Forma Combined Condensed Consolidated
Statement of Operations
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended
March 31, 1998
----------------------
SVR QIC Adjustments(3) Pro Forma
---------------------- -------------- ---------
<S> <C> <C> <C> <C>
Revenue $ 2,755 $ 1,196 $ 0 $ 3,951
Cost of revenue 2,778 997 0 3,775
-------- -------- -------- --------
Gross profit (23) 199 0 176
Operating expenses 9,635 156 69 (b) 9,860
-------- -------- -------- --------
Operating income (loss) (9,658) 43 (69) (9,684)
Other income and expense, net 100 0 0 100
-------- -------- -------- --------
Income (loss) before provision for
income taxes (9,558) 43 (69) (9,584)
Provision for income taxes 0 15 (15)(a) 0
-------- -------- -------- --------
Net income (loss) $ (9,558) $ 28 $ (54) $ (9,584)
======== ======== ======== ========
Net income (loss) per share (basic) $ (0.54) $ -- $ -- $ (0.46)
======== ======== ======== ========
Net income (loss) per share (diluted) $ (0.54) $ -- $ -- $ (0.46)
======== ======== ======== ========
Weighted-average common
shares (basic) 17,541 -- 3,150 (c) 20,691
======== ======== ======== ========
Weighted-average common shares
and equivalents (diluted) 17,541 -- 3,150 (c) 20,691
======== ======== ======== ========
</TABLE>
11
<PAGE> 12
Silicon Valley Research, Inc.
Notes to Pro Forma Combined Condensed
Consolidated Financial Statements
(in thousands, except share data)
(Unaudited)
Note 1 - The Acquisition and basis of combination
Consideration for the acquisition was $2,937 consisting of notes payable to the
former shareholders of QIC in the amount of $200 and the issuance of 3,150
shares of SVR common stock valued at $2,737. The allocation of the total
purchase price among identifiable tangible and intangible assets, as reflected
in the accompanying pro forma financial information, was based on an analysis of
the fair values of those assets prepared by the Company. The resulting purchased
in-process technology of $2,480 was expensed on the accompanying pro forma
combined consolidated Balance Sheet as of March 31, 1998, the completion date of
the acquisition. The allocation of the purchase price is as follows:
<TABLE>
<S> <C>
Total purchase price $ 2,937
=======
Net current assets 43
Property and equipment 83
Other non-current assets 3
In-process technology 2,480
Non-current deferred tax liability (17)
-------
Goodwill $ 345
=======
</TABLE>
Note 2 - Adjustments to the Balance Sheet
a. Reflects the issuance of shares of SVR common stock and notes payable
to the former shareholders of QIC in exchange for all of the
outstanding shares of QIC common stock, the recording of goodwill, the
elimination of QIC's shareholders equity and the recording of
in-process technology.
b. Reflects the elimination of intercompany receivables and payables.
Note 3 - Adjustments to the Statement of Operations
a. Reflects the tax benefit related to the acquisition.
b. Reflects the amortization of goodwill over the estimated useful life
of five years.
c. The weighted-average common shares and equivalents represents the
shares of SVR common stock which were issued pursuant to the
acquisition of QIC.
Note 4 - Nonrecurring charges
The unaudited pro forma combined condensed consolidated statement of operations
for the year ended March 31, 1998 does not include the $2,480 write-off of
purchased in-process technology as it is a material non-recurring charge. It
will be included in the actual consolidated statement of operations of SVR for
the year ended March 31, 1998.
12
<PAGE> 13
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.
SILICON VALLEY RESEARCH, INC.
Date: June 12, 1998 By: /s/Laurence G. Colegate, Jr.
-----------------------------
Laurence G. Colegate, Jr.
Senior Vice President of Finance
and Administration
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
23.1 Consent of Independent Public Accountants
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
As independent public accountants, we hereby consent to the inclusion in the
amendment to the Current Report (File No. 000-13836) on Form 8-K of Silicon
Valley Research, Inc. March 31, 1998 of our report dated May 22, 1998 with
respect to the financial statements of Quality IC Corporation.
/s/Faske Lay & Co., L.L.P.
June 9, 1998
