<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
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):
June 27, 2000
PROSOFTTRAINING.COM
-------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
Nevada 000-21535 87-0448639
---------------------------------------------------------------------------------------------
(State or Other Jurisdiction of (Commission File Number) (IRS Employer Identification
Incorporation) Number)
</TABLE>
3001 Bee Caves Rd., Suite 100, Austin, Texas 78746
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(512) 328-6140
--------------
NO CHANGE
-----------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OF ASSETS.
On June 27, 2000, the Registrant signed an agreement to purchase 100%
of the capital stock of ComputerPREP, Inc. (ComputerPREP) from Drake Personnel
(New Zealand) Limited (Drake) for approximately $30 million, split equally
between cash and stock, and 600,000 warrants to purchase Registrant's capital
stock. ComputerPREP is one of the largest North American publishers and
distributors of courseware for information technology, offering over 1,000
titles covering topics such as Certified Internet Webmaster (CIW) certification,
A+ certification and Linux courses. CIW is an Internet skills program
administered and branded by ProsoftTraining.com. ComputerPREP had over $4
million in revenue attributable to A+ certification during its fiscal year ended
October 1, 1999.
Pursuant to the Stock Purchase Agreement, the Registrant placed the
purchase price in escrow, subject to termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, which is expected by the
end of July 2000. The source of the cash consideration paid came from a private
placement of common stock that was recently completed. Net proceeds from the
private placement to the Registrant will exceed the cash portion of the purchase
price. The excess proceeds will be used for working capital and general
corporate purposes. Outstanding shares of the Registrant will increase by
approximately 3.25 million as a result of both transactions. The 2,092,126
shares sold in the private placement will be registered for resale immediately
on a Form S-3 Registration Statement, while the 1,142,422 shares issued to Drake
in the ComputerPREP acquisition will be registered in three semiannual
installments beginning in January 2001.
ComputerPREP generated approximately $14.5 million in revenue during
its fiscal year ended October 1, 1999. The technology training publishing unit
had revenue of approximately $13.8 million and the online training software unit
had revenue of approximately $700,000 in that period. The Registrant intends to
continue operating the technology training publishing unit and discontinue the
online training software unit.
ITEM 5. OTHER EVENTS
In June 2000, the Registrant received gross proceeds of $23,013,386
from the sale to certain accredited investors of 2,092,126 shares of Common
Stock. The Registrant has agreed to file a Registration Statement on Form S-3
with the Securities and Exchange Commission covering the resale of those shares
no later than July 7, 2000 and to use its best efforts to get the Registration
Statement declared effective as soon as possible. Net proceeds from that
private placement, after payment of fees and other expenses, were approximately
$22,000,000. As discussed above under Item 2, approximately $15,000,000 of
those proceeds was used to fund the cash portion of the ComputerPREP purchase
price. The remaining proceeds will be used for working capital and general
corporate purposes. The Registrant believes that the sale to these investors
was exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Act"), in reliance on the exemption set forth in Rule 506 of
Regulation D promulgated under the Act.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENT OF BUSINESS ACQUIRED.
Report of Independent Auditors
Balance Sheet as of October 1, 1999 and September 25, 1998
Statements of Operations and Retained Earnings for the fifty-three week
period ended October 1, 1999 and fifty-two week periods ended September
25, 1998 and September 26, 1997
Statements of Cash Flows for the fifty-three week period ended October
1, 1999 and fifty-two week periods ended September 25, 1998 and
September 26, 1997
Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION OF PROSOFTTRAINING.COM AND
COMPUTERPREP, INC.
Unaudited Pro Forma Combined Balance Sheet as of April 30, 2000.
Notes to Unaudited Pro Forma Combined Balance Sheet as of April 30,
2000
Unaudited Pro Forma Combined Statement of Operations for the year
ended July 31, 1999
Notes to Unaudited Pro Forma Combined Statement of Operations for the
year ended July 31, 1999
Unaudited Pro Forma Combined Statement of Operations for the nine
months ended April 30, 2000
Notes to Unaudited Pro Forma Combined Statement of Operations for the
nine months ended April 30, 2000
(c) Exhibits
--------
2.1 Stock Purchase Agreement, dated June 27, 2000, by and among
the Registrant and Drake Personnel (New Zealand) Limited and
ComputerPREP, Inc.
10.1 Registration Rights Agreement dated as of June 27, 2000 by and
between the Registrant and Drake Personnel (New Zealand) Limited
10.2 Common Stock Purchase Warrant dated June 27, 2000 to purchase
300,000 shares issued to Drake Personnel (New Zealand) Limited
10.3 Common Stock Purchase Warrant dated June 27, 2000 to purchase
300,000 shares issued to Drake Personnel (New Zealand) Limited
10.4 Securities Purchase Agreement dated June 27, 2000 by and among
Registrant and various investors
10.5 Registration Rights Agreement dated June 27, 2000 by and among
Registrant and various investors
23.1 Consent of Semple & Cooper, LLP
<PAGE>
FINANCIAL STATEMENT OF BUSINESS ACQUIRED.
Report of Independent Auditors
Balance Sheet as of October 1, 1999 and September 25, 1998
Statements of Operations and Retained Earnings for the fifty-three week
period ended October 1, 1999 and fifty-two week periods ended September 25, 1998
and September 26, 1997
Statements of Cash Flows for the fifty-three week period ended October 1, 1999
and fifty-two week periods ended September 25, 1998 and September 26, 1997
Notes to Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholder and Board of Directors of
ComputerPrep, Inc. (A Wholly-Owned Subsidiary)
We have audited the accompanying balance sheets of ComputerPrep, Inc. (A Wholly-
Owned Subsidiary) as of October 1, 1999 and September 25, 1998, and the related
statements of operations and retained earnings, and cash flows for the fifty-
three week period ended October 1, 1999 and fifty-two week periods ended
September 25, 1998 and September 26, 1997, respectively. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ComputerPrep, Inc. (A Wholly-
Owned Subsidiary) as of October 1, 1999, September 25, 1998 and September 26,
1997, the results of its operations, and cash flows for the three years in the
period ended October 1, 1999, in conformity with generally accepted accounting
principles.
Certified Public Accountants /s/ Semple & Cooper, LLP
Phoenix, Arizona
November 16, 1999
<PAGE>
COMPUTERPREP, INC
(A WHOLLY-OWNED SUBSIDIARY)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 25, October 1, April 30, 2000
1998 1999 (UNAUDITED)
---- ---- ----
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 199,999 $ 54,277 $ 93,547
Accounts receivable, net 1,845,752 2,204,439 1,978,611
Due from related party 78,274 14,338 --
Advances to related parties 374,512 264,034 --
Inventory 306,106 74,253 152,446
Prepaid expenses 57,544 35,325 42,139
----------- ----------- -----------
Total Current Assets 2,862,187 2,646,666 2,266,743
Property and Equipment, net 1,162,555 653,588 541,369
----------- ----------- -----------
Total Assets $ 4,024,742 $ 3,300,254 $ 2,808,112
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Line of credit $ - $ 974,452 $ 228,813
Accounts payable 2,502,567 1,959,291 2,516,395
Due to related parties 1,050,288 635,904 455,218
Accrued expenses 906,138 535,252 556,144
----------- ----------- -----------
Total Current Liabilities 4,458,993 4,104,899 3,756,570
----------- ----------- -----------
Stockholder's Deficit:
Common stock - $1 par value, 1,000 shares
authorized, 100 shares issued and outstanding 100 100 100
Accumulated deficit (434,351) (804,745) (948,558)
----------- ----------- -----------
Total Stockholder's Deficit (434,251) (804,645) (948,458)
----------- ----------- -----------
Total Liabilities and Stockholder's Deficit $ 4,024,742 $ 3,300,254 $ 2,808,112
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral
Part of the Financial Statements
<PAGE>
COMPUTERPREP, INC.
(A WHOLY-OWNED SUBSIDIARY)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
For The Fifty-Three Week Period Ended October 1, 1999 and
For The Fifty-Two Week Periods Ended September 25, 1998 and September 26,
1997, respectively
<TABLE>
<CAPTION>
Six Months Ended March 31
-----------------------------
1999 2000
September 26 September 25 October 1 --------------------------------
1997 1998 1999 UNAUDITED
---- ---- ---- --------------------------------
<S> <C> <C> <C> <C> <C>
Sales $11,136,455 $12,826,004 $14,526,233 $ 6,832,080 $ 7,630,012
Cost of Sales 3,123,715 3,715,164 5,242,818 2,446,889 3,133,446
----------- ----------- ----------- ------------ ------------
Gross Profit 8,012,740 9,110,840 9,283,415 4,385,191 4,496,566
----------- ----------- ----------- ------------ ------------
Expenses:
Selling and marketing 1,569,380 6,274,008 4,328,725 2,233,572 2,178,680
Product research and development 3,920,148 2,856,657 2,697,237 1,179,694 1,055,329
General and administrative 2,464,029 2,278,832 2,399,590 1,224,895 1,245,404
----------- ----------- ----------- ------------ ------------
7,953,557 11,409,497 9,425,552 4,638,161 4,479,413
----------- ----------- ----------- ------------ ------------
Gain (loss) from Operations 59,183 (2,298,657) (142,137) (252,970) 17,153
----------- ----------- ----------- ------------ ------------
Other Income (Expenses):
Interest expense (3,228) (12,439) (99,522) (39,807) (39,474)
Loss on sale of fixed assets - (3,077) (2,159) - -
Management fees (523,184) (598,657) (134,447) (250,768) (40,116)
Miscellaneous 55,116 6,011 7,871 (310) 13,355
----------- ----------- ----------- ------------ ------------
(471,296) (608,162) (228,257) (290,885) (66,235)
----------- ----------- ----------- ------------ ------------
Net Loss (412,113) (2,906,819) (370,394) (543,855) (49,082)
----------- ----------- ----------- ------------ ------------
Retained Earnings (Deficit), Beginning of Year 2,884,581 2,472,468 (434,351) (434,351) (804,745)
----------- ----------- ----------- ------------ ------------
Accumulated Earnings (Deficit), End of Year $ 2,472,468 $ (434,351) $ (804,745) $ (978,206) $ (853,827)
=========== =========== =========== ============ ============
</TABLE>
The Accompanying Notes are an Integral
Part of the Financial Statement.
<PAGE>
COMPUTERPREP, INC.
(A WHOLLY-OWNED SUBSIDIARY)
STATEMENTS OF CASH FLOWS
For The Fifty-Three Week Period Ended October 1, 1999
and for the Fifty-Two Week Periods Ended
September 25, 1998, and September 26, 1997, respectively
<TABLE>
<CAPTION>
Six Months
September 26 September 25 October 1 Ended March 31
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Net Loss $ (412,113) $(2,906,819) $ (370,394) $ (543,855) $ (49,082)
Adjustments to reconcile net loss to cash used by
operating activities:
Depreciation and amortization 433,606 540,424 450,447 282,708 164,117
Loss on sale of fixed asset - 3,077 2,159 - -
Proceeds from sale of fixed assets applied
against accounts payable - - 168,978 - -
Changes in non-cash operating accounts:
Accounts receivable 739,180 (320,414) (358,687) 400,131 323,498
Due from related party - (78,274) 63,936 - -
Advances to related parties (158,497) (176,307) 110,478 - (20,000)
Inventory (135,901) 94,770 231,853 (45,465) (62,782)
Prepaid expenses (64,737) 30,716 22,219 33,161 20,019
Accounts payable 802,654 1,278,268 (543,276) (1,483,720) 343,195
Due to related parties - 1,050,288 (414,384) - -
Accrued expenses (62,316) 315,266 (370,886) (65,316) 13,674
Income taxes payable (70,829) - - - -
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities 1,071,047 (169,005) (1,007,557) (1,422,356) 732,639
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (743,113) (509,543) (120,390) (40,055) (78,158)
Proceeds from sale of fixed assets - 7,306 7,773 - -
Collection (disbursement) of note receivable
from related party (200,000) 200,000 - - -
----------- ----------- ----------- ----------- -----------
Net cash used by investing activities (943,113) (302,237) (112,617) (40,055) (78,158)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds (payments) on credit line, net - - 974,452 1,185,000 (636,359)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities - - 974,452 1,185,000 (636,359)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 127,934 (471,242) (145,722) (277,411) 18,122
Cash and cash equivalents at beginning of period 543,307 671,241 199,999 199,999 54,277
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 671,241 $ 199,999 $ 54,277 $ (77,412) $ 72,399
=========== =========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ - $ 12,439 $ 99,522 $ 49,761 $ 11,700
=========== =========== =========== =========== ===========
Income taxes paid $ - - - - -
=========== =========== =========== =========== ===========
Non-cash investing activities:
Proceeds from sale of fixed assets applied
against accounts payable $ - $ - $ 168,978 $ - $ -
=========== =========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral
Part of the Financial Statements
<PAGE>
COMPUTERPREP, INC.
(A WHOLLY-OWNED SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies, Nature of Operations and Use of
Estimates:
Nature of Business:
ComputerPrep, Inc. (a wholly-owned subsidiary of Drake Management Systems,
Inc.) is in the business of publishing computer training manuals and systems
for customers principally in the United States and Canada. The Company was
incorporated in Delaware on July 17, 1986.
Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents:
Cash and cash equivalents are considered to be all highly liquid investments
purchased with an initial maturity of three (3) months or less.
Accounts Receivable:
The Company provides for potentially uncollectible accounts receivable by use
of the allowance method. The allowance is provided based upon a review of the
individual accounts outstanding, and the Company's prior history or
uncollectible accounts receivable. At October 1, 1999 and September 25, 1998,
management has established allowances for potentially uncollectible accounts
in the amounts of $218,453 and $173,614, respectively.
Inventories:
Inventories are stated at the lower of cost or market. Cost is determined on
a first-in, first-out (FIFO) basis.
<PAGE>
COMPUTERPREP, INC.
(A WHOLLY-OWNED SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies, Nature of Operations and Use of
Estimates (Continued)
Software Development Costs:
In accordance with Statements of Financial Accounting Standards (SFAS) No.
86, the Company has evaluated the establishment of technological
feasibility of its various products during the development phase. Due to
the dynamic changes in the market, the Company has concluded that it cannot
determine, with any reasonable degree of accuracy, technological
feasibility until the development phase of the project is nearly complete.
The time period during which costs could be capitalized from the point of
reaching technological feasibility until the time of general product
release is generally very short and, consequently, the amounts that could
be capitalized pursuant to SFAS No. 86 are not material to the Company's
financial position or results of operation. Therefore, the Company charges
all product research and development expenses to operations in the period
incurred.
Property and Equipment:
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is provided for on a straight-line basis at the following
rates:
Furniture and fixtures 7 years
Leasehold improvements Over the term of the lease
Machinery and equipment 5 years
Software 3 years
Maintenance and repairs that neither materially add to the value of the
property nor appreciably prolong its life and charged to expense as
incurred. Betterments or renewals are capitalized when incurred. For the
periods ended October 1, 1999, September 25, 1998 and September 26, 1997
depreciation expense was $450,447, $540,424 and $433,606 respectively.
<PAGE>
COMPUTERPREP, INC.
(A WHOLLY-OWNED SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies, Nature of Operations and Use of
Estimates: (Continued)
Income Taxes:
Deferred income taxes are provided on an asset and liability method,
whereby deferred tax assets are recognized for deductible temporary
differences and operating loss carryforwards. Deferred tax liabilities are
recognized for taxable temporary differences. Deferred tax assets are
reduced by a valuation allowance when it is more likely than not that the
carryforwards will not be utilized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
ComputerPrep, Inc. files a consolidated return with the other U.S.
subsidiaries of its parent company. All provisions for federal and state
income taxes, including provisions for deferred taxes, are provided for
through the intercompany accounts. At October 1, 1999, management has
established a valuation allowance equal to the benefit from the current
period net loss as the utilization of the loss carryforward is uncertain.
2. Concentrations:
The Company maintains cash balances at various financial institutions.
Deposits not to exceed $100,000 at the financial institution are insured
by the Federal Deposit Insurance Corporation. At October 1, 1999 and
September 25, 1998, the Company had approximately $50,000 and $166,000 of
uninsured cash.
3. Related Party Transactions:
Due from Related Party:
The amount due from related party represents refunds due from its parent
company for estimated state tax payments made during the fiscal years
ended September 30, 1998 and 1997. The refunds are issued to the parent
company who forwards them to the Company upon receipt.
Advances to Related Parties:
Amount represents advances to companies under common control, are
considered short-term in nature, non-interest bearing, and due on demand.
<PAGE>
COMPUTERPREP, INC.
(A WHOLLY-OWNED SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS (Continued)
3. Related Party Transactions: (Continued)
Due to Related Parties:
Amount represents advances to companies under common control, are considered
short-term in nature, non-interest bearing, and due on demand.
4. Property and Equipment:
Property and equipment as of October 1, 1999 and September 25, 1998 consist
of the following:
<TABLE>
<CAPTION>
October 1, September 25,
1999 1998
---- ----
<S> <C> <C>
Furniture and fixtures $ 367,931 $ 367,931
Leasehold improvments 51,499 76,093
Machinery and equipment 1,518,287 2,002,267
Software 683,213 626,138
--------- ---------
2,620,930 3,072,429
Less: accumulated depreciation (1,967,342) (1,909,874)
--------- ---------
$ 653,588 $1,162,555
========== ==========
</TABLE>
5. Inventory:
Inventory as of October 1, 1999 and September 25, 1998 is comprised of the
following:
<TABLE>
<CAPTION>
October 1, September 25,
1999 1998
---- ----
<S> <C> <C>
Raw materials $ - $ 62,236
Finished goods 74,253 243,870
---------- ----------
$ 74,253 $ 306,106
========== ==========
</TABLE>
<PAGE>
COMPUTERPREP, INC.
(A WHOLLY-OWNED SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Line of Credit:
As of October 1, 1999, the Company had outstanding borrowings of $974,452,
under a $1,764,000 revolving line of credit agreement with Union Bank of
California, N.A. Interest on the line of credit agreement is payable at the
bank's reference rate, which was 8.25% at October 1, 1999, and is due on
the last day of each month. Principal and interest are due in full on
December 31, 1999. The loan is secured by a guarantee of the parent
company.
7. Commitments:
Purchases:
The Company is committed to purchases of inventory through July, 2003 at
then prevailing market prices. At October 1, 1999, these purchases
aggregated as follows, based on current market prices:
Fifty-Two Week
Period Ending
October 1, Amount
---------- ------
2000 $ 4,121,360
2001 3,783,333
2002 3,200,000
2003 2,666,667
-----------
$13,771,360
===========
For the periods ended October 1, 1999 and September 25, 1998, purchases
under the aforementioned commitments amounted to approximately $1,046,000
and $0, respectively.
<PAGE>
COMPUTERPREP, INC.
(A WHOLLY-OWNED SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS (Continued)
7. Commitments: (Continued)
Operating Leases:
The Company has entered into non-cancellable operating leases for the rental of
office and production space which expire at various dates. Gross minimum rental
commitments required under those operating leases that have initial or remaining
lease terms in excess of one year, are as follows:
Fifty-Two Week
Period Ended
October 1, Amount
---------- ------
2000 $ 330,111
2001 192,565
---------
$ 522,676
=========
For the periods ended October 1, 1999, September 25, 1998 and September 26,
1997, rent expense under the aforementioned operating leases was $366,264,
$438,992 and $349,591, respectively.
<PAGE>
PRO FORMA FINANCIAL INFORMATION OF PROSOFTTRAINING.COM AND
COMPUTERPREP, INC.
Unaudited Pro Forma Combined Balance Sheet as of April 30, 2000.
Notes to Unaudited Pro Forma Combined Balance Sheet as of April 30,
2000
Unaudited Pro Forma Combined Statement of Operations for the year
ended July 31, 1999
Notes to Unaudited Pro Forma Combined Statement of Operations for the
year ended July 31, 1999
Unaudited Pro Forma Combined Statement of Operations for the nine
months ended April 30, 2000
Notes to Unaudited Pro Forma Combined Statement of Operations for the
nine months ended April 30, 2000
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
The following unaudited pro forma combined financial information of
Prosofttraining.com (Prosoft or the Company) gives effect to the ComputerPrep,
Inc. (ComputerPrep) acquisition (the Acquisition) and the sale of common stock
in the private placement transaction as if such transaction were consummated on
April 30, 2000, in the case of the Unaudited Pro Forma Combined Balance Sheet,
and as if such transaction were consummated on August 1, 1998, in the case of
Unaudited pro Forma Combined Statements of Operations for the year ended July
31, 1999 and the nine months ended April 30, 2000. The Unaudited Pro Forma
Combined Statements of Operations for the year ended July 31, 1999 includes
ComputerPrep historical information for the fifty-three week period ended
October 1, 1999, its fiscal year end, and for the nine months ended April 30,
2000. The agreement to purchase ComputerPrep was signed on June 27, 2000. The
aforementioned transaction and the related adjustments are described in the
accompanying notes. In the opinion of management, all adjustments have been made
that are necessary to present fairly the pro forma data.
The following unaudited pro forma combined financial information is
presented for illustrative purposes only, does not purport to be indicative of
Prosoft's financial position or results of operations as of the date hereof, or
as of or for any other future date, and is not necessarily indicative of what
Prosoft's actual financial position or results of operations would have been had
the foregoing transaction been consummated on such dates, nor does it give
effect to (i) any transactions other that the forgoing transaction and those
described in the accompanying Notes to Unaudited Pro Forma Combined Financial
Information or (ii) Prosoft's results of operations since April 30, 2000.
Although the following Unaudited pro forma combined financial information gives
effect to expected annual net savings from the elimination of duplicate general
and administrative expense and the elimination of sales and related cost of
sales associated with the discontinuance of the online training software unit,
it does not give effect to additional annual net savings expected to be achieved
following consummation of the Acquisition to the Unaudited Pro Forma Combined
Statement of Operations for the year ended July 31, 1999. Actual amounts could
differ from those presented.
The following unaudited pro forma combined financial information is based
upon historical financial statements of Prosoft and ComputerPrep and should be
read in conjunction with such historical financial statements, the related
notes, and the Notes to Unaudited Pro Forma Combined Financial information. In
the preparation of the Unaudited pro forma combined financial information, it
has been assumed that the historical value of ComputerPrep's assets and
liabilities approximates the fair value thereof, since an independent valuation
has not been completed. Prosoft will be required to determine the fair value of
ComputerPrep's assets and liabilities as of the closing date of the Acquisition
and the fair value of the 600,000 warrants given in the Acquisition. Although
such determination of the fair value is not presently expected to result in
values that are materially greater or less than the values assumed in the
preparation of the following pro forma combined financial information, there can
be no assurances with respect thereof.
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
April 30, 2000
<TABLE>
<CAPTION>
ComputerPrep Acquisition
Prosoft ComputerPrep Pro Forma and Offering Pro Forma
Historical Historical Adjustments Adjustments Combined
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,506,044 $ 93,547 $ 815,969 (1) $ 7,000,000 (3)$ 12,415,560
Accounts receivable, net 4,535,043 1,978,611 - - 6,513,654
Notes receivable 16,800 - - - 16,800
Inventory - 152,446 - - 152,446
Prepaid expenses and other current assets 504,793 38,638 - - 543,431
------------- ------------- ------------- ------------- -------------
Total current assets 9,562,680 2,263,242 815,969 - 19,641,891
Property and equipment, net 522,602 541,369 - - 1,063,971
Intangible assets, net 3,204,537 - - 30,448,458 (3) 33,652,995
Other asserts - 3,501 - - 3,501
------------- ------------- ------------- ------------- -------------
Total assets $ 13,289,819 $ 2,808,112 $ 815,969 $ 37,448,458 $ 54,362,358
============= ============= ============= ============= =============
Liabilities and stockholders' equity
Current liabilities:
Bank loans payable $ - $ 228,813 $ (228,813) (1) $ - $ -
Accounts payable 1,644,958 2,306,603 - - 3,951,561
Accrued payroll and other expenses 569,186 556,144 - - 1,125,330
Current portion of capital leases
obligations 875,355 - - - 875,355
Customer deposits - 209,792 - - 209,792
Intercompany payable - 455,218 (455,218) (1) - -
Accrued restructuring costs 553,781 - 1,000,000 (2) - 1,553,781
------------- ------------- ------------- ------------- -------------
Total current liabilities 3,643,280 3,756,570 315,969 - 7,715,819
Capital lease obligations, net of current
portion 249,743 - - - 249,743
Other 289,575 - - - 289,575
------------- ------------- ------------- ------------- -------------
Total liabilities 4,182,598 3,756,570 315,969 - 8,255,137
Common stock subject to redemption 56,649 - - - 56,649
Stockholders' equity 9,050,572 (948,458) 500,000 (1,2) 37,448,458 (3) 46,050,572
------------- ------------- ------------- ------------- -------------
Total liablilities and stockholders' equity $ 13,289,819 $ 2,808,112 $ 815,969 $ 37,448,458 $ 54,362,358
============= ============= ============= ============= =============
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Balance Sheet
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
APRIL 30, 2000
(1) Adjustment to record $1,500,000 cash contribution to stockholders' equity
by ComputerPrep's parent and the payment of intercompany payables and bank
loans, per the Acquisition agreement.
(2) Reflects estimated transition and integration costs to be incurred in
connection with the acquisition.
Severance and other compensation to employees $ 700,000
Lease terminations and other costs 300,000
----------
$1,000,000
==========
(3) Adjustment to record the sale of stock to investors, the equity required to
finance the Acquisition and the related purchase accounting for the
Acquisition.
Intangible Stockholders'
Cash Assets Equity
------------ ------------ ------------
Proceeds from the sale of stock $ 22,000,000 $ 22,000,000
Payment to Drake - cash portion (15,000,000) $ 15,000,000
Payment to Drake - stock portion 15,000,000 15,000,000
Purchase accounting adjustment 448,458 448,458
------------ ------------ ------------
$ 7,000,000 $ 30,448,458 $ 37,448,458
============ ============ ============
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1999
<TABLE>
<CAPTION>
ComputerPrep Pro Forma Adjustments
---------------------------------------
Prosoft ComputerPrep Elimination of Pro Forma
Historical Historical Business Unit Acquisition Combined
-------------- ------------- -------------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue $ 8,716,016 $ 14,526,233 $ (690,000) (1) $ $ 22,552,249
Costs and expenses:
Cost of revenue 9,071,871 7,940,055 (2,080,000) (1) 14,931,926
Sales and marketing 1,613,182 4,328,725 (1,100,000) (2) 4,841,907
General and administrative 4,907,967 2,514,381 (1,150,000) (2) 6,272,348
Amortization of intangibles 601,135 1,500,000 (3) 2,101,135
Restructuring charge 3,723,148 - 3,723,148
------------- ------------ ------------ ------------ -------------
Total costs and expenses 19,917,303 14,783,161 (2,080,000) (750,000) 31,870,464
------------- ------------ ------------ ------------ -------------
Loss from operations (11,201,287) (256,928) 1,390,000 750,000 (9,318,215)
Interest income (expense) (405,648) (99,522) - - (505,170)
------------- ------------ ------------ ------------ -------------
Net loss $ (11,606,935) $ (356,450) $ 1,390,000 $ 750,000 $ (9,823,385)
============= ============ ============ ============ =============
Basic and diluted net loss per share $ (0.90) $ (0.64)
============= =============
Weighted average shares
outstanding (4) 12,845,182 15,414,056
============= =============
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Statement of Operations
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1999
(1) Reflects the elimination of sales and related cost of sales on
ComputerPrep's online training software unit that will discontinued.
(2) Elimination of duplicate corporate overhead and marketing expenses:
Corporate Overhead:
Salaries and benefits $ 770,000
Administrative expenses 330,000
----------
Total $1,100,000
==========
Marketing Expenses:
Salaries and benefits $ 345,000
Other marketing expenses 805,000
----------
Total $1,150,000
==========
(3) To record pro forma intangible amortization required as a result of the
ComputerPrep acquisition, using 20 years as the estimated useful life for
excess costs over fair value of net assets acquired.
(4) Weighted average common shares outstanding for both basic and diluted
earnings per share was calculated as follows:
Prosoft historical 12,845,182
Number of shares issued in the private
placement to fund the cash purchase
price 1,426,452
Payment to Drake 1,142,422
----------
15,414,056
==========
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 2000
<TABLE>
<CAPTION>
ComputerPrep Pro Forma Adjustments
---------------------------------------
Prosoft ComputerPrep Elimination of Pro Forma
Historical Historical Technology Business Acquisition Combined
------------ ------------ ------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $ 12,928,506 $ 11,664,166 $ (1,840,000) (1) $ $ 22,752,672
Costs and expenses:
Cost of revenue 7,436,341 4,352,617 (2,820,000) (1) 8,968,958
Sales and marketing 1,177,115 4,117,514 (1,000,000) (2) 4,294,629
General and administrative 2,930,403 3,263,206 (1,600,000) (2) 4,593,609
Amortization of intangibles 484,735 1,125,000 (3) 1,609,735
Restructuring charge - - -
------------ ------------ ---------------- ------------ ------------
Total costs and expenses 12,028,594 11,733,337 (2,820,000) (1,475,000) 19,466,931
------------ ------------ ---------------- ------------ ------------
Income (loss) from operations 899,912 (69,171) 980,000 1,475,000 3,285,741
Interest income (expense) (305,353) (68,426) - - (373,779)
------------ ------------ ---------------- ------------ ------------
Net income (loss) $ 594,559 $ (137,597) $ 980,000 $ 1,475,000 $ 2,911,962
============ ============ ================ ============ ============
Earnings per share:
Basic $ 0.04 $ 0.15
============ ============
Diluted $ 0.03 $ 0.13
============ ============
Weighted average shares outstanding:
Basic 16,311,680 18,880,554
============ ============
Diluted 19,725,800 22,294,674
============ ============
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Statement of Operations
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 2000
(1) Reflects the elimination of sales and related cost of sales on
ComputerPrep's online training software unit that will discontinued.
(2) Elimination of duplicate corporate overhead and marketing expenses;
Corporate Overhead:
Salaries and benefits $ 480,000
Administrative expenses 1,120,000
----------
Total $1,600,000
==========
Marketing Expenses:
Salaries and benefits $ 700,000
Other marketing expenses 300,000
----------
Total $1,000,000
==========
(3) To record pro forma intangible amortization required as a result the
ComputerPrep acquisition, using 20 years as the estimated useful life for
excess costs over fair value of net assets acquired.
(4) Weighted average common shares outstanding for both basic and diluted
earnings per share are calculated as follows:
Basic Diluted
----- -------
Prosoft historical 16,311,680 19,725,800
Sale of stock in private placement 1,426,452 1,426,452
Payment to Drake 1,142,422 1,142,422
---------- ----------
Total 18,880,554 22,294,674
========== ==========
<PAGE>
Exhibits
--------
2.1 Stock Purchase Agreement, dated June 27, 2000, by and among the
Registrant and Drake Personnel (New Zealand) Limited and ComputerPREP,
Inc.
10.1 Registration Rights Agreement dated as of June 27, 2000 by and between the
Registrant and Drake Personnel (New Zealand) Limited
10.2 Common Stock Purchase Warrant dated June 27, 2000 to purchase 300,000
shares issued to Drake Personnel (New Zealand) Limited
10.3 Common Stock Purchase Warrant dated June 27, 2000 to purchase 300,000
shares issued to Drake Personnel (New Zealand) Limited
10.4 Securities Purchase Agreement dated June 27, 2000 by and among Registrant
and various investors
10.5 Registration Rights Agreement dated June 27, 2000 by and among Registrant
and various investors
23.1 Consent of Semple & Cooper, LLP
<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 hereunto duly authorized.
PROSOFTTRAINING.COM
(Registrant)
Date: July 6, 2000 By: /s/ William J. Weronick
------------------------------------
Name: William J. Weronick
Title: Vice President Finance
