<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
October 1, 1999
- --------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
ONYX SOFTWARE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its
charter)
Washington 0-68559 91-1629814
- ------------------------ ---------------------- ------------------
(State of incorporation) (Commission file number) (I.R.S. Employer
Identification No.)
3180 139TH AVENUE NE, SUITE 500
BELLEVUE, WASHINGTON 98005-4091
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
(425) 451-8060
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Amendment No. 1 to the Current Report on Form 8-K dated October 1, 1999
of Onyx Software Corporation relates to Onyx's acquisition of Market Solutions
Limited, a corporation formed under the laws of England, pursuant to a Sale and
Purchase Agreement dated as of October 1, 1999, by and among Onyx and the
shareholders of Market Solutions. The purpose of this amendment is to provide
the financial statements of Market Solutions required by Item 7(a) of Form 8-K
and the pro forma financial information required by Item 7(b) of Form 8-K, which
information was excluded from the original filing in reliance upon Item 7(a)(4)
of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Market Solutions Limited Audited Financial Statements
(i) Report of Feltons Chartered Accountants, Independent Auditors
(ii) Statements of Operations for the years ended 31/st/ July 1999 and
1998
(iii) Balance Sheets as of 31/st/ July 1999 and 1998
(iv) Statements of Cash Flows for the years ended 31/st/ July 1999 and
1998
(v) Directors' Report for the years ended 31/st/ July 1999 and 1998
(vi) Notes to Financial Statements for the years ended 31/st/ July 1999
and 1998
Market Solutions Limited Condensed Financial Statements (unaudited)
(i) Balance Sheets as of September 30, 1999 and December 31, 1998
(ii) Statements of Operations for the nine months ended September 30,
1999 and 1998
(iii) Statements of Cash Flows for the nine months ended September 30,
1999 and 1998
(iv) Notes to Financial Statements for the nine months ended September
30, 1999 and 1998
(b) PRO FORMA FINANCIAL INFORMATION
Pro Forma Combined Condensed Consolidated Financial Statements (unaudited)
(i) Pro Forma Combined Condensed Consolidated Balance Sheet as of
September 30, 1999
(ii) Pro Forma Combined Condensed Consolidated Statement of Operations
for the year ended December 31, 1998
(iii) Pro Forma Combined Condensed Consolidated Statement of Operations
for the nine month period ended September 30, 1999
(iv) Notes to Pro Forma Combined Condensed Consolidated Financial
Statements
<PAGE>
(c) EXHIBITS
2.1 Sale and Purchase Agreement dated as of October 1, 1999, by and among Onyx
Software Corporation and the shareholders of Market Solutions Limited
(incorporated by reference to exhibit 2.1 to the registrant's Current
Report on Form 8-K (file no. 0-68559) filed on October 15, 1999).
10.1 Amended and Restated Investors' Rights Agreement, dated as of December 14,
1998, by and among the registrant, Foundation Capital, L.P., Foundation
Capital Entrepeneurs Fund, L.L.C., TCV II, V.O.F., Technology Crossover
Ventures II, L.P., TCV II (Q), L.P., TCV II Strategic Partners, L.P.,
Technology Crossover Ventures II, C.V., Hillman/Dover Limited Partnership,
Brent Frei, Brian Janssen, Todd Stevenson, Mary Forler, Ronald Frei, Glenda
Frei, Barbara Stevenson, Leon Stevenson, Michael Racine, Mary Winifred
Racine, Bettie Ruzicka, Larry L. Ruzicka, Colleen Chmelik, James Chmelik,
J. Michael Ellis and Barbara S. Ellis (incorporated by reference to
exhibit 10.1 to the registrant's Registration Statement on Form S-1 (file
no. 333-68559), filed on January 21, 1999).
23.1 Consent of Feltons Chartered Accountants, Independent Auditors
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Market Solutions Limited:
We have audited the accounts of Market Solutions Limited as of and for the years
ended 31/st/ July 1999 and 1998 in accordance with the financial reporting
standard for small entities and the accounting policies set out in the notes
hereto. The Company's directors are responsible for the preparation of the
accounts. It is our responsibility to form an independent opinion, based on our
audit, on those accounts and report our opinion to you.
We conducted our audits in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgments made by the
directors in the preparation of the accounts, and of whether the accounting
policies are appropriate to the Company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion, we also evaluated the overall adequacy of the
presentation of the information in the accounts.
In our opinion, the accounts give a true and fair view of the state of the
Company's affairs as at 31/st/ July 1999 and 1998 and of its losses and profits
respectively for the years then ended and have been properly prepared in
accordance with the Companies Act 1985.
Feltons
Chartered Accountants and Registered Auditors
Windsor, Berkshire
29/th/ October 1999
<PAGE>
MARKET SOLUTIONS LIMITED
PROFIT AND LOSS ACCOUNT
YEAR ENDED 31/st/ JULY 1999 AND 1998
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Turnover (Note 2) (Pounds) 2,882 (Pounds) 3,014
Cost of sales 84 118
--------------- ---------------
Gross profit 2,798 2,896
--------------- ---------------
Administrative expenses 3,265 2,680
--------------- ---------------
(467) 216
Other operating income 12
--------------- ---------------
Operating (loss)/profit (Note 3) (467) 228
Interest receivable 15 15
Interest payable and similar charges (Note 5) (6) (5)
--------------- ---------------
(Loss)/profit on ordinary activities before
taxation (458) 238
Tax on (loss)/profit on ordinary
activities (Note 6) (44) 40
--------------- ---------------
(Loss)/profit for the financial year (414) 198
Dividends (Note 16) - 115
--------------- ---------------
(Loss)/profit for the financial year (Note 17) (414) 83
Retained profit brought forward 295 212
--------------- ---------------
Retained (loss)/profit carried forward (119) 295
=============== ===============
</TABLE>
All amounts relate to continuing activities.
There were no recognized gains or losses for 1999 or 1998 other than those
included in the profit and loss account.
See notes to financial statements.
<PAGE>
MARKET SOLUTIONS LIMITED
BALANCE SHEETS
JULY 31, 1999 AND 1998
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
FIXED ASSETS:
Tangible assets, net (Note 7) (Pounds) 187 (Pounds) 210
CURRENT ASSETS:
Debtors (Note 8) (Pounds) 471 (Pounds) 1,285
Cash at bank and in hand 207 406
-------------- ---------------
678 1,691
CREDITORS:
Amounts falling due within one year (Note 9) 956 1,563
-------------- ---------------
NET CURRENT (LIABILITIES)/ASSETS: (278) 128
-------------- ---------------
TOTAL ASSETS LESS CURRENT LIABILITIES: (91) 338
CREDITORS:
Amounts falling due after more than one year (Note 10) 17 32
-------------- ---------------
TOTAL (108) 306
============== ===============
CAPITAL AND RESERVES:
Share capital - equity (Note 12) 11 11
Profit and loss account (Note 17) (119) 295
-------------- ---------------
Shareholders' funds (Note 13) (108) 306
============== ===============
</TABLE>
These accounts were approved by the board on 26/th/ October 1999 and signed on
its behalf.
/s/ Tania Holmes /s/ Phil Meek
Director Director
See notes to financial statements.
<PAGE>
MARKET SOLUTIONS LIMITED
CASH FLOW STATEMENT
YEAR ENDED 31/st/ July 1999 AND 1998
- --------------------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Reconciliation of Operating Loss to Net Cash flow from Operating Activities
Operating (loss) profit (467) 228
Depreciation 56 52
Loss on sale of fixed assets - -
Decrease in debtors 813 (741)
Decrease in creditors (564) 849
------------------
Net cash flow from operating activities (162) 388
------------------
CASH FLOW STATEMENT
Net cash flow from operating activities (162) 388
Returns on investments and servicing of finance (Note 18) 9 10
Taxation 5 (27)
Capital expenditure and financial investment (Note 18) (33) (116)
Equity dividends paid - (115)
------------------
Cash flow before use of liquid resources and financing (181) 140
Management of liquid resources (Note 18) - -
Financing (Note 18) (18) 28
------------------
(Decrease)/increase in cash (199) 168
------------------
Reconciliation of Net Cash Flow to Movement in Net Debt
(Decrease)/Increase in cash in the year (199) 168
Cash flow from decrease in net debt and lease financing (Note 19) 18 (28)
------------------
Increase in net debt (Note 19) (181) 140
Net debt at beginning of year 342 202
------------------
Net funds at end of year (Note 19) 161 342
------------------
</TABLE>
<PAGE>
MARKET SOLUTIONS LIMITED
DIRECTORS' REPORT
YEAR ENDED 31/st/ July 1999 AND 1998
- --------------------------------------------------------------------------------
PRINCIPAL ACTIVITIES AND REVIEW OF BUSINESS
The Company's principal activity continued to be that of software retailing and
related development, training, and consultancy.
The directors do not recommend a dividend
RESEARCH AND DEVELOPMENT
Research and development costs are written off in the year of expenditure.
DIRECTORS
The directors who served during the year and their beneficial interests in the
Company's issued share capital were:
<TABLE>
<CAPTION>
`A' Ordinary Shares `B' Ordinary Shares `C' Ordinary Shares
31/st/ July 1/st/ August 31/st/ July 1/st/ August 31/st/ July 1/st/ August
1999 1998 1999 1998 1999 1999
<S> <C> <C> <C> <C> <C> <C>
Ms. Tania Holmes 5,000 5,000 50 50 - -
Mr. Philip Meek 5,000 5,000 50 50 - -
</TABLE>
EVENTS SINCE THE END OF THE YEAR
On 1/st/ October 1999, the share capital of the Company was purchased by Onyx
Software Corporation, a company incorporated in the United States of America.
POLITICAL AND CHARITABLE CONTRIBUTIONS
The Company gave (Pounds)539 for charitable purposes during the year.
YEAR 2000 COMPLIANCE
As is well known, many computer and digital storage systems express dates using
only the last two digits of the year and will thus require modification or
replacement to accommodate the Year 2000 and beyond in order to avoid
malfunctions and resulting widespread commercial disruption. This is a complex
and pervasive issue. The operation of our business depends not only on our own
computer systems, but also to some degree on those of our suppliers and
customers. This could expose us to further risk in the event that there is a
failure by other parties to remedy their own year 2000 issues.
The Company is well advanced in the phase of assessing the risks to our business
resulting from the date change to the Year 2000. Once this phase is completed we
can assess the likely impact on our activities and develop prioritized action
plans to deal with the key risks.
DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare accounts for each financial year
which give a true and fair view of the state of the Company's affairs and of
the profit or loss for that year. In preparing these accounts the directors are
required to:
Select suitable accounting policies and then apply them consistently;
Make judgments and estimates that are reasonable and prudent;
Prepare the accounts on the going concern basis unless it is inappropriate
to presume that the Company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose, with reasonable accuracy at any time, the financial position of the
Company and enable them to ensure that the accounts comply with the Companies
Act 1985. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
<PAGE>
MARKET SOLUTIONS LIMITED
NOTES TO THE ACCOUNTS
YEAR ENDED 31/st/ July 1999 AND 1998
- --------------------------------------------------------------------------------
1. ACCOUNTING POLICIES
Basis of Accounting
The Accounts have been prepared under the historical cost convention.
Turnover
Turnover is the total amount receivable by the Company for goods supplied and
services provided, adjusted for deferred income and excluding Value Added Tax.
Depreciation
Depreciation is calculated to write down the cost or valuation less estimated
residual value of all tangible fixed assets over their expected useful lives.
The rates and periods generally applicable are:
<TABLE>
<CAPTION>
<S> <C>
Improvements to leasehold 20% per annum on cost
Computer equipment 25% per annum on reducing balance
Motor vehicles 25% per annum on reducing balance
Office furniture and equipment 15% per annum on reducing balance
Software 99.99% per annum on cost
</TABLE>
Research and Development
Research and development costs are written off in the year of expenditure.
Long-Term Contracts
The attributable profit on long-term contracts is recognized once their outcome
can be assessed with reasonable certainty. The profit recognized reflects the
proportion of work completed to date on the project.
Costs associated with long-term contracts are included in the work in progress
to the extent that they cannot be matched with contract work accounted for as
turnover. Long-term contract balances included in work in progress are stated at
cost, after provision has been made for any foreseeable losses and the deduction
of applicable payments on account.
Full provision is made for losses on all contracts in the year in which the loss
is first foreseen.
Deferred Taxation
Deferred tax is provided for under the liability method using the tax rates
estimated to arise when the timing differences reverse and is accounted for to
the extent that it is probable that a material liability or asset will
crystallize. Unprovided deferred tax is disclosed as a contingent liability.
Debit balances arising in respect of advanced corporation tax on dividends
payable or proposed are carried forward to the extent that they are expected to
be recoverable.
Foreign Currencies
Transactions in foreign currencies are translated at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date. All other exchange differences are dealt with through the profit and loss
account.
Contribution to Pension Funds
The pension costs charged against profits represent the amount of the
contributions payable to the scheme in respect of the accounting period.
Leased Assets
Assets held under finance leases and hire purchase contracts are capitalized in
the Balance Sheet and depreciated over their expected useful lives. The interest
element of leasing payments represents a constant proportion of the capital
balance outstanding and is charged to the Profit and Loss Account over the
period of the lease.
<PAGE>
MARKET SOLUTIONS LIMITED
NOTES TO THE ACCOUNTS
YEAR ENDED 31/st/ July 1999 AND 1998
- --------------------------------------------------------------------------------
All other leases are regarded as operating leases and the payments made under
them are charged to the Profit and Loss Account on a straight-line basis over
the lease term.
2. TURNOVER
Turnover is attributable to the principal activity of the Company.
The geographical analysis of turnover is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Europe 10 38
UK 2,878 2,972
Rest of the World (6) 4
-----------------
2,882 3,014
=================
</TABLE>
3. OPERATING (LOSS)/PROFIT
The operating (loss)/profit is arrived at after charging or crediting (in
thousands):
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Depreciation of owned assets 30 28
Depreciation of assets held under finance leases and hire purchase
contracts 26 20
(Profit)/loss on disposal of fixed assets - -
Hire of equipment - operating leases 84 76
Auditors' remuneration 6 5
Research and development - current years expenditure 433
=================
</TABLE>
4. DIRECTORS AND EMPLOYEES
Staff costs, including directors' remuneration, were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Wages and salaries 1,680 1,075
Social security costs 22 11
Other pension costs 42 31
Other costs - 94
-----------------
1,744 1,211
=================
</TABLE>
The average monthly number of employees, including directors, during the year
was as follows:
<TABLE>
<CAPTION>
1999 1998
# #
<S> <C> <C>
Administration 9 6
Management 2 3
Sales and marketing 8 8
Services/Operations 29 25
Product development 3 3
----------------
51 45
================
</TABLE>
Directors' emoluments were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Emoluments 241 151
Directors' pension contributions under defined contribution schemes 24 22
-----------------
265 173
=================
</TABLE>
<PAGE>
MARKET SOLUTIONS LIMITED
NOTES TO THE ACCOUNTS
YEAR ENDED 31/st/ July 1999 AND 1998
- --------------------------------------------------------------------------------
4. DIRECTORS AND EMPLOYEES (continued)
Retirement benefits were accruing to directors under schemes as follows:
<TABLE>
<CAPTION>
1999 1998
# #
<S> <C> <C>
Money purchase schemes 2 2
================
</TABLE>
The highest paid director received emoluments and benefits as follows
(in thousands):
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Emoluments 125 76
Contributions to a money purchase pension scheme 12 11
------------------
137 87
==================
</TABLE>
5. INTEREST PAYABLE AND SIMILAR CHARGES
Interest payable includes (in thousands):
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Interest on finance lease and hire purchase contracts 6 4
==================
</TABLE>
6. TAXATION (in thousands)
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Based on the profit for the year
UK corporation tax at 21% (44) 45
------------------
(44) 45
Prior periods
UK corporation tax - (5)
------------------
(44) 40
==================
</TABLE>
7. TANGIBLE FIXED ASSETS (in thousands)
<TABLE>
<CAPTION>
Improvements Computer Motor Office Software Total
to leasehold equipment vehicles furniture
and
equipment
----------------------------------------------------------------------------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C>
Cost
At 1/st/ August
1998 31 217 123 61 -- 432
Additions 3 20 2 8 33
----------------------------------------------------------------------------------
At 31/st/ July
1999 34 237 123 63 8 465
----------------------------------------------------------------------------------
Depreciation
At 1/st/ August
1998 13 104 83 22 -- 222
Charge for the
year 4 31 10 6 5 56
----------------------------------------------------------------------------------
At 31/st/ July
1999 17 135 93 28 5 278
==================================================================================
Net Book Value
At 31/st/ July
1999 17 102 30 35 3 187
==================================================================================
At 31/st/ July
1998 18 114 40 38 -- 210
==================================================================================
</TABLE>
<PAGE>
MARKET SOLUTIONS LIMITED
NOTES TO THE ACCOUNTS
YEAR ENDED 31/st/ July 1999 AND 1998
- --------------------------------------------------------------------------------
7. TANGIBLE FIXED ASSETS (continued)
Included in the amounts for computer equipment and motor vehicles above are
amounts relating to assets which are subject to lease and hire purchase
contracts.
The cost and net book value of these was (in thousands):
<TABLE>
<CAPTION>
Cost Net
Book
Value
At 31 July 1999: (Pounds) (Pounds)
<S> <C> <C>
Computer equipment 110 68
Motor vehicles 31 11
Software 5 1
=================
At 31 July 1998:
Computer equipment 100 77
Motor vehicles 31 15
=================
8. DEBTORS (in thousands)
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Trade debtors 380 1,222
Other debtors 50 25
Prepayments and accrued income 41 38
-----------------
471 1,285
=================
9. CREDITORS: Amounts falling due within one year (in thousands)
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Obligations under hire purchase and finance lease contracts 28 31
Trade creditors 182 94
Corporation tax - 40
Other taxes and social security 134 298
Other creditors - 1
Directors' loan accounts - 63
Accruals and deferred income 612 1,036
-----------------
956 1,563
=================
10. CREDITORS: Amounts falling due after one year (in thousands)
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Obligations under hire purchase and finance lease contracts 17 32
=================
11. OBLIGATIONS UNDER HIRE PURCHASE AND FINANCE LEASES (in thousands)
Obligations under finance leases and hire purchase contracts are analyzed:
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Current obligations 28 31
Obligations due between one and five years 17 32
-----------------
45 63
=================
</TABLE>
<PAGE>
MARKET SOLUTIONS LIMITED
NOTES TO THE ACCOUNTS
YEAR ENDED 31/st/ July 1999 AND 1998
- --------------------------------------------------------------------------------
12. SHARE CAPITAL
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
Authorized:
'A' Ordinary shares of (Pounds)1.00 each 100,000 100,000
'B' Ordinary shares of (Pounds)1.00 each 100,000 100,000
'C' Ordinary shares of (Pounds)1.00 each 100,000 100,000
--------------------
300,000 300,000
====================
Allotted:
Allotted, called up and fully paid 'A' Ordinary shares of
(Pounds)1.00 each 10,000 10,000
Allotted, called up and fully paid 'B' Ordinary shares of
(Pounds)1.00 each 700 300
Allotted, called up and fully paid 'C' Ordinary shares of
(Pounds)1.00 each 100 100
---------------
10,800 10,400
===============
</TABLE>
During the year, 100 'B' Ordinary shares were designated as 'C' Ordinary shares
on a (Pounds)1 for (Pounds)1 basis.
Rights of the 'A' Ordinary, 'B' Ordinary and 'C' Ordinary shares:
Dividend Rights - Profits available for distribution to each class of share are
distributed among the holders of the shares in proportion to the amounts paid
up.
Voting Rights - Only 'A' shares carry a vote at a general meeting. The 'A'
shares are entitled to receive notice of and be present at any general meeting
of the Company, and are entitled to one vote per share at any such meeting. 'B'
shares and 'C' shares have no voting rights at any general meeting of the
Company.
Rights on a Winding-Up of the Company - On a return of assets on liquidation or
otherwise the assets of the Company available for distribution among the members
shall be applied firstly in paying to the holders of the 'B' shares the amount
paid up on such shares, and secondly to the holders of the 'C' shares the amount
paid up on such shares. The balance of the assets shall belong to and be
distributed to the holders of 'A' shares in proportion to the amount paid up on
such shares.
The Surrender of 'B' and 'C' Shares - On leaving employment all 'B' and 'C'
shares shall be surrendered to the Company, and the director or employee shall
receive (Pounds)1 for each share so surrendered.
13. RECONCILIATION OF SHAREHOLDERS' FUNDS (in thousands)
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
<S> <C> <C>
(Loss)/profit for the financial year (414) 198
Dividends (115)
-----------------
Decrease)/increase in shareholders' funds (414) 83
Opening shareholders' funds 306 223
-----------------
Closing shareholders' funds (108) 306
=================
</TABLE>
<PAGE>
MARKET SOLUTIONS LIMITED
NOTES TO THE ACCOUNTS
YEAR ENDED 31/st/ July 1999 AND 1998
- -------------------------------------------------------------------------------
14. OPERATING LEASE COMMITMENTS
At 31/st/ July, the Company had annual commitments under non-cancelable
operating leases as set out below (in thousands):
<TABLE>
<CAPTION>
Land and Other
buildings
1999 1998 1999 1998
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Operating leases which expire:
Within one year - - 5 7
Between two and five years - - 66 49
After five years 136 136
----------------------------------------------
136 136 71 56
==============================================
</TABLE>
15. PENSION SCHEME
The Company operates a defined contribution pension scheme for the benefit of
employees and directors. The assets of the scheme are administered by trustees
in a fund independent from those of the Company. The total contributions paid in
the year ended 31/st/ July 1999 amounted to (Pounds)42,065 and in 1998 amounted
to (Pounds)30,734.
16. DIVIDENDS(in thousands)
1999 1998
(Pounds) (Pounds)
'A' ordinary shares - 107
'C' ordinary shares - 8
-----------------
- 115
=================
17. RESERVES(in thousands)
(Pounds)
At 1/st/ August 1997 212
Profit for the year 83
-------
At 31/st/ July 1998 295
Loss for the year (414)
-------
At 31/st/ July 1999 (119)
=======
18. GROSS CASH FLOWS (in thousands)
<TABLE>
<CAPTION>
1999 1998
(Pounds) (Pounds)
------------------
<S> <C> <C>
Returns on investments and servicing of finance
Interest received 15 15
Interest paid - -
Interest element of finance lease rentals payment (6) (5)
-----------------
Net cash flow for returns on investments and servicing of finance 9 10
=================
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (33) (118)
Proceeds from the sale of fixed assets - 2
-----------------
(33) (116)
=================
Management of liquid resources
Cash deposited - -
-----------------
Net cash flow for management of liquid resources - -
=================
Financing
Capital element of finance lease rental payments (18) 28
-----------------
Net cash flow for financing (18) 28
=================
</TABLE>
<PAGE>
MARKET SOLUTIONS LIMITED
NOTES TO THE ACCOUNTS
YEAR ENDED 31/st/ July 1999 AND 1998
- -----------------------------------------------------------------------------
19. ANALYSIS OF CHANGES IN NET DEBT (in thousands)
1998 Cash 1999
flow
(Pounds) (Pounds) (Pounds)
Cash at bank and in hand 406 (199) 207
Finance leases (64) 18 (46)
-------------------------
342 (181) 161
=========================
<PAGE>
MARKET SOLUTIONS LIMITED
BALANCE SHEETS
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
(unaudited) (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 120 $ 666
Accounts receivable 610 1,211
Prepaid expenses and other current assets 5 66
------------- -----------
Total current assets 735 1,943
PROPERTY AND EQUIPMENT, Net 292 323
------------- -----------
TOTAL $ 1,027 $ 2,266
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 438 $ 329
Accrued compensation and related benefits 110 168
Other accrued liabilities 208 151
Taxes payable -- 27
Deferred revenue 878 780
Line of credit 250 8
Current portion lease obligations 47 28
------------- -----------
Total current liabilities 1,931 1,491
------------- -----------
LONG-TERM LEASE OBLIGATIONS 20 58
SHAREHOLDERS' EQUITY:
Common stock, $1.60 par value: 300,000 shares authorized;
shares outstanding: 10,800 at September 30, 1999 and 10,400 at
December 31, 1998 18 18
Retained earnings (accumulated deficit) (942) 699
------------- -----------
Total shareholders' equity (924) 717
------------- -----------
TOTAL $ 1,027 $ 2,266
============= ===========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE>
MARKET SOLUTIONS LIMITED
STATEMENTS OF OPERATIONS
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, September 30,
1999 1998
(unaudited) (unaudited)
<S> <C> <C>
REVENUES:
License $ 211 $ 1,465
Services 2,436 3,367
---------- -----------
2,647 4,832
---------- -----------
COST OF REVENUES:
License 103 307
Services 1,522 1,932
---------- -----------
1,625 2,239
---------- -----------
GROSS MARGIN 1,022 2,593
OPERATING EXPENSES:
Sales and marketing 680 536
Research and development 1,664 750
General and administrative 338 358
---------- -----------
Total operating expenses 2,682 1,644
---------- -----------
INCOME (LOSS) FROM OPERATIONS (1,660) 949
Interest income, net (2) 17
---------- -----------
INCOME (LOSS) BEFORE TAXES (1,662) 966
Income tax provision (benefit) (70) 66
---------- -----------
NET INCOME (LOSS) $ (1,592) $ 900
========== ===========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE>
MARKET SOLUTIONS LIMITED
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating activities:
Net (loss) income available to common shareholders................. $ (1,592) $ 900
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation.................................................. 69 59
Changes in operating assets and liabilities:
Accounts receivable....................................... 602 (677)
Other assets.............................................. 62 (27)
Accounts payable and accrued liabilities.................. 165 107
Salaries and benefits payable............................. (58) 63
Deferred revenue.......................................... 98 243
Income taxes.............................................. (27) 9
----------- -----------
Net cash provided by (used in)
operating activities.......................................... (681) 677
Investing activities:
Purchases of property and equipment..................................... (38) (59)
----------- -----------
Net cash provided by (used in)
investing activities................................................ (38) (59)
Financing activities:
Payments on capital lease obligations.............................. (19) (41)
Proceeds from line of credit....................................... 242 82
Cash dividends paid................................................ (50) (195)
----------- -----------
Net cash provided by (used in) financing activities........... 173 (154)
----------- -----------
Net increase in cash and cash equivalents................................ (546) 464
Cash and cash equivalents at beginning of year........................... 666 550
----------- -----------
Cash and cash equivalents at end of year................................. $ 120 $ 1,014
=========== ===========
Supplemental cash flow disclosure:
Interest paid...................................................... $ 7 $ 7
Income taxes paid, net............................................. 27 75
Fixed assets financed through capital
lease obligations.................................................. -- 86
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE>
MARKET SOLUTIONS LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998 (unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed financial statements have been prepared in
accordance with United States generally accepted accounting principles for
interim financial information and with the instructions to Form 8-K and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine month period ended September
30, 1999 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1999. For further information, refer to the
financial statements for the year ended July 31, 1999 and 1998 and notes thereto
included herein.
The functional currency of Market Solutions is British Pounds Sterling. The
accompanying financial statements have been converted into U.S. Dollars using
the month end rate for the Balance Sheet and the average rate for the Statement
of Operations. There were no accounting differences resulting from the
statements as presented in U.S. gennerally accepted accounting principles versus
the historical statements as presented under U.K. generally accepted accounting
principles.
2. SUBSEQUENT EVENT
On October 1, 1999, Onyx Software Corporation acquired Market Solutions Limited,
a corporation formed under the laws of England, pursuant to a Sale and Purchase
Agreement dated as of October 1, 1999, by and among Onyx and the shareholders of
Market Solutions. Market Solutions, a privately held company established in
1989, is a leading provider of Web-based customer relationship management
("CRM") systems in the United Kingdom.
Under the terms and conditions of the Sale and Purchase Agreement, at closing,
Onyx paid $5 million in cash and issued approximately $1 million (66,024 shares)
of common stock in exchange for all the outstanding capital stock of Market
Solutions. Onyx is also obligated to issue up to an additional $3.6 million in
common stock on October 1, 2000 and up to an additional $4.32 million in common
stock on October 1, 2001, depending on Market Solutions' attainment of certain
revenue and profitability targets in each of the next two years. These shares of
Onyx common stock will be valued based on the trading prices of Onyx common
stock on the Nasdaq National Market on the three trading days immediately prior
to issuance. Onyx will account for the transaction using the purchase method of
accounting.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed consolidated financial
statements give effect to the Market Solutions Acquisition. The Market Solutions
Acquisition was accounted for under the purchase method of accounting in
accordance with APB Opinion No. 16. Under the purchase method of accounting, the
purchase price is allocated to the assets acquired and liabilities assumed based
on their estimated fair values. Estimates of the fair values of the assets and
liabilities of Market Solutions have been combined with the recorded values of
the assets and liabilities of Onyx Software in the unaudited pro forma combined
condensed consolidated financial statements.
The unaudited pro forma combined condensed consolidated balance sheet has
been prepared to reflect the Market Solutions Acquisition as if it occurred on
September 30, 1999. The unaudited pro forma combined condensed consolidated
statements of operations reflect the results of operations of Onyx Software and
Market Solutions for the year ended December 31, 1998 and the nine months ended
September 30, 1999 as if the Market Solutions Acquisition occurred on January 1,
1998.
We have allocated the estimated purchase costs of the acquisition on a
preliminary basis to assets and liabilities based on Onyx management's estimate
of fair value with excess costs over net assets being allocated to goodwill. The
allocation is subject to changes when Onyx makes a final determination of
purchase costs and fair values of assets of Market Solutions. The effects of any
changes could be material.
The unaudited pro forma combined condensed consolidated financial
statements are presented for illustrative purposes only and are not necessarily
indicative of the combined condensed consolidated financial position or results
of operations in future periods or the results that actually would have been
realized had Onyx Software and Market Solutions been a combined company during
the specified periods.
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ONYX MARKET PRO FORMA
SOFTWARE SOLUTIONS ADJUSTMENTS PRO FORMA
--------- ---------- --------------- ----------
ASSETS
<S> <C> <C> <C> <C>
Current Assets:
Cash.................................................. $ 8,275 $ 120 $ (5,000)(a) $ 3,395
Marketable securities................................. 23,879 -- -- 23,879
Accounts receivable................................... 18,005 610 -- 18,615
Prepaid expenses and other............................ 1,713 5 -- 1,718
------- ------ --------- -------
Total current assets.......................... 51,872 735 (5,000) 47,607
Fixed assets, net....................................... 7,690 292 -- 7,982
Marketable securities................................... 1,006 -- -- 1,006
Purchased technology, goodwill other intangibles, net 3,950 -- 8,424(c) 12,374
Other assets............................................ 899 -- -- 899
------- ------ --------- -------
Total assets.................................. $65,417 $1,027 $ 3,424 $69,868
======= ====== ========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................... $ 1,957 $ 438 $ -- $ 2,395
Salary and benefits payable........................... 2,366 110 -- 2,476
Accrued liabilities................................... 1,473 208 1,500(a) 3,181
Income taxes payable.................................. 446 -- -- 446
Current portion of lease obligations.................. 135 47 -- 182
Current portion of long-term debt..................... 37 250 -- 287
Deferred revenue...................................... 9,634 878 -- 10,512
------- ------ --------- -------
Total current liabilities..................... 16,048 1,931 1,500 19,479
Long-term portion of capital lease obligation........... 97 20 -- 117
Long-term portion of debt............................... 63 -- -- 63
Stockholders' Equity:
Preferred stock, common stock and additional paid-in
capital............................................ 59,441 18 982(a),(b) 60,441
Note receivable from officer.......................... (212) -- -- (212)
Deferred compensation................................. (1,059) -- -- (1,059)
Accumulated other comprehensive loss.................. (139) -- -- (139)
Accumulated deficit................................... (8,822) (942) 942(b) (8,822)
------- ------ --------- -------
Total stockholders' equity.................... 49,209 (924) 1,924 50,209
------- ------ --------- -------
Total liabilities and stockholders'
equity................................ $65,417 $1,027 $ 3,424 $69,868
======= ====== ========= =======
</TABLE>
See accompanying notes.
<PAGE>
The unaudited pro forma combined condensed consolidated financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the combined condensed consolidated financial position or results of operations
in future periods or the results that actually would have been realized had Onyx
Software and Market Solutions been a combined company during the specified
periods. The unaudited pro forma combined condensed consolidated financial
statements, including the notes thereto, are qualified in their entirety by
reference to, and should be read in conjunction with our audited consolidated
financial statements for the year ended December 31, 1998, included in our
prospectus, dated February 11, 1999, filed with the Securities and Exchange
Commission in connection with our initial public offering and our Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 31, 1999, June 30, 1999
and September 30, 1999 and the Company's Current Report on Form 8-K filed
October 15, 1999.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ONYX MARKET PRO FORMA
SOFTWARE SOLUTIONS ADJUSTMENTS PRO FORMA
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
License......................................... $22,811 $ 1,494 $ -- $24,305
Service......................................... 12,299 4,231 -- 16,530
------- ------- --------- -------
35,110 5,725 40,835
Cost of revenues:
License......................................... 1,127 318 -- 1,445
Service......................................... 7,927 2,580 -- 10,507
------- ------- --------- -------
9,054 2,898 11,952
Gross profit.................................... 26,056 2,827 28,883
Operating expenses:
Sales and marketing............................ 19,656 844 -- 20,500
Research development........................... 8,847 1,007 -- 9,854
General and administrative..................... 4,136 492 -- 4,628
Merger and acquisition related costs........... 117 -- 2,101(d) 2,218
------- ------- --------- -------
Total operating expenses...................... 32,756 2,343 2,101 37,200
Loss from operations............................ (6,700) 484 (2,101) (8,317)
Interest income, net............................ 61 25 -- 86
------- ------- --------- -------
Loss before income taxes........................ (6,639) 509 (2,101) (8,231)
Income tax provision............................ 340 66 406
------- ------- --------- -------
Net loss........................................ (6,979) 443 (2,101) (8,637)
Preferred stock accretion....................... (1,215) (1,215)
------- ------- --------- -------
Loss to common shareholders..................... $(8,194) $ 443 $ (2,101) $(9,852)
======= ======= ========= =======
Pro forma basic and diluted loss per share...... $ (0.99) $ (1.18)
Combined pro forma basic and diluted loss per
share .......................................... $ (0.59) $ (0.73)
Shares used in computation of basic and
diluted loss per share ........................ 8,287 66 (a) 8,353
Shares used in computation of combined pro form
basic and diluted loss per share .............. 11,821 66 (a) 11,887
</TABLE>
See accompanying notes.
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ONYX MARKET PRO FORMA
SOFTWARE SOLUTIONS ADJUSTMENTS PRO FORMA
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
License........................................... $ 25,238 $ 211 $ -- $ 25,449
Service........................................... 15,016 2,436 -- 17,452
-------- --------- ----------- ---------
40,254 2,647 42,901
Cost of revenues:
License........................................... 1,488 103 -- 1,591
Service........................................... 7,558 1,522 -- 9,080
-------- --------- ----------- ---------
9,046 1,625 10,671
Gross profit...................................... 31,208 1,022 32,230
Operating expenses:
Sales and marketing.............................. 20,322 680 -- 21,002
Research development............................. 7,760 1,664 -- 9,424
General and administrative....................... 4,184 338 -- 4,522
Merger and acquisition related costs............. 770 -- 1,576(d) 2,346
-------- --------- ----------- ---------
Total operating expenses........................ 33,036 2,682 1,576 37,294
Loss from operations.............................. (1,828) (1,660) (1,576) (5,064)
Interest income, net.............................. 942 (2) -- 940
-------- --------- ----------- ---------
Loss before income taxes.......................... (886) (1,662) (1,576) (4,124)
Income tax provision (benefit).................... 315 (70) 245
-------- --------- ----------- ---------
Net loss.......................................... (1,201) (1,592) (1,576) (4,369)
Preferred stock accretion......................... (1,442) (1,442)
-------- --------- ----------- ---------
Loss to common shareholders....................... $ (2,643) $ (1,592) $ (1,576) $ (5,811)
======== ========= =========== =========
Pro forma basic and diluted loss per share........ $ (0.18) $ (0.39)
Combined pro forma basic and diluted loss per
share............................................. $ (0.08) $ (0.28)
Shares used in computation of basic and
diluted loss per share .......................... 14,832 66 (d) 14,898
Shares used in computation of combined pro forma
basic and diluted loss per share ................ 15,376 66 (d) 15,442
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The pro forma combined condensed Consolidated financial statements reflect the
payment of $5 million in cash and the issuance of approximately 66,024 shares of
Onyx Software common stock, par value $.01 per share, in connection with the
acquisition of Market Solutions. The Market Solutions Acquisition was accounted
for under the purchase method of accounting in accordance with APB Opinion No.
16. Under the purchase method of accounting, the purchase price is allocated to
the assets acquired and liabilities assumed based on their estimated fair
values. Estimates of the fair values of the assets and liabilities of Market
Solutions have been combined with the recorded values of the assets and
liabilities of Onyx Software in the unaudited pro forma combined condensed
consolidated financial statements.
PRO FORMA ADJUSTMENTS
a. To reflect the issuance of approximately 66,024 shares of Onyx
Software Common Stock and a $5 million cash payment in connection with
the Market Solutions Acquisition for an aggregate purchase price of
approximately $7.5 million, including approximately $1.5 million of
transaction costs.
The accompanying financial statements do not include subsequent adjustments
to purchase price for the contingent consideration related to future
operating performance measures of Market Solutions, principally revenue and
operating income targets. Should the targets be met in the future,
additional equity consideration of up to $7.92 million will be paid and
capitalized as part of the purchase price.
b. To eliminate the net equity of Market Solutions.
c. To record the excess of the purchase price over the fair value of
assets and liabilities acquired in connection with the Market
Solutions Acquisition. An independent valuation and allocation of the
purchase price is currently in progress and will be completed by year-
end. However, management has estimated the fair values of the tangible
assets, intangible assets and technology for purposes of allocating the
purchase price and providing the required pro forma disclosures. The book
value of tangible assets and liabilities acquired are assumed to
approximate fair value. The goodwill and substantially all other purchased
intangible assets will be amortized on a straight-line basis over
approximately three to five years.
d. Pro forma adjustments have been made to the historical statements
operations to reflect the amortization of goodwill and other intangibles
generated in the acquisition using the straight-line method over three to
five years.
PRO FORMA NET LOSS PER SHARE
Basic pro forma net loss per share is computed using the weighted average
number of Onyx Software common shares outstanding during the period plus shares
of Onyx Software Common Stock issued in connection with the Market Solutions
Acquisition. Diluted pro forma net loss per share is computed using the
weighted average number of common and common equivalent shares outstanding
during the period plus shares of Onyx Software Common Stock and common
equivalent shares assumed in connection with the Market Solutions Acquisition.
Common equivalent shares are excluded from the computation if their effect is
antidilutive. Onyx Software Common Stock issued in connection with the Market
Solutions Acquisition is assumed outstanding at the beginning of the period.
<PAGE>
CONFORMING AND RECLASSIFICATION ADJUSTMENTS
There were no material adjustments required to conform the accounting
policies of Onyx Software and Market Solutions. Certain amounts have been
reclassified to conform to Onyx Software's financial statement presentation.
There have been no significant intercompany transactions.
SIGNATURE
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.
ONYX SOFTWARE CORPORATION
Dated: December 14, 1999 By /s/ Sarwat H. Ramadan
-----------------------------------
Sarwat H. Ramadan
Vice President, Chief Financial
Officer, Secretary and Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
2.1 Sale and Purchase Agreement dated as of October 1, 1999, by
and among Onyx Software Corporation and the shareholders of
Market Solutions Limited (incorporated by reference to
exhibit 2.1 to the registrant's Current Report on Form 8-K
(file no. 0-68559) filed on October 15, 1999).
10.1 Amended and Restated Investors' Rights Agreement, dated as
of December 14, 1998, by and among the registrant,
Foundation Capital, L.P., Foundation Capital Entrepeneurs
Fund, L.L.C., TCV II, V.O.F., Technology Crossover Ventures
II, L.P., TCV II (Q), L.P., TCV II Strategic Partners, L.P.,
Technology Crossover Ventures II, C.V., Hillman/Dover
Limited Partnership, Brent Frei, Brian Janssen, Todd
Stevenson, Mary Forler, Ronald Frei, Glenda Frei, Barbara
Stevenson, Leon Stevenson, Michael Racine, Mary Winifred
Racine, Bettie Ruzicka, Larry L. Ruzicka, Colleen Chmelik,
James Chmelik, J. Michael Ellis and Barbara S. Ellis
(incorporated by reference to exhibit 10.1 to the
registrant's Registration Statement on Form S-1 (file no.
333-68559), filed on January 21, 1999).
23.1 Consent of Feltons Chartered Accountants, Independent
Auditors
<PAGE>
Exhibit 23.1
Consent of Feltons Chartered Accountants, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-72235) pertaining to the Onyx Software Corporation 1998 Stock
Incentive Compensation Plan, Onyx Software Corporation Amended and Restated 1994
Combined Incentive and Nonqualified Stock Option Plan, and Onyx Software
Corporation 1998 Employee Stock Purchase Plan, of our report dated October 29,
1999 with respect to the financial statements of Market Solutions Limited
included in this Current Report (Form 8-K) of Onyx Software Corporation filed
December 14, 1999.
FELTONS CHARTERED ACCOUNTANTS
Windsor, Berkshire
December 13, 1999
