SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 8, 1999 (October 4, 1999)
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FOCUS ENHANCEMENTS, INC.
(exact name of registrant as specified in charter)
Delaware 1-11860 04-3186320
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
600 Research Drive 10887
Wilmington, Massachusetts (Zip Code)
(address of principal office)
(978) 988-5888
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On October 4, 1999, FOCUS Enhancements, Inc., a Delaware corporation
(the "Company"), entered into a letter of intent (the "Letter Agreement") with
Faroudja, Inc., a Delaware corporation ("Faroudja"), which sets forth the
principal terms, on a non-binding basis, of a proposed business combination
between the Company and Faroudja. Under the terms of the Letter Agreement, the
Company would merge with and into Faroudja or a wholly owned subsidiary of
Faroudja. Upon consummation of the merger, each share of the Company's common
stock then outstanding would be converted into, and become exchangeable for,
0.58 of a share of Faroudja common stock, which ratio may be adjusted if the
price of Faroudja common stock, as calculated on the basis of an agreed-upon
pre-closing measurement period, falls below $2.82.
The proposed transaction between the Company and Faroudja remains
subject to the parties' satisfactory completion of their respective due
diligence examinations of one another, their negotiation and execution of a
definitive merger agreement, receipt of governmental and stockholder approvals
and satisfaction of such other terms and conditions as may be contained in any
such definitive merger agreement.
The Company has agreed to negotiate exclusively with Faroudja, subject
to the fiduciary obligations of the Company's Board of Directors, for a period
of sixty days following the date of the Letter Agreement (the "No Shop Period")
with respect to the terms and conditions that may be contained in a definitive
merger agreement. The Company has also granted Faroudja an option to purchase
1,000,000 shares of the Company's common stock at an exercise price equal to
0.58 of the closing price of Faroudja common stock on October 4, 1999 (the
"Option"). The Option will become exercisable only if the Company abandons its
negotiations with Faroudja prior to the expiration of the No Shop Period and
becomes involved in or announces a transaction in which the Company would be
acquired by a third party within ninety days after the Company's abandonment of
its negotiations with Faroudja at a price per share greater than the price
offered by Faroudja.
The Letter Agreement constitutes merely an outline of the principal
terms of the proposed transaction, which is intended to facilitate the parties'
further negotiation and preparation of a definitive merger agreement. Except for
the No Shop Period and the Option, and certain other limited obligations between
the parties set forth in the Letter Agreement, there are no binding or otherwise
legally enforceable obligations on the part of either party created by the
Letter Agreement to enter into a definitive merger agreement or otherwise to
complete any form of transaction between the Company and Faroudja.
A copy of the Company's press release pertaining to the proposed
transaction, issued on October 5, 1999, is included as Exhibit 99.1 to this
Current Report.
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Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits.
(a) Financial Statements
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
99.1 Press Release dated October 5, 1999
[Remainder of Page Intentionally Blank]
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Signatures
Under 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.
FOCUS ENHANCEMENTS, INC.
By: /s/ Thomas L. Massie
Thomas L. Massie
President and Chief Executive Officer
Date: October 8, 1999
EXHIBIT 99.1
Faroudja to Acquire FOCUS Enhancements; Combination Will Create Leader in Video
Processing and Conversion Technologies
WILMINGTON, Mass. and SUNNYVALE, Calif.--(BUSINESS WIRE)--Oct. 5,
1999--Faroudja, Inc. (NASDAQ:FDJA) and FOCUS Enhancements, Inc. (NASDAQ:FCSE),
announced today that they have signed a letter of intent for the merger of FOCUS
into Faroudja. The companies have established a schedule that calls for
completion of a definitive merger agreement by Thanksgiving.
Under the letter of intent, which is subject to completing due diligence,
execution of a definitive merger agreement, and obtaining customary regulatory
and stockholder approvals, each share of FOCUS common stock would be exchanged
for .58 shares of Faroudja common stock or up to 14.2 million shares of Faroudja
common stock.
Based on primary Faroudja and FOCUS shares outstanding at June 30, 1999, the
existing Faroudja stockholders would own approximately 53% of the combined
company and the existing FOCUS stockholders would own approximately 47%. The
combined entity had total revenues of over $27 million in the twelve months
ended June 30, 1999, on a pro forma basis.
"Combining these companies will create a much stronger company, from marketing,
distribution, technology, and financial perspectives," stated Glenn Marschel,
Jr., President and CEO of Faroudja. Mr. Marschel, who will lead the combined
company, continued: "The combination will provide us with access to new markets
and distribution channels and allow us to leverage our intellectual property
across a much broader set of products, including products that augment
televisions, internet appliances and personal computers.
"The new company will benefit from many synergies. Both companies are leaders in
video processing technologies for different markets. Faroudja's emphasis is on
transforming conventional video signals into film-like images for large screen
home theater displays and translating standard television to HDTV for
broadcasters. FOCUS specializes in products for displaying TV signals on
personal computers and Apple Macintoshes(R) and computer signals on TVs. Each
company provides a range of standalone box, board and proprietary chip
solutions.
"In particular, what makes these companies such a natural fit is their shared
commitment to developing and marketing highly integrated, high-performance
application-specific integrated circuit (ASIC) solutions for the emerging
digital video display and computer/television convergence markets. The
combination of the Faroudja and FOCUS VLSI development capabilities will
accelerate Faroudja's efforts to provide a broader selection of high value ASICs
to high volume chip markets.
"Finally, consolidating the two companies presents opportunities for cost
reduction and a more stable platform for growth and profitable operations. The
combined company will continue to benefit from a strong balance sheet," Mr.
Marschel concluded.
"We are very excited about merging the businesses and technologies of Faroudja
and FOCUS," said Thomas Massie, Chairman and CEO of FOCUS. "Complementary
technologies, product
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lines, and strategies will make the company resulting from the combination of
these two industry leaders a formidable competitor. The combined entity will
have the critical mass and scale necessary to serve exciting market
opportunities and further enhance shareholder value."
Faroudja, Inc. (NASDAQ:FDJA) is a world leader in high-performance video
processing technologies for markets requiring superior image quality solutions.
The Company provides innovative products for the HDTV broadcast, home theater,
digital television and PC/TV convergence markets. Faroudja's technologies are
protected by more than 60 patents. Faroudja has received numerous awards,
including an Emmy award for Engineering Development and a Lifetime Achievement
Emmy presented in June 1998 to its founder, Yves Faroudja.
FOCUS Enhancements, Inc. (NASDAQ:FCSE) is an industry leader in the development
and marketing of advanced, proprietary video conversion ASICs for the rapidly
converging, multi-billion dollar Internet, computer and television industries.
The Company's technology, which is sold globally through Original Equipment
Manufacturers (OEMs) and resellers, merges computer-generated graphics and
television displays for Internet viewing, presentations, training, education,
video teleconferencing, and home gaming markets. In addition, the Company is
developing a family of products that will enable the current installed base of
televisions, VCRs, and camcorders to remain functional in upcoming HDTV
environments.
Statements about the proposed merger are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, and involve
risks and uncertainties. Some of the factors that could cause actual results of
Faroudja, FOCUS or the entity resulting from their combination to differ
materially from those in the forward-looking statements are: the failure of the
companies to execute a definitive merger agreement or to consummate the merger;
the ability of Faroudja to successfully integrate FOCUS' business and capitalize
on the combined technologies and market opportunities; the availability of
favorable tax treatment and accounting treatment for the merger; and those
factors set forth in the companies various filings with the Securities and
Exchange Commission.
CONTACT: FOCUS Enhancements, Inc.
Thomas L. Massie
(978) 988-5888
www.FOCUSinfo.com
