<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-27016
ROSS TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 74-2507960
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two Ceilo Center, Third Floor 1250 Capital of Texas Highway, South Austin,
Texas 78746 (512) 329-2499 (Address and Telephone Number of Principal
Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Number of shares outstanding of each of the issuer's classes of common stock,
as of February 8, 1999: Common Stock, $.001 par value, 23,476,965 shares.
<PAGE> 2
QUARTERLY REPORT ON FORM 10-Q
NINE MONTHS ENDED DECEMBER 28, 1998
INDEX
<TABLE>
<S> <C>
Title Page.............................................................. 1
Index................................................................... 2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
December 28, 1998 and March 30, 1998 3
Condensed Consolidated Statements of Operations for
the Three and Nine Months Ended December 28, 1998 and
December 29, 1997 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended December 28, 1998 and
December 29, 1997 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
ITEM 1. Legal proceedings 11
ITEM 2. Changes in Securities 11
ITEM 3. Defaults Upon Senior Securities 11
ITEM 4. Submission of Matters to a Vote of Security-Holders 11
ITEM 5. Other Information 11
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES.............................................................. 12
</TABLE>
2
<PAGE> 3
Part 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 28, MARCH 30,
1998 1998
------------ ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 8,438 $ 787
Trade accounts receivable................ -- 2,712
Receivable from Fujitsu.................. -- 3,343
Inventory................................ -- 7,808
Prepaid expenses and other assets........ -- 512
--------- --------
Total current assets............. 8,438 15,162
Property and equipment, net................ -- 3,325
--------- --------
Total assets............................... $ 8,438 $ 18,487
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable................... $ 624 $ 6,091
Accrued shutdown costs................... 2,230 --
Accrued severance costs.................. 2,420 --
Accrued warranty and production costs.... -- 647
Accrued liabilities...................... 808 4,436
Payable to Fujitsu....................... 1,303 1,293
Notes payable............................ 20,000 15,000
--------- --------
Total current liabilities........ 27,385 27,467
--------- --------
Total stockholders' deficit...... (18,947) (8,980)
--------- --------
Total liabilities and stockholders' deficit $ 8,438 $ 18,487
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 29, DECEMBER 28, DECEMBER 29, DECEMBER 28,
1997 1998 1997 1998
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales ................................ $ 14,269 $ 4,246 $ 37,554 $ 16,475
Cost of sales ............................ 8,679 3,960 29,917 14,952
-------- -------- -------- --------
Gross profit ........................... 5,590 286 7,637 1,523
-------- -------- -------- --------
Operating expenses:
Research and development, net .......... 1,490 -- 2,884 3,811
Selling, general and administrative .... 3,633 523 10,768 7,477
Severance costs ........................ -- -- -- 5,248
Shutdown costs ......................... -- -- -- 4,125
-------- -------- -------- --------
Total operating expenses ....... 5,123 523 13,652 20,661
-------- -------- -------- --------
Gain on sale of subsidiary ............. -- -- -- 2,500
Gain on sale of intellectual property... -- -- -- 7,550
Gain on sale of operating unit ......... -- 37 -- 37
-------- -------- -------- --------
Income (loss) from operations... 467 (200) (6,015) (9,051)
Interest expense, net .................... (216) (308) (1,800) (916)
-------- -------- -------- --------
Income (loss) before income
taxes ........................ 251 (508) (7,815) (9,967)
Income tax provision (benefit) ........... -- -- -- --
-------- -------- -------- --------
Net income (loss) .............. $ 251 $ (508) $ (7,815) $ (9,967)
======== ======== ======== ========
Net income (loss) applicable to common
shareholders ........................... $ 251 $ (508) $ (7,815) $ (9,967)
======== ======== ======== ========
Basic net income (loss) per share ........ $ .01 $ (0.02) $ (0.33) $ (0.42)
======== ======== ======== ========
Weighted average common shares
outstanding -- Basic ................... 23,471 23,477 23,456 23,477
======== ======== ======== ========
Diluted net income (loss) per share ...... $ .01 $ (0.02) $ (0.33) $ (0.42)
======== ======== ======== ========
Weighted average common shares
outstanding -- Diluted ................. 43,582 23,477 23,456 23,477
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
DECEMBER 29, DECEMBER 28,
1997 1998
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss .......................................... $ (7,815) $ (9,967)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization .................. 4,291 1,642
Write-down of property and equipment ........... -- 1,785
Change in assets and liabilities:
Trade accounts receivable .................... 4,602 2,712
Receivable from Fujitsu ...................... (3,461) 3,343
Inventory .................................... 1,158 7,808
Prepaid expenses ............................. 1,352 512
Trade accounts payable ....................... (10,760) (5,467)
Accrued shutdown costs ....................... -- 2,230
Accrued severance costs ...................... -- 2,420
Accrued warranty and production costs ........ -- (647)
Payable to Fujitsu ........................... (23) 10
Accrued liabilities .......................... (4,162) (3,628)
-------- --------
Net cash provided by (used in) operating
activities .............................. (14,818) 2,753
-------- --------
Cash flows from investing activities:
Capital expenditures .............................. (3,617) (102)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock ............ 11 --
Proceeds from issuance of preferred stock, net .... 49,508 --
Proceeds from borrowings on notes payable ......... (33,500) 5,000
Net cash provided by financing ............... -- --
activities .................................. 16,019 5,000
-------- --------
Net increase in cash and cash equivalents .... (2,416) 7,651
Cash and cash equivalents at beginning of period .... 2,811 787
-------- --------
Cash and cash equivalents at end of period .......... $ 395 $ 8,438
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) FINANCIAL STATEMENT PRESENTATION
The preceding financial statements of ROSS Technology, Inc. and its
subsidiary (collectively the "Company") have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC") and, in the opinion of management, reflect all adjustments
necessary, such adjustments being of a normal recurring nature, to present
fairly the financial condition and the results of operations for such interim
periods. As a result of the Company's continued financial deterioration, in
July 1998, the Company's Board of Directors adopted and Fujitsu Limited
("Fujitsu"), as the holder of a majority of the outstanding shares of Common
Stock entitled to vote and all outstanding shares of Preferred Stock, approved
the Plan of Complete Liquidation and Dissolution. As a result of this action,
the Company changed its basis of accounting from a going concern basis to a
liquidation basis. Accordingly, the carrying values of liabilities as of
December 28, 1998 are presented at the estimated amounts required to liquidate
and dissolve the Company.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations; however,
management believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the audited financial statements and notes thereto for
the fiscal year ended March 30, 1998 ("Fiscal 1998"). The results for interim
periods are not necessarily indicative of the results for the respective fiscal
years.
(2) INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 28, MARCH 30,
1998 1998
------------ ---------
<S> <C> <C>
Die bank.......... $ -- $ 694
Work-in-process... -- 5,297
Finished goods.... -- 1,817
------- ------
$ -- $7,808
======= ======
</TABLE>
Die bank inventory, consisting of silicon wafers and cut and tested die, is
comparable to raw material inventory in other manufacturing industries.
Work-in-process inventory includes work in process as well as the Company's
inventories of multi-die packages (MDPs) and components and sub-systems to be
incorporated into module, board and system products. Finished goods inventory
includes finished module, board and system products as well as MDPs and ASICs
offered for sale to OEM customers.
(3) NOTES PAYABLE
The notes payable to a bank at December 28, 1998, were outstanding under a
$20,000,000 revolving credit facility with a bank, due March 25, 1999. Interest
accrues at the bank's quoted rate (6.3% at December 28, 1998).
The notes payable are guaranteed by Fujitsu.
6
<PAGE> 7
(4) NET INCOME (LOSS) PER COMMON SHARE
Basic earnings (loss) per share is based on the weighted average of all
common shares issued and outstanding, and is calculated by dividing net income
(loss) available to common stockholders by the weighted average shares
outstanding during the period. Diluted earnings per share is calculated by
dividing net income (loss) available to common stockholders by the weighted
average number of common shares used in the basic calculation plus the number
of common shares that would be issued assuming conversion of all potentially
dilutive common shares outstanding.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- -------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 29, DECEMBER 28,
1997 1998 1997 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net income (loss) applicable to
common stockholders....... $ 251 $ (508) $ (7,815) $ (9,967)
======== ======== ======== ========
Weighted average shares
outstanding -- Basic...... 23,471 23,477 23,456 23,477
======== ======== ======== ========
Basic income (loss) per share $ .01 $ (.02) $ (.33) $ (.42)
======== ========= ======== ========
Weighted average shares
outstanding -- Diluted.... 43,582 23,477 23,456 23,477
======== ======== ======== ========
Diluted income (loss) per
share....................... $ .01 $ (.02) $ (.33) $ (.42)
======== ========= ======== ========
</TABLE>
For the quarter and nine months ended December 28, 1998 options totaling
1,710,409 and 2,544,889, respectively, were excluded from the computation of
diluted earnings per share because they would have been antidilutive for those
periods. Similarly, for the three and nine month periods ended December 29,
1997, options totaling 1,527,892 and 1,899,049, respectively were excluded from
the computation of dilutive earnings per share because they would have been
antidilutive for those periods.
(5) SEVERANCE COST
As previously reported, the Company has commenced an orderly shutdown of
its operations. In conjunction with the Company's orderly shutdown of its
operations and in order to provide certain employees with an incentive to
continue their employment with the Company, the Company adopted an Employee
Retention and Severance Plan (the "Retention Plan"). The Company provided
severance packages to all eligible terminated employees as required by its
general severance policy, and substantially all of the executive officers were
retained pursuant to individual retention agreements. Given the Company's
uncertain financial position, retention agreements were provided by the Company
to such executive officers to provide incentives so that the key personnel
necessary to effect the sale of the Company's assets remained with the Company
until such time that their services were no longer required. The total cost of
the Retention Plan and severance packages totals $5.2 million, of which $3.2
million relates to prior contractual obligations of the Company and obligations
of the Company under its general severance policy. At June 29, 1998, these
severance costs met the criteria as stated in Emerging Issues Task Force issue
No. 94-3 and, therefore, these severance costs were accrued in the first
quarter the fiscal year ending March 29, 1999 ("Fiscal 1999"). These severance
costs are not of a normal recurring nature.
As of December 31, 1998, all employees have been terminated or have
transferred to BridgePoint Technical Manufacturing Corporation ("BridgePoint"),
a Texas corporation.
7
<PAGE> 8
ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) GAIN ON SALE OF SUBSIDIARY
On August 10, 1998, the Company sold all of the issued and outstanding
shares of capital stock of ROSS Semiconductors (Israel) Ltd. ("RIL") to Fujitsu
for $2.5 million. In Fiscal 1998, the Company recorded a $1.1 million charge to
write-down its investment in RIL to $0. Accordingly, the sale of RIL resulted
in a gain of $2.5 million.
(7) GAIN ON SALE OF INTELLECTUAL PROPERTY
On July 27, 1998, the Company sold certain intellectual property rights
(the "Acquired IP") to Fujitsu (subject to a license back of certain of those
rights) for $7.6 million. The Acquired IP had a book value of $0.
Accordingly, the sale of the Acquired IP resulted in a gain of $7.6 million.
(8) GAIN ON SALE OF OPERATING UNIT
On December 15, 1998, pursuant to the Asset Purchase Agreement dated as of
July 23, 1998 between the Company and BridgePoint ("Buyer"), the assets of the
Company's "BridgePoint" business unit were sold (the "BridgePoint Sale"). The
BridgePoint business unit was formed in the second calendar quarter of 1998 to
contain the Company's scaled back sales, service and operations employees, as
well as the inventory related to the Company's 32-bit products. The purchase
price for the BridgePoint Sale was $5.66 million in cash, which included
$250,000 that was deposited by Buyer in an escrow account for an
indemnification holdback, plus the assumption of certain liabilities. There was
also, at the closing, a net purchase price adjustment paid to the Buyer of
approximately $1.06 million (subject to post-closing adjustment) for the
proration of certain expenses and revenues reasonably allocable to the
BridgePoint business unit from June 29, 1998 through the closing. As the
closing, the Company also paid $1.72 million to Buyer in connection with the
Buyer's assumption of certain warranty repair liabilities for previous product
sales to customers throughout the world. The Company received net proceeds of
$2.88 million for assets having a net book value of $2.51 million.
(9) OTHER
On December 29, 1998, pursuant to the Plan of Liquidation and Dissolution
adopted by the Company's Board of Directors and approved by the Company's
majority stockholder, the Company filed a certificate of dissolution with the
Secretary of State of the State of Delaware. Subsequent to the filing of the
certificate of dissolution, the Company's stock transfer books were closed. As a
result, the Company's common and preferred stock will no longer be treated as
outstanding. Following the filing of the certificate of dissolution, the Company
will cease all of its business activities, except as necessary for the sale of
its remaining assets and for the proper winding up of the Company pursuant to
Delaware law. Based on the anticipated value of the Company's assets and the
amounts owed to creditors of the Company, the Company will not have any funds or
assets available to make distributions to either preferred or common
stockholders.
Following consummation of the BridgePoint Sale, the Company no longer has
any operating assets.
The Company estimates total future obligations and commitments associated
with the Company's planned shutdown of its operations, including employee
related costs, at approximately $27.4 million (including the Company's
obligations under its revolving credit facility guaranteed by Fujitsu).
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT
The information contained in this Quarterly Report is not a complete
description of the Company's business or the risks associated with an
investment in the Company. More complete discussions can be found in the
Company's Annual Report on Form 10-K for the Fiscal 1998, as supplemented by
the information contained in the Current Reports on Form 8-K dated July 30,
1998, August 11, 1998 and December 29, 1998 and this Quarterly Report.
RESULTS OF OPERATIONS
Overview. On December 29, 1998, pursuant to the Plan of Liquidation
and Dissolution adopted by the Company's Board of Directors and approved by the
Company's majority stockholder, the Company filed a certificate of dissolution
with the Secretary of State of the State of Delaware. Subsequent to the filing
of the certificate of dissolution, the Company's stock transfer books were
closed. As a result, the Company's common and preferred stock will no longer be
treated as outstanding. Following the filing of the certificate of dissolution,
the Company will cease all of its business activities, except as necessary for
the sale of its remaining assets, which are limited, and for the proper winding
up of the Company pursuant to Delaware law. Based on the anticipated value of
the Company's assets and the amounts owed to creditors of the Company, the
Company will not have any funds or assets available to make distributions to
either preferred or common stockholders.
On December 15, 1998, pursuant to the Asset Purchase Agreement dated as of
July 23, 1998 between the Company and BridgePoint ("Buyer"), the assets of the
Company's "BridgePoint" business unit were sold (the "BridgePoint Sale"). The
BridgePoint business unit was formed in the second quarter of calendar 1998 to
contain the Company's scaled back sales, service and operations employees, as
well as the inventory related to the Company's 32-bit products. The purchase
price for the BridgePoint Sale was $5.66 million in cash, which included
$250,000 that was deposited by Buyer in an escrow account for an indemnification
holdback, plus the assumption of certain liabilities. There was also, at the
closing, a net purchase price adjustment paid to the Buyer of approximately
$1.06 million (subject to post-closing adjustment) for the proration of certain
expenses and revenues reasonably allocable to the BridgePoint business unit from
June 29, 1998 through the closing. As the closing, the Company also paid $1.72
million to Buyer in connection with the Buyer's assumption of certain warranty
repair liabilities for previous product sales to customers throughout the world.
The BridgePoint Sale was a part of the Company's previously-announced orderly
shutdown of its operations. Following consummation of the BridgePoint Sale, the
Company no longer has any operating assets.
Net Sales. Net sales in the three month period ended December 28, 1998 (the
"third quarter") of the fiscal year ending March 29, 1999 ("Fiscal 1999")
decreased 70.2% to $4.2 million from $14.3 million in the corresponding period
of Fiscal 1998. This reduction in sales reflects the continued decline in
demand for the Company's 32-bit products and the previously reported migration
of the Company's primary customers to 64-bit products sold by the Company's
competitors, primarily Sun Microsystems, Inc. A similar decline in sales is
also reflected in the 56.1% decrease in net sales during the first nine months
of Fiscal 1999 as compared to the corresponding period in Fiscal 1998. This
reduction was mitigated by a $5.0 million end of life ("EOL") order from
Fujitsu. This order was placed and shipped during the first quarter of Fiscal
1999 in connection with the Company's previously announced EOL program, which
provided the Company's customers the opportunity to place EOL orders until July
31, 1998, with all such orders to be shipped on or before November 28, 1998. On
December 15, 1998, the Company sold its BridgePoint unit and accordingly, the
Company will have no future sales.
Gross Profit. Gross profit as a percentage of net sales for the quarter
ended December 28, 1998 decreased to 6.7% as compared to 39.2% of net sales for
the comparable period in Fiscal 1998. This decrease reflected a sharp decrease
in sales without a decrease of equal magnitude in the Company's manufacturing
overhead. For similar reasons, for the nine month period ended December 28,
1998, gross profit as a percentage of net sales decreased to 9.2% as compared
to 20.3% for the corresponding period in Fiscal 1998.
Research and Development Expense. Research and development ("R&D") expense
includes costs associated with the definition, design and development of new
products. Reflecting the lay-off of the Company's R&D personnel on July 31,
1998, the Company incurred no R&D expense for the third quarter of Fiscal 1999.
9
<PAGE> 10
Absolute R&D expenses were $.9 million higher for the nine months ended
December 28, 1998 as compared to the same period of Fiscal 1998 reflecting
reimbursement from Fujitsu of $12.5 million in expenses in the first three
quarters of Fiscal 1998 relating to the development of the Company's 64-bit
Viper project pursuant to a development agreement between the Company and
Fujitsu (the "Viper Development Agreement"). No such reimbursements occurred
during the first three quarters of Fiscal 1999.
Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expenses were $.5 million for the third quarter of
Fiscal 1999, reflecting the Company's decision to terminate its operations. For
the same reason, absolute SG&A expenses decreased $3.3 million for the nine
month period ended December 28, 1998 as compared to the same period of Fiscal
1998.
Severance Cost. In conjunction with the Company's orderly shutdown of its
operations and in order to provide certain employees with an incentive to
continue his or her employment with the Company, the Company adopted an
Employee Retention and Severance Plan (the "Retention Plan"). The Company
provided severance packages to all eligible terminated employees as required by
its general severance policy, and substantially all of the executive officers
were retained pursuant to individual retention agreements. Given the Company's
uncertain financial position, retention agreements were provided by the Company
to such executive officers to provide incentives so that the key personnel
necessary to effect the sale of the Company's assets remained with the Company
until such time that their services were no longer required. The total cost of
the Retention Plan and severance packages totals $5.2 million, of which $3.2
million relates to prior contractual obligations of the Company and obligations
of the Company under its general severance policy. At June 29, 1998, these
severance costs met the criteria as stated in Emerging Issues Task Force issue
No. 94-3 and, therefore, these severance costs were accrued in the first
quarter of Fiscal 1999. As of December 28, 1998, all employees have been
terminated or have transferred to BridgePoint.
Gain on Sale of Subsidiary. On August 10, 1998, the Company sold all of the
issued and outstanding shares of capital stock of RIL to Fujitsu for $2.5
million. In Fiscal 1998, the Company recorded a $1.1 million charge to
writedown its investment in RIL to $0. Accordingly, the sale of RIL resulted in
a gain of $2.5 million.
Gain on Sale of Intellectual Property. On July 27, 1998, the Company sold
certain intellectual property (the "Acquired IP") to Fujitsu for $7.6 million,
with a royalty-free license back of certain of those rights. The Acquired IP
had a book value of $0. Accordingly, the sale of the Acquired IP resulted in a
gain of $7.6 million.
Gain on Sale of Operating Unit. As previously discussed, on December 15,
1998, the BridgePoint Sale was consummated. The Company received net proceeds
of $2.88 million for assets having a net book value of $2.51 million.
Net Interest Expense. The Company had net interest expense of $.3 million
for the quarter ended December 28, 1998, versus interest expense of $.2 million
in the quarter ended December 29, 1997, reflecting a lower level of debt during
the third quarter of Fiscal 1998 as compared to the corresponding period in
Fiscal 1999. Conversely, interest expense decreased to $.9 million for the nine
months ended December 28, 1998 as compared to $1.8 million for the comparable
period in Fiscal 1998 reflecting a higher level of debt during the first six
months of Fiscal 1998 as compared to the first six months of Fiscal 1999.
Income Tax Expense. The Company has established a 100% reserve against its
deferred income tax asset and will not record income tax expense or benefit.
Although it is anticipated that the Company will not generate any future tax
obligations as a result of any future transactions, it is possible that such
tax obligations may occur.
Future Operating Results. The Company has dissolved and and intends to
liquidate and pay out its assets including, if any, the net proceeds of the
sale of its remaining assets, to satisfy the Company's obligations to its
creditors. The Company will not have any funds or assets remaining to make
distributions to either preferred or common stockholders.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced significant negative cash flows during Fiscal 1998.
The Company has a credit facility with DKB for a maximum principal amount of
$20 million, which is guaranteed by Fujitsu. The line of credit and guaranty
are scheduled to expire on March 25, 1999. As of February 10, 1999, the Company
has borrowed the maximum $20 million of available credit provided by the
existing credit facility. DKB has informed the Company that it will not renew
the line of credit. In addition, if DKB does not renew the line of credit,
there can be no assurance that Fujitsu will agree to extend or renew the
guaranty, on their existing terms or otherwise. Although the Company hopes it
will have sufficient funds to complete an orderly shutdown of its operations,
the Company may nevertheless be forced to seek protection under Federal
bankruptcy laws.
10
<PAGE> 11
The Company's principal source of liquidity as of December 28, 1998
consisted of $8.4 million of cash. The Company has no availability under any
credit facility. As of December 28, 1998, the Company had negative working
capital of $18.9 million and stockholders deficit of $18.9 million.
ITEM 1. LEGAL PROCEEDINGS
Rao Cherukuri et al. v. PeQuR Technology, Inc., et al, Civil No. CV757267
(Santa Clara Court). Plaintiffs and the Company had previously agreed in
principle to settle this litigation for $35,000. However, to date, the Company
and plaintiffs have been unable to agree in a definitive settlement agreement
and the Company believes that it is unlikely that a settlement agreement will
be entered into in the near future, if at all.
ITEM 2. CHANGES IN SECURITIES
On December 29, 1998, pursuant to the Plan of Liquidation and Dissolution
adopted by the Company's Board of Directors and approved by the Company's
majority stockholder, the Company filed a certificate of dissolution with the
Secretary of State of the State of Delaware. Subsequent to the filing of the
certificate of dissolution, the Company's stock transfer books were closed. As
a result, the Company's common and preferred stock will no longer be treated as
outstanding.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
---------- -----------
<S> <C>
10.1* Consulting Agreement between Jack Simpson, Sr. and the
Company dated as of January 1, 1999
10.2* Consulting Agreement between Francis S. (Kit) Webster III
and the Company dated as of January 1, 1999
10.3 Consulting Agreement between Carter L. Godwin and the
Company dated as of January 1, 1999
27* Financial Data Schedule
</TABLE>
* Previously Filed
(b) Reports on Form 8-K
One Current Report on Form 8-K dated December 29, 1998 reporting the
consummation of the agreement of the sale of Company's BridgePoint business
unit and the filing of a certificate of dissolution with the Secretary of the
State of Delaware.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROSS TECHNOLOGY, INC., a Delaware corporation
Date: March 9, 1999 /s/ F. S. (KIT) WEBSTER III
----------------------------------------
F. S. (Kit) Webster III
Chief Financial Officer
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
<S> <C>
10.1* Consulting Agreement between Jack Simpson, Sr. and the
Company dated as of January 1, 1999
10.2* Consulting Agreement between Francis S. (Kit) Webster III
and the Company dated as of January 1, 1999
10.3 Consulting Agreement between Carter L. Godwin and the
Company dated as of January 1, 1999
27* Financial Data Schedule
</TABLE>
* Previously filed
<PAGE> 1
EXHIBIT 10.3
CONSULTING AGREEMENT
1. This Consulting Agreement is entered into between Carter Godwin
("Consultant") and ROSS Technology, Inc. ("ROSS").
2. Consultant agrees to provide consulting services to ROSS on an as
needed, and, except as expressly provided in Section 3 below, non-exclusive and
non-full-time basis by Consultant as an Independent Contractor for a term of
twelve months (the "Term"), commencing January 1, 1999. Consultant shall perform
any such consulting services in a diligent, competent and timely manner.
3. From January 1, 1999 through April 22, 1999 (the "Initial Period"),
Consultant shall devote such time during and outside normal business hours for
the purpose of performing the tasks identified in general and within the time
limits specified on Exhibit A (the "Required Activities"). Exhibit A also sets
forth the approximate number of hours that ROSS and Consultant currently believe
will be required for Consultant to satisfactorily complete the Required
Activities. Following completion of the Required Activities to the reasonable
satisfaction of ROSS, Consultant shall be reasonably available for consulting
with ROSS at such times both during and outside of normal business hours as ROSS
may reasonably require, subject, however, to Consultant's prior business and
professional commitments, vacation plans and absences due to illness or injury.
Such consulting services shall be provided in such manner and at such locations
(including by telephone) as will least inconvenience Consultant. Consultant
shall be responsible for determining the location at which and the manner in
which the consulting services will be provided.
4. For the consulting services to be performed by Consultant with respect
to the Required Activities, or as otherwise reasonably requested during the
Initial Period, ROSS shall pay Consultant a flat fee of $33,000, payable in four
equal monthly installments of $8,250. ROSS shall make such payments on or
<PAGE> 2
before the 10th day of February through May, 1999. For any other consulting
services performed by Consultant at ROSS's request after the latter of
completion of the Required Activities or the Initial Period, ROSS shall pay
Consultant an hourly rate equal to $100.00. Unless other arrangements are made
with ROSS, Consultant shall invoice ROSS on a monthly basis for such other
consulting services rendered to ROSS pursuant to this Agreement. ROSS shall
reimburse Consultant for all reasonable and documented out-of-pocket expenses,
including but not limited to expenses for travel, if any, incurred in connection
with any consulting services rendered pursuant to this Agreement. Any expenses
in excess of $1,000 must be approved in advance by ROSS's President, Chief
Financial Officer or their respective designees.
5. ROSS shall also pay Consultant a bonus equal to $27,000. Such bonus
shall be paid in full on April 22, 1999, provided that the Required Activities
have been completed to the reasonable satisfaction of ROSS's President or his
designee.
6. Consultant agrees that when this consultancy with ROSS ends or at any
time upon ROSS's request, Consultant will immediately deliver to ROSS any
documents or materials of whatever nature relating to ROSS which Consultant
acquired during the period of the consultancy or are otherwise in Consultant's
possession.
7. Consultant agrees that during the period of this consultancy and
thereafter, not to use or disclose confidential trade secret or confidential
information of ROSS and not to disparage ROSS or any officer, director,
shareholder, employee or affiliate of ROSS or otherwise make statements which
could injure the personal or business reputation of any of them.
8. This Agreement may be terminated by ROSS upon thirty days written notice
to Consultant, although such termination shall not relieve ROSS of the
obligation to make the bonus payment to Consultant provided for in paragraph 5.
2
<PAGE> 3
9. This Agreement is in addition to any other agreements which may exist
between Consultant and ROSS and shall not be deemed to supercede or replace any
other written Agreement between the parties. This Agreement, however, does
constitute the entire Agreement of the parties with respect to consulting
obligations. There are no other agreements, written or oral, express or implied,
between the parties, concerning consulting arrangements. This Agreement may be
amended only by an agreement in writing.
10. Consultant shall be liable for all federal, state or local income taxes
with regard to any taxable benefit or payment conferred by this Agreement and
shall indemnify the Company with regard to any such taxes. ROSS may, however,
withhold taxes to the extent it determines that such withholding is required.
Executed as of the first day of January, 1999 in Austin, Texas.
By: /s/ Carter L. Godwin
--------------------------------------
Carter Godwin
ROSS Technology, Inc.
By: /s/ Jack W. Simpson
--------------------------------------
Its: President and Chief Executive Officer
3
<PAGE> 4
EXHIBIT - A
CARTER L. GODWIN
<TABLE>
<CAPTION>
TASK COMPLETION DATE OWNER(S)
- ---- --------------- --------
<S> <C> <C>
Complete last 10Q 1/29/99 Carter, Stefanie & Mark
File Final Tax return 2/26/99 Carter
Final notice of closure with all 2/26/99 Mark
states in which Sales Tax returns
have been filed
File Final Franchise Tax Return 3/05/99 Carter
File Final 5500 for 401(k) Plan 1/15/99 Carter
Issue W2s 1/15/99 Mark
Issue 1099s 1/29/99 Stefanie
Clear all A/R remaining after BP 1/08/99 Carter, Stefanie
sale
Close all "open" accounts 1/08/99 Carter
(mainly common couriers)
Process any A/R and A/P activity 3/05/99 Carter, Stefanie
sent to ROSS in error that belongs
to BP
Respond to W2 questions 4/15/99 Carter
Respond to Benefit questions 4/15/99 Marcia (Mark?)
Process on-going Company A/P 3/31/99 Carter
Archive all remaining 4/22/99 Carter
Accounting, HR and Corporate
documents
Index Archived Files 4/22/99 Carter
Respond to FJ inquiries 3/31/99 Carter
Coordinate legal Issues (i.e. 4/30/99 Carter
contacting all appropriate parties
and interfacing as necessary)
</TABLE>
ESTIMATED HOURS - CALENDAR 1Q99
