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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-29634
FUNDTECH LTD.
(Exact Name of Registrant as Specified in its Charter)
ISRAEL Not Applicable
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
12 Ha'hilazon Street
Ramat-Gan, Israel 52522
(Address of Principal (Zip Code)
Executive Offices)
011-972-3-575-2750
(Registrant's Telephone Number, Including Area Code)
Former Address: Beit Habonim, 2 Habonim St. Ramat Gan, Israel
(Former name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 13,931,205 shares of Ordinary
Shares, NIS 0.01 par value, as of June 30, 1999.
790870 v. 1
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FUNDTECH LTD.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART i
FINANCIAL INFORMATION
<S> <C>
Item 1. Condensed Consolidated Financial Statements.....................................................1
Condensed Consolidated Balance Sheets as of June 30, 1999 (unaudited) and December 31, 1998.............1
Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30,
1999 and June 30, 1998............................................................................2
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 1999 and
June 30, 1998.....................................................................................5
Notes to Condensed Consolidated Financial Statements (unaudited)........................................7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........9
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................12
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds......................................................12
Item 6. Exhibits and Reports on Form 8-K...............................................................13
Index To Exhibits......................................................................................14
Signatures.............................................................................................15
</TABLE>
i
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Item 1. Condensed Consolidated Financial Statement
PART I
FINANCIAL INFORMATION
FUNDTECH LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1999 1998
- ------------------------------------------------------- ----------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 95,105 $ 13,019
Investment in securities 1,218 --
Trade receivables, net 13,880 12,040
Other current assets 1,562 579
-------------- --------------
Total current assets 111,765 25,638
-------------- --------------
Long-term trade receivables 760 244
Property and equipment, net 5,579 3,759
Other assets, net 12,936 2,963
-------------- --------------
Total assets $ 131,040 $ 32,604
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Trade payables $ 1,673 $ 1,386
Deferred revenues and accrued expenses 6,968 6,112
--------------- ----------------
Total current liabilities 8,641 7,498
--------------- ----------------
Other liabilities 45 58
--------------- ----------------
Shareholders' equity:
Share capital 41 34
Accumulated other comprehensive loss (167) --
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Additional paid-in capital 137,754 41,664
Deferred compensation (178) (219)
Accumulated deficit (15,096) (16,431)
--------------- -----------------
Total shareholders' equity 122,354 25,048
--------------- ----------------
Total liabilities and shareholders' equity $ 131,040 $ 32,604
=============== ================
See notes to condensed consolidated financial statements (unaudited)
</TABLE>
FUNDTECH LTD. AND ITS SUBSIDIARIES Condensed Consolidated
Statements of Operations (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ------------------------------
1999 1998 1999 1998
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues
Software licenses $ 5,532 $ 2,926 $ 10,154 $ 4,944
Maintenance and services fees 2,984 1,783 5,792 2,468
Hardware sales 516 691 987 1,016
----------- ------------ ------------- -------------
Total revenues 9,032 5,400 16,933 8,428
----------- ------------ ------------- -------------
Cost of revenues
Software licenses costs 278 91 308 158
Maintenance and services costs 2,004 1,162 3,653 1,456
Hardware costs 395 561 767 838
=========== ============ ============= =============
Total cost of revenues 2,677 1,814 4,728 2,452
----------- ------------ ------------- -------------
Gross profit 6,355 3,586 12,205 5,976
----------- ------------ ------------- -------------
Operating expenses:
Software development 2,580 1,592 4,917 2,859
Selling and marketing, net 1,304 664 2,399 1,209
Amortization of acquisition-related
Intangible assets 165 52 243 52
General and administrative 816 422 1,486 847
</TABLE>
2
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ------------------------------
1999 1998 1999 1998
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
In process R&D write-off 2,802 16,600 2,802 16,600
----------- ------------ ------------- -------------
Total operating expenses 7,667 19,330 11,847 21,567
----------- ------------ ------------- -------------
Operating income (loss) (1,312) (15,744) 358 (15,591)
Financial income, net 853 167 977 246
=========== ============ ============= =============
Net income (loss) $ (459) $ (15,577) $ 1,335 $ (15,345)
=========== ============ ============= =============
Net income (loss) per share:
Basic income (loss) per share $ (0.04) $ (1.46) $ 0.11 $ (1.62)
Diluted income (loss) per share $ (0.04) $ (1.46) $ 0.11 $ (1.62)
Diluted income per share excluding
in-process R&D write-off $ 0.18 $ 0.09 $ 0.33 $ 0.13
Shares used in computing:
Basic income (loss) per share 12,638,167 10,699,000 11,741,685 9,494,000
Diluted income (loss) per share 12,638,167 10,699,000 12,454,204 9,494,000
Diluted income per share excluding
in-process R&D write-off 13,383,537 11,254,000 12,454,204 10,050,000
Adjusted net income per share (a):
Adjusted net income used in
computing net income per share $ 2,508 $ 1,075 $ 4,380 $ 1,307
Diluted adjusted income per share $ 0.19 $ 0.10 $ 0.35 $ 0.13
Shares used in computing diluted
income per share 13,383,537 11,254,000 12,454,204 10,050,000
(a) Adjusted net income and adjusted net income per share exclude the pre-tax
effects of the line items "in process R&D write-off" and "Amortization of
acquisition-related intangible assets", listed above.
</TABLE>
3
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FUNDTECH LTD. AND ITS SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
for Six Months Ended June 30, 1999 and June 30, 1998
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: .......................................................... (unaudited)
Net income(loss) ............................................................................ $ 1,335 $(15,345)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization ......................................................... 762 84
In process research and development wirte-0f .......................................... 2,802 16,600
Amortization of deferred compensation ................................................. 41 34
Capital loss (gain) on sale of fixed assets ........................................... -- 4
Increase in other liabilities ......................................................... (13) 9
Increase in trade receivables ......................................................... (2,057) (506)
Decrease (increase) in other accounts receivable and prepaid
expenses ........................................................................... (776) (265)
Increase (decrease) in trade payables ................................................. 163 106
Increase (decrease) in deferred revenues and accrued expenses ......................... (2,111) (1,208)
-------- --------
Net cash used in operating activities ....................................................... 146 (487)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition ............................................................... (9,194) (18,600)
Investments in short-term deposits .................................................... -- 2,694
Proceeds from sale of fixed assets .................................................... -- 12
Purchase of fixed assets .............................................................. (1,646) (258)
-------- --------
Net cash provided by (used in) investing activities ......................................... (10,840) (16,152)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment of long-term loan to a related party ................................ -- (242)
Proceeds from the issuance of share capital and exercise of
stock options and warrants, net .................................................... 92,393 29,409
Proceeds from long term loans ......................................................... 387 36
Short-term bank credit, net ........................................................... -- (250)
-------- --------
</TABLE>
4
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<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Net cash provided by financing activities ................................................... 92,780 28,953
-------- --------
Increase (decrease) in cash and cash equivalents ............................................... 82,086 12,314
Cash and cash equivalents at the beginning of the period ....................................... 13,019 1,573
-------- --------
Cash and cash equivalents at the end of the period ............................................. $ 95,105 $ 13,887
======== ========
</TABLE>
See notes to condensed consolidated financial statements (unaudited)
5
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FUNDTECH LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
as of June 30, 1999 and for the three months ended June 30, 1999 and 1998 and
for the six months ended June 30, 1999 and 1998 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of the financial condition and results of operations,
contained in Fundtech's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998. The results of operations for the three months ended June 30,
1999 are not necessarily indicative of the results for the entire fiscal year
ending December 31, 1999.
2. NET INCOME PER SHARE
Basic net income per share is computed using the weighted average
number of common shares outstanding during each period. Diluted net income per
share is computed using the weighted average number of common shares outstanding
and dilutive common stock equivalents outstanding during the period. A
reconciliation of the numerators and denominators used in computing the basic
and diluted net income per share is as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
(U.S. dollars in thousands, except share amounts)
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted per share
amounts - net income (loss) (459) (15,577) 1,335 (15,345)
Denominator:
Denominator for basic net income (loss)
per share weighted average shares 12,638,167 10,699,000 11,741,685 9,494,000
Effect of dilutive stock options and warrants -- -- 712,519 --
Denominator for dilutive net income (loss)
per share weighted average shares and
assumed conversions 12,638,167 10,699,000 12,454,204 9,494,000
</TABLE>
6
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3. SHARE CAPITAL
On April 30, 1999, Fundtech completed a public offering of 2,9000,000
Ordinary Shares, which raised net proceeds in the amount of approximately $92.3
million.
4. PURCHASE OF BBP
In June 1999, Fundtech entered into a Share Purchase Agreement ("the
Agreement"), with Biveroni Batchelet Partners AG, a Swiss corporation ("BBP")
and its shareholders (the "Shareholders"), pursuant to which Fundtech purchased
all of the outstanding shares of BBP from the shareholders for an aggregate
purchase price of approximately $13.3 million, of which 75% was paid in cash and
25% in stock ( 105,315 Ordinary Shares). The transaction was recorded as a
purchase and resulted in the initial recording of approximately $10 million of
goodwill which is being amortized over 8.5 years and a one time write-off of R&D
in process in the amount of $2.8 million.
The Pro Forma unudited results of operations for the six months ended
June 30, 1999 and June 1998, assuming consummation of the purchase and issuance
of the 25% in stock as of January 1, 1998 are as follows:
Six Months Ended June 30,
-------------------------
1999 1998
---- ----
Sales 12,163 7,520
Net Income (loss) 1,726 (16,428)
Net Income per share:
Basic 0.14 (1.52)
Diluted 0.13 (1.52)
7
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following table sets forth certain financial data and the
percentage total revenue of the Company for the periods indicated:
<TABLE>
<CAPTION>
Three months ended
June 30,
-------------------------------------------------------------
% of % of
1999 Revenues 1998 Revenues
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Software license fees $ 5,532 61.3% $ 2,926 54.2%
Maintenance and services fees 2,984 33.0 1,783 33.0
Hardware sales 516 5.7 691 12.8
----------- ---------- ----------- ---------
Total revenues 9,032 100.0 5,400 100.0
Cost of revenues:
Software license costs 278 3.1 91 1.7
Maintenance and services costs 2,004 22.2 1,162 21.5
Hardware costs 395 4.3 561 10.4
----------- --------- ----------- --------
Total cost of revenues 2,677 29.6 1,814 33.6
----------- --------- ----------- --------
Gross profit 6,355 70.4 3,586 66.4
----------- --------- ----------- --------
Operating expenses:
Software development 2,580 28.6 1,592 29.5
Selling and marketing, net 1,304 14.4 664 12.3
Amortization of acquisition-related
intangible assets 165 1.8 52 1.0
General and administrative 816 9.0 422 7.8
In process R&D write-off 2,802 31.0 16,600 307.4
----------- --------- ----------- --------
Total operating expenses 7,667 84.8 19,330 358.0
----------- --------- ----------- --------
Income from operations (1,312) (14.4) (15,744) (291.6)
Financial income, net 853 9.4 167 3.1
----------- --------- ----------- --------
Net income $ (459) (5.0)% $ (15,577) (288.5)%
=========== ========= ============= ==========
</TABLE>
8
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THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
SOFTWARE LICENSE FEES. Software license fees consist of revenues derived from
software license agreements entered between Fundtech and its customers. Software
license fees increased by $2,606,000 to $5,532,000 in the three months ended
June 30, 1999 from $2,926,000 for the three months ended June 30, 1998, an
increase of 89%. This increase was attributable to the sale of new product
offerings such as Global CASHstar, Nostro Management System and PAYplus RTGS,
Fundtech's international payment system.
MAINTENANCE AND SERVICES FEES. Maintenance and services fees include revenues
derived from maintenance contracts, installation and training revenue,
consulting fees, certification fees and related items. Fundtech generally
receives a contract for maintenance and service at the time of the sale of the
system. Maintenance and services fees increased by $1,201,000 to $2,984,000 in
the three months ended June 30, 1999 from $1,783,000 in the three months ended
June 30, 1998, an increase of 67%. The increase is commensurate with the
increase in systems sold during this period.
HARDWARE SALES. Hardware sales consist of the reselling of third-party hardware
in connection with the license and installation of Fundtech's software. Hardware
sales decreased by $175,000 to $516,000 in the three months ended June 30, 1999
from $691,000 in the three months ended June 30, 1998, a decrease of 25%.
Hardware sales are attributable to the number of software systems sold whereby
the customer purchases hardware through the Company.
SOFTWARE LICENSE COSTS. Software license costs consist primarily of the royalty
payments related to grants from the Government of Israel, product media,
duplication, manuals and shipping. Software license costs increase by $187,000
to $278,000 in the three months ended June 30, 1999 from $91,000 in the three
months ended June 30, 1998, an increase of 205%. The gross margin of
software license fees decreased from 97% in the three months ended March 31,
1998 to 95% in the three months ended March 31, 1999. The decrease in gross
margin is attributable to the increase in royalty bearing software as a
percentage of total sales as certain of Fundtech's product offerings are not
royalty-bearing.
MAINTENANCE AND SERVICES COSTS. Maintenance and services costs consist primarily
of personnel costs, telephone support costs and other costs related to the
provision of maintenance and consulting services. Maintenance and services costs
increased by $842,000 to $2,004,000 in the three months ended June 30, 1999 from
$1,162,000 in the three months ended June 30, 1998, an increase of 72%. The
gross margin on maintenance and services fees decreased from 35% in the three
months ended June 30, 1998 to 33% in the three months ended June 30, 1999. The
decrease on gross margin was primarily due to an increase in personnel
associated with such maintenance and services.
9
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HARDWARE COSTS. Hardware costs consist primarily of Fundtech's cost of computer
hardware resold to its customers. Cost of hardware sales decreased by $166,000
to $395,000 in the three months ended June 30, 1999 from $561,000 in the three
months ended June 30, 1998, a decrease of 30%.
SOFTWARE DEVELOPMENT. Software development expenses are related to the
development and testing of new products and product enhancements. Software
development expenses increased by $988,000 to $2,580,000 in the three months
ended June 30, 1999, from $1,592,000 in the three month ended June 30, 1998 an
increase of 62%. The increase in software development costs is principally
related to the development of new product offerings by Fundtech such as PAYplus
RTGS, Access.pro, Nostro Management System and Global CASHstar as well as
enhancements to certain of Fundtech's existing products. In the three months
ended June 30, 1998 and 1999 Fundtech did not receive grants from the Government
of Israel.
SELLING AND MARKETING, NET. Selling and marketing expenses increase by $640,000
to $1,304,000 in the three months ended June 30, 1999 from $664,000 in the three
months ended June 30, 1998, an increase of 96%. Selling and marketing expenses
as a percentage of revenues increased from 12% in June 30, 1998 to 14% in the
three months ended June 30, 1999.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by
$394,000 to $816,000 in the three months ended June 30, 1999 from $422,000 in
the three months ended June 30, 1998 an increase of 93%. As a percentage of
total revenues general and administrative expenses increase to 9% compared with
8% in the same period in 1998.
IN-PROCESS R&D WRITE-OFF. In June 1999, Fundtech purchases from BBP's
shareholders all of the outstanding shares of BBP for approximately $13.3
million. The BBP acquisition has been accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based on the their estimated fair value at
the date of acquisition. The excess of the purchase price over the estimated
fair value of the net assets acquired has been recorded, as goodwill, which is
amortized on a straight-line basis over 8.5 years. Fundtech recorded, according
to FASB interpretation No. 4 (FIN 4), an expense in the amount of $2,802,000
which represents the estimated value of software acquired from BBP for which
technological feasibility has not yet been established and for which no
alternative future use exists (in-process research and development).
FINANCIAL INCOME, NET. Net financial income increased by $686,000 to $853,000 in
the three months ended June 30, 1999 from $167,000 in the three months ended
June 30, 1998 an increase of 411%. The increase of the financial income is due
mainly to interest earned on cash received from our April 30, 1999 secondary
public offering.
10
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LIQUIDITY AND CAPITAL RESOURCES
Fundtech has financed its operations primarily through the sale of
equity securities to its shareholders in the amount of approximately $137.7
million including net proceeds from the IPO in the amount of approximately $29.0
million, proceeds from the secondary public offering in the amount of
approximately $92.3 million, grants from the Government of Israel and borrowings
from banks.
As of June 30, 1999 Fundtech's working capital was $103.0 million. Cash
and cash equivalents were $95.0 million. Fundtech's provided net cash from
operations amounting to $146,000 for the six months ended June 30, 1999 and
utilized $487,000 for the six months ended June 30, 1998.
In April 1998, Fundtech acquired the CheckFree businesses for
approximately $18.8 million in cash including expenses.
On April 30, 1999 Fundtech completed a second public offering of
2,900,000 Ordinary Shares, which raised net proceeds in the amount of
approximately $92.3 million.
On June 1999, Fundtech acquired all of the outstanding shares of BBP
for approximately $10.4 million in cash and $2.9 million in stock.
Fundtech believes that cash on hand and cash flows from operations
during the remainder of 1999 together with the proceeds from the April 30, 1999
offering will provide adequate financial resources to finance Fundtech's current
operations and the planned expansion of its operations for the foreseeable
future. However, in the event that Fundtech makes one or more acquisitions for
consideration consisting of all or a substantial part of Fundtech's available
cash, Fundtech might be required to seek external debt or equity financing for
such acquisition or acquisitions or to fund subsequent operations.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written
using two digits (rather than four) to identify a given year. Computer programs
that have time-sensitive software may interpret the date code "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in other normal business activities. We maintain a significant number of
computer software programs and operating systems across our entire organization,
including various administrative and billing functions, all of which are
potentially subject to Year 2000 problems.
11
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Fundtech's Year 2000 compliance program is divided into two sections:
software programs licensed to Fundtech's customer and internal information
technology systems. Phases common to both sections include preparing inventory
of all software and hardware items affected by the Year 2000 issue, assessing
the Year 2000 compliance of identified items, repairing or replacing items that
are determined not to be Year 2000 compliant, testing items, and creating
contingency plans.
The software product section of Fundtech's compliance program includes
all Fundtech software products licensed by Fundtech's customers. As of July 31,
1999 substantially all of Fundtech's software products had been assessed for
Year 2000 compliance. The software repair and testing phases began in June 1997.
The assessment phase will be repeated periodically through January 2000 to
verify that any changes made to Fundtech's existing software do not bring any of
Fundtech's software components out of Year 2000 compliance. The repair and
testing steps will be repeated as necessary depending on the outcome of the
periodic assessments. Both phases are dependent on the availability of Year 2000
compliant versions of software from some external vendors. If Fundtech's testing
uncovers any material Year 2000 compliance issues in any widely-used versions of
our software, it may be necessary for Fundtech to upgrade all affected customers
to a newer version of Fundtech's software which is Year 2000 compliant.
The infrastructure section of our compliance program consists of
hardware and software used by Fundtech's staff in the course of operating its
business. Fundtech's Year 2000 Task Force has conducted a comprehensive
inventory and evaluation of such internal hardware and software systems. As part
of this process, The Year 2000 Task Force has contacted most of the Company's
vendors, including all vendors that it believes supply hardware, software and
services that are critical to Fundtech's critical operations, to receive written
confirmation that such systems and services are Year 2000 compliant. We estimate
that as of July 31, 1999 this phase was 95% complete. The repair/replacement
phase and testing phase are both expected to be completed by the end of
September 1999, although both phases are dependent on the availability of Year
2000 compliant versions of certain software and hardware.
In its review process, Fundtech confirmed that a substantial majority
of all of its customers, the disruption of whose operations could have a
material adverse impact on Fundtech's operations, are subject to regulations
promulgated by the Federal Reserve mandating Year 2000 compliance. Fundtech
expects that substantially all such customers will comply with such regulations
prior to January 1, 2000.
Fundtech expects that its employees will perform all significant work
for the Year 2000 project described above. Fundtech does not anticipate hiring
any additional employees, nor does Fundtech anticipate incurring any significant
consulting expenses for the Year 2000 project. The cost of software tools and
consulting expenses used for detection of Year 2000 compliance problems, and
repair of affected software is not currently expected to exceed $500,000.
12
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Contingency planning has not yet begun for either section, but Fundtech
expects preliminary contingency plans to be completed by the end of September
1999.
Compliance with Year 2000 requirements may disrupt Fundtech's ability
to continue developing and marketing its electronic payments and funds transfers
and cash and treasury management solutions. Fundtech may also incur certain
unexpected expenditures in connection with Year 2000 compliance. While
uncertainty exists concerning such expenditures, Fundtech does not believe that
Year 2000 compliance will result in a material adverse effect on its business,
financial condition or results of operations. Even if Fundtech's products and
services are Year 2000 compliant, the electronic funds transfer products and
services used be funds transferring parties not using Fundtech's products may
not be Year 2000 compliant, thereby disrupting the ability of Fundtech's
customers to use Fundtech's products for funds transfer transactions with these
parties. Furthermore, if funds transfers were unable to be processed by
Fundtech's customer because of Year 2000 compliance problems, there can be no
assurance that third parties will not commence litigation against Fundtech for
such funds transfer failure.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Fundtech does not utilize financial instruments for trading purposes
and holds no derivative financial instruments which could expose Fundtech to
significant market risk.
FUNDTECH LTD.
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) In June 1999, Fundtech Ltd. ("Fundtech") consummated a
transaction with Biveroni Batchelet Partners AG, a Swiss corporation
("BBP") and its shareholders (the "Shareholders"), pursuant to which
Fundtech purchased all of the outstanding shares of BBP. Twenty-five
percent (25%) of the purchase price was paid by Fundtech to the five
(5) Shareholders through a private issuance of One Hundred and Five
Thousand Three Hundred and Fifteen (105,315) Ordinary Shares at a price
of Thirty-one U.S. Dollars($31) per share in reliance on the exemption
from registration contained in Section 4(2) of the 1933 Act and
Regulation D of the rules and regulations promulgated under the 1933
Act.
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(d) The effective date of the registration statement (no. 333-8304) for
Fundtech's initial public offering of its ordinary shares, NIS .01 par
value, was March 13, 1998. The offering commenced on March 16, 1998,
and terminated after the sale of all the securities registered. The
managing underwriter of the offering was BancAmerica Robertson
Stephens. Fundtech registered 3,450,000 ordinary shares in the
offering, including shares issued pursuant to the exercise of the
underwriters' over-allotment option. Of such shares, Fundtech sold
2,587,500 ordinary shares at an aggregate offering price of $33.6
million ($13.00 per share) and certain selling shareholders sold an
aggregate of 862,500 ordinary shares at an aggregate offering price of
$11.2 million ($13.00 per share). Under the terms of the offering,
Fundtech incurred underwriting discounts of $2.4 million. Fundtech
incurred expenses of $2.5 million in connection with the offering. None
of the amounts were paid directly or indirectly to any director,
officer, general partner of Fundtech or their associates, persons
owning ten percent or more of any class of equity securities of
Fundtech, or an affiliate of Fundtech.
The net proceeds that Fundtech received as a result of the offering
were $29.0 million. As of June, 1999, the net proceeds have been used
as follows: $6.6 million has been used to purchase a series of 30 day
certificates of deposit at interest rates ranging from 4.8% to 5.5%
pending application of the funds, $18.8 million has been used for the
acquisition of certain assets from CheckFree Holdings Corporation, and
$3.4 million has been used for general corporate purposes. In addition,
approximately $248,000 of one of Fundtech's shareholders, Aura
Investments Research & Development Ltd. in 1993. Except for the
repayment of the aforementioned loan, none of the net proceeds of the
offering were paid directly or indirectly to any director, officer,
general partner of Fundtech or their associates, persons owning ten
percent or more of any class of equity securities of Fundtech, or an
affiliate of Fundtech.
The effective date of the registration statement (no. 333-75233) for
Fundtech's secondary public offering of its ordinary shares, NIS .01
par value, was April 30, 1999 ("Secondary Offering"). The Secondary
Offering was completed on April 30, 1999, and terminated after the sale
of all the securities registered. The managing underwriter of the
Secondary Offering was BancBoston Robertson Stephens. Fundtech
registered and sold 2,900,000 ordinary shares in the Secondary Offering
at an aggregate offering price of $101.5 million ($35.00 per share).
Under the terms of the Secondary Offering, Fundtech incurred
underwriting discounts of $6.1 million. As of June 30, 1999, Fundtech
incurred expenses of approximately $3.1 million in connection with the
offering. None of the amounts were paid directly or indirectly to any
director, officer, general partner of Fundtech or their associates,
persons owning ten percent or more of any class of equity securities of
Fundtech, or an affiliate of Fundtech.
The gross proceeds that Fundtech received as a result of the Secondary
Offering were $95.4 million. As of June 30, 1999, the net proceeds have
been used as follows: $85 million has been used to purchase a series of
30 day certificates of
14
<PAGE>
deposit at interest rates ranging from 4.8% to 6% pending application
of the funds, $10 million has been used for the acquisition of BBP.
None of the net proceeds of the offering were paid directly or
indirectly to any director, officer, general partner of Fundtech or
their associates, persons owning ten percent or more of any class of
equity securities of Fundtech, or an affiliate of Fundtech.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.00 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter, Fundtech filed the following Current
Report on Form 8-K:
(1) A Current Report on Form 8-K/A dated and filed July
21, 1999, pertaining to.
(2) A Current Report on Form 8-K dated and filed June 29,
1999, pertaining to.
(3) A Current Report on Form 8-K dated and filed June 11,
1999, pertaining to.
15
<PAGE>
FUNDTECH LTD.
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
27.00 Financial Data Schedule
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Fundtech Ltd.
(Registrant)
/s/ Reuven Ben-Menachem
--------------------------
Dated: August 16, 1999 Chairman, President & CEO
/s/ Michael Carus
--------------------------
Dated: August 16, 1999 Executive Vice President & CEO
(Principal Financial Officer)
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet (unaudited) as of March 31, 1999 and the
condensed consolidated statement of operations (unaudited) for the three months
ended March 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 95,105
<SECURITIES> 1,218
<RECEIVABLES> 13,880
<ALLOWANCES> 301
<INVENTORY> 0
<CURRENT-ASSETS> 111,765
<PP&E> 4,740
<DEPRECIATION> 513
<TOTAL-ASSETS> 131,040
<CURRENT-LIABILITIES> 8,641
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> 137,754
<TOTAL-LIABILITY-AND-EQUITY> 131,040
<SALES> 16,933
<TOTAL-REVENUES> 16,933
<CGS> 4,728
<TOTAL-COSTS> 16,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1335
<INCOME-TAX> 0
<INCOME-CONTINUING> 1335
<DISCONTINUED> 0
<EXTRAORDINARY> 2,802
<CHANGES> 0
<NET-INCOME> 1,335
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>
