<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 8-K/A
AMENDMENT NO. 1
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): June 11, 1997
ESS TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 0-26660 94-2928582
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
48401 FREMONT BOULEVARD
FREMONT, CALIFORNIA 94538
(Address of principal executive offices) (Zip code)
(510) 492-1088
(Registrant's telephone number, including area code)
<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
June 24, 1997 as set forth in the pages attached hereto: Item 7.
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Audited Financial Statements of Platform Technologies, Inc. for the
year ended December 31, 1996 together with Report of Independent Accountants,
and Unaudited Balance Sheet as of March 31, 1997 and Unaudited Statements of
Operations for the three months ended March 31, 1997 and 1996.
(b) Pro Forma Financial Information.
Unaudited Pro Forma Condensed Combined Balance Sheet as of March
31, 1997.
Unaudited Pro Forma Condensed Statement of Operations for the year
ended December 31, 1996.
Unaudited Pro Forma Condensed Statement of Operations for the three
months ended March 31, 1997.
Notes to Unaudited Pro Forma Condensed Combined Consolidated
Financial Statements.
(c) Exhibits.
*2.1 First Amended and Restated Agreement and Plan of
Reorganization dated as of April 27, 1997 among Registrant,
EP Acquisition Corporation and Platform Technologies, Inc.
*20.1 ESS Press Release dated April 16, 1997 announcing execution
of the Agreement and Plan of Reorganization.
*20.2 ESS Press Release dated April 29, 1997 announcing the
conversion of the acquisition of Platform Technologies,
Inc. from a pooling-of-interests to a purchase transaction.
*20.3 ESS Press Release dated June 12, 1997 announcing completion
of acquisition of Platform Technologies, Inc.
23.1 Consent of Price Waterhouse LLP, Independent Auditors.
- --------
*Previously filed.
-3-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ESS Technology, Inc.
(Registrant)
Dated: August 25, 1997 By: /s/ JOHN H. BARNET
---------------------------------------
John H. Barnet
Chief Financial Officer
Dated: August 25, 1997 By: /s/ HOWARD N. HIDESHIMA
---------------------------------------
Howard N. Hideshima
Controller and Principal
Accounting Officer
-4-
<PAGE> 5
PLATFORM
TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
June 27, 1997
To the Board of Directors and Shareholders of
Platform Technologies, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, shareholders' equity and cash flows present fairly, in all material
respects, the financial position of Platform Technologies, Inc. (a company in
the development stage) at December 31, 1996, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles. 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
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.
Price Waterhouse LLP
<PAGE> 7
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,892,000 $2,204,000
Prepaid expenses and other current assets 7,000 120,000
----------- ----------
Total current assets 2,899,000 2,324,000
Property and equipment, net 223,000 222,000
Other assets 8,000 141,000
----------- ----------
$ 3,130,000 $2,687,000
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 26,000 $ 273,000
Accrued liabilities 38,000 73,000
Current portion of capital lease obligations 10,000 10,000
----------- ----------
Total current liabilities 74,000 356,000
----------- ----------
Capital lease obligations, net of current portion 16,000 13,000
----------- ----------
Commitments (Note 6)
Sharesholders' equity:
Convertible Preferred Stock, no par value, 10,000,000
shares authorized:
Series A convertible Preferred Stock, 1,000,000 shares
authorized, issued and outstanding 200,000 200,000
Series B convertible Preferred Stock, 1,313,000 shares
authorized, issued and outstanding 1,050,000 1,050,000
Series C convertible Preferred Stock, 1,500,000 shares
authorized; 1,000,000 issued and outstanding 3,125,000 3,125,000
Common Stock, no par value, 25,000,000 shares authorized;
820,000 shares issued and outstanding 2,342,000 2,342,000
Deferred compensation related to stock option grants (1,898,000) (1,760,000)
Deficit accumulated during development stage (1,779,000) (2,639,000)
----------- ----------
Total shareholders' equity 3,040,000 2,318,000
----------- ----------
$ 3,130,000 $2,687,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION THREE THREE
(SEPTEMBER 26, MONTHS MONTHS
YEAR ENDED 1995) THROUGH ENDED ENDED
DECEMBER 31, MARCH 31, MARCH 31, MARCH 31,
1996 1997 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operating expenses:
Research and development $ 1,356,000 $ 2,154,000 $ 769,000 $ 216,000
Selling, general and administrative 444,000 570,000 118,000 160,000
----------- ----------- --------- ---------
Total operating expenses 1,800,000 2,724,000 887,000 376,000
Loss from operations (1,800,000) (2,724,000) (887,000) (376,000)
Interest income, net 55,000 85,000 27,000 9,000
----------- ----------- --------- ---------
Net loss $(1,745,000) $(2,639,000) $(860,000) $(367,000)
=========== =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 9
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 26, 1995) THROUGH MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONVERTIBLE TOTAL
PREFERRED STOCK COMMON STOCK DEFERRED ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT COMPENSATION DEFICIT EQUITY
---------- ---------- -------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C
Issuance of Series A Convertible
Preferred Stock 1,000,000 $ 200,000 -- $ -- $ -- $ -- $ 200,000
Issuance of Series B Convertible
Preferred Stock 1,313,000 1,050,000 -- -- -- -- 1,050,000
Issuance of Common Stock -- -- 600,000 6,000 -- -- 6,000
Net loss for the period -- -- -- -- -- (34,000) (34,000)
---------- ---------- -------- --------- ------------ ----------- ------------
Balance at December 31, 1995 2,313,000 1,250,000 600,000 6,000 -- (34,000) 1,222,000
Issuance of Series C Convertible
Preferred Stock 1,000,000 3,000,000 -- -- -- -- 3,000,000
Exercise of Stock Options -- -- 220,000 2,000 -- -- 2,000
Issuance of warrants for Series C
Convertible Preferred Stock -- 125,000 -- -- -- -- 125,000
Deferred compensation related to
incentive stock option grants -- -- -- 2,202,000 (2,202,000) -- --
Amortization of deferred compensation -- -- -- -- 304,000 -- 304,000
Nonqualified stock option grants -- -- -- 132,000 -- -- 132,000
Net loss for the year -- -- -- -- -- (1,745,000) (1,745,000)
---------- ---------- -------- --------- ------------ ----------- ------------
Balance at December 31, 1996 3,313,000 4,375,000 820,000 2,342,000 (1,898,000) (1,779,000) 3,040,000
Amortization of deferred compensation -- -- -- -- 138,000 -- 138,000
Net loss for the period -- -- -- -- -- (860,000) (860,000)
---------- ---------- -------- --------- ------------ ----------- ------------
Balance at March 31, 1997 3,313,000 $4,375,000 820,000 $2,342,000 $ (1,760,000) $(2,639,000) $ 2,318,000
========== ========== ======== ========= ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 10
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(SEPTEMBER 26,
YEAR ENDED 1995) THROUGH
DECEMBER 31, MARCH 31,
1996 1997
-------------- ----------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $(1,745,000) $(2,639,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization .................... 63,000 87,000
Compensation related to stock option grants....... 436,000 574,000
Changes in assets and liabilities:
Prepaid expenses and other current assets....... (7,000) (120,000)
Other assets.................................... (8,000) (141,000)
Accounts payable................................ 25,000 273,000
Accrued liabilities............................. 38,000 73,000
----------- -----------
Net cash used in operating activities......... (1,198,000) (1,893,000)
----------- -----------
Cash used in investing activities for
acquisition of property and equipment................. (253,000) (278,000)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of Series A Convertible
Preferred Stock.................................... - 200,000
Proceeds from issuance of Series B Convertible
Preferred Stock..................................... - 1,050,000
Proceeds from issuance of Common Stock................ - 6,000
Proceeds from issuance of Series C Convertible
Preferred Stock.................................... 3,000,000 3,000,000
Proceeds from issuance of warrants................... 125,000 125,000
Proceeds from issuance of Common Stock upon
exercise of stock options.......................... 2,000 2,000
Payments on capital leases........................... (5,000) (8,000)
----------- -----------
Net cash provided by financing activities....... 3,122,000 4,375,000
----------- -----------
Net increase in cash and cash equivalents.............. 1,671,000 2,204,000
Cash and cash equivalents at beginning of period....... 1,221,000 -
----------- -----------
Cash and cash equivalents at end of period............. $ 2,892,000 $ 2,204,000
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest............................... $ 3,000 $ 4,000
=========== ===========
NONCASH FINANCING ACTIVITIES:
Equipment additions under capital leases............ $ 31,000 $ 31,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 11
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. THE COMPANY AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Platform Technologies, Inc. (the "Company") was incorporated in
California on September 26, 1995. The Company designs and develops
multimedia subsystems.
The Company's operations to date have been funded primarily through the
issuance of Preferred Stock.
Since its inception, the Company has been engaged principally in
research and development, raising capital and developing markets for its
planned products. The Company is in the development stage. Accordingly,
the accompanying statement of operations should not be viewed as being
representative of normal periods of operations.
The Company incurred cumulative losses of $2,639,000 since its inception
through March 31, 1997. Additional capital may be required to enable the
Company to continue its development activities and achieve profitable
operations. Although the Company has been pursuing additional capital,
management believes that existing capital resources will be sufficient
to fund its cash needs through 1997.
USE OF ESTIMATES AND ASSUMPTIONS
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 revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity
of 90 days or less when purchased to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the shorter of the
estimated useful lives of the assets, ranging from three to five years,
or the lease term of the respective assets.
1
<PAGE> 12
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
The Company accounts for income taxes using the asset and liability
approach which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of timing
differences between the carrying amounts and the tax bases of assets and
liabilities. A valuation allowance is provided for deferred tax assets
if there are significant uncertainties regarding their ultimate
realization.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
significant concentration of credit risk consist principally of cash and
cash equivalents. The Company places its cash and cash equivalents
primarily in money market accounts with leading financial institutions.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". The Company provides
additional disclosures as required under Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
(SFAS 123).
2. BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Property and equipment:
Office furniture $ 12,000
Computer equipment and software 100,000
Engineering equipment and software 174,000
----------
286,000
Less: accumulated depreciation and amortization (63,000)
----------
$ 223,000
==========
Accrued liabilities:
Accrual for sick leave and vacation $ 30,000
Others 8,000
----------
$ 38,000
==========
</TABLE>
2
<PAGE> 13
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. INCOME TAXES
No provision for federal or state income taxes was recorded during the
period from inception through March 31, 1997 as the Company incurred net
losses in those periods.
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-----------
<S> <C>
Net operating loss carryforward $ 510,000
Research and development credit 50,000
Accrued liabilities not currently deductible 12,000
---------
572,000
Deferred tax assets valuation allowance (572,000)
---------
$ --
=========
</TABLE>
The Company has provided a valuation allowance for the full value of
deferred tax assets because of uncertainty regarding their realization. At
December 31, 1996, the Company had a federal net operating loss carryforward
of approximately $1,277,000 which expires in 2011. The utilization of net
operating loss carryforwards may be limited in the event of cumulative stock
ownership changes of more than 50% over a three-year period.
4. CONVERTIBLE PREFERRED STOCK
A total of 10,000,000 shares of convertible Preferred Stock have been
authorized for issuance, of which 1,000,000 shares have been designated as
Series A convertible Preferred Stock (Series A), 1,313,000 shares have been
designated as Series B convertible Preferred Stock (Series B) and 1,500,000
shares have been designated as Series C convertible Preferred Stock (Series
C).
In 1995, the Company issued 1,000,000 shares of Series A and 1,313,000
shares of Series B at $0.20 and $0.80 per share, respectively, for cash. In
October 1996, the Company issued 1,000,000 shares of Series C at $3.00 per
share for cash. The Company also issued 500,000 shares of warrant at $0.25
per share to one investor for purchase of 500,000 shares of Series C at an
exercise price of $3.00 per share. A total of 500,000 shares of Series C
have been reserved for issuance upon exercise of the warrants. No warrants
had been exercised as of December 31, 1996 and March 31, 1997.
3
<PAGE> 14
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The rights, preferences and restrictions of the Series A, B and C
(Preferred Stock) are as follows:
CONVERSION
Each share of Preferred Stock is convertible by the holder into Common
Stock as is determined by dividing the original issue price of the
Preferred Stock by the "Conversion Price." The respective original issue
prices are $0.20, $0.80 and $3.00 for each share of Series A, B and C
Preferred Stock. The initial Conversion Price for shares of Series A,
Series B and Series C is $0.20, $0.80 and $3.00 per share,
respectively. The initial Conversion Price is subject to subsequent
adjustment to give effect to certain dilutive events that may occur.
Such conversion is automatic upon the effective date of a public
offering of Common Stock with a per share price of at least $5.00 and
for which the aggregate proceeds equal at least $10,000,000.
DIVIDENDS
Holders of Series A, B and C are entitled to receive noncumulative
dividends at an annual rate of $0.02, $0.08 and $0.24 per share,
respectively, when and as declared by the Board of Directors. No
dividends were declared through March 31, 1997.
VOTING
The holders of each share of Preferred Stock have the same number of
votes as the number of shares of Common Stock into which such Preferred
Stock may be converted.
LIQUIDATION
In the event of liquidation, holders of Series A, B and C are entitled
to a per share distribution in preference to holders of Common Stock.
This per share distribution is equal to the original issue price of
$0.20, $0.80 and $3.00, respectively, plus any declared but unpaid
dividends. In the event funds are insufficient to make a complete
distribution to the holders of Series A, B and C, as described above,
distribution shall be prorated among the holders of Preferred Stock
based on the total preferential amount owed to each holder.
Any assets remaining after the distributions to the holders of the
Preferred Stock shall be distributed on a pro rata basis to the holders
of Common Stock and Preferred Stock based on the number of shares
(assuming conversion of the Preferred Stock into Common Stock at the
then conversion ratio) then held by each holder of Common Stock and
Preferred Stock.
4
<PAGE> 15
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
5. STOCK OPTION PLAN
In 1995, the Company adopted a stock option plan (the Plan). Under the
Plan, the Company has reserved a total of 4,000,000 shares of Common
Stock for incentive and nonqualified stock option grants. The Plan
expires in 2005. During 1996, 3,080,000 shares of incentive stock option
with an exercise price of $0.01 per share were granted to employees.
The incentive stock options vest ratably over four years. At December
31, 1996, 3,080,000 shares of incentive stock option were outstanding,
of which 534,000 shares were vested. Fully vested options aggregating
225,000 shares at an exercise price of $0.01 per share were granted to
outside consultants during 1996, of which options to purchase 220,000
shares of nonqualified stock option were exercised in 1996.
During 1996, the Company recognized $132,000 compensation expenses
related to nonqualified stock options granted. The Company also recorded
$2,202,000 deferred compensation expenses related to incentive stock
options granted. The deferred compensation expenses are amortized over
four years.
Had compensation cost for the Company's stock option plan been
determined based on the fair value at the grant dates, as specified in
SFAS 123, there would not be a material change to the Company's net loss
for the year ended December 31, 1996 and the period from inception
through March 31, 1997.
6. COMMITMENTS
The Company leases office facility and certain equipment under
noncancelable operating lease agreements that expire at various dates
through 1999.
Total operating lease expense was $88,000 for the year ended December
31, 1996 and $117,000 for the period from inception through March 31,
1997.
5
<PAGE> 16
PLATFORM TECHNOLOGIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Future minimum lease payments under all noncancelable operating and
capital leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
<S> <C> <C>
YEAR ENDING DECEMBER 31,
1997 $ 37,000 $ 13,000
1998 8,000 12,000
1999 - 6,000
--------- ---------
Total minimum payments $ 45,000 31,000
=========
Less: amount representing interest 5,000
---------
Present value of capitalized lease obligations 26,000
Less: current portion 10,000
---------
Capitalized lease obligations, net of current portion $ 16,000
=========
</TABLE>
7. SUBSEQUENT EVENT
On June 11, 1997, the Company was acquired by ESS Technology, Inc.
("ESS") for 2.54 million shares of ESS's Common Stock (including stock
option of 954,000 shares) with a value of $32.7 million.
6
<PAGE> 17
ESS TECHNOLOGY, INC.
PRO FORMA COMBINED FINANCIAL INFORMATION
(unaudited)
On June 11, 1997, ESS Technology, Inc. ("ESS" or "the Company") acquired
Platform Technologies, Inc. ("Platform"). The following unaudited pro forma
combined financial information reflects the business combination between ESS
and Platform accounted for under the purchase method of accounting. The pro
forma combined balance sheet combines ESS' March 31, 1997 balance sheet with
Platform's March 31, 1997 balance sheet, assuming the acquisition occurred as
of March 31, 1997. The pro forma combined statements of operations for the year
ended December 31, 1996 and the three months ended March 31, 1997 combine ESS'
and Platform's historical statements of operations of the respective periods as
if the combination had occurred at January 1, 1996.
The unaudited pro forma combined statements of operations are not necessarily
indicative of the operating results that would have been achieved had the
transaction been in effect as of the beginning of the periods presented and
should not be construed as representative of future operations.
The historical financial statements of ESS and Platform are included in the
Company's Form 10-K and 10-Q and elsewhere in this Form 8-K, respectively, and
the unaudited pro forma combined financial information presented herein should
be read in conjunction with those financial statements and related notes.
<PAGE> 18
ESS TECHNOLOGY, INC.
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
(In thousands)
The following unaudited pro forma combined balance sheet represents the combined
financial position of ESS and Platform as of March 31, 1997. Such unaudited pro
forma information is based on the combined historical balance sheets of ESS and
Platform as of March 31, 1997, giving effect to (1) the acquisition of Platform
as of March 31, 1997 accounted for under the purchase method of accounting and
(2) the pro forma adjustments described in the accompanying notes to the pro
forma combined financial information.
<TABLE>
<CAPTION>
March 31, 1997
--------------------------------------------------------------
Pro Forma
-------------------------------
ESS Platform Adjustments Combined
-------- ----------- ----------- ----------
(Note 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 48,091 $ 2,204 $ - $ 50,295
Short-term investments 16,945 - - 16,945
Accounts receivable, net 33,966 - - 33,966
Inventories 34,497 - - 34,497
Deferred income taxes 3,270 - - 3,270
Prepaid expenses and other assets 4,727 120 44 (d) 4,891
-------- ------- -------- --------
Total current assets 141,496 2,324 44 143,864
Property and equipment, net 22,352 222 - 22,574
Other assets 55,322 141 13,345 (a) 68,808
------- -------- -------- --------
$219,170 $ 2,687 $13,389 $235,246
======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 23,825 $ 346 $ - $ 24,171
Advances payable to vendors 15,960 - - 15,960
Current portion of capital lease obligations - 10 - 10
Income taxes payable 11,690 - - 11,690
Deferred income taxes 5,412 - 5,204 (b) 10,616
------- -------- -------- --------
Total current liabilities 56,887 356 5,204 62,447
------- -------- -------- --------
Capital lease obligations, net of current portion - 13 - 13
------- -------- -------- --------
Shareholders' equity:
Series A convertible Preferred Stock - 200 (200) (d) -
Series B convertible Preferred Stock - 1,050 (1,050) (d) -
Series C convertible Preferred Stock - 3,125 (3,125) (d) -
Common Stock 99,935 2,342 30,361 (c),(d) 132,638
Deferred compensation related to stock option grants - (1,760) 1,760 (d) -
Retained earnings (accumulated deficit) 62,348 (2,639) (19,561) (d) 40,148
------- -------- -------- --------
Total shareholders' equity 162,283 2,318 8,185 172,788
------- -------- -------- --------
$219,170 $ 2,687 $ 13,389 $235,246
======== ======== ======== ========
</TABLE>
See accompanying notes to pro forma combined financial information.
<PAGE> 19
ESS TECHNOLOGY, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
The following unaudited pro forma combined statement of operations presents the
combination of ESS and Platform by combining the results of operations of ESS
and Platform for the year ended December 31, 1996, giving effect to (1) the
acquisition of Platform as of the beginning of the year accounted for under the
purchase method of accounting and (2) the pro forma adjustments described in
the accompanying notes to the pro forma combined financial information.
<TABLE>
<CAPTION>
Year ended December 31, 1996
--------------------------------------------------------
Pro Forma
-------------------------
ESS Platform Adjustments Combined
--- -------- ----------- --------
(Note 3)
<S> <C> <C> <C> <C>
Net revenues $226,455 $ - $ - $226,455
Cost of revenues 106,818 - - 106,818
-------- ------- -------- --------
Gross profit 119,637 - - 119,637
Operating expenses:
Research and development 20,270 1,356 1,811 (a) 23,437
Research and development in-process 30,355 - - 30,355
Selling, general and administrative 16,814 444 1,525 (a) 18,783
--------- -------- ------- --------
Operating income (loss) 52,198 (1,800) (3,336) 47,062
Interest income, net 2,276 55 - 2,331
Gain on short-term investments 965 - - 965
-------- ------- ------- --------
Income (loss) before provision for income taxes 55,439 (1,745) (3,336) 50,358
Provision for income taxes (33,813) - 1,314 (b) (32,499)
-------- ------- ------- ---------
Net income (loss) $ 21,626 $(1,745) $(2,022) $ 17,859
======== ======= ======== =========
Net income per share $ 0.52 $ 0.40
======== ========
Weighted average common and common
equivalent shares 41,588 2,540 (c) 44,128
======== ======= ========
</TABLE>
See accompanying notes to pro forma combined financial information.
<PAGE> 20
ESS TECHNOLOGY, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands, except per share data)
The following unaudited pro forma combined statement of operations presents the
combination of ESS and Platform by combining the results of operations of ESS
and Platform for the three months ended March 31, 1997, giving effect to (1) the
acquisition of Platform as of the beginning of the period accounted for under
the purchase method of accounting and (2) the pro forma adjustments described in
the accompanying notes to the pro forma combined financial information.
<TABLE>
<CAPTION>
Three Months ended March 31, 1997
-----------------------------------------------------
Pro Forma
----------------------------
ESS Platform Adjustments Combined
------- -------- ----------- --------
(Note 3)
<S> <C> <C> <C> <C> <C>
Net revenues $81,468 $ -- $ -- $81,468
Cost of revenues 41,772 -- -- 41,772
------- -------- ----------- --------
Gross profit 39,696 -- -- 39,696
Operating expenses:
Research and development 5,571 769 453 (a) 6,793
Selling, general and administrative 5,611 118 381 (a) 6,110
------- -------- ----------- --------
Operating income (loss) 28,514 (887) (834) 26,793
Interest income, net 640 27 -- 667
------- -------- ----------- --------
Income (loss) before provision for income taxes 29,154 (860) (834) 27,460
Provision for income taxes (11,327) -- 324 (b) (11,003)
------- -------- ----------- --------
Net income (loss) $17,827 $ (860) $ (510) $16,457
======= ======== =========== ========
Net income per share $ 0.43 $ 0.37
======= ========
Weighted average common and common
equivalent shares 41,469 2,540 (c) 44,009
======= =========== ========
</TABLE>
See accompanying notes to pro forma combined financial information.
<PAGE> 21
ESS TECHNOLOGY, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(Unaudited)
1. THE ACQUISITION
The pro forma combined financial information reflects the acquisition of
Platform for 2.54 million shares of ESS' Common Stock including 954,000
options with a value of $32.7 million and estimated acquisition costs.
The stock options granted in respect of the Platform acquisition are
with an exercise price ranging from $0.03 to $0.92 and have a vesting
period of four years. The purchase price for pro forma purposes has been
allocated to assets acquired and liabilities assumed based on the book
value of Platform's current assets, equipment and liabilities, which
management believes approximates their fair value, and an independent
appraisal for all other identifiable assets.
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Net assets acquired based on book value
as of June 30, 1997 $ 3,062
Research and development in-process 22,200
Intangible assets:
Technical infrastructure 7,245
Covenants not to compete 6,100
Deferred tax liabilities related to
intangible assets (5,204)
-------
33,403
Estimated acquisition costs (700)
-------
Value of Common Stock issued for acquisition $32,703
=======
</TABLE>
The net assets of Platform as of March 31, 1997 have no material
difference from the aggregate of Platform's book net assets as of
June 30, 1997 and the estimated acquisition costs.
2. PRO FORMA COMBINED BALANCE SHEET
The following significant adjustments were applied to the historical
balance sheet of ESS and Platform at March 31, 1997 to arrive at the pro
forma combined balance sheet.
(a) To record intangible assets acquired at their fair values as
follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Technical infrastructure $ 7,245
Covenants not to compete 6,100
-------
$13,345
=======
</TABLE>
(b) To record deferred taxes related to the fair value ascribed to the
technical infrastructure and the covenants not to compete, which
will not be deductible for income tax purposes.
(c) To reflect the issuance of 2.54 million shares of ESS Common Stock
and options in connection with the purchase of Platform.
(d) To reflect the one-time charge for the fair value of in-process
research and development and the elimination of Platform's
historical shareholders' equity.
3. PRO FORMA COMBINED STATEMENT OF OPERATIONS
The follow significant adjustments were applied to the historical
statements of operations for ESS and Platform for the year ended
December 31, 1996 and the three months ended March 31, 1997 to arrive at
the pro forma combined statements of operations of the respective
periods.
(a) To reflect amortization of the fair value of the technical
infrastructure and the covenants not to compete over a four year
period.
<PAGE> 22
ESS TECHNOLOGY, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(Unaudited)
(b) To adjust the provision for income taxes to the estimated
consolidated income tax provision.
(c) To reflect the issuance of 2.54 million shares of ESS Common
Stock and options in connection with the purchase of Platform, as if
the shares had been outstanding for the entire period presented.
(d) The one-time charge to expense for the fair value of the
in-process research and development has been excluded from the pro
forma combined statement of operations because it is nonrecurring.
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
- ------- -------
<S> <C>
*2.1 First Amended and Restated Agreement
and Plan of Reorganization dated as of
April 27, 1997 among Registrant,
EP Acquisition Corporation and Platform
Technologies, Inc.
*20.1 ESS Press Release dated April 16, 1997
announcing execution of the Agreement
and Plan of Reorganization.
*20.2 ESS Press Release dated April 29,
1997 announcing the conversion of the
acquisition of Platform Technologies,
Inc. from a pooling-of-interests to a
purchase transaction.
*20.3 ESS Press Release dated June 12, 1997
announcing completion of acquisition of
Platform Technologies, Inc.
23.1 Consent of Price Waterhouse LLP,
Independent Auditors.
</TABLE>
- --------
*Previously filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of ESS Technology, Inc. of our report dated June 27, 1997
relating to the financial statements of Platform Technologies, Inc. which
appears in the Current Report on Form 8-k of ESS Technology, Inc. dated June
24, 1997, as amended.
PRICE WATERHOUSE LLP
San Jose, California
August 22, 1997
