SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K/A
AMENDMENT NO. 2
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): August 31, 1997
Pinnacle Systems, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
California 0-24784 94-3003809
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
280 North Bernardo Avenue, Mountain View, California 94043
- ----------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 237-1600
<PAGE>
The undersigned Registrant hereby amends the following items, financial
statements, exhibits, or other portions of its Current Report on Form 8-K,
originally filed with the Securities and Exchange Commission on September 12,
1997 (the "Form 8-K") as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits.
a. Financial Statements of Business Acquired.
The following financial statements of the business acquired are
attached hereto:
1. Digital Video Editing (DVE) Division of Miro Computer
Products AG, Braunschweig, Auditors' Report on the
Examination of the Combined Statements of Certain Assets
and Liabilities as of December 31, 1996 and 1995 and
Related Statements of Revenues and Expenses and Cash
Flows for the Years then Ended .......................... F-1
Report of Independent Public Accountants................. F-2
Combined Statements of Certain Assets and Liabilities as
of December 31, 1996 and 1995............................ F-3
Combined Statements of Income and Expenses for the Three
Years in the Period Ended December 31, 1996, 1995 and
1994..................................................... F-4
Statements of Cash Flow for the Years Ended December 31,
1996, 1995 and 1994...................................... F-5
Notes to the Combined Financial Statements............... F-6
2. Digital Video Editing (DVE) Division of Miro Computer
Products AG, Braunschweig, Unaudited Interim Financial
Statements.
Combined Condensed Statements of Certain Assets and
Liabilities (unaudited) as of June 30, 1997............ F-14
Combined Condensed Statements of Income and Expenses
(unaudited) for the Six Months Ended June 1997 and 1996.. F-15
Combined Condensed Statements of Cash Flows (unaudited)
for the Six Months Ended June 30, 1997 and 1996.......... F-16
Notes to Unaudited Combined Condensed Financial
Statements .............................................. F-17
b. Pro Forma Financial Information.
The following unaudited pro forma combined condensed financial
statements are attached hereto:
Pro Forma Combined Condensed Financial Information
(Unaudited) ............................................. F-18
Unaudited Pro Forma Combined Condensed Balance Sheet June
30, 1997 ................................................ F-19
Unaudited Pro Forma Combined Condensed Statement of
Operations Year Ended June 30, 1997 ..................... F-20
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements............................................... F-21
-2-
<PAGE>
c. Exhibits.
2.1* Asset Purchase Agreement dated August 29, 1997 by and
between Pinnacle Systems, Inc., Pinnacle Systems GmbH,
Pinnacle Systems C.V., Pinnacle Systems Ltd., Miro
Computer Products AG, Miro Computer Products, Inc. and
Miro Computer Products Ltd.
23.1 Consent of Arthur Andersen GmbH, Independent Public
Accountants
- ---------------------------
* Previously filed.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to its Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PINNACLE SYSTEMS, INC.
Dated: November 19, 1997 By: /S/ ARTHUR D. CHADWICK
-------------------------------------
Arthur D. Chadwick, Vice President,
Finance and Administration and Chief
Financial Officer
-4-
<PAGE>
ARTHUR
ANDERSEN
ARTHUR ANDERSEN
-----------------------------------
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
-----------------------------------
Sophienstrasse 5
30159 Hannover
DIGITAL VIDEO EDITING (DVE) DIVISION OF
MIRO COMPUTER PRODUCTS AG
BRAUNSCHWEIG
AUDITORS' REPORT ON THE
EXAMINATION OF THE COMBINED
STATEMENTS OF CERTAIN ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1996 AND 1995
AND RELATED STATEMENTS OF REVENUES AND
EXPENSES AND CASH FLOWS FOR THE
YEARS THEN ENDED
F-1
<PAGE>
ARTHUR
ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the shareholders of miro Computer Products AG:
We have audited the accompanying combined statements of certain assets and
liabilities of the Digital Video Editing (DVE) division of miro Computer
Products AG (the "Division", as described in Footnote 1) as of December 31, 1995
and 1996 and the related combined statements of revenues and expenses and cash
flows for the three years then ended. These statements are the responsibility of
the management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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.
As discussed more fully in Note 3, the Division was sold on August 29, 1997 to
Pinnacle Systems, Inc., a California corporation.
In our opinion, the statements referred to above present fairly, in all material
respects, certain assets and liabilities of the Division as of December 31, 1995
and 1996 and its statements of revenues and expenses and cash flows for the
three years then ended in conformity with U.S. generally accepted accounting
principles.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft
/s/ Dr. Maiss
- --------------------
Dr. Maiss Stieve
Wirtschaftsprufer Wirtschaftsprufer
Hanover, Germany
November 18, 1997
F-2
<PAGE>
DIGITAL VIDEO EDITING (DVE) DIVISION OF
MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG
COMBINED STATEMENTS OF CERTAIN ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1996 AND 1995
1996 1995
U.S. $ U.S. $
------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 1,566,918 629,755
Accounts receivables, net 11,439,237 4,320,773
Inventories 5,795,399 5,247,054
Other current assets 405,598 903,848
Prepaid expenses 312,127 209,136
------------- --------------
19,519,279 11,310,566
------------- --------------
PROPERTY, PLANT AND EQUIPMENT
Machinery and equipment 77,031 106,435
Furniture and fixtures 1,154,350 1,009,046
Less-accumulated depreciation (434,109) (400,230)
------------- --------------
797,272 715,251
------------- --------------
INTANGIBLE ASSETS, NET 1,595,787 1,456,019
------------- --------------
TOTAL ASSETS 21,912,338 13,481,836
============= ==============
1996 1995
U.S. $ U.S. $
------------- -------------
LIABILITIES AND INTERDIVISIONAL EQUITY
CURRENT LIABILITIES
Short-term borrowings 9,059,934 7,733,436
Accounts payable trade 3,703,785 2,410,366
Other liabilities 721,246 417,519
Accrued income taxes 2,988,487 981,286
Other accrued liabilities 836,529 400,416
-------------- -------------
17,309,981 11,943,023
-------------- -------------
LONG-TERM LIABILITIES
Deferred income taxes 523,704 522,010
-------------- -------------
ASSETS EXCEEDING LIABILITIES 4,078,653 1,016,803
-------------- -------------
TOTAL LIABILITIES AND INTERDIVISIONAL EQUITY 21,912,338 13,481,836
============== =============
The accompanying notes are an integral part of these combined statements of
certain assets and liabilities.
F-3
<PAGE>
DIGITAL VIDEO EDITING (DVE) DIVISION OF
MICRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG
COMBINED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
U.S. $ U.S. $ U.S. $
---------- ---------- ---------
Revenues 41,517,098 20,677,002 10,264,219
Cost of sales 22,761,660 14,083,045 6,493,408
---------- ---------- ---------
Gross profit 18,755,438 6,593,957 3,770,811
---------- ---------- ---------
Selling expenses 8,952,256 3,174,761 1,806,188
Research and development expenses 2,395,541 1,897,777 968,439
General administrative expenses 2,042,904 927,058 310,297
Other revenues and gains (570,148) (114,620) (151,520)
Other expenses and losses 100,362 5,335 16,027
---------- ---------- ---------
Operating income 5,834,523 703,646 821,380
Interest income 11,251 2,932 4,477
Interest expense 852,325 663,189 300,306
---------- ---------- ---------
Income before taxes 4,993,449 43,389 525,551
Income taxes 2,273,247 113,302 371,748
---------- ---------- ---------
Net income (loss) 2,720,202 (69,913) 153,803
========== ========== =========
The accompanying notes are an integral part of these combined statements of
income and expenses.
F-4
<PAGE>
<TABLE>
DIGITAL VIDEO EDITING (DVE) DIVISION OF
MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG
STATEMENTS OF CASH FLOW
<CAPTION>
For the Years Ended December 31
----------------------------------------------------
1996 1995 1994
U.S. $ U.S. $ U.S. $
---------- --------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/-Net Loss 2,720,202 (69,913) 153,803
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 846,315 698,461 622,595
Change in operating assets and liabilities
Increase in inventory, net (548,346) (1,910,916) (3,336,137)
Increase in trade accounts receivable (7,118,465) (2,914,847) (1,405,926)
Change in other assets 395,259 (837,629) (275,355)
Increase in accruals for taxes 2,008,895 85,776 1,417,519
Increase in other accruals 436,112 192,064 208,353
Increase in trade accounts payable 1,293,419 (695,676) 3,106,042
Increase in other accounts payable 303,727 122,567 294,952
---------- --------- -----------
Total adjustments (2,383,084) (5,260,200) 632,043
---------- --------- -----------
Net cash provided by (used in) operating activities 337,118 (5,330,113) 785,846
---------- ---------- -----------
Cash flows from investing activities:
Intangible asset additions (568,736) (718,612) (943,119)
Tangible fixed asset additions (493,524) (793,127) (1,037,468)
Financial fixed asset additions (5,844) -- --
---------- --------- -----------
Net cash used in investing activities (1,068,104) (1,511,739) (1,980,587)
---------- --------- -----------
Cash flows from financing activities:
Advances from miro AG 0 0 1,002,782
Increase in short-term borrowings, net 1,326,498 7,514,951 218,485
Dividends paid 0 (503,616) 0
---------- --------- -----------
Net cash provided by financing activities 1,326,498 7,011,335 1,221,267
---------- --------- -----------
Effect of exchange rate changes 341,651 228,304 205,442
Net increase in cash and cash equivalents 937,163 397,787 231,968
Cash and cash equivalents at beginning of year 629,755 231,968 0
---------- --------- -----------
Cash and cash equivalents at end of year 1,566,918 629,755 231,968
========== ========= ===========
<FN>
The tax is only calculated on the basis of DVE income for the years, no tax
payments had occurred in these years.
The cash amounts paid for interest are the following: 1996: U.S. $852,325; 1995:
U.S. $663,189; 1994: U.S. $300,306
The accompanying notes are an integral part of these statements of cash flow.
</FN>
</TABLE>
F-5
<PAGE>
MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG
DIGITAL VIDEO EDITNG (DVE) DIVISION
(As described in footnote 1)
Notes to the Combined Financial Statements
NOTE 1
Principles of Combination
The combined statements of certain assets and liabilities include certain assets
and liabilities of the Digital Video Editing (DVE) Division (the "Division" or
"DVE") of miro Computer Products AG ("miro AG") and miro AG's wholly owned
subsidiaries in the United States, France, The Netherlands and United Kingdom.
All significant intercompany transactions have been eliminated. Refer to Note 2,
Basis of Presentation.
Company
The DVE Division of miro AG designs, develops, manufactures and sells certain
digital video products.
NOTE 2
Basis of Presentation
The combined statements are presented in accordance with U.S. generally accepted
accounting principles and are stated in U.S. dollars.
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 period.
Actual results could differ from those estimates.
As a result of the DVE's relationship with miro AG the financial position and
results of operations are not necessarily indicative of what actually would have
occurred, had the Division been a stand-alone entity. Additionally, these
financial statements are not necessarily indicative of future financial position
or results of operations.
F-6
<PAGE>
ARTHUR
ANDERSEN
Combined statement of certain assets and liabilities
The combined statements of certain assets and liabilities consist of the items
being sold to or assumed by Pinnacle and other assets and liabilities
specifically identifiable or allocable to the DVE Division, but that are not
being sold to Pinnacle.
The assets and liabilities sold to or assumed by Pinnacle include:
o all tangible property (such as machinery, equipment, inventory, raw
materials, supplies, manufactured and purchased parts, work in progress,
finished goods, furniture, automobiles and tools), relating to the Digital
Video Group Assets;
o the capital stock of (i) miro Computer Products SARL, a corporation
organized under the laws of France and a wholly-owned subsidiary of miro
AG, and (ii) miro Computer Products BV, a corporation organized under the
laws of The Netherlands and a wholly-owned subsidiary of miro AG;
o certain accounts receivable of miro Computer Products Inc., USA,
pertaining to the Digital Video Group Assets in an amount equal to U.S.
$150,000.
The liabilities sold or assumed by Pinnacle are limited to:
o all liabilities of miro AG under certain employee benefit plans to the
extent such contracts are assumed by the buyers; and
o existing obligations of the sellers to perform end user warranty repair
and replacement services for products sold on or prior to the effective
date.
The agreement states that the liabilities of the acquired subsidiaries shall
remain liabilities of these subsidiaries.
Other specifically identifiable assets and liabilities related to miro AG but
not being sold to Pinnacle mainly include: land, buildings and related property
owned by miro AG in Braunschweig, furniture and fixtures of miro AG's
Braunschweig facilities, remaining accounts receivable in excess of U.S.
$150,000 and other miscellaneous assets and the majority of all liabilities.
Combined statement of revenues and expenses
The combined statements of revenue and expenses reflect substantially all of the
DVE Division's revenues and expenses associated with the normal course of
business. These costs include direct expenses and certain expenses incurred by
miro AG on the DVE Division's behalf. Refer to Note 5, Supplementary Information
on the Basis of Allocation, for further details. Expenses that are not incurred
for the benefit of the DVE Division are not allocated.
F-7
<PAGE>
ARTHUR
ANDERSEN
NOTE 3
Asset Purchase Agreement
On August 29, 1997, miro AG entered into an agreement (the "Agreement") to sell
certain assets, liabilities and obligations of the DVE division to Pinnacle
including all of the issued and outstanding stock of miro Computer Products
SARL, a corporation organized under the laws of France and miro Computer
Products BV, a corporation organized under the law of The Netherlands. The
assets sold included, among other things, various machinery, equipment,
inventory, books and records, intellectual and intangible property.
miro AG has no financial interest in the DVE division after the date of sale to
Pinnacle except to settle outstanding liabilities and collect outstanding
receivables which were not sold to Pinnacle. In addition, miro AG may remain
liable after the sale to Pinnacle for certain known and unknown existing
obligations and liabilities that are not transferred to and assumed by Pinnacle.
In connection with the Asset Purchase Agreement Pinnacle signed a service and
rent agreement with miro AG for certain service and office facilities at
Braunschweig.
NOTE 4
Summary of Significant Accounting Policies
Cash and cash Equivalents
For purposes of the Statement of Cash Flow, the Division considers all highly
liquid financial investments purchased with an original maturity of three months
or less to be cash equivalents.
Valuation of Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
moving average method for all inventories. Inventory costs consist of materials,
labor and factory overhead.
Fixed assets, amortization and maintenance
Fixed assets, consisting of machinery and equipment, are stated at cost. The
company computes depreciation on fixed assets using principally the
straight-line method. The estimated useful lives used in computing depreciation
range from 3 to 10 years for machinery and office equipment. Expenditures for
maintenance and repairs are expensed; expenditures for renewals and improvements
are generally capitalized. Upon sale or retirement of an asset, the related cost
and accumulated depreciation or amortization are removed from the accounts and
any gain or loss is recognized. In the event that facts and circumstances
indicate that assets may be impaired, an evaluation of recoverability would be
performed.
F-8
<PAGE>
ARTHUR
ANDERSEN
Intangible assets
Research and development costs, including costs incurred to establish the
technological feasibility of computer software products to be sold, are charged
to income as incurred. Once the technological feasibility of a software product
has been established, costs of coding, testing and producing product masters are
capitalized. Capitalization ceases and amortization begins when the product is
available for release. Amortization generally is based on the straight line
method over periods ranging from 1 to 3 years. The net realizable value of
unamortized costs is evaluated based on the estimated future revenues from the
software product, net of estimated future costs of completing and disposing of
the software product. Unamortized software costs were $1,047,000 and $1,044,000
at the end of 1996 and 1995, respectively. Amortization was $ 919,607, $ 790,182
and $ 669,459 in 1996, 1995 and 1994, respectively.
Foreign currency translation
For the European operations of the Company, the functional currency is the
applicable local currency. The accounts of these operations are translated into
United States dollars as follows: all asset and liability accounts are
translated at year-end exchange rates; income and expense items are translated
at the average exchange rates during the year. Cumulative translation
adjustments resulting from such translation of the financial statements of these
operations to United States dollars are included in assets exceeding
liabilities.
Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". This standard
requires an asset and liability approach for financial accounting and income tax
reporting based on enacted tax rates.
Revenue recognition
The company`s revenues are composed of product sales and other revenues. The
Company records product sales when the goods are sold to a customer. Service and
other revenues are recorded at the time the services are performed.
Highly liquid financial investments
The carrying values of cash and cash equivalents, receivables, accounts payable
and short-term debt approximate the fair market values due to the short-term
maturities of these instruments.
F-9
<PAGE>
ARTHUR
ANDERSEN
NOTE 5
Supplementary information on the basis of allocation
Generally, miro AG had not prepared separate financial statements for the DVE
division in the past.
miro's operations are composed of the display, the multimedia/graphics and the
DVE division. The accompanying statements of certain assets, liabilities,
revenues and expenses relating to the DVE division had to be identified on an
item-by-item basis or allocated to the DVE division from miro AG by a reasonable
method.
Inventories, sales and cost of sales relating to the DVE division were
individually identifiable whereas the remaining assets and liabilities and the
remaining operating, general and administrative expenses of the DVE division had
to be allocated.
The method of allocation mainly used the following criteria:
Accounts receivables of the DVE division are derived from the related identified
sales portion of consolidated miro sales.
Fixed assets of miro AG are allocated to the DVE division using the percentage
of DVE employees compared to total headcount at Braunschweig based on the
assumption that most of the fixed assets can be allocated based on the usage by
the divisions' employees. For subsidiaries for which the business is only the
distribution of products, the DVE sales portion had been used. Although specific
identification of the assets to be sold has not been completed and is therefore
subject to change, management estimates that the book value of such assets will
approximate the amount determined in the manner described above. Depreciation
expense related to fixed assets of miro AG that are used by the DVE division but
not being sold and interest expense on debt secured by such assets are allocated
to the DVE division but not being sold and interest expense on debt secured by
such assets are allocated to the DVE division using the approach described
above.
Accounts payable are allocated in relation to the percentage of DVE inventories
to total inventories.
Short-term borrowings are allocated to the DVE division in relation to the
financial structure of miro AG as it is assumed that the DVE division would be
financed in the same way as the miro AG was financed during the years.
Certain payroll related accruals are allocated by the headcount portion of DVE
employees.
All other assets and liabilities are allocated to the DVE Division in view of
the portion of DVE sales.
NOTE 6
Accounts Receivables
Accounts receivables amount to U.S. $11,439,000 and U.S. $4,321,000
respectively, at December 31, 1996 and 1995 net of allowances for doubtful
accounts of U.S. $21,000 and U.S. $10,000 and net of accruals for credit notes
still to be issued of U.S. $215,000 and U.S. $56,000, respectively.
F-10
<PAGE>
ARTHUR
ANDERSEN
NOTE 7
Inventories
Inventories consist of the following at December 31:
1996 1995
U.S. $ U.S. $
--------- ---------
Raw materials 2,043,000 1,251,000
Work-in-process 895,000 953,000
Finished goods 2,857,000 3,043,000
--------- ---------
5,795,000 5,247,000
========= =========
NOTE 8
Other current assets
The other assets mainly contain VAT refunds.
NOTE 9
Debts
The interest rates for the short-term borrowings range from 4.3 percent up to 9
percent. The short-term borrowings were collateralized by mortgage bonds on the
company's premises in Braunschweig as well as bank assignment of receivables and
chattel mortgage of inventories.
The fair value of the borrowings approximates the carrying value.
NOTE 10
Business Segment Information
Group's revenues are made in the following areas:
1996 1995 1994
U.S. $ U.S. $ U.S. $
---------- ---------- ----------
Germany 14,768,000 13,109,000 9,085,000
Other Europe 9,903,000 2,574,000 0
USA 16,846,000 4,994,000 1,179,000
---------- ---------- ----------
41,517,000 20,677,000 10,264,000
========== ========== ==========
F-11
<PAGE>
ARTHUR
ANDERSEN
NOTE 11
Income taxes
The income tax provision are summarized as follows:
1996 1995 1994
U.S. $ U.S. $ U.S. $
---------- ---------- ----------
Current 2,229,000 21,000 338,000
Deferred 44,000 92,000 34,000
---------- ---------- ----------
2,273,000 113,000 372,000
========== ========== ==========
Miro AG and all its subsidiaries presently prepare individual tax returns; no
tax pooling or consolidated tax returns had been filed in the past. Accordingly,
the DVE division calculated the current and deferred taxes, for purposes of
these statements, as if it filed individual tax returns for each consolidated
DVE entity regardless to the fact that certain legal entities realized losses in
1995 and subsequent years.
Corporate income tax rate on miro AG's results in Germany are depending on the
actual decision to distribute or retain earnings; these rates are 30 percent or
45 percent, respectively. Considering also the municipal trade tax the Company
has assumed an income tax rate of 50 percent for the income of the DVE division
in Germany and its European subsidiaries and 40 percent for the income of miro
Inc., USA. Deferred tax assets have been considered for miro Inc. on its losses
in 1994 and 1995.
Differences between the 50 percent tax rate in Germany and the consolidated
effective tax rates are due to differences between the German tax rate and the
tax rates in other countries.
Deferred income taxes were provided when tax laws and financial accounting
standards differ with respect to the amount of income calculated for a given
year and the basis of assets and liabilities. Generally, income taxes are
ultimately paid by and are the responsibility of miro AG and each of its legal
subsidiaries. In fact, as a result of the losses in 1995 and 1996, no income
taxes had to be paid by miro AG.
Deferred income taxes of U.S. $524,000 and U.S. $522,000 at December 31, 1996
and 1995, respectively, relate to the amortization of software development cost.
F-12
<PAGE>
ARTHUR
ANDERSEN
NOTE 12
Related companies
<TABLE>
The Company holds shares in the following companies:
<CAPTION>
Net income
Portion of of DVE Division
share capital in 1996
in % U.S. $
------------- ----------------
<S> <C> <C>
miro Computer Products Inc., Palo Alto, USA 100 1,322,000
miro Computer Products Limited, Cambridge, England 100 95,000
miro Computer Products SARL, Paris, France 100 287,000
miro Computer Products BV, Eindhoven, The Netherlands 100 72,000
Entities not consolidated
miro Computer Products AG, Dietikon, Switzerland 99.5(1)
miro Computer Products GmbH, Schwechat, Austria 100
<FN>
- -------------------------
1) The remaining 0.5 percent of shares are held by a third person in trust for
the Company.
</FN>
</TABLE>
F-13
<PAGE>
DIGITAL VIDEO EDITING (DVE) DIVISION OF
MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG
COMBINED CONDENSED STATEMENTS OF CERTAIN ASSETS AND LIABILITIES
(unaudited)
June 30, 1997
U.S. $
--------------
(in thousands)
Current assets:
Cash and cash equivalents $ 563
Accounts receivable, net 7,546
Inventories 3,736
Other current assets 204
Prepaid expenses 412
--------
Total current assets 12,461
Property and equipment, net 725
Intangibles, net 1,178
--------
Total assets $ 14,364
========
Current liabilities:
Accounts payable $ 4,053
Accrued expenses 1,465
Short-term borrowings 1,682
Accrued income taxes 2,497
Other current liabilities 680
--------
Total current liabilities 10,377
Long-term obligations 405
Deferred income taxes 520
--------
Total liabilities 11,302
--------
Total interdivisional equity $ 3,062
--------
Total liabilities and interdivisional equity $ 14,364
========
The accompanying notes are an integral part of the combined condensed financial
statements.
F-14
<PAGE>
DIGITAL VIDEO EDITING (DVE) DIVISION OF
MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG
COMBINED CONDENSED STATEMENTS OF INCOME AND EXPENSES
(unaudited)
Six months ended June 30,
-------------------------
1997 1996
U.S. $ U.S. $
------------------------
(in thousands)
Revenue $ 14,839 $ 19,583
Cost of sales 8,092 10,859
-------- --------
Gross profit 6,747 8,724
Operating expenses:
Selling expenses 5,345 4,461
Research and development 843 1,062
General and administrative 1,018 926
-------- --------
Total operating expenses 7,206 6,449
-------- --------
Operating income (459) 2,275
Other income (expense):
Interest income 117 7
Interest expense (222) (322)
-------- --------
Total other income (expense) (105) (315)
-------- --------
Income (loss) before taxes (564) 1,960
Income tax benefit (expense) 188 (936)
-------- --------
Net income (loss) $ (376) $ 1,024
======== ========
The accompanying notes are an integral part of the combined condensed financial
statements.
F-15
<PAGE>
DIGITAL VIDEO EDITING (DVE) DIVISION OF
MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
---------------------
1997 1996
U.S. $ U.S. $
---------------------
(in thousands)
Cash flows from operating activities:
Net income (loss) $ (376) 1,024
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 730 223
Change in operating assets and liabilities:
Change in inventory, net 2,059 (218)
Change in trade accounts receivable 3,893 (4,201)
Decrease in other assets 102 635
Change in accruals for taxes (495) 707
Increase in other accruals 629 900
Increase in trade accounts payable 349 159
Decrease in other accounts payable (41) (49)
------- -------
Total adjustments 7,226 (1,844)
------- -------
Net cash provided by (used in)
operating activities 6,850 (820)
------- -------
Cash flows from investing activities:
Intangible asset additions (221) (284)
Tangible fixed asset additions (19) (117)
------- -------
Net cash used in investing activities (240) (401)
------- -------
Cash flows from financing activities:
Increase (decrease) in short term borrowings, net (6,973) 2,581
------- -------
Net cash provided (used in) by financing
activities (6,973) 2,581
------- -------
Effect of exchange rate changes (641) (902)
Net increase (decrease) in cash and cash equivalents (1,004) 458
Cash and cash equivalents at beginning of period 1,567 630
------- -------
Cash and cash equivalents at end of period $ 563 $ 1,088
======= =======
Supplemental disclosures of cash paid during period:
Interest 222 322
======= =======
The accompanying notes are an integral part of the combined condensed financial
statements.
F-16
<PAGE>
DIGITAL VIDEO EDITING (DVE) DIVISION OF
MIRO COMPUTER PRODUCTS AG, BRAUNSCHWEIG
NOTES TO UNAUDITED COMBINED CONDENSED FINANCIAL STATEMENTS
June 30, 1997
1. Basis of Presentation
The interim financial statements are unaudited and reflect all adjustments
(consisting only of normal recurring accruals) that, in the opinion of
management, are necessary for a fair presentation of the results for the
interim periods. The results of operations for the current interim period
are not necessarily indicative of results to be expected for the current
year or any other period.
These financial statements should be read in conjunction with the Company's
annual financial statements for the year ended December 31, 1996.
2. Inventories
Inventories as of June 30, 1997, consisted of the following (in thousands):
Raw materials............................. $1,377
Work-in-process........................... 632
Finished goods............................ 1,727
------
Total..................................... $3,736
======
F-17
<PAGE>
Pro Forma Combined Condensed Financial Information
(Unaudited)
The following unaudited pro forma condensed financial statements give
effect to the acquisition by Pinnacle Systems, Inc. ("Pinnacle" or the
"Company") of certain assets and assumption of certain liabilities of the miro
Digital Video Editing Division ("Miro") from Miro Computer Products AG in a
business combination accounted for by the purchase method. The unaudited pro
forma combined condensed financial statements are based on historical financial
statements of Pinnacle as of June 30, 1997.
The unaudited pro forma combined condensed balance sheet gives effect
to the business combination as if it had occurred on June 30, 1997. The
unaudited pro forma combined condensed statement of operations gives effect to
the business combination as if it had occurred on July 1, 1996. The pro forma
adjustments are based upon available information and certain assumptions that
management believes are reasonable under the circumstances. In the opinion of
management, all adjustments have been made that are necessary to present fairly
the pro forma data. Final amounts could differ from those set forth below. In
the quarter ended September 30, 1997, the Company recorded a charge of
$16,960,000 representing the fair value of in process research and development
acquired from Miro. Such charge has not been included in the unaudited pro forma
combined condensed statement of operations.
The following unaudited pro forma condensed financial statements are
not necessarily indicative of the future results of operations of the Company or
the results of operations which would have resulted had the Company and Miro
been combined during the period presented. In addition, the pro forma results
are not intended to be a projection of future results. The unaudited pro forma
combined condensed financial statements should be read in conjunction with the
consolidated financial statements of Pinnacle for the year ended June 30, 1997,
and the financial statements of Miro appearing elsewhere in this Form 8-K/A.
F-18
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
June 30, 1997
(in thousands)
<CAPTION>
Historical Pro Forma
Pinnacle Adjustments Pro Forma
-----------------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents 32,788 51 17,689
(15,150)
Marketable securities 15,024 15,024
Accounts receivable 10,646 234 10,880
Inventories 5,497 1,767 7,264
Prepaid expenses and other current assets 528 54 582
-------- --------
Total current assets 64,483 51,439
Property and equipment, net 4,395 342 4,737
Intangibles -- 3,903 3,903
Other assets 1,129 1,129
-------- --------
Total assets 70,007 61,208
======== ========
Current liabilities:
Accounts payable 3,955 135 4,090
Accrued expenses and other 2,584 2,569 6,258
1,105
Deferred revenue 282 282
-------- --------
Total current liabilities 6,821 10,630
Long-term obligations 475 475
-------- --------
Total liabilities 7,296 11,105
Stockholders' equity:
Common stock 75,316 4,352 79,668
Retained earnings (deficit) (12,605) (16,960) (29,565)
-------- --------
Total stockholders' equity 62,711 50,103
-------- --------
Total liabilities and stockholders'
equity 70,007 61,208
======== ========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
F-19
<PAGE>
<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Year Ended June 30, 1997
(in thousands, except per share data)
<CAPTION>
Historical Historical Pro Forma
Pinnacle Miro Adjustments Pro Forma
-------------- ------------------------------------------------
<S> <C> <C> <C>
Net sales 37,482 36,773 74,255
Cost of sales 23,997 19,995 43,992
----------- --------- -------
Gross profit 13,485 16,778 30,263
Operating expenses:
Sales and marketing 12,667 9,836 624 23,127
Engineering and product development 7,579 2,177 9,756
General and administrative 3,702 1,664 114 5,480
In-process research and development 4,894 -- 4,894
----------- --------- -------
Total operating expenses 28,842 13,677 43,257
----------- --------- -------
Operating income (expense) (15,357) 3,101 (12,994)
----------- --------- -------
Other income (expense):
Interest income 2,867 121 2,988
Interest expense -- (753) (753)
----------- --------- -------
Total other income (expense) 2,867 (632) 2,235
----------- --------- -------
Income before taxes (12,490) 2,469 (10,759)
Income tax expense 2,445 1,149 3,594
----------- --------- -------
Net income (loss) (14,935) 1,320 (14,353)
============ ========= ========
Net loss per share $ (2.02) $ (1.89)
======== ========
Shares used to compute net loss per share 7,402 7,606
======== ========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
F-20
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
On August 31, 1997, Pinnacle completed the purchase of certain assets
and the assumption of certain liabilities of Miro, pursuant to an Asset Purchase
Agreement dated August 29, 1997 (the Agreement). Under the terms of the
Agreement, the Company will pay approximately $15.2 million in cash and issue
approximately 203,565 shares of common stock valued at $4.4 million. The
Agreement also includes an "earnout" in which Miro will receive additional
consideration if the acquired operating group achieves certain sales and profit
levels during the earnout period, which is the first twelve full months
following the acquisition. Specifically, the earnout consideration will equal
50% of sales generated in excess of $37 million during the earnout period, as
long as operating profit exceeds 3% of sales, increasing to 85% of sales for
those sales which exceed $59 million during the earnout period, as long as
operating profit exceeds 3% of sales. In the event such amounts are earned, such
earnout payments will be paid in common stock of the Company, and additional
goodwill will be recorded. The Pinnacle statement of operations for the year
ended June 30, 1997, has been combined with the Miro statement of operations
for the twelve-month period ended June 30, 1997, giving effect to the business
combination as if it had occurred on July 1, 1996. The pro forma combined
condensed balance sheet as of June 30, 1997, gives effect to the business
combination as if it had occurred on June 30, 1997.
Note 2. Pro Forma Adjustments
Under purchase accounting, the total purchase price will be allocated
to the Company's assets and liabilities based on their relative fair values.
Allocations are subject to valuations as of the date of the purchase
transaction. The amount and components of the estimated purchase price along
with the preliminary allocation of the estimated purchase price to assets
purchased are as follows (in thousands):
Cash.................................................................. $15,150
Common stock.......................................................... 4,352
Transaction costs..................................................... 1,105
-------
Total purchase price......................................... $20,607
=======
Cash.................................................................. $51
Receivables........................................................... 234
Inventory............................................................. 1,767
Prepaid expenses and other current assets............................. 54
Property, plant, and equipment........................................ 342
Goodwill and other intangibles........................................ 3,903
In-process research and development................................... 16,960
Assumed liabilities................................................... (2,704)
-------
Net assets acquired........................................... $20,607
=======
F-21
<PAGE>
The Company recorded a charge of $16,960,000 for the fair value of
acquired in process research and development related to the net assets acquired.
Such charge has not been included in the unaudited pro forma combined condensed
statement of operations. The pro forma adjustments applied to the historical
statement of operations to arrive at the pro forma combined condensed statement
of operations reflects amortization expense of $624,000 related to goodwill and
other intangibles. The pro forma adjustments also reflect incremental
depreciation expense of $114,000 associated with the adjustment in basis of
fixed assets acquired from Miro.
F-22
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ------------------ -------------------------------------------------------
2.1* Asset Purchase Agreement dated August 29, 1997 by and
between Pinnacle Systems, Inc., Pinnacle Systems GmbH,
Pinnacle Systems C.V., Pinnacle Systems Ltd.,
Miro Computer Products AG, Miro Computer Products, Inc.
and Miro Computer Products Ltd
23.1 Consent of Arthur Andersen GmbH, Independent Public
Accountants
- ---------------------------
*Previously filed.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
The Board of Directors
Pinnacle Systems, Inc.:
We consent to incorporation by reference in the Registration Statement (No.
333-38999) on Form S-3 of Pinnacle Systems, Inc., of our report dated November
18, 1997, relating to the combined statements of certain assets and liabilities
of the Digital Video Editing division of miro Computer Products AG ("Miro") as
of December 31, 1996 and 1995, and the related combined statements of revenues
and expenses and cash flows for each of the years in the three-year period ended
December 31, 1996, which report appears in the Form 8-K of Pinnacle Systems,
Inc. filed in connection with the acquisition of certain assets of Miro.
/s/ Arthur Andersen
-------------------------------
Hanover, Germany
November 18, 1997
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
SteuerberatungsgesellschaftmbH
/s/ Dr. Maiss
Dr. Maiss Stieve
Wirtschaftsprufer Wirtschaftsprufer
