8-K/A 1 d8ka.htm AMENDMENT 1 TO FORM 8-K Prepared by R.R. Donnelley Financial -- Amendment 1 to Form 8-K
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form 8-K/A
 
Amended Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):    January 31, 2002
 
 
Echelon Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
  
000-29748
  
77-0203595
(State or other jurisdiction
of incorporation)
  
(Commission File Number)
  
(I.R.S. Employer
Identification No.)
550 Meridian Avenue, San Jose, California
      
95126
(Address of principal executive offices)
      
(Zip Code)
 
Registrant’s telephone number, including area code:    (408) 938-5200
 
(Former name or former address, if changed since last report.)
 
 

 
Item 7.    Financial Statements, Pro Forma Financial Information and Exhibits.
 
On February 14, 2002, Echelon Corp. (the “Company” or “Echelon”) filed a Current Report on Form 8-K to report its acquisition of BeAtHome, Inc. (“BeAtHome”) on January 31, 2002. Pursuant to Item 7 of Form 8-K, Echelon indicated that it would file certain financial information under Item 7 of Form 8-K no later than the date required. This Amendment is filed to provide the required financial information and to amend the language of sections (a), (b), and (c) of Item 7.
 
(a)  Financial Statements of Business Acquired
 
The required financial information of BeAtHome has been included hereto in exhibit 99.3.
 
(b)  Pro Forma Financial Information
 
The pro forma financial statements included in this Amended Current Report, Form 8-K/A are as follows:
 
Financial Statement Description
   
Page
• Unaudited Pro Forma Combined Condensed Financial Information
   
3
• Unaudited Pro Forma Combined Condensed Balance Sheet As of December 31, 2001
   
4
• Unaudited Pro Forma Combined Condensed Statements of Operations for the Year Ended December 31, 2001
   
5
• Notes to the Unaudited Pro Forma Combined Condensed Financial Statements
   
6
 
(c)  Exhibits
 
Exhibit Number
     
Description
2.1
*
   
Agreement and Plan of Reorganization dated as of January 7, 2002 by and among Echelon Corporation, BeAtHome.com, Inc., BAH Acquisition Corporation, Thor Iverson, Dan and Lisa Malmstrom, Jeff Johnson, Dan Schulz, Howard Dahl, David Arvig, and with respect to Articles VII and IX only Thor Iverson as Stockholder Representative and U.S. Bank Trust, National Association as Escrow Agent.
23.1
 
   
Consent of Arthur Andersen LLP
99.1
*
   
Press Release dated January 8, 2002.
99.2
*
   
Press Release dated February 1, 2002.
99.3
 
   
BeAtHome, Inc. audited financial statements for the years ended December 31, 2000 and 2001.
99.4
 
   
Company Letter of Representations Regarding Arthur Andersen LLP
 
 
*
 
Previously Filed as Exhibits to our Current Report on Form 8-K filed with the Commission on February 14, 2002.

2

 
ECHELON CORP. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
 
On January 31, 2002, Echelon Corp. (“Echelon”) completed the acquisition of BeAtHome.com, Inc. (“BeAtHome”), through the merger of a wholly owned subsidiary of Echelon with and into BeAtHome, with BeAtHome surviving as a wholly owned subsidiary of Echelon (the “Merger”).
 
The following unaudited pro forma combined condensed financial information has been prepared to give effect to the Merger, to be accounted for using the purchase method of accounting. This financial information reflects certain assumptions deemed probable by management regarding the Merger. The total estimated purchase cost of the Merger has been allocated on a preliminary basis to assets and liabilities based on management’s best estimates of their fair value with the excess cost over the net assets acquired allocated to goodwill. The adjustments to the unaudited pro forma combined condensed financial information are subject to change pending a final analysis of the total purchase cost and the fair value of the assets and liabilities assumed. The impact of these changes could be material.
 
The unaudited pro forma combined condensed balance sheet as of December 31, 2001 gives effect to the Merger as if it had occurred on December 31, 2001, and combines the historical consolidated balance sheet of Echelon and the historical balance sheet of BeAtHome as of that date.
 
The unaudited pro forma combined condensed statement of operations for the year ended December 31, 2001 combines the historical consolidated statement of operations of Echelon for the year ended December 31, 2001 with the historical statement of operations of BeAtHome for the year ended December 31, 2001.
 
The unaudited pro forma combined condensed financial information is based on estimates and assumptions. These estimates and assumptions are preliminary and have been made solely for purposes of developing this pro forma information. Unaudited pro forma combined condensed financial information is presented for illustrative purposes only and is not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during this period. This unaudited pro forma combined financial information is based upon the respective historical consolidated financial statements of Echelon and notes thereto, previously filed with the Securities and Exchange Commission, and should be read in conjunction with those statements and the related notes.

3

 
ECHELON CORPORATION AND SUBSIDIARIES
 
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
(in thousands)
 
    
Historical
    
Adjustments
  
Combined
  
    
Echelon As of December 31, 2001
     
BeAtHome As of December 31, 2001
    
Amount
     
Reference
  
Assets
                                       
Current Assets:
                                       
Cash and cash equivalents
   
$
23,232
 
   
$
37
 
  
$
(2,381
)
   
(a)
  
$
20,888
 
Short-term investments
   
 
88,421
 
   
 
3
 
  
 
—  
 
       
 
88,424
 
Accounts receivable, net
   
 
29,113
 
   
 
47
 
  
 
—  
 
       
 
29,160
 
Inventories
   
 
10,316
 
   
 
—  
 
  
 
—  
 
       
 
10,316
 
Other current assets
   
 
11,556
 
   
 
24
 
  
 
—  
 
       
 
11,580
 
    
  
 
      
Total current assets
   
 
162,638
 
   
 
111
 
  
 
—  
 
       
 
160,368
 
Property and equipment, net
   
 
16,480
 
   
 
347
 
  
 
—  
 
       
 
16,827
 
Other long-term assets
   
 
4,084
 
   
 
4
 
  
 
—  
 
       
 
4,088
 
Goodwill and other intangible assets, net
   
 
2,452
 
   
 
—  
 
  
 
4,995
 
   
(a)
  
 
7,447
 
    
  
 
      
    
$
185,654
 
   
$
462
 
  
$
2,614
 
       
$
188,730
 
    
  
 
      
Liabilities and Stockholders’ Equity
                                       
Current Liabilities:
                                       
Accounts payable
   
$
7,409
 
   
$
748
 
  
$
—  
 
       
$
8,157
 
Notes payable
   
 
—  
 
   
 
2,090
 
  
 
(550
)
   
(a)
  
 
1,540
 
Accrued liabilities
   
 
2,426
 
   
 
638
 
  
 
—  
 
       
 
3,064
 
Deferred revenues
   
 
1,055
 
   
 
—  
 
  
 
—  
 
       
 
1,055
 
    
  
 
      
Total current liabilities
   
 
10,890
 
   
 
3,476
 
  
 
(550
)
       
 
13,816
 
    
  
 
      
Deferred rent
   
 
47
 
   
 
—  
 
  
 
—  
 
       
 
47
 
Stockholders’ Equity:
                                       
Common stock
   
 
390
 
   
 
16
 
  
 
(16
)
       
 
390
 
Additional paid-in capital
   
 
265,787
 
   
 
5,116
 
  
 
(4,566
)
   
(a)
  
 
266,337
 
Treasury stock
   
 
(3,191
)
   
 
—  
 
  
 
—  
 
       
 
(3,191
)
Deferred compensation
   
 
(31
)
   
 
—  
 
  
 
—  
 
       
 
(31
)
Accumulated other comprehensive income
   
 
38
 
   
 
—  
 
  
 
—  
 
       
 
38
 
Accumulated deficit
   
 
(88,276
)
   
 
(8,146
)
  
 
(7,746
)
   
(a),(b)
  
 
(88,676
)
    
  
 
      
Total stockholder’s equity
   
 
174,717
 
   
 
(3,014
)
  
 
3,164
 
       
 
174,867
 
    
  
 
      
    
$
185,654
 
   
$
462
 
  
$
2,614
 
       
$
188,730
 
    
  
 
      
 
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements

4

 
ECHELON CORPORATION AND SUBSIDIARIES
 
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(in thousands)
 
      
Historical
     
Adjustments
         
      
Echelon Year Ended December 31, 2001
       
BeAtHome
Year Ended
December 31, 2001
     
Amount
       
Reference
     
Combined
  
Revenues:
                                                 
Product
     
$
74,777
 
     
$
463
 
   
$
—  
 
            
$
75,240
 
Service
     
 
1,812
 
     
 
28
 
   
 
—  
 
            
 
1,840
 
      
    
  
           
Total revenues
     
 
76,589
 
     
 
491
 
   
 
—  
 
            
 
77,080
 
Cost of revenues:
                                                 
Product
     
 
34,842
 
     
 
966
 
   
 
—  
 
            
 
35,808
 
Service
     
 
2,347
 
     
 
579
 
   
 
—  
 
            
 
2,926
 
      
    
  
           
Total cost of revenues
     
 
37,189
 
     
 
1,545
 
   
 
—  
 
            
 
38,734
 
      
    
  
           
Gross margin
     
 
39,400
 
     
 
(1,054
)
   
 
—  
 
            
 
38,346
 
      
    
  
           
Operating Expenses:
                                                 
Product development
     
 
17,028
 
     
 
1,309
 
   
 
100
 
     
(a
)
   
 
18,437
 
Sales and marketing
     
 
15,787
 
     
 
1,098
 
   
 
—  
 
            
 
16,885
 
General and administrative
     
 
6,942
 
     
 
1,608
 
   
 
—  
 
            
 
8,550
 
Impairment of long-lived assets
     
 
—  
 
     
 
125
 
   
 
—  
 
            
 
125
 
      
    
  
           
Total operating expenses
     
 
39,757
 
     
 
4,140
 
   
 
100
 
            
 
43,997
 
      
    
  
           
Loss from operations
     
 
(357
)
     
 
(5,194
)
   
 
(100
)
            
 
(5,651
)
Interest and other income (expense), net
     
 
6,655
 
     
 
(74
)
   
 
—  
 
            
 
6,581
 
      
    
  
           
Income/(loss) before provision for income taxes
     
 
6,298
 
     
 
(5,268
)
   
 
(100
)
            
 
930
 
Provision for income taxes
     
 
252
 
     
 
—  
 
   
 
—  
 
     
(b
)
   
 
252
 
      
    
  
           
Net income/(loss)
     
$
6,046
 
     
$
(5,268
)
   
$
(100
)
            
$
678
 
      
    
  
           
Net income per share:
                                                 
Basic
     
$
0.16
 
                                
$
0.02
 
      
                               
Diluted
     
$
0.15
 
                                
$
0.02
 
      
                               
Shares used in per share calculation:
                                                 
Basic
     
 
38,443
 
                                
 
38,443
 
      
                               
Diluted
     
 
41,141
 
                                
 
41,141
 
      
                               
 
 
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements

5

ECHELON CORPORATION AND SUBSIDIARIES
 
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS

 
Note 1.    Unaudited Pro Forma Combined Condensed Balance Sheet
 
The unaudited pro forma combined condensed balance sheet gives effect to the Merger as if it had occurred on December 31, 2001 with respect to the balance sheets of Echelon and BeAtHome.
 
On January 8, 2002, Echelon announced it would acquire all of the outstanding capital stock of BeAtHome, pay off certain of BeAtHome’s debts, and assume certain other of BeAtHome’s liabilities in exchange for $3,000,000 in cash (subject to certain adjustments). The following adjustments have been reflected in the unaudited pro forma combined condensed balance sheet:
 
(a)  To record the application of purchase accounting, including the write-off of purchased in-process research and development (“IPR&D”).
 
The total estimated purchase price of approximately $2,931,000 consists of cash paid to BeAtHome’s shareholders of approximately $2,041,000; the forgiveness of $550,000 in loans made by Echelon to BeAtHome prior to the completion of the Merger; and estimated direct transaction costs of approximately $340,000.
 
The amounts and components of the estimated purchase price is presented below ($    thousands):
 
Cash paid
   
$
2,041
Loans forgiven
   
 
550
Transaction costs
   
 
340
    
Total purchase price
   
$
2,931
    
 
Under purchase accounting, the total purchase price will be allocated to BeAtHome’s assets and liabilities based on their fair values. Allocations are subject to valuations as of the date of the consummation of the merger. The total purchase price is expected to be allocated to tangible assets and liabilities, identifiable intangible assets, including in-process research and development (“IPR&D”) and purchased technology, and goodwill. The purchased technology is expected to be amortized over two years and the IPR&D will be written-off upon consummation of the Merger.
 
The fair value assigned to IPR&D was estimated by discounting, to present value, the cash flows attributable to the technology once it has reached technological feasibility. The discount rate was calculated based on BeAtHome’s estimated weighted average cost of capital (“WACC”). The cost of equity was determined by utilizing the Capital Asset Pricing Model (“CAPM”) and by reviewing published studies, which analyze market returns required by venture capitalists for various developmental-stage companies. The IPR&D discount rate of 50 percent represents a premium over the calculated WACC of 25 percent. The value assigned to IPR&D was the amount attributable to the efforts of BeAtHome up to the time of acquisition. This amount was estimated through application of the “stage of completion” calculation by multiplying the estimated present value of future cash flows, excluding costs of completion, by the percentage of completion of the purchased research and development project at the time of acquisition.
 
The preliminary allocation of the purchase price to the net assets acquired is presented below ($        thousands).
 
Preliminary fair value of net liabilities of BeAtHome
   
$
(3,014
)
Intangible assets:
         
Purchased technology
   
 
200
 
Goodwill
   
 
5,345
 
In-process research and development
   
 
400
 
    
Net assets acquired
   
$
2,931
 
    
 
The actual allocation of the purchase price will depend upon the composition of BeAtHome’s net assets on the closing date and Echelon’s evaluation of the fair value of the net assets as of the date indicated. Consequently, the actual allocation of the purchase price could differ from that presented above.
 

6

ECHELON CORPORATION AND SUBSIDIARIES
 
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS—(Continued)

 
Note
 
2. Unaudited Pro Forma Combined Condensed Statement of Operations
(b)  To record the income statement effect of the pro forma adjustments. The $100,000 adjustment is the result of the amortization of the purchased technology. It is currently anticipated that the $200,000 value assigned to the purchased technology will be amortized over the expected two-year life of the asset. The effects of the write-off of IPR&D have not been included in the unaudited pro forma combined condensed statement of operations.
 

7

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
ECHELON CORPORATION
 
Dated:  April 16, 2002
 
 
By:
  
/s/    OLIVER R. STANFIELD        
   
Oliver R. Stanfield
Executive Vice President and Chief Financial Officer

8

 
EXHIBIT INDEX
 
Exhibit Number
   
Description
    2.1*

   
Agreement and Plan of Reorganization dated as of January 7, 2002 by and among Echelon Corporation, BeAtHome.com, Inc., BAH Acquisition Corporation, Thor Iverson, Dan and Lisa Malmstrom, Jeff Johnson, Dan Schulz, Howard Dahl, David Arvig, and with respect to Articles VII and IX only Thor Iverson as Stockholder Representative and U.S. Bank Trust, National Association as Escrow Agent.
 
23.1
   
Consent of Arthur Andersen LLP
 
  99.1*
   
Press Release dated January 8, 2002.
 
  99.2*
   
Press Release dated February 1, 2002.
 
99.3
   
Be At Home, Inc. audited financial statements for the years ended December 31, 2000 and 2001.
99.4
   
Company Letter of Representations regarding Arthur Andersen LLP.
            *
 
Previously Filed as exhibits to our Current Report on Form 8-K filed with the Commission on February 14, 2002.