<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
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):
March 30, 1999
---------------------------
AXENT TECHNOLOGIES, INC.
-------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-28100 87-0393420
---------- ------- ----------
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
2400 Research Boulevard, Suite 200
Rockville, Maryland 20850
----------------------------------------------
(Address of principal executive offices) (Zip Code)
(301) 258-5403
-------------------------------
(Registrant's telephone number)
Not applicable
-------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
On April 13, 1999, AXENT Technologies, Inc. ("AXENT") filed a Form 8-K reporting
that on March 30, 1999, AXENT had acquired all of the issued share capital of
CKS Limited ("CKS") under a Share Exchange Agreement dated as of March 29, 1999.
In that transaction, CKS and its operating subsidiaries, PassGo Technologies
Limited, PassGo Group Limited and PassGo Technologies SARL, became subsidiaries
of AXENT, and AXENT agreed to issue a total of one million five hundred fifty
thousand (1,550,000) shares of AXENT common stock for all of the equity
interests in CKS.
In this Amendment No.1 to Form 8-K, AXENT files the consolidated financial
statements of CKS and its subsidiaries for its last fiscal year ended December
31, 1998 and the pro forma financial statements required under Regulation S-X to
be filed as part of this report.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
<TABLE>
<CAPTION>
(a) Financial Statements of Business Acquired. Page Number
----------------------------------------- -----------
<S> <C>
CKS Limited
- --- -------
Report of Independent Auditors................................................ 3
Consolidated Profit and Loss Account for the year ended December 31, 1998..... 4
Consolidated Statement of Total Recognized Gains and Losses for the year
ended December 31, 1998...................................................... 5
Consolidated Balance Sheet as of December 31, 1998............................ 6
Consolidated Cash Flow Statement for the year ended December 31, 1998......... 7
Notes to the Consolidated Financial Statements................................ 8
(b) Pro Forma Financial Information.
-------------------------------
Unaudited Pro Forma Consolidated Financial Information....................... 24
Unaudited Pro Forma Consolidated Statements of Operations
for the year ended December 31, 1998........................................ 25
Notes to the Unaudited Pro Forma Consolidated Statements of Operations....... 27
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1998....... 29
Notes to Unaudited Pro Forma Consolidated Balance Sheet...................... 31
(c) Signatures.............................................................. 32
----------
</TABLE>
1
<PAGE>
(d) Exhibits.
--------
Exhibit Number Exhibit Name
-------------- ------------
10.37 The Share Exchange Agreement.
10.39 Consent of Ernst and Young
2
<PAGE>
CKS LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of CKS Limited
We have audited the accompanying consolidated balance sheet of CKS Limited at 31
December 1998 and the related consolidated profit and loss account and
consolidated statement of total recognized gains and losses and cash flow for
the year then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CKS Limited at 31
December 1998 and the consolidated results of its operations and its
consolidated cash flow for the year then ended, in conformity with accounting
principles generally accepted in the United Kingdom which differ in certain
respects from those generally accepted in the United States (see Note 23 of
Notes to Financial Statements).
Ernst & Young
Bristol, England
Date 14 June 1999,
3
<PAGE>
CKS LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in British Pounds Sterling)
<TABLE>
<CAPTION>
1998
--------------------
<S> <C>
Turnover (Note 2) (Pounds) 8,526,056
Administrative expenses (10,008,767)
--------------------
(1,482,711)
Operating loss
Bank interest receivable 20,800
Interest payable and similar charges (Note 6) (200,623)
Deficit arising on revaluation of freehold land and buildings (405,262)
--------------------
Loss on ordinary activities before taxation (Note 3) (2,067,796)
Tax on loss on ordinary activities (Note 7) 11,262
--------------------
Loss for the financial year* (2,056,534)
Other appropriations
Non-equity shares 29,474
--------------------
Retained loss for the year (Pounds) (2,027,060)
====================
</TABLE>
__________
* A summary of the significant adjustments to loss for the financial year that
would be required if U.S. generally accepted accounting principles were to be
applied instead of those generally accepted in the United Kingdom is set forth
in Note 23 of Notes to Financial Statements.
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CKS LIMITED
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in British Pounds Sterling)
<TABLE>
<CAPTION>
1998
--------------------
<S> <C>
Loss for the financial year
(Pounds) (2,056,534)
Exchange loss on retranslation of net assets of
subsidiary undertaking and foreign branches (91,168)
--------------------
Total recognized gains and losses relating to the year (Pounds) (2,147,702)
====================
</TABLE>
______________
The statement of comprehensive income required under U.S. generally accepted
accounting principles is set forth in Note 23 of Notes to Financial Statements.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CKS LIMITED
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(amounts in British Pounds Sterling)
<TABLE>
<CAPTION>
1998
------------------
<S> <C>
Fixed Assets
Intangible fixed assets (Note 8) (Pounds) 792,512
Tangible fixed assets (Note 9) 1,328,971
------------------
2,121,483
------------------
Current Assets
Debtors (Note 10) 3,741,497
Cash at bank and in hand (Note 11) 298,578
------------------
4,040,075
------------------
Creditors: amounts falling due within one year (Note 12) 4,846,409
------------------
Net Current Liabilities (806,334)
------------------
Total Assets Less Current Liabilities 1,315,149
Creditors: amounts falling due after more than one year (Note 13) 574,062
------------------
(Pounds) 741,087
==================
Capital and Reserves*
Called up share capital (Note 17) (Pounds) 6,703,552
Share premium account (Note 18) 382,879
Capital redemption reserve (Note 18) 278,200
Profit and loss account (Note 18) (6,623,544)
------------------
(Pounds) 741,087
==================
Shareholders' Funds
Equity (Pounds)(4,121,144)
Non equity (Note 19) 4,862,951
------------------
(Pounds) 741,087
====================
</TABLE>
____________________
* A summary of the significant adjustments to capital and reserves that would be
required if U.S. generally accepted accounting principles were to be applied
instead of those generally accepted in the United Kingdom is set forth in Note
23 of Notes to Financial Statements.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
CKS LIMITED
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in British Pounds Sterling)
<TABLE>
<CAPTION>
1998
----------------------
<S> <C>
Net Cash Outflow From Operating Activities (Note 3b) (Pounds) (1,868,323)
----------------------
Returns On Investments And Servicing Of Finance
Interest received 20,800
Interest paid (187,372)
Interest element of hire purchase repayments (13,251)
Finance costs on issue of non equity shares (60,606)
----------------------
(240,429)
----------------------
Taxation
U.K. corporation tax paid (158,669)
----------------------
Capital Expenditure And Financial Investment
Purchase of tangible fixed assets (176,899)
----------------------
Net Cash Outflow Before Financing (2,444,320)
----------------------
Financing
Issue of preference shares 1,090,909
Issue of ordinary shares 131,513
Finance costs on issue of equity shares (10,339)
Repayment of capital element of hire purchase contracts (26,885)
Net movement on bank borrowings (946,303)
----------------------
Net Inflow From Financing 238,895
----------------------
Decrease In Cash (Note 11) (Pounds) (2,205,425)
======================
Reconciliation Of Net Cash Flow To Movement In Net Debt
Decrease in cash (Pounds) (2,205,425)
Repayments of capital element of hire purchase contracts 26,885
Net movement in bank borrowings 946,303
----------------------
Change in net debt resulting from cash flows (1,232,237)
New hire purchase contracts (51,337)
----------------------
Movement In Net Debt (1,283,574)
Net Funds At January 1, 1998 (Note 11) 145,548
----------------------
Net Debt At December 31, 1998 (Note 11) (Pounds) (1,138,026)
======================
</TABLE>
__________________
The significant differences between the cash flow statement presented above and
that required under U.S. generally accepted accounting principles is set forth
in Note 23 of Notes to Financial Statements.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
CKS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Accounting convention-The financial statements are prepared under the
historical cost convention and applicable U.K. accounting standards.
Basis of consolidation-The consolidated profit and loss account and balance
sheet include the financial statements of the company and its subsidiary
undertaking made up to 31 December 1998. Intra-group sales and profits are
eliminated fully on consolidation.
Goodwill-Goodwill arising on consolidation represents the excess of the
fair value of the consideration given over the fair value of the
identifiable net assets acquired.
Goodwill, which had previously been eliminated against reserves, has not
been reinstated on 1 January 1998 as permitted by FRS 10.
Tangible assets-The cost of tangible assets is their purchase cost,
together with any incidental expenses of acquisition.
Depreciation-Depreciation is calculated so as to write off the cost of
tangible fixed assets, less their estimated residual values, on a straight-
line basis over the expected useful economic lives of the assets concerned.
The annual rates used for this purpose are:
Plant and equipment 25%
Motor vehicles 25%
Fixtures and fittings 25%
Property improvements 20%
Freehold property 2%
Freehold property-Freehold property is made up of a listed building, an
unlisted building and improvements to property.
These are carried at open market value.
Freehold property has previously not been depreciated as it is maintained
to a sufficient condition so that the difference between the carrying value
and realizable value and the amount of depreciation would not be material.
The freehold property has been revalued in the year as detailed in Note 9.
8
<PAGE>
Intangible assets-Development expenditure relating to the specific internal
and external costs of creating software products for commercial
exploitation is capitalised as intangible fixed assets once commercial
feasibility has been achieved. Costs incurred prior to this are written off
as incurred. Capitalised development costs are amortised over the period of
benefit to the group from distribution and maintenance revenues from the
commencement of sales. In respect of the MyNet product, this period of
benefit is expected to be five years, which commenced in 1997.
Leasing and hire purchase commitments-Where fixed assets are acquired under
hire purchase agreements, the assets are treated as if they had been
purchased outright and are included in tangible fixed assets. The capital
element of the hire purchase commitments are shown as obligations under
hire purchase. The repayments are treated as consisting of capital and
interest elements. The capital element is applied to reduce the outstanding
obligations and the interest element is charged against profit in
proportion to the reducing capital element outstanding. Assets held under
hire purchase agreements are depreciated over the shorter of the hire term
and the useful lives of equivalent owned assets.
Rentals payable under operating leases are charged in the profit and loss
account on a straight-line basis over the lease term.
Foreign currencies-Assets and liabilities of branches denominated in
foreign currencies are translated into sterling at rates of exchange ruling
at the end of the financial year. Differences on exchange arising from the
translation of the opening net assets of the branches are taken to reserves
and reported in the statement of total recognized gains and losses.
All other foreign exchange differences are taken to the profit and loss
account as incurred.
Deferred taxation-Provision is made for deferred taxation, using the
liability method, on all material timing differences to the extent that it
is probable a liability will crystallise.
Pensions-A subsidiary undertaking operates a defined contribution pension
scheme, which is independent of that company's finances. Contributions are
fixed by the fund managers and are charged against profits in the period
they are made.
2. TURNOVER
Turnover, which is stated net of value-added tax and trade discounts,
represents the invoiced value of goods and services supplied. Income from
maintenance contracts is recognized pro-rata over the life of the contract
corresponding to delivery of the service.
Turnover is attributable to one continuing activity, the development, sale,
distribution and maintenance of technical software.
9
<PAGE>
An analysis of turnover by geographical market is as follows:
<TABLE>
<CAPTION>
1998
------------------------
<S> <C>
United Kingdom (Pounds) 2,204,313
Rest of Europe 3,145,196
United States 3,176,547
------------------------
(Pounds) 8,526,056
========================
</TABLE>
3. LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
(a) Loss on ordinary activities before taxation is stated after
charging/(crediting):
<TABLE>
<CAPTION>
1998
------------------
<S> <C>
Depreciation of owned fixed assets (Pounds) 172,977
Depreciation of fixed assets held under hire purchase contracts 28,001
Amortization of deferred development expenditure 264,171
Auditors' remuneration 17,000
Loss on disposal of fixed assets 1,215
Operating lease rentals - plant, machinery and vehicles 506,355
Operating lease rentals - land and buildings 273,768
Profit on foreign exchange (33,291)
==================
</TABLE>
(b) Reconciliation of operating loss to net cash outflow from operating
activities:
<TABLE>
<CAPTION>
1998
--------------------
<S> <C>
Operating loss (Pounds) (1,482,711)
Depreciation of tangible fixed assets 200,978
Amortization of development costs 264,171
Loss on sale of tangible fixed assets 1,215
Increase in debtors (1,429,958)
Increase in creditors 669,150
Exchange loss arising on retranslation of net assets of subsidiary
undertaking and foreign branches (91,168)
--------------------
Net cash outflow from operating activities (Pounds) (1,868,323)
====================
</TABLE>
10
<PAGE>
4. DIRECTORS' EMOLUMENTS
<TABLE>
<CAPTION>
1998
----------------------
<S> <C>
Emoluments (Pounds) 139,484
======================
Company contributions paid to money purchase pension scheme (Pounds) 10,175
======================
No
Member of money purchase pension scheme 1
======================
</TABLE>
5. STAFF COSTS
<TABLE>
<CAPTION>
1998
-------------------
<S> <C>
Wages and salaries (Pounds) 3,852,100
Social security costs 417,233
Other pension costs 155,849
-------------------
(Pounds) 4,425,182
===================
</TABLE>
The average monthly number of persons employed by the group during the year
was as follows:
<TABLE>
<CAPTION>
1998
---------------------
<S> <C>
No
Production and distribution 94
Administration 15
---------------------
109
=====================
<CAPTION>
6. INTEREST PAYABLE AND SIMILAR CHARGES
1998
-------------------
<S> <C>
Bank loans and overdraft (Pounds) 187,372
Finance charges payable under hire purchase contracts 13,251
-------------------
(Pounds) 200,623
===================
</TABLE>
11
<PAGE>
7. TAX ON LOSS ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1998
-------------------
<S> <C>
U.K. corporation tax (Pounds) ---
Over provision in respect of prior years (44,000)
Irrecoverable withholding tax written off 32,738
-----------------
(Pounds) (11,262)
=================
</TABLE>
As a result of available losses there is no current year U.K. corporation
tax charge. Losses available to carry forward at 31 December 1998 are
estimated at (Pounds)1.7 million.
8. INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Development Costs
---------------------
<S> <C>
Cost:
At January 1, 1998 and December 31, 1998 (Pounds) 1,320,854
=====================
Amortization:
At January 1, 1998 264,171
Provided during the year 264,171
=====================
At December 31, 1998 528,342
=====================
Net book value at December 31, 1998 (Pounds) 792,512
=====================
Net book value at January 1, 1998 (Pounds) 1,056,683
=====================
</TABLE>
Development costs relate to specific projects undertaken by the group's
development department based at Horton Cross. The major project to date is
the creation of a single sign on product, which has been styled "MyNet".
Intensive work began on this project in October 1995. The product became
commercially available in 1997 and is being amortized over a five-year
period from that time.
12
<PAGE>
9. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Vehicles,
Freehold fixtures and
property equipment Total
------------------- --------------------- --------------------
<S> <C> <C> <C>
Cost:
At January 1, 1998 (Pounds) 1,190,507 (Pounds) 1,468,365 (Pounds) 2,658,872
Exchange adjustment --- 4,815 4,815
Additions --- 228,236 228,236
Transfer 61,598 (61,598) ---
Disposals --- (9,724) (9,724)
Deficit arising on revaluation (452,105) --- (452,105)
------------------- --------------------- --------------------
At December 31, 1998 800,000 1,630,094 2,430,094
------------------- --------------------- --------------------
Depreciation:
At January 1, 1998 22,203 930,451 952,654
Exchange adjustment --- 2,843 2,843
Transfer 12,320 (12,320) ---
Provided during the year 12,320 188,658 200,978
Disposals --- (8,509) (8,509)
Elimination on revaluation (46,843) --- (46,843)
------------------- --------------------- --------------------
At December 31, 1998 --- 1,101,123 1,101,123
------------------- --------------------- --------------------
Net book value at December 31, 1998 (Pounds) 800,000 (Pounds) 528,971 (Pounds) 1,328,971
=================== ===================== ====================
Net book value at January 1, 1998 (Pounds) 1,168,304 (Pounds) 537,914 (Pounds) 1,706,218
=================== ===================== ====================
</TABLE>
The net book value of vehicles, fixtures and equipment includes an amount
of (Pounds)179,626 in respect of assets held under hire purchase contracts.
Freehold land and buildings were valued at their open market valuation, in
accordance with the Appraisal and Valuation Manual of the Royal Institution
of Chartered Surveyors, on 14 September 1998 by Alder King, Property
Consultants.
13
<PAGE>
On the historical cost basis, these freehold land and buildings would have
been included as follows:
<TABLE>
<S> <C>
Cost:
At January 1, 1998 (Pounds) 1,084,621
======================
At December 31, 1998 (Pounds) 1,146,219
======================
Cumulative depreciation based on cost:
At January 1, 1998 (Pounds) 22,203
======================
At December 31, 1998
(Pounds) 46,843
======================
</TABLE>
10. DEBTORS
<TABLE>
<CAPTION>
1998
----------------------
<S> <C>
Trade debtors (Pounds) 3,296,266
Corporation tax 214,972
Other debtors 105,907
Prepayments and accrued income 124,352
----------------------
(Pounds) 3,741,497
======================
</TABLE>
Included within trade debtors is (Pounds)14,412, which falls due after more
than one year. Included within other debtors is (Pounds)27,000 relating to
an amount owed by an officer of the company.
11. ANALYSIS OF CHANGES IN NET FUNDS/(DEBT)
<TABLE>
<CAPTION>
At
At January 1, 1998 Cash Flow Other Changes December 31, 1998
------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Cash at bank and in hand (Pounds)1,832,393 (Pounds)(1,533,815) (Pounds) ___ (Pounds) 298,578
Bank overdraft (29,984) (671,610) ___ (701,504)
------------------ ------------------- ---------------- ------------------
1,802,499 (2,205,425) ___ (402,926)
Loans due within one year (128,000) --- ___ (128,000)
Loans due after one year (1,458,303) 946,303 --- (512,000)
Hire purchase contracts (70,648) 26,885 (51,337) (95,100)
------------------ ------------------- ---------------- ------------------
(Pounds) 145,548 (Pounds)(1,232,237) (Pounds)(51,337) (Pounds)(1,138,026)
================== =================== ================ ==================
</TABLE>
14
<PAGE>
12. CREDITORS: amounts falling due within one year
<TABLE>
<CAPTION>
1998
---------------------
<S> <C>
Current installment due on bank loan (see Note 14) (Pounds) 128,000
Overdraft 701,504
Obligations under hire purchase contracts (see Note 15) 33,038
Trade creditors 348,850
Taxation and social security costs 244,097
Other creditors 187,308
Accruals and deferred income 3,203,612
---------------------
(Pounds) 4,846,409
=====================
</TABLE>
Accruals and deferred income include (Pounds)2,585,837 in respect of
deferred maintenance revenue.
Bank overdrafts include a Revolving Credit Facility with Greyrock Business
Credit of (Pounds)3 million made available up to 31 October 1999 at an
aggregate interest rate of 4.5% per annum over LIBOR.
This facility is secured by a debenture containing fixed and floating
charges in favor of Greyrock Business Credit over the subsidiary
undertaking's obligations under the facility.
The fixed charge is over all present and future equipment of the subsidiary
undertaking together with any investments held (whether marketable or not)
in whatever form. All book and other debtors (excluding any bank deposits
and credit balances with Lloyds Bank Plc) and revenues both present and
future are also covered, together with any interests in patents, trade
marks and/or goodwill held or acquired by the subsidiary undertaking.
The floating charge is over all other property assets of the subsidiary
undertaking not subject to the fixed charge under the debenture.
13. CREDITORS: amounts falling due after more than one year
<TABLE>
<CAPTION>
1998
-------------------
<S> <C>
Loan (see Note 14) (Pounds) 512,000
Obligations under hire purchase contracts (see Note 15) 62,062
-------------------
(Pounds) 574,062
===================
</TABLE>
15
<PAGE>
14. LOAN
<TABLE>
<CAPTION>
1998
------------------------
<S> <C>
The bank loan is repayable as follows:
In one year or less (Pounds) 128,000
Between one and two years 128,000
Between two and five years 384,000
-------------------------
(Pounds) 640,000
=========================
</TABLE>
During the year the group rearranged its debt financing through the
repayment of the existing facility with Lloyds Bank Plc. This facility was
replaced by the Revolving Credit Facility with Greyrock Business Credit (see
note 12) and a Treasury Loan Facility with Barclays Bank PLC of
(Pounds)640,000 repayable over 5 years in equal quarterly installments of
(Pounds)32,000. Interest is payable under this facility at an aggregate
interest rate of 3.5% per annum above LIBOR plus the associated cost rate to
reflect the cost of the lender's dealings with the Bank of England. This
facility is secured under a floating charge over all of the undertaking,
property and assets of the subsidiary undertaking and a first legal charge
over Horton Manor and the land at Horton Cross.
The parties to these arrangements and the subsidiary undertaking are subject
to an inter lender deed which regulates the respective rights of recourse to
the assets of the subsidiary undertaking.
15. OBLIGATIONS UNDER HIRE PURCHASE CONTRACTS
Amounts due under hire purchase contracts:
<TABLE>
<CAPTION>
1998
----------------------------
<S> <C>
Amounts payable:
In one year or less (Pounds) 41,367
Between one and two years 37,128
Between two and five years 31,273
----------------------------
109,768
Less: finance charges allocated to future periods (14,668)
----------------------------
(Pounds) 95,100
============================
Hire purchase contracts are analyzed as follows:
Current obligations (Pounds) 33,038
Non-current obligations 62,062
----------------------------
(Pounds) 95,100
============================
</TABLE>
16
<PAGE>
16. PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation which has been fully provided in the accounts is as
follows:
<TABLE>
<CAPTION>
1998
----------------------------
<S> <C>
Accelerated capital allowances (Pounds) 147,000
Losses available for offset (147,000)
----------------------------
(Pounds) -
============================
</TABLE>
17. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1998 1998
No. of Shares Amount
------------------- ------------------
<S> <C> <C>
Authorized
Preference shares of U.S. $1 each 6,272,500 (Pounds) 3,772,042
'A' preference shares of U.S. $1 each 1,800,000 1,090,909
Ordinary shares of 20p each 8,968,595 1,793,719
'A' ordinary shares of 20p each 4,381,405 876,281
------------------- ------------------
21,422,500 (Pounds) 7,532,951
=================== ==================
Allotted, called up and fully paid
Preference shares of U.S. $1 each 6,272,500 (Pounds) 3,772,042
'A' preference shares of U.S. $1 each 1,800,000 1,090,909
Ordinary shares of 20p each 6,076,665 1,215,333
'A' ordinary shares of 20p each 3,126,338 625,268
------------------- ------------------
17,275,503 (Pounds) 6,703,552
=================== ==================
</TABLE>
On 12 January 1998 1,954 ordinary shares of (Pounds)1 each were issued at
par for cash of (Pounds)1,954 following the exercise of a number of share
options.
The company undertook a significant share capital restructuring exercise on
20 January 1998. A 100: 1 bonus issue occurred for the holders of the
ordinary shares and 'A' ordinary shares and, subsequent to this, the
existing (Pounds)1 share options held over the ordinary and 'A' ordinary
share capital have been adjusted accordingly. At the same time, the
(Pounds)1 ordinary shares and (Pounds)1 'A' ordinary shares were divided
into 20p ordinary shares and 20p 'A' ordinary shares.
On 31 May 1998 Mr. R Davis exercised the options held over 39,895 ordinary
shares of 20p each at their par value for a consideration of (Pounds)7,979.
A further U.S.$2m was raised through a number of share issues on 25 August
1998.
1,800,000 'A' preference shares of U.S.$1 each were issued at their par
value for cash of (Pounds)1,090,909. These 'A' preference shares rank
equally in all respects with the existing U.S.$1
17
<PAGE>
preference shares, except for the entitlement of U.S.$1.1109 per share in
the event of a winding up or redemption. 45,000 of these shares were issued
to Mr. G Reyes, a director of the company.
In addition, 607,903 'A' ordinary shares of 20p each were issued at their
par value for cash of (Pounds)121,580 together with a matching number of
equity warrants to subscribe for further 'A' ordinary shares of 20p each.
At 31 December 1998 these warrants were exercisable at any time in the
five-year period ending 25 August 2003 at an exercise price of U.S.$3.29
per share. 15,198 of these shares and 15,198 equity warrants were issued to
Mr. G Reyes.
Finally, equity warrants to subscribe for 30,395 ordinary shares of 20p
each at an exercise price of U.S.$3.29 per share were also issued. At 31
December 1998 these warrants were also exercisable at any time between the
date of issue and 25 August 2003.
The 'A' ordinary shares rank pari passu for capital and dividends and in
all other respects with the existing ordinary shares in issue.
The U.S.$1 preference shares carry a fixed cumulative preferential dividend
of 6% per share per annum. However, no accrual has been made as ultimate
payment is considered to be remote. These preference shares are redeemable
at the earlier of:
a) the company becoming listed on a recognized stock exchange;
b) July 2001.
At 31 December 1998 one organization was entitled within five years from 9
July 1997 to exercise a warrant to subscribe for 91,405 ordinary shares of
20p each in the capital of the company at a price of U.S.$3.285 per share.
The same organization was entitled within five years from 18 December 1997
to exercise a warrant to subscribe for 30,300 ordinary shares of 20p each
in the capital of the company at a price of U.S.$3.285 per share.
At 31 December 1998 this same organization was also entitled to subscribe
for 30,395 ordinary shares of 20p each within five years from 25 August
1998 at a price of U.S.$ 3.29 per share.
At 31 December 1998 one shareholder was entitled within five years from 18
December 1997 to exercise a warrant to subscribe for 592,986 'A' ordinary
shares of 20p each in the capital of the company at a price of U.S.$3.285
per share.
The same shareholder was also entitled within 5 years from 25 August 1998
to subscribe for 592,705 'A' ordinary shares of 20p each of the company at
a price of U.S.$ 3.29 per share.
At 31 December 1998 Mr. Reyes was entitled within five years from 18
December 1997 to exercise a warrant to subscribe for 15,127 'A' ordinary
shares in the capital of the company and for 15,198 'A' ordinary shares
within five years from 25 August 1998, both at a price of U.S.$3.29 per
share.
18
<PAGE>
18. RECONCILIATION OF SHAREHOLDERS' FUNDS AND MOVEMENT ON RESERVES
<TABLE>
<CAPTION>
Capital Profit
Share Share redemption and loss
Capital premium reserve account Total
---------------- ------------------ ---------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
At January 1, 1998 (Pounds)3,816,503 (Pounds)2,147,924 (Pounds) 278,200 (Pounds)(4,505,316) (Pounds)1,737,311
Retained loss for the
financial year -- -- -- (2,027,060) (2,027,060)
New shares issued 1,222,423 -- -- -- 1,222,423
Utilized on bonus issue 1,694,100 (1,694,100) -- -- --
Share issue costs -- (70,945) -- -- (70,945)
Loss on retranslation of
net assets of
subsidiary undertaking
and foreign branches -- -- -- (91,168) (91,168)
Retranslation of U.S.$
preference shares (29,474) -- -- -- (29,474)
----------------- ----------------- --------------- ------------------ ---------------
At December 31, 1998 (Pounds)6,703,552 (Pounds)382,879 (Pounds)278,200 (Pounds)(6,623,544) (Pounds)741,087
================= ================= =============== ================== ===============
</TABLE>
19. NON-EQUITY SHAREHOLDERS' FUNDS
Non-equity shareholders' funds are attributable as follows:
<TABLE>
<CAPTION>
1998
------------------------
<S> <C>
U.S.$1 preference shares (Pounds) 3,772,042
U.S.$1 'A' preference shares 1,090,909
-----------------------
(Pounds) 4,862,951
=======================
</TABLE>
20. FINANCIAL COMMITMENTS
At 31 December 1998 the group had annual commitments under non-cancelable
operating leases as set out below:
<TABLE>
<CAPTION>
Land and
Buildings Other
1998 1998
--------------------- -------------------
<S> <C> <C>
Operating leases which expire:
Within one year (Pounds) 23,913 (Pounds) 444,617
Between two and five years inclusive 88,327 98,737
After more than five years 145,169 --
----------------------- -----------------------
(Pounds) 257,409 (Pounds) 543,354
======================= =======================
</TABLE>
19
<PAGE>
21. PENSION COMMITMENT
A subsidiary undertaking operates a defined contribution pension scheme.
The assets of the scheme are held separately from those of the group in an
independently administered fund.
22. COMPANIES ACT 1985
These consolidated financial statements do not constitute "statutory
accounts" within the meaning of the Companies Act 1985 of Great Britain.
Statutory accounts for the year ended 31 December 1998 will be delivered to
the Registrar of Companies for England and Wales. The auditor's report on
these statutory accounts was unqualified and did not contain statements
under Section 237(2) and (3) of the Companies Act 1985.
23. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AFFECTING THE FINANCIAL STATEMENTS
The financial statements are prepared in conformity with accounting
principles generally accepted in the United Kingdom (U.K. GAAP), which
differ in certain significant respects from those applicable in the U.S.,
(U.S. GAAP). The differences applicable to the group are described below:
Goodwill and other intangible assets-Under U.K. GAAP in force at the time
of the acquisition, goodwill arising has been charged to reserves. Under
U.S. GAAP, goodwill is capitalised and amortised by charges against income
over its estimated useful life, not to exceed 40 years. For U.S. GAAP,
goodwill has been amortised over a period of seven years.
Deferred taxation -Under U.K. GAAP, provision is made for deferred taxation
only to the extent that it is probable that an actual liability or asset
will crystallise in the foreseeable future. U.S. GAAP require full
provision for deferred income taxes under the liability method on all
temporary differences and, if required, a valuation allowance is
established to reduce gross deferred taxation assets to the amount which is
more likely than not to be realised.
Revaluation of fixed assets-Under U.K. GAAP, the group has revalued certain
fixed assets. Upward revaluations are not permitted under U.S. GAAP.
However, impairments have to be recognised by writing down long-lived
assets to their fair value. The write down under U.K. GAAP establishes a
new basis under U.S. GAAP, and no reconciling adjustment is required.
Current assets and liabilities-Under U.K. GAAP, current assets include
amounts, which fall due after more than one year. Under U.S. GAAP, such
assets would be classified as non-current assets.
20
<PAGE>
Foreign exchange-Under U.K. GAAP, the results of foreign branches and the
subsidiary undertaking for the year are translated into sterling at the
closing rate of exchange. U.S. GAAP require translation of the results at
the average rate of exchange ruling for the year.
Revenue recognition-The group includes a warranty period with the majority
of its sales contracts under which they agree to offer technical support
and any relevant product upgrades during the term of this warranty. The
revenue relating to the warranty element of new sales contracts is
recognised in full at the time of invoicing in the U.K. Under U.S. GAAP the
revenue relating to this element of the sale is required to be deferred and
recognised pro-rata over the period covered by the warranty.
Effect on loss for the financial year of differences between U.K. and U.S.
GAAP:
<TABLE>
<CAPTION>
1998
---------------------
<S> <C>
Loss for the financial year as reported under U.K. GAAP (Pounds)(2,056,534)
U.S. GAAP adjustments:
Amortization of goodwill (506,283)
Foreign exchange (74,840)
Deferred taxation 343,011
Revenue recognition (89,715)
---------------------
Net loss under U.S. GAAP (Pounds) (2,384,361)
=====================
Comprehensive income:
1998
---------------------
Net loss under U.S. GAAP (Pounds)(2,384,361)
Other comprehensive income:
Foreign exchange translation (91,168)
---------------------
Comprehensive income under U.S. GAAP (Pounds)(2,475,529)
=====================
</TABLE>
21
<PAGE>
Effect on shareholders' funds of differences between U.K. and U.S. GAAP:
<TABLE>
<CAPTION>
1998
----------------------
<S> <C>
Shareholders' funds as reported under U.K. GAAP (Pounds) 741,087
U.S. GAAP adjustments:
Goodwill at cost 3,543,984
Accumulated amortization (2,025,133)
----------------------
1,518,851
Deferred taxation 450,579
Revenue recognition (309,516)
----------------------
(Pounds) 2,401,001
======================
</TABLE>
Cash flow-The principal difference between U.K. GAAP and U.S. GAAP is in respect
of classification. Under U.K. GAAP the group presents its cash flows for
operating activities, returns on investments and servicing of finance, taxation,
capital expenditure and financial investment, acquisitions and disposals, equity
dividends paid, management of liquid resources and financing. U.S. GAAP
requires only three categories of cash flow activities which are operating,
investing and financing.
Cash flows arising from taxation and returns on investments and servicing of
finance under U.K. GAAP would, with the exception of dividends paid, be included
as operating activities under U.S. GAAP; dividend payments would be included as
a financing activity under U.S. GAAP. In addition, capital expenditure and
financial investment, acquisition and disposals and management of liquid
resources under U.K. GAAP would be presented as investing activities under U.S.
GAAP.
U.K. GAAP defines cash as cash in hand and deposits repayable on demand less
overdrafts held with any qualifying financial institution. U.S. GAAP defines
cash and cash equivalents as cash in hand and short term highly liquid
investments with original maturities exceeding three months or less. Cash flows
in respect of short-term deposits with original maturities exceeding three
months are included in investing activities under U.S. GAAP and are included in
capital expenditure and financial investment under U.K. GAAP.
22
<PAGE>
Under U.S. GAAP the following amounts would be reported:
<TABLE>
<CAPTION>
1998
---------------------
<S> <C>
Net cash used in operating activities (Pounds) (2,176,253)
Net cash used in investing activities (176,899)
Net cash provided by financing activities 910,505
Effect of changes in exchange rate (91,168)
---------------------
Net decrease in cash and cash equivalents (1,533,815)
Cash and cash equivalents at beginning of year 1,832,393
Cash and cash equivalents at end of year ---------------------
(Pounds) 298,578
=====================
</TABLE>
23
<PAGE>
AXENT TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet at December 31,
1998 presents, on a pro forma basis, AXENT Technologies, Inc.'s (the "Company")
consolidated financial position assuming the acquisition of CKS Limited ("CKS")
had been consummated on December 31, 1998. The following Unaudited Pro Forma
Consolidated Statement of Operations for the year ended December 31, 1998
(collectively with the Unaudited Pro Forma Consolidated Balance Sheet, the "Pro
Forma Financial Information") present, on a pro forma basis, the Company's
consolidated results of operations assuming (i) the acquisition of CKS and (ii)
the issuance by the Company of 1,486,146 shares of common stock to stockholders
of CKS had each occurred on January 1, 1998.
The acquisition has been accounted for as a purchase business combination and,
accordingly, the purchase price has been allocated to tangible assets acquired
and liabilities assumed, based upon their respective fair values, with the
excess allocated to intangible assets to be amortized over the estimated
economic lives of the intangible assets from the respective dates of
acquisition. The Company received an independent third party valuation to
establish the allocation of the total purchase price of this acquisition to the
various assets acquired, including in-process research and development and the
liabilities assumed. The portion of the purchase price allocated to in-process
research and development will be recognized in the historical financial
statements in the period in which the acquisition occurred. The consolidated
accumulated deficit reflected in the Unaudited Pro Forma Consolidated Balance
Sheet reflects the write-off of intangible assets attributable to the value of
purchased in-process research and development associated with the acquisition of
CKS. The expense related to in-process research and development is not reflected
in the Unaudited Pro Forma Consolidated Statements of Operations because such
expense will not have a continuing impact.
The Pro Forma Financial Information is not intended to be indicative of the
results which would actually have been obtained had the transactions described
above occurred on the dates indicated or which may be obtained in the future.
The pro forma adjustments are based upon available information and assumptions
that the Company believes are reasonable in the circumstance. The Pro Forma
Financial Information should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto included in the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1998 as filed
with the Securities and Exchange Commission (the "Commission") and the financial
statements of CKS included elsewhere in this Form 8-K.
24
<PAGE>
AXENT TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in thousands of U.S. dollars, except per share amounts)
<TABLE>
<CAPTION>
CKS Pro Forma Pro Forma
AXENT Limited Adjustments Consolidated
(a) (b) (c) (d)
--------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Net revenues:
Product licenses $ 80,912 $ 8,265 $ - $ 89,177
Services 20,118 5,695 - 25,813
--------------- --------------- ---------------- ------------------
Total net revenues 101,030 13,960 - 114,990
Cost of net revenues 9,804 1,158 - 10,962
--------------- --------------- ---------------- ------------------
Gross profit 91,226 12,802 - 104,028
Operating expenses:
Sales and marketing 41,209 8,776 - 49,985
Research and development 18,956 2,816 - 21,772
General and administrative 5,995 5,006 - 11,001
Amortization of acquired intangible 450 437 4,043 2a 4,930
assets
Acquisition-related charges 17,422 - - 17,422
--------------- --------------- ---------------- ------------------
Total operating expenses 84,032 17,035 4,043 105,110
--------------- --------------- ---------------- ------------------
Profit (loss) before royalties, interest
and taxes 7,194 (4,233) (4,043) (1,082)
Interest income and other 4,895 (298) - 4,597
Royalty income 1,862 - - 1,862
Income tax benefit (provision) (7,507) 586 - (6,921)
--------------- --------------- ---------------- ------------------
Net income (loss) $ 6,444 $(3,945) $(4,043) $ (1,544)
================= ================= ================== ==================
Net income (loss) per common share (basic): $0.26 $(0.06)
================= ==================
Number of shares used in computing net
income (loss) per common share
outstanding (basic) 25,205 1,486 2b 26,691
================= ================== ==================
Net income (loss) per common share
(diluted): $0.24 $(0.06)
================= ==================
Number of shares used in computing net
income (loss) per common share
outstanding (diluted) 26,740 (49) 3 26,691
================= ================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
(a) Reflects the unaudited consolidated results of operations of the Company
restated for the acquisition of Internet Tools, Inc. ("ITI") for the year
ended December 31, 1998. On January 12, 1999 the Company consummated its
merger with ITI in which it acquired 100% of the outstanding stock of ITI.
The ITI business combination has been accounted for by the pooling-of-
interests method of accounting and, accordingly, the assets, liabilities and
stockholders' equity of ITI were combined with the Company's historical
accounts at recorded values. This acquisition did not meet the criteria for
a significant business combination and as such pro forma disclosures were
not included in the audited results of operations for the year ended
December 31, 1998 as presented in the Company's annual report for 1998 on
Form 10-K.
(b) Amounts have been derived from the translated historical British pound
sterling denominated results of operations of CKS for the twelve month
period ended December 31, 1998 prepared in accordance with accounting
principles generally accepted in the United States. The historical statement
of operations of CKS has been converted to U.S. dollars at the weighted
average exchange rate for the period presented. Certain amounts have been
reclassified to conform with the Company's presentation.
(c) See Note 2 to Unaudited Pro Forma Consolidated Statements of Operations.
(d) Reflects the results of operations of the Company, on a pro forma basis,
assuming (i) the acquisition of CKS and (ii) the issuance by the Company of
1,486,146 shares of common stock to stockholders of CKS, had each been
consummated on January 1, 1998.
See notes to Pro Forma Financial Information
26
<PAGE>
AXENT TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
Note 1 - Basis of Presentation
The Unaudited Pro Forma Consolidated Statements of Operations do not give effect
to potential cost savings and synergies that could result from the acquisition
included therein. Management believes that the assumptions used in preparing the
Unaudited Pro Forma Consolidated Statements of Operations provide a reasonable
basis for presenting the significant effects for the acquisition included
therein, that the pro forma adjustments give appropriate effect to those
assumptions and that the pro forma adjustments are properly applied in the
Unaudited Pro Forma Consolidated Statements of Operations.
Note 2 - Pro Forma Adjustments
The pro forma adjustments outlined below relate to the acquisition of CKS
Limited. The purchase price has been allocated to tangible assets acquired and
liabilities assumed, based upon their respective fair values, with the excess
allocated to intangible assets to be amortized over the estimated economic lives
of the intangible assets from the date of acquisition.
The Company received an independent third party valuation to determine the
allocation of the total purchase price of CKS. For purposes of this Pro Forma
Financial Information, the Company has attributed the excess of the purchase
price over the acquired net tangible assets for CKS of approximately $25 million
to goodwill and other intangible assets with useful lives of between three and
seven years. The actual goodwill recorded as of the acquisition date was
approximately $26 million. The difference between the actual goodwill amount
and the amount included in the pro forma balance sheet herein is due to the
change in the net assets of CKS between December 31, 1998 and the acquisition
date. Based on the results of the independent third party valuation, $2 million
of the purchase price was allocated to in-process research and development and
is being expensed in the Company's consolidated operating results in the period
in which the acquisition occurred. The expense related to purchased in-process
research and development has not been reflected in the accompanying Unaudited
Pro Forma Consolidated Statement of Operations because the charge will not have
a continuing impact.
For the Year Ended December 31, 1998:
(a) Reflects the increase in goodwill amortization resulting from the
allocation of the purchase price to the acquired net tangible and
intangible assets (principally tradename, customer relationships,
goodwill, assembled workforce and existing technology) relating to the
acquisition included therein. The assigned lives of the acquired
intangible assets range from three to seven years.
27
<PAGE>
(b) Reflects the adjustment to weighted average shares assuming the
issuance of 1,486,146 shares of common stock to stockholders of CKS
Limited had occurred on January 1, 1998.
Note 3 - Basic and Diluted Net Loss per Share
Basic and diluted net loss per share are computed using net loss available to
common stockholders divided by the weighted average number of shares of the
Company's common stock that were outstanding during the period presented and
assumes that the issuance of 1,486,146 shares of common stock to stockholders of
CKS Limited had occurred on January 1, 1998. As all common stock equivalents
are antidilutive, basic and diluted net loss per share are the same for the
period presented.
28
<PAGE>
AXENT TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(amounts in thousands of U.S. dollars)
<TABLE>
<CAPTION>
CKS Pro Forma Pro Forma
AXENT Limited Adjustments Consolidated
(a) (b) (c) (d)
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 80,035 $ 496 $ --- $ 80,531
Marketable securities 31,774 --- --- 31,774
Accounts receivable, net 28,300 5,473 --- 33,773
Other current assets 4,128 1,487 --- 5,615
--------- ---------- ----------- ------------
Total current assets 144,237 7,456 --- 151,693
Property and equipment, net 7,482 2,207 --- 9,689
Goodwill and other intangible assets 2,630 3,838 24,968 2a 31,436
Other assets 6,927 --- --- 6,927
--------- ---------- ----------- ------------
Total assets $ 161,276 $ 13,501 $ 24,968 $ 199,745
========= ========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 15,764 $ 3,681 $ 6,000 2b 25,445
Deferred revenue 11,184 5,833 --- 17,017
--------- ---------- ---------- ------------
Total liabilities 26,948 9,514 6,000 42,462
--------- ---------- ---------- ------------
Stockholders' equity:
Preferred --- 8,075 (8,075) 2c ---
Common stock 523 3,056 (3,056) 2c 554
31 2d
Additional paid-in capital 161,386 636 (636) 2c 186,310
24,924 2d
Accumulated deficit (27,211) (7,904) 7,904 2c (29,211)
(2,000) 2e
Accumulated comprehensive income and
other (370) 124 (124) 2c (370)
--------- ---------- ---------- ------------
Total stockholders' equity 134,328 3,987 18,968 157,283
--------- ---------- ---------- ------------
Total liabilities and stockholders' equity $ 161,276 $ 13,501 $ 24,968 $ 199,745
========= ========== ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
(a) Reflects the unaudited consolidated financial position of the Company
restated for the ITI acquisition as of December 31, 1998. On January 12,
1999 the Company consummated its merger with ITI in which it acquired 100%
of the outstanding stock of ITI. The ITI business combination has been
accounted for by the pooling-of-interests method of accounting and,
accordingly, the assets, liabilities and stockholders' equity of ITI were
combined with the Company's historical accounts at recorded values. This
acquisition did not meet the criteria for a significant business
combination and as such, pro forma disclosures were not included in the
audited consolidated financial position of the Company as of December 31,
1998 as presented in the Company's annual report for 1998 on Form 10K.
(b) Reflects the translated historical British pounds sterling denominated
financial position of CKS as of December 31, 1998. The historical balance
sheet of CKS has been converted to U.S. dollars at the December 31, 1998
exchange rate.
(c) See Note 2 to Unaudited Pro Forma Consolidated Balance Sheet.
(d) Reflects the consolidated financial position of the Company, on a pro forma
basis, assuming the acquisition of CKS Limited had been consummated on
December 31, 1998.
See notes to Pro Forma Financial Information.
30
<PAGE>
AXENT TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
Note 1 - Basis of Presentation
Management believes that the assumptions used in preparing the Unaudited Pro
Forma Consolidated Balance Sheet provide a reasonable basis for presenting the
significant effects of the acquisition of CKS , that the pro forma adjustments
give appropriate effect to those assumptions and that the pro forma adjustments
are properly applied in the Unaudited Pro Forma Consolidated Balance Sheet.
Note 2 - Pro Forma Adjustments
Reflects the pro forma effects of the acquisition of CKS Limited including: (a)
allocation of purchase price among net tangible and intangible assets as
discussed below; (b) estimated acquisition related costs; (c) the elimination
of the equity accounts of the acquired company; (d) the issuance of a total of
1,550,000 shares of AXENT stock for all the equity interests in CKS valued at
$16.10 per share ($24.9 million) based on the approximated weighted average
price (based on volume of shares traded) during the period from March 29, 1999
to April 5, 1999; and (e) the write-off of in-process research and development
based on an independent third party valuation performed as of the acquisition
date.
The Company received an independent third party valuation to determine the
allocation of the total purchase price of CKS. For purposes of the Unaudited
Pro Forma Consolidated Financial Information, the Company has attributed the
excess of the purchase price over the acquired net tangible assets of CKS at
December 31, 1998 of approximately $25 million to goodwill and other intangibles
with useful lives of between three and seven years. The adjustment was computed
as follows (000's):
<TABLE>
<S> <C>
1,550,000 shares of AXENT common stock at $16.10 per share $ 24,995
Acquisition costs 6,000
-----------
Purchase consideration $ 30,955
Write-off of in-process research and development (2,000)
CKS net assets at December 31, 1998 (3,987)
-----------
Purchase price allocated to goodwill $ 24,968
===========
</TABLE>
The actual goodwill recorded as of the acquisition date was approximately $26
million. The difference between the actual goodwill amount and the amount
included in the pro forma balance sheet herein is due to the change in the net
assets of CKS between December 31, 1998 and the acquisition date.
31
<PAGE>
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 thereunto duly authorized.
Date: June 14, 1999 AXENT Technologies, Inc.
/s/ Robert B. Edwards, Jr.
---------------------------------------
By: Robert B. Edwards, Jr.
Title: Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
32
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
10.37 (1) Share Exchange Agreement dated as of March 29, 1999 by and among
AXENT Technologies, Inc. and the holders of all of the shares of
capital stock, issued share capital and warrants of CKS Limited.
10.39 * Consent of Ernst and Young
________________________________________________________________________________
(1) Previously filed as an exhibit to AXENT's Form 8-K dated March 30, 1999 and
filed on April 13, 1999.
* File herewith.
33
<PAGE>
EXHIBIT 10.39
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 Nos. 333-71333, 333-79089 and 333-62689 and Form S-8 Nos. 333-73029,
333-47379, 333-47375, 333-47373, 333-08831, 333-08829 and 333-08827) of AXENT
Technologies, Inc. of our report dated 14 June 1999 with respect to the
consolidated financial statements of CKS Limited for the year ended 31 December
1998 included in the Current Report on Form 8-K of AXENT Technologies, Inc.
dated 30 March 1999.
Ernst & Young
Bristol, England
14 June 1999
