<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 25, 1999
eSOFT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 00-23527 84-0938960
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
295 INTERLOCKEN BOULEVARD, SUITE 500
BROOMFIELD, COLORADO 80021
(303) 444-1600
(Address and Telephone Number of Registrant's Principal Executive Office)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective May 25, 1999, eSoft, Inc. ("eSoft" or the "Company")
completed the merger (the "Merger") with Apexx Technology, Inc. ("Apexx")
located in Boise, Idaho which provided for the issuance of 1,591,365 shares of
eSoft common stock in exchange for all of the outstanding common stock of Apexx
and for the conversion of all Apexx stock options into eSoft stock options to
acquire 1,356,003 shares of eSoft common stock. The Merger has been accounted
for as a pooling of interests.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
(i) The unaudited financial statements of Apexx Technology, Inc. at
March 31, 1999 and for the three months ended March 31, 1999 and
1998 are set forth at pages F-1 to F-6 attached hereto.
(ii) The audited financial statements of Apexx Technology, Inc. at
December 31, 1998 and for the years ended December 31, 1998
and 1997 filed with Registration Statement on Form S-4/A dated
April 20, 1999 and incorporated herein by reference.
(b) Unaudited Pro Forma Condensed Combined Financial Information.
Unaudited pro forma condensed combined financial information giving
effect to the merger with Apexx Technology, Inc. are set forth at pages F-7 to
F-12 attached hereto.
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
2.1 Amended and Restated Agreement and Plan Merger dated January 25,
1999 between eSoft, Inc., eSoft Acquisition Corporation and Apexx
Technology, Inc. (filed with Registration Statement on Form S-4/A on
April 20, 1999 and incorporated herein by reference).
2.2 Form of Stockholders Agreement executed by Apexx Technology, Inc.
stockholders in connection with the merger (filed with Registration
Statement on Form S-4/A on April 20, 1999 and incorporated herein by
reference).
2.3 Form of Escrow Agreement executed by eSoft, Inc. Thomas
Loutzenheiser and The Trust Company of The Bank of Montreal (filed
with Registration Statement on Form S-4/A on April 20, 1999 and
incorporated herein by reference).
2.5 Employment Agreement by and between eSoft, Inc. and Thomas
Loutzenheiser (filed with Registration Statement on Form S-4/A on
April 20, 1999 and incorporated herein by reference).
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
9.1 Voting Agreement by and between eSoft, Inc and Tom Loutzenheiser,
Gayl Loutzenheiser and David Dahms (filed with Registration
Statement on Form S-4/A on April 20, 1999 and incorporated herein by
reference).
9.2 Voting Agreement by and between eSoft, Inc and Albert Youngwerth,
Heather Youngwerth, Lawrence Lynch, George Minow, Chris Minow,
William Rivers, Ray Jenks (filed with Registration Statement on Form
S-4/A on April 20, 1999 and incorporated herein by reference).
23.1* Consent of Balukoff, Lindstrom & Co., P.A.
</TABLE>
- ------------
* Filed herewith
3
<PAGE> 4
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.
eSoft, Inc.
Date: August 9, 1999 By: /s/ Jeffrey Finn
------------------------------
Name: Jeffrey Finn
Title: President and Chief
Executive Officer
4
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
Board of Directors
Apexx Technology, Inc.
Boise, Idaho
We have audited the balance sheet of Apexx Technology, Inc. as of December 31,
1998 and the related statements of operations, changes in stockholders' deficit,
and cash flows for each of the two years in the period ended December 31, 1998.
The 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 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 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 Apexx Technology, Inc. as of
December 31, 1998 and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
The Company's financial statements have been prepared assuming that it will
continue as a going concern. The Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Balukoff, Lindstrom & Co., P.A.
Boise, Idaho
February 4, 1999
<PAGE> 6
APEXX TECHNOLOGY, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
========================================================================================================
March 31, 1999
- --------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 24,409
Accounts receivable, less allowance of $84,452
for possible losses 505,092
Inventories 316,559
Prepaid expenses and other 16,887
- --------------------------------------------------------------------------------------------------------
Total current assets 862,947
- --------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Computer equipment 135,398
Furniture and equipment 60,835
Manufacturing tool and equipment 26,424
- --------------------------------------------------------------------------------------------------------
222,657
Less accumulated depreciation 135,069
- --------------------------------------------------------------------------------------------------------
Net property and equipment 87,588
- --------------------------------------------------------------------------------------------------------
$950,535
========================================================================================================
</TABLE>
See accompanying notes to condensed financial statements
F-1
<PAGE> 7
APEXX TECHNOLOGY, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
(UNAUDITED)
========================================================================================================
March 31, 1999
- --------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT:
Accounts payable $ 386,078
Revolving line of credit 165,000
Notes payable 1,070,953
Deferred revenue 2,181
Accrued expenses 47,844
- --------------------------------------------------------------------------------------------------------
Total current liabilities 1,672,056
- --------------------------------------------------------------------------------------------------------
STOCKHOLDERS' DEFICIT:
Common stock, no par value, 5,000,000 shares authorized,
1,421,305 shares issued and outstanding 1,106,684
Additional paid-in capital 49,311
Accumulated deficit (1,877,516)
- --------------------------------------------------------------------------------------------------------
Total stockholders' deficit (721,521)
- --------------------------------------------------------------------------------------------------------
$ 950,535
========================================================================================================
</TABLE>
See accompanying notes to condensed financial statements.
F-2
<PAGE> 8
APEXX TECHNOLOGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED)
================================================================================================================
Three Months Ended March 31, 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $ 788,055 $ 744,612
COST OF GOODS SOLD 425,279 418,182
- ----------------------------------------------------------------------------------------------------------------
Gross profit 362,776 326,430
- ----------------------------------------------------------------------------------------------------------------
EXPENSES:
Selling and marketing 589,100 241,011
General and administrative 243,378 150,223
Research and development 120,186 59,390
Engineering 49,670 22,408
- ----------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,002,334 473,032
- ----------------------------------------------------------------------------------------------------------------
Loss from operations (639,558) (146,602)
- ----------------------------------------------------------------------------------------------------------------
OTHER EXPENSE:
Interest expense, net 16,717 1,412
Loss on sale of assets 1,897 --
- ----------------------------------------------------------------------------------------------------------------
Total other expense 18,614 1,412
- ----------------------------------------------------------------------------------------------------------------
NET LOSS $ (658,172) (148,014)
================================================================================================================
</TABLE>
See accompanying notes to condensed financial statements.
F-3
<PAGE> 9
APEXX TECHNOLOGY, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
(UNAUDITED)
==================================================================================================================================
Common Stock ADDITIONAL TOTAL
----------------------- Paid-in Accumulated Stockholders'
Three Months Ended March 31, 1999 Shares Amount Capital Deficit Deficit
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1999 1,421,305 $1,106,684 $36,813 $(1,219,344) $ (75,847)
Issuance of compensatory options -- -- 12,498 -- 12,498
Net loss for the three months ended March 31, 1999 -- -- -- (658,172) (658,172)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, March 31, 1999 1,421,305 $1,106,684 $49,311 $(1,877,516) $(721,521)
==================================================================================================================================
</TABLE>
See accompanying notes to condensed financial statements.
F-4
<PAGE> 10
APEXX TECHNOLOGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
===================================================================================================
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three Months Ended March 31, 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(658,172) $(148,014)
Adjustment to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 12,524 14,839
Loss on sale of assets 1,897 --
Provision for losses on accounts receivable 80,726 1,500
Provision for inventory obsolescence 34,267 24,401
Issuance of compensatory options 12,498 --
Changes in operating assets and liabilities:
Accounts receivable 129,003 (201,405)
Inventories (27,856) (2,571)
Other assets (6,219) 6,817
Accounts payable (3,470) (8,855)
Accrued expenses and other (44,123) (4,299)
- ---------------------------------------------------------------------------------------------------
Net cash used in operating activities (468,925) (317,587)
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 1,380 --
Purchase of property and equipment (5,924) (41,910)
- ---------------------------------------------------------------------------------------------------
Net cash used in investing activities (4,544) (41,910)
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCIAL ACTIVITIES:
Proceeds from sale of stock, warrants and options -- 125,250
Proceeds from short-term debt 318,286 --
Payments on short-term debt (491) --
Proceeds from line of credit 356,679 50,000
Payments on line of credit (191,679) --
Payments on long-term debt (7,211) (2,551)
- ---------------------------------------------------------------------------------------------------
Net cash provided by financing activities 475,584 172,699
- ---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,115 (186,798)
CASH AND CASH EQUIVALENTS, beginning of period 22,294 196,395
- ---------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 24,409 $ 9,597
===================================================================================================
</TABLE>
See accompanying notes to condensed financial statements.
F-5
<PAGE> 11
APEXX TECHNOLOGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
1. BASIS OF The condensed interim financial statements included
PRESENTATION herein have been prepared by Apexx Technology, Inc.
("Apexx" or the "Company"), without audit, in
accordance with applicable Accounting Standards and
other professional requirements. Although certain
information and footnote disclosures normally
included in financial statements prepared in
accordance with generally accepted accounting
principles have been condensed or omitted pursuant to
such rules and regulations, the Company believes that
the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments, consisting
of normal recurring adjustments which, in the opinion
of management, are necessary for fair presentation of
the information contained therein. It is suggested
that these condensed financial statements be read in
conjunction with the financial statements and notes
thereto included elsewhere in this report. The
Company follows the same accounting policies in
preparation of interim financial statements.
2. SUBSEQUENT On May 25, 1999 the Company consummated a merger with
EVENT eSoft, Incorporated ("eSoft"). eSoft issued 1,591,365
shares of its common stock in exchange for all of the
outstanding shares of the Company's common stock.
Additionally, all options to purchase Apexx common
stock were converted into options to purchase shares
of eSoft common stock. The merger has been accounted
for as a pooling of interests.
F-6
<PAGE> 12
eSOFT, INCORPORATED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
================================================================================
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial information
reflects financial information which gives effect to eSoft, Inc.'s ("eSoft" or
the "Company") merger (the "Merger") with Apexx Technology , Inc. ("Apexx")
which provided for the issuance of 1,591,365 shares of eSoft common stock for
all of the outstanding stock of Apexx, and the conversion of all Apexx stock
options into eSoft stock options to acquire 1,356,003 shares of eSoft common
stock. The Pro Forma Financial Information included herein reflects the use of
the pooling of interests method of accounting, after giving effect to the pro
forma adjustments discussed in the accompanying notes. Such financial
information has been prepared from, and should be read in conjunction with, the
historical consolidated financial statements and notes thereto of eSoft and
Apexx.
The Pro Forma Condensed Combined Balance Sheet gives effect to the
Merger as if it had occurred on March 31, 1999, combining the balance sheets of
eSoft at March 31, 1999, with that of Apexx as of March 31,1999. The Pro Forma
Condensed Combined Statements of Operations give effect to the Merger as if it
had occurred at the beginning of the earliest period presented, combining the
results of eSoft for the three months ended March 31, 1999, and each year in the
two year period ended December 31, 1998 with those of Apexx for the same
periods.
The Pro Forma Condensed Combined Statements of Operations presented do
not include any potential cost savings. The Company believes that it may be able
to reduce salaries and related costs and office and general expenses as it
eliminates duplications of overhead. However, there can be no assurance that the
Company will be successful in effecting any such cost savings.
The Pro Forma Condensed Combined Financial Information is unaudited and
is not necessarily indicative of the consolidated results which actually would
have occurred if the above transactions had been consummated at the beginning of
the periods presented, nor does it purport to present the future financial
position and results of operations for future periods.
F-7
<PAGE> 13
eSOFT, INCORPORATED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Apexx
eSoft, Technology Pro Forma
March 31, 1999 Incorporated Inc. Adjustments Combined
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 763,485 $ 24,409 $ -- $ 787,894
Accounts receivable, net 1,983,128 505,092 (53,193)(a) 2,435,027
Inventories 1,013,060 316,559 (99,651)(b) 1,229,968
Note receivable 500,000 -- (500,000)(a) --
Prepaid expenses and other 224,204 16,887 -- 241,091
- --------------------------------------------------------------------------------------------------------------------
Total current assets 4,483,877 862,947 (652,844) 4,693,980
- --------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Computer equipment 225,754 135,398 -- 361,152
Furniture and equipment 217,864 60,835 -- 278,699
Manufacturing tool and equipment -- 26,424 -- 26,424
- --------------------------------------------------------------------------------------------------------------------
443,618 222,657 -- 666,275
Less accumulated depreciation 222,970 135,069 -- 358,039
- --------------------------------------------------------------------------------------------------------------------
Net property and equipment 220,648 87,588 -- 308,236
- --------------------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Capitalized software development
costs, net of accumulated
amortization of $356,279 827,895 -- -- 827,895
Other 22,039 -- -- 22,039
- --------------------------------------------------------------------------------------------------------------------
Total other assets 849,934 -- -- 849,934
- --------------------------------------------------------------------------------------------------------------------
$ 5,554,459 $ 950,535 $ (652,844) $ 5,852,150
====================================================================================================================
</TABLE>
See notes to pro forma condensed combined balance sheet on page F-9.
F-8
<PAGE> 14
ESOFT, INCORPORATED
PRO FORMA CONDENSED COMBINED
BALANCE SHEET (CONTINUED)
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Apexx
eSoft, Technology Pro Forma
March 31, 1999 Incorporated Inc. Adjustments Combined
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS'
EQUITY (DEFICIT)
CURRENT:
Accounts payable $ 1,420,391 $ 386,078 $ (53,193)(a) $ 1,753,276
Revolving line of credit -- 165,000 -- 165,000
Notes payable -- 1,070,953 (500,000)(a) 570,953
Deferred revenue 26,994 2,181 -- 29,175
Accrued expenses:
Payroll and payroll expenses 280,533 -- -- 280,533
Other 364,941 47,844 -- 412,785
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,092,859 1,672,056 (553,193) 3,211,722
- --------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock -- -- -- --
Common stock of Apexx -- 1,106,684 (1,106,684)(c) --
Common stock 73,455 -- 15,914 (d) 89,369
Additional paid-in capital 9,569,977 49,311 1,090,770 (c), (d) 10,710,058
Notes receivable (131,898) -- -- (131,898)
Accumulated deficit (6,049,934) (1,877,516) (99,651)(b) (8,027,101)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) 3,461,600 (721,521) (99,651) 2,640,428
- --------------------------------------------------------------------------------------------------------------------
$ 5,554,459 $ 950,535 $ (652,844) $ 5,852,150
====================================================================================================================
</TABLE>
(a) To eliminate intercompany receivable/payable.
(b) To eliminate intercompany gross profit.
(c) Par value of the Apexx shares is reclassified as additional paid-in
capital net of the par value of the newly issued eSoft Common Stock.
(d) Represents par value of the 1,591,365 shares issued in connection with
the Transaction, excluding options that could be exercised by current
holders of Apexx options, based on the number of outstanding Apexx
shares as of the balance sheet date.
F-9
<PAGE> 15
ESOFT, INCORPORATED
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Apexx
eSoft, Technology Pro Forma
Three Months Ended March 31, 1999 Incorporated Inc. Adjustments Combined
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 553,067 $ 788,055 $ (178,014)(A) $ 1,163,108
COST OF GOODS SOLD 359,215 425,279 (78,363)(A) 706,131
- --------------------------------------------------------------------------------------------------------------------
Gross profit 193,852 362,776 (99,651) 456,977
- --------------------------------------------------------------------------------------------------------------------
EXPENSES:
Selling and marketing 1,679,608 589,100 - 2,268,708
General and administrative 1,111,899 243,378 - 1,355,277
Engineering 122,562 49,670 - 172,232
Research and development - 120,186 - 120,186
Amortization of software costs 41,826 - - 41,826
- --------------------------------------------------------------------------------------------------------------------
Total costs and expenses 2,955,895 1,002,334 - 3,958,229
- --------------------------------------------------------------------------------------------------------------------
Loss from operations (2,762,043) (639,558) (99,651) (3,501,252)
- --------------------------------------------------------------------------------------------------------------------
OTHER (INCOME) EXPENSE:
Interest (income) expense, net (32,720) 16,717 - (16,003)
Loss on sale of assets - 1,897 - 1,897
- --------------------------------------------------------------------------------------------------------------------
Total other (income) expense (32,720) 18,614 - (14,106)
- --------------------------------------------------------------------------------------------------------------------
NET LOSS $ (2,729,323) $ (658,172) $ (99,651) $ (3,487,146)
====================================================================================================================
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.39) $ (.41)
========================================================= ==================
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
BASIC AND DILUTED 7,006,044 8,595,361
========================================================= ==================
</TABLE>
(a) To eliminate intercompany gross profit.
F-10
<PAGE> 16
eSOFT, INCORPORATED
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Apexx
eSoft, Technology Pro Forma
Year Ended December 31, 1998 Incorporated Inc. Adjustments Combined
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 3,867,600 $ 3,808,106 $ - $ 7,675,706
COST OF GOODS SOLD 1,357,463 1,924,172 72,211(a) 3,353,846
- --------------------------------------------------------------------------------------------------------------------
Gross profit 2,510,137 1,883,934 72,211 4,321,860
- --------------------------------------------------------------------------------------------------------------------
EXPENSES:
Selling and marketing 2,612,065 1,394,002 - 4,006,067
General and administrative 2,369,564 865,066 (79,766)(a) 3,154,864
Engineering 588,933 127,018 - 715,951
Research and development 12,908 369,884 - 382,792
Amortization of software costs 189,399 - - 189,399
- --------------------------------------------------------------------------------------------------------------------
Total costs and expenses 5,772,869 2,755,970 (79,766) 8,449,073
- --------------------------------------------------------------------------------------------------------------------
Loss from operations (3,262,732) (872,036) (7,555) (4,127,213)
- --------------------------------------------------------------------------------------------------------------------
OTHER (INCOME) EXPENSE:
Interest (income) expense, net (161,083) 21,472 - (139,611)
Other (income) expense, net - (7,555) 7,555(a) -
Loss on sale of assets 1,013 - - 1,013
- --------------------------------------------------------------------------------------------------------------------
Total other (income) expense (160,070) 13,917 7,555 (138,598)
- --------------------------------------------------------------------------------------------------------------------
Loss before income tax benefit (3,102,662) (885,953) - (3,988,615)
Income tax benefit (162,000) - - (162,000)
- --------------------------------------------------------------------------------------------------------------------
NET LOSS $ (2,940,662) $ (885,953) $ - $ (3,826,615)
====================================================================================================================
BASIC AND DILUTED LOSS PER COMMON
SHARE $ (.54) $ (.54)
======================================================== =================
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
BASIC AND DILUTED 5,493,276 7,089,382
======================================================== =================
</TABLE>
F-11
<PAGE> 17
eSOFT, INCORPORATED
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
(a) To reclassify Apexx expenses for Apexx
comparable presentation.Year Ended eSoft, Technology Pro Forma
December 31, 1997 Incorporated Inc. Adjustments Combined
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $1,233,137 $ 2,003,426 $ - $ 3,236,563
COST OF GOODS SOLD 429,601 1,023,344 39,174 (a) 1,492,119
- --------------------------------------------------------------------------------------------------------------------
Gross profit 803,536 980,082 39,174 1,744,444
- --------------------------------------------------------------------------------------------------------------------
EXPENSES:
Selling and marketing 225,737 567,660 - 793,397
General and administrative 506,861 386,393 (67,015)(a) 826,239
Engineering 55,653 55,071 - 110,724
Research and development 56,671 174,580 - 231,251
Amortization of software costs 116,912 - - 116,912
- --------------------------------------------------------------------------------------------------------------------
Total costs and expenses 961,834 1,183,704 (67,015) 2,078,523
- --------------------------------------------------------------------------------------------------------------------
Loss from operations (158,298) (203,622) (27,841) (334,079)
- --------------------------------------------------------------------------------------------------------------------
Other (income) expense:
Interest (income) expense, net 27,151 16,058 - 43,209
Other (income) expense, net - (22,020) 22,020 (a) -
Loss on sale of assets 7,803 - 5,821 (a) 13,624
- --------------------------------------------------------------------------------------------------------------------
Total other (income) expense 34,954 (5,962) 27,841 56,833
- --------------------------------------------------------------------------------------------------------------------
Loss before income tax expense (193,252) (197,660) - (390,912)
Income tax expense 162,000 - - 162,000
- --------------------------------------------------------------------------------------------------------------------
NET LOSS $ (355,252) $ (197,660) $ - $ (552,912)
====================================================================================================================
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.23) $ (.21)
========================================================= =================
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
BASIC AND DILUTED 1,536,884 2,688,563
========================================================= =================
</TABLE>
(a) To reclassify Apexx expenses for comparable presentation.
F-12
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
2.1 Amended and Restated Agreement and Plan Merger dated January 25,
1999 between eSoft, Inc., eSoft Acquisition Corporation and Apexx
Technology, Inc. (filed with Registration Statement on Form S-4/A on
April 20, 1999 and incorporated herein by reference).
2.2 Form of Stockholders Agreement executed by Apexx Technology, Inc.
stockholders in connection with the merger (filed with Registration
Statement on Form S-4/A on April 20, 1999 and incorporated herein by
reference).
2.3 Form of Escrow Agreement executed by eSoft, Inc. Thomas
Loutzenheiser and The Trust Company of The Bank of Montreal (filed
with Registration Statement on Form S-4/A on April 20, 1999 and
incorporated herein by reference).
2.5 Employment Agreement by and between eSoft, Inc. and Thomas
Loutzenheiser (filed with Registration Statement on Form S-4/A on
April 20, 1999 and incorporated herein by reference).
9.1 Voting Agreement by and between eSoft, Inc and Tom Loutzenheiser,
Gayl Loutzenheiser and David Dahms (filed with Registration
Statement on Form S-4/A on April 20, 1999 and incorporated herein by
reference).
9.2 Voting Agreement by and between eSoft, Inc and Albert Youngwerth,
Heather Youngwerth, Lawrence Lynch, George Minow, Chris Minow,
William Rivers, Ray Jenks (filed with Registration Statement on Form
S-4/A on April 20, 1999 and incorporated herein by reference).
23.1* Consent of Balukoff, Lindstrom & Co., P.A.
</TABLE>
- ------------
* Filed herewith
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Apexx Technology, Inc.
Boise, Idaho
We hereby consent to the incorporation by reference in this Form 8-K/A-1 and the
previously filed Registration Statements on Form S-3 (Registration # 333-82619
and # 333-82247) and Form S-8 (Registration # 333-80151) of eSoft, Inc. of our
report dated February 4, 1999, relating to the balance sheet of Apexx
Technology, Inc. as of December 31, 1998 and the statements of operations,
stockholders' deficit and cash flows for each of the two years in the period
ended December 31, 1998 appearing in eSoft's Registration Statement on Form
S-4/A (Registration # 333-74675) dated April 20, 1999. Our report contains an
explanatory paragraph regarding Apexx Technology, Inc.'s ability to continue as
a going concern.
/s/ Balukoff, Lindstrom & Co., P.A.
Boise, Idaho
August 9, 1999
