SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 26, 2000
PIVOTAL CORPORATION
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
British Columbia, Canada
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(State or Other Jurisdiction of Incorporation)
000-26867 Not Applicable
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
300 - 224 West Esplanade
North Vancouver, B.C., Canada V7M 3M6
--------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (604) 988-9982
Not Applicable
--------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 26, 2000, Pivotal Corporation acquired 100 percent of the issued
and outstanding shares of Simba Technologies Inc. (now Digital Conversations,
Inc.) a Vancouver, British Columbia company that provides digital solutions that
aggregate and analyze all Internet customer interactions such as email messages,
Web chat sessions and Web site surfing into an integrated conversation for
Microsoft standards. Under the terms of the Share Purchase Agreement dated May
29, 2000, a copy of which is attached hereto as Exhibit 2.1, Pivotal Corporation
paid a total purchase price of $17.6 million for all of the issued and
outstanding shares of Simba Technologies Inc. by issuing common shares and
options to purchase common shares with a fair value of $17.1 million and
acquisition related expenditures of $455,000. The transaction has been accounted
for under the purchase method of accounting.
Prior to the acquisition, Simba Technologies Inc. was comprised of two
primary business units, Simba Digital Conversations and Simba Tools. Simba Tools
was the primary operating business unit, consisting of data access and analytics
technology that enables complex data warehousing and database analytics used by
analytical software providers. Simba Digital Conversations was a business unit,
still primarily in the research and development stage, that provides Internet
marketing solutions. On June 24, 2000, Simba Technologies Inc. sold the Simba
Tools business unit, the primary operating business unit, to a third party.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Audited Consolidated Financial Statements of Simba Technologies Inc. for
the years ended December 31, 1999 and 1998:
Report of Independent Auditor
Consolidated Balance Sheet
Consolidated Statements of Earnings (Loss) and Deficit
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Unaudited Consolidated Financial Statements of Simba Technologies Inc.:
Condensed Consolidated Balance Sheet - March 31, 2000
Condensed Consolidated Statement of Earnings (Loss) and Deficit -
March 31, 2000 and 1999
Condensed Consolidated Statement of Cash Flows - March 31, 2000
and 1999
Notes to Condensed Consolidated Financial Statements
<PAGE>
Consolidated Financial Statements of
SIMBA TECHNOLOGIES INCORPORATED
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
<PAGE>
KPMG LLP
Chartered Accountants Telephone (604) 691-3000
Box 10426 777 Dunsmuir Street Telefax (604) 691-3031
Vancouver BC V7Y 1K3 www.kpmg.ca
Canada
Auditors' Report
To the Board of Directors
Simba Technologies Incorporated
We have audited the consolidated balance sheets of Simba Technologies
Incorporated as at December 31, 1999 and 1998 and the consolidated statements of
operations and deficit and cash flows for each of the years then ended. 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 Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1999
and the results of its operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting principles.
Canadian generally accepted accounting principles vary in certain significant
respects from accounting principles generally accepted in the United States.
Application of generally accepted accounting principles in the United States
would have required the additional disclosures set out in note 9.
KPMG LLP (signed)
Chartered Accountants
Vancouver, Canada
February 28, 2000
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Consolidated Balance Sheet
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
<TABLE>
=================================================================================================
1999 1998
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 854,101 $ 1,109,148
Accounts receivable 975,654 1,303,626
Investment tax credits receivable 350,000 387,481
Prepaid expenses 46,672 93,708
-------------------------------------------------------------------------------------------------
2,226,427 2,893,963
Capital assets (note 3) 304,705 355,097
-------------------------------------------------------------------------------------------------
$ 2,531,132 $ 3,249,060
-------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 156,950 $ 694,120
Current portion of obligations under capital leases 39,252 21,903
Current portion of note payable - 45,047
Deferred revenue 259,455 139,717
-------------------------------------------------------------------------------------------------
455,657 900,787
Obligations under capital leases 31,372 -
Deferred lease inducement 35,285 49,621
Shareholders' equity:
Share capital (note 4) 6,139,514 6,111,813
Deficit (4,130,696) (3,813,161)
-------------------------------------------------------------------------------------------------
2,008,818 2,298,652
Contingency (note 4(d))
Commitments (note 8)
-------------------------------------------------------------------------------------------------
$ 2,531,132 $ 3,249,060
=================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Consolidated Statements of Operations and Deficit
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
<TABLE>
===============================================================================================
1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue: $ 4,001,852 $ 4,201,429
Cost of goods sold (note 6) 831,611 1,192,682
-----------------------------------------------------------------------------------------------
3,170,241 3,008,747
Operating expenses:
Research and development (note 6) 1,930,113 549,463
Sales and marketing 1,019,130 1,012,148
General and administrative 527,833 628,663
-----------------------------------------------------------------------------------------------
3,477,076 2,190,274
-----------------------------------------------------------------------------------------------
Earnings (loss) before other income and expense (306,835) 818,473
Other income and expense:
Interest income 13,764 35,529
Foreign exchange loss (24,464) (48,856)
-----------------------------------------------------------------------------------------------
(10,700) (13,327)
-----------------------------------------------------------------------------------------------
Net earnings (loss) (317,535) 805,146
Deficit, beginning of year (3,813,161) (4,618,307)
-----------------------------------------------------------------------------------------------
Deficit, end of year $ (4,130,696) $ (3,813,161)
===============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
<TABLE>
=====================================================================================================
1999 1998
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in):
Operating Activities:
Net earnings (loss) $ (317,535) $ 805,146
Items not involving cash:
Amortization 217,811 220,620
Deferred lease inducement (14,336) (14,396)
Changes in non-cash operating working capital:
Accounts receivable 327,972 (332,218)
Investment tax credits receivable 37,481 295,605
Prepaid expenses 47,036 (31,901)
Accounts payable and accrued liabilities (537,170) 158,114
Deferred revenue 119,738 (26,636)
-----------------------------------------------------------------------------------------------------
(119,003) 1,074,334
Investing Activities:
Purchase of capital assets (167,419) (191,541)
Financing activities:
Additional obligations under capital leases 98,741 -
Payment of obligations under capital leases (50,020) (44,317)
Payment of note payable (45,047) (88,013)
Issuance of common shares for cash 27,701 3,020
-----------------------------------------------------------------------------------------------------
31,375 (129,310)
-----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (255,047) 753,483
Cash and cash equivalents, beginning of year 1,109,148 355,665
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 854,101 $ 1,109,148
-----------------------------------------------------------------------------------------------------
Supplementary information:
Interest received $ 35,766 $ 56,260
Interest paid $ 10,396 $ 15,379
=====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
Simba Technologies Incorporated is comprised of two primary business units,
Simba Digital Conversations and Simba Tools. Simba Tools is the primary
operating business unit, consisting of data access and analytics technology that
enables complex data warehousing and database analytics used by analytical
software providers. Simba Digital Conversations is a business unit, still
primarily in the research and development stage, that provides digital solutions
that aggregate and analyze all Internet customer interactions such as email
messages, Web chat sessions and Web site surfing into an integrated conversation
for Microsoft standards.
1. Significant accounting policies:
(a) Basis of presentation:
The consolidated financial statements include the accounts of the
Company, and its wholly owned subsidiaries, Simba Technologies
Incorporated (USA) and PageAhead Research Company. All significant
intercompany transactions and balances have been eliminated.
(b) Measurement uncertainty:
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, including accounts receivable and investment tax credits,
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may
differ from those estimates.
(c) Revenue recognition:
The Company recognizes revenue from software licenses at the time the
software is delivered provided there is evidence of an arrangement,
the fee is fixed and determinable, and collection is probable.
Revenue from license agreements with original equipment manufacturers
(OEM) for redistribution to the OEM's end user customers is recognized
when the software is delivered provided there is evidence of an
arrangement, the fee is fixed and determinable, and collection of the
receivable is probable. Revenue from OEM royalties is recognized when
the OEM delivers its product incorporating the Company's software to
the end user, the Company has received evidence of delivery, and
collection is probable.
Revenue from minimum royalty license agreements is recognized to the
extent of guaranteed amounts upon delivery of the product master
provided collection is probable. Amounts due beyond one year are
recognized in the year received. Royalties per copy in excess of the
guaranteed amounts are recognized as earned.
Revenue from post-contract customer support agreements, including
maintenance agreements bundled with software licenses, is recognized
ratably over the term of the related agreements.
Revenue from consulting and other software-related services is
recognized as the services are rendered only if the services are not
essential to the functionality of the software.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
1. Significant accounting policies (continued):
(c) Revenue recognition (continued):
The Company recognizes revenue from contracts involving production,
modification, or customization of software using the percentage of
completion method, based on performance milestones specified in the
contract where such milestones fairly reflect progress toward contract
completion. In other instances, progress toward completion is based on
individual contract costs incurred to date compared with total
estimated contract costs. Deferred revenue represents the amount of
billing in excess of the revenue recognized using the percentage of
completion method and the unamortized amount of post-contract customer
support agreements.
(d) Capital assets:
Capital assets are stated at cost and are amortized on a straight-line
basis over their estimated useful lives:
----------------------------------------------------
Asset Rate
----------------------------------------------------
Computer software 2 years
Computer hardware 3 years
Office equipment 5 years
Trademarks 5 years
----------------------------------------------------
Property under capital leases is initially recorded at the present
value of minimum lease payments at the inception of the lease.
Leasehold improvements are depreciated over the shorter of the lease
term or their estimated useful lives.
(e) Foreign currency translation:
These financial statements are expressed in US dollars. Canadian and
other foreign currency amounts are translated into US dollars using
the temporal method of accounting at the following rates: monetary
assets and liabilities at the rate in effect at the balance sheet
date; non-monetary assets and liabilities at the historical rate in
effect on the transaction date; and revenue and expense items at
average rates for the year, except for amortization which is
translated at historical rates in effect on the dates the assets were
acquired. Gains and losses arising on foreign exchange translation are
recognized in earnings.
(f) Research and development costs:
Research costs are expensed as incurred. Development costs are
deferred if they meet specific criteria; otherwise they are expensed
as incurred. At December 31, 1999, no development costs have been
deferred.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
1. Significant accounting policies (continued):
(g) Investment tax credits and government grants:
The Company accounts for investment tax credits and government grants
using the cost reduction approach, whereby investment tax credits and
government grants related to the acquisition of assets are deferred
and amortized to income on the same basis as the related assets.
Investment tax credits and government grants that relate to current
research and development expenditures are deducted from those
expenditures in the current period.
(h) Cash and cash equivalents:
The Company considers all short-term investments with a maturity date
at purchase of 3 months or less to be cash equivalents.
(i) Stock option plan:
The Company has a stock option plan, which is described in note 5. No
compensation expense is recognized when stock options are issued. Any
consideration paid on exercise of stock options is credited to share
capital.
(k) Income taxes:
The Company follows the tax allocation method of accounting for income
taxes. Taxes deferred by claiming amounts for tax purposes which are
different from those recorded in the accounts are charged against
current operations and are reflected on the balance sheet as deferred
income taxes.
2. Financial instruments and risk management:
(a) Fair values:
As at December 31, 1999, the carrying amounts reported in the balance
sheet for cash, and cash equivalents, amounts receivable, accounts
payable and accrued liabilities and capital lease obligations
approximate their fair value due to the short term to maturity of
these instruments.
(b) Foreign exchange risk:
The Company incurs the majority of its expenditures in Canadian
dollars and earns its revenues mainly in U.S. dollars. The Company
does not engage in any foreign exchange hedging activities.
(c) Credit and concentration risk:
Credit risk reflects the risk that the Company may be unable to
recover contractual receivables. The Company employs established
credit approval practices to mitigate this risk. The accounts
receivable balance includes amounts due from customers in Canada, the
U.S. and overseas. As at December 31, 1999, one customer in the U.S.
accounted for approximately 48% of the total balance, which has been
collected subsequent to year end.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
3. Capital assets:
<TABLE>
===========================================================================================
1999
-------------------------------------------------------------------------------------------
Accumulated Netbook
Cost amortization value
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer software $ 234,876 $ 216,986 $ 17,890
Computer hardware 883,719 688,759 194,960
Office equipment 205,956 156,207 49,749
Trademarks 48,355 20,332 28,023
Leasehold improvements 21,280 7,197 14,083
-------------------------------------------------------------------------------------------
$ 1,394,186 $ 1,089,481 $ 304,705
-------------------------------------------------------------------------------------------
===========================================================================================
1998
-------------------------------------------------------------------------------------------
Accumulated Netbook
Cost amortization value
-------------------------------------------------------------------------------------------
Computer software $ 226,185 $ 205,305 $ 20,880
Computer hardware 754,256 535,344 218,912
Office equipment 194,622 119,403 75,219
Trademarks 39,434 11,618 27,816
Leasehold improvements 12,270 - 12,270
-------------------------------------------------------------------------------------------
$ 1,226,767 $ 871,670 $ 355,097
-------------------------------------------------------------------------------------------
</TABLE>
Included in computer hardware are the costs of assets under capital leases
of $337,385 (1998 -$238,644) and the corresponding accumulated amortization
of $266,761 (1998 - $213,269).
4. Share capital:
(a) Authorized:
15,000,000 common shares without par value;
1,362,500 Class A preferred shares, 10% non-cumulative, voting,
convertible, retractable, without par value;
1,764,800 Class B preferred shares, 10% non-cumulative, voting,
convertible, retractable, without par value;
2,360,458 Class C preferred shares, 10% non-cumulative, voting,
convertible, retractable, without par value.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
4. Share capital (continued):
(b) Issued:
<TABLE>
===============================================================================================
1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C>
1,640,163 common shares (1998 - 1,491,071) $ 130,759 $ 103,058
1,350,000 Class A preferred shares $ 1,319,254 $ 1,319,254
1,764,707 Class B preferred shares $ 1,429,326 $ 1,429,326
2,356,070 Class C preferred shares $ 3,260,175 $ 3,260,175
-----------------------------------------------------------------------------------------------
$ 6,139,514 $ 6,111,813
===============================================================================================
</TABLE>
During the year, 25,000 common share warrants at $0.10 each, 123,242
common share options at $0.20 each and 850 common share options at
$0.65 each were exercised.
(c) Conversion:
All preferred shares are convertible into common shares on a
one-share-for-one-share basis subject to an anti-dilutive adjustment,
at the option of each holder, or automatically upon an initial public
offering by the Company with a public offering price of not less than
$3.00 per common share and with aggregate gross proceeds of more than
$5,000,000. If 60% or greater of the outstanding holders of a class of
preferred shares vote for conversion, the entire class will be
converted to common shares.
(d) Retraction:
At any time on or after December 7, 1999, upon written request of 54%
of the then outstanding shareholders of the specific class, the
Company shall redeem in three equal annual installments all of the
shares of that class by paying, in cash,
(i) the issue price; plus
(ii) 10% per annum (not compounded); plus
(iii) $0.19 per share for Class A Preferred shareholders only; less
(iv) any dividends declared and paid; plus
(v) any dividends declared but unpaid.
The preferred shares have warrants attached to them, however, the fair
value of these warrants was determined to be a nominal amount.
(e) Liquidation:
In the event of any liquidation, dissolution, bankruptcy, buy-out or
winding-up of the Company the shareholders of Class A, B and C
Preferred shares shall receive:
(i) US$1.00, US$0.85, US$1.414 per share for each outstanding Class
A, B and C preferred share, respectively; plus
(ii) 10% per annum (not compounded); plus
(iii) $0.19 per share for Class A Preferred shareholders only; less
(iv) any dividends declared and paid; plus
(v) any dividends declared and unpaid, plus
(vi) any remaining amounts after the distribution of (i) to (v) above
to be distributed on a pro-rata basis among the Common and Class
A, B and C Preferred shareholders.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
5. Stock options and warrants:
(a) Stock options:
The Company has a stock option plan for selected employees, directors,
officers, agents, consultants, advisors, and independent contractors,
which provides for incentive options. The options vest at rates
between 25% and 100% each year from the date of granting. The Board of
Directors determines the option price at the date of grant. The
options generally expire ten years from the date of grant and are
exercisable over the period stated in each plan.
During the year, 427,320 options at $0.65 per share were granted.
At December 31, 1999, the authorized options for common shares were
1,785,400 (1998 - 1,785,400), of which 680,590 (1998 - 679,313) were
exercisable pursuant to the vesting requirements of the plan.
Activity in the Company's stock option plan was as follows:
<TABLE>
======================================================================================
Number of Weighted-average
shares Exercise Price
--------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding, December 31, 1997 854,518 $ 0.20
Granted during 1998 614,479 0.31
Exercised during 1998 (15,100) 0.20
Forfeited/expired during 1998 (45,400) 0.20
Options outstanding, December 31, 1998 1,412,497 $ 0.24
Granted during 1999 427,320 0.65
Exercised during 1999 (124,092) 0.20
Forfeited/expired during 1999 (303,492) 0.25
--------------------------------------------------------------------------------------
Options outstanding, December 31, 1999 1,412,233 $ 0.37
======================================================================================
</TABLE>
Stock options outstanding at December 31, 1999
<TABLE>
====================================================================================
Weighted-average
remaining Weighted-average
Range (US$) Number outstanding contractual life exercise price
------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.10-0.20 896,423 4.7 0.20
0.65 515,810 9.4 0.65
------------------------------------------------------------------------------------
1,412,233 6.5 0.37
====================================================================================
</TABLE>
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
5. Stock options and warrants (continued):
(a) Stock options (continued):
Stock options exercisable at December 31, 1999
======================================================================
Weighted-average
Range (US$) Number Exercisable Exercise Price
----------------------------------------------------------------------
0.10-0.20 606,038 0.20
0.65 74,552 0.65
----------------------------------------------------------------------
680,590 0.25
======================================================================
(b) Share purchase warrants:
At December 31, 1999, the Company had outstanding warrants to purchase
78,720 (1998 -78,720) shares of common stock at a price of $0.65 per
share during the period up to and including September 9, 2001 and
warrants to purchase 12,500 (1998 - 12,500) shares of Class A
Preferred stock at a price of $1.00 per share during the period up to
and including August 15, 2001.
6. Research and development:
<TABLE>
========================================================================================
1999 1998
----------------------------------------------------------------------------------------
<S> <C> <C>
Gross research and development expenses $2,442,769 $1,030,197
Research and development funding:
Investment tax credits (431,431) (480,734)
Government grants (81,225) -
----------------------------------------------------------------------------------------
Net research and development expenses 1,930,113 549,463
Contract research and development expenses
(included in cost of goods sold) 690,785 1,040,832
----------------------------------------------------------------------------------------
$2,620,898 $1,590,295
========================================================================================
</TABLE>
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
7. Income taxes:
As at December 31, 1999, the Company has accumulated the following tax
balances:
(a) Non-capital losses carried forward:
The Company has available net operating losses that may be carried
forward and used to reduce future taxable income. The benefit of these
losses has not been recognized, in the financial statements and they
expire as follows:
2005 $ 61,871
2006 843,784
2007 360,921
2008 181,738
2009 23,819
2011 250,472
2014 27,261
-----------------------------------------------
$ 1,749,866
-----------------------------------------------
(b) Unclaimed scientific research and experimental development
expenditures:
The Company has available unclaimed Scientific Research and
Experimental Development expenditures of $2,021,826 that may be
carried forward indefinitely and used to reduce future taxable income.
The benefit of these expenditures has not been recognized in the
financial statements.
8. Commitments:
(a) Leases:
The Company is committed to payments under operating leases for
premises as follows.
2000 $ 136,615
2001 68,677
2002 5,723
----------------------------------------------
$ 211,015
(b) Operating credit facility:
The Company has established an operating credit facility with a
Canadian chartered bank for up to CDN$400,000 at the bank's prime rate
plus 1.5%. The amount available from the credit facility is limited to
75% of the Company's current Canadian and United States accounts
receivable and 65% of the Company's current international accounts
receivable. The credit facility is secured by a general charge on the
Company's assets.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements, page 8
(Expressed in U.S. Dollars)
Years ended December 31, 1999 and 1998
================================================================================
9. Differences between Canadian and United States Generally Accepted
Accounting Principles:
Accounting for income taxes:
Under the asset and liability method of Statement of Financial Accounting
Standard No. 109 ("FAS 109"), deferred income taxes and liabilities are
measured using enacted tax rates to reflect the future income tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
losses. A valuation allowance is recognized to reduce deferred tax assets
when their realization cannot be determined to be more likely than not.
There is no effect of adopting the provisions of FAS 109 on the Company's
financial statements, since the Company's deferred tax asset under United
States GAAP as at the reporting date was $nil, after deducting a valuation
allowance.
The Company's deferred tax asset consists of the following:
<TABLE>
=============================================================================================
December 31, December 31,
1999 1998
---------------------------------------------------------------------------------------------
<S> <C> <C>
Net operating loss carry forward $ 1,749,866 $ 1,469,747
Unclaimed scientific research and experimental
development expenditures 909,822 646,042
Capital assets 28,463 (82,036)
---------------------------------------------------------------------------------------------
Total gross deferred tax assets 2,688,151 2,033,753
Less valuation allowance (2,688,151) (2,033,753)
---------------------------------------------------------------------------------------------
Net deferred tax assets $ - $ -
=============================================================================================
</TABLE>
Accounting for redeemable preferred shares:
Under United States GAAP the Company would classify its redeemable
preferred shares (note 4) outside of shareholders' equity and the 10% per
annum increase in the redemption price would be accounted for as a charge
to equity.
The impact of this accounting for redeemable preferred shares is as
follows:
<TABLE>
======================================================================================================
December 31, December 31,
1999 1998
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carrying value of redeemable preferred shares under US GAAP 8,368,760 7,767,295
======================================================================================================
Share capital under Canadian GAAP $ 6,139,514 $ 6,111,813
Adjustment for redeemable preferred shares under US GAAP (6,014,649) (6,014,649)
------------------------------------------------------------------------------------------------------
Share capital under US GAAP $ 124,865 $ 97,164
======================================================================================================
Shareholders' deficit under Canadian GAAP $ 4,130,696 $ 3,813,161
Adjustment for increase in redemption price under US GAAP 2,354,111 1,752,646
------------------------------------------------------------------------------------------------------
Shareholders' deficit under US GAAP $ 6,484,807 $ 5,565,807
======================================================================================================
</TABLE>
<PAGE>
Consolidated Financial Statements of
SIMBA TECHNOLOGIES INCORPORATED
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
(Unaudited)
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Consolidated Balance Sheet
(Expressed in U.S. Dollars)
<TABLE>
======================================================================================================
March 31, December 31,
2000 1999
------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 792,710 $ 854,101
Accounts receivable 408,364 975,654
Investment tax credits receivable 350,000 350,000
Prepaid expenses 45,707 46,672
------------------------------------------------------------------------------------------------------
1,596,781 2,226,427
Capital assets 279,177 304,705
------------------------------------------------------------------------------------------------------
$ 1,875,958 $ 2,531,132
------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 350,967 $ 156,950
Current portion of obligations under capital leases 36,090 39,252
Deferred revenue 211,900 259,455
------------------------------------------------------------------------------------------------------
598,957 455,657
Obligations under capital leases 24,985 31,372
Deferred lease inducement 31,123 35,285
Shareholders' equity:
Share capital 6,141,232 6,139,514
Deficit (4,920,339) (4,130,696)
------------------------------------------------------------------------------------------------------
1,220,893 2,008,818
Subsequent event (note 3)
------------------------------------------------------------------------------------------------------
$ 1,875,958 $ 2,531,132
======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Consolidated Statement of Loss and Deficit
(Unaudited)
(Expressed in U.S. Dollars)
<TABLE>
====================================================================================================
Three months Three months
ended ended
March 31, March 31,
2000 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue: $ 561,760 $ 759,216
Cost of goods sold 105,525 60,283
----------------------------------------------------------------------------------------------------
456,235 698,933
Operating expenses:
Research and development 609,543 660,332
Sales and marketing 407,425 253,856
General and administrative 233,048 140,003
----------------------------------------------------------------------------------------------------
1,250,016 1,054,191
----------------------------------------------------------------------------------------------------
Loss before other expense (793,781) (355,258)
Other income (expense):
Interest income 6,178 2,388
Foreign exchange loss (2,040) (17,041)
----------------------------------------------------------------------------------------------------
4,138 (14,653)
----------------------------------------------------------------------------------------------------
Net loss 789,643 369,911
Deficit, beginning of period 4,130,696 3,813,161
----------------------------------------------------------------------------------------------------
Deficit, end of period $ 4,920,339 $ 4,183,072
====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Consolidated Statement of Cash Flows
(Unaudited)
(Expressed in U.S. Dollars)
<TABLE>
========================================================================================================
Three months Three months
ended ended
March 31, March 31,
2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in):
Operating activities:
Net loss $ (789,643) $ (369,911)
Items not involving cash:
Amortization 41,382 49,946
Deferred lease inducement (4,162) (3,516)
Changes in non-cash operating working capital:
Accounts receivable 567,290 54,108
Investment tax credits receivable - (147,599)
Prepaid expenses 965 (11,680)
Accounts payable and accrued liabilities 194,017 (7,089)
Deferred revenue (47,555) 40,433
--------------------------------------------------------------------------------------------------------
Net cash used in operating activities (37,706) (395,309)
Investing Activities:
Purchase of capital assets (15,854) (86,874)
--------------------------------------------------------------------------------------------------------
Net cash used in investing activities (15,854) (86,874)
Financing activities:
Repayments of obligations under capital leases (9,549) (8,791)
Repayment of note payable - (19,148)
Proceeds from exercise of options 1,718 23,333
--------------------------------------------------------------------------------------------------------
Net cash used in financing activities (7,831) (4,606)
--------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (61,391) (486,788)
Cash and cash equivalents, beginning of period 854,101 1,109,148
--------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 792,710 $ 622,360
--------------------------------------------------------------------------------------------------------
Supplementary information:
Interest received $ 8,979 $ 8,388
Interest paid $ 2,800 $ 6,000
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
Simba Technologies Incorporated is comprised of two primary business units,
Simba Digital Conversations and Simba Tools. Simba Tools is the primary
operating business unit, consisting of data access and analytics technology that
enables complex data warehousing and database analytics used by analytical
software providers. Simba Digital Conversations is a business unit, still
primarily in the research and development stage, that provides digital solutions
that aggregate and analyze all Internet customer interactions such as email
messages, Web chat sessions and Web site surfing into an integrated conversation
for Microsoft standards.
1. Significant accounting policies:
(a) Basis of presentation:
The consolidated financial statements include the accounts of the
Company, and its wholly owned subsidiaries, Simba Technologies
Incorporated (USA) and PageAhead Research Company. All significant
intercompany transactions and balances have been eliminated.
(b) Measurement uncertainty:
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, including accounts receivable and investment tax credits,
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may
differ from those estimates.
(c) Revenue recognition:
The Company recognizes revenue from software licenses at the time the
software is delivered provided there is evidence of an arrangement,
the fee is fixed and determinable, and collection is probable.
Revenue from license agreements with original equipment manufacturers
(OEM) for redistribution to the OEM's end user customers is recognized
when the software is delivered provided there is evidence of an
arrangement, the fee is fixed and determinable, and collection of the
receivable is probable. Revenue from OEM royalties is recognized when
the OEM delivers its product incorporating the Company's software to
the end user, the Company has received evidence of delivery, and
collection is probable.
Revenue from minimum royalty license agreements is recognized to the
extent of guaranteed amounts upon delivery of the product master
provided collection is probable. Amounts due beyond one year are
recognized in the year received. Royalties per copy in excess of the
guaranteed amounts are recognized as earned.
Revenue from post-contract customer support agreements, including
maintenance agreements bundled with software licenses, is recognized
ratably over the term of the related agreements.
Revenue from consulting and other software-related services is
recognized as the services are rendered only if the services are not
essential to the functionality of the software.
The Company recognizes revenue from contracts involving production,
modification, or customization of software using the percentage of
completion method, based on performance milestones specified in the
contract where such milestones fairly reflect progress toward contract
completion. In other instances, progress toward completion is based on
individual contract costs incurred to date compared with total
estimated contract costs. Deferred revenue represents the amount of
billing in excess of the revenue recognized using the percentage of
completion method and the unamortized amount of post-contract customer
support agreements.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
1. Significant accounting policies (continued):
(d) Capital assets:
Capital assets are stated at cost and are amortized on a straight-line
basis over their estimated useful lives:
---------------------------------------------------------
Asset Rate
---------------------------------------------------------
Computer software 2 years
Computer hardware 3 years
Office equipment 5 years
Trademarks 5 years
---------------------------------------------------------
Property under capital leases is initially recorded at the present
value of minimum lease payments at the inception of the lease.
Leasehold improvements are depreciated over the shorter of the lease
term or their estimated useful lives.
(e) Foreign currency translation:
These financial statements are expressed in US dollars. Canadian and
other foreign currency amounts are translated into US dollars using
the temporal method of accounting at the following rates: monetary
assets and liabilities at the rate in effect at the balance sheet
date; non-monetary assets and liabilities at the historical rate in
effect on the transaction date; and revenue and expense items at
average rates for the year, except for amortization which is
translated at historical rates in effect on the dates the assets were
acquired. Gains and losses arising on foreign exchange translation are
recognized in earnings.
(f) Research and development costs:
Research costs are expensed as incurred. Development costs are
deferred if they meet specific criteria; otherwise they are expensed
as incurred. At March 31, 2000, no development costs have been
deferred.
(g) Investment tax credits and government grants:
The Company accounts for investment tax credits and government grants
using the cost reduction approach, whereby investment tax credits and
government grants related to the acquisition of assets are deferred
and amortized to income on the same basis as the related assets.
Investment tax credits and government grants that relate to current
research and development expenditures are deducted from those
expenditures in the current period.
(h) Cash and cash equivalents:
The Company considers all short-term liquid investments with a
maturity date at purchase of 3 months or less to be cash equivalents.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
1. Significant accounting policies (continued):
(i) Stock option plan:
The Company has a stock option plan, which is described in note 5. No
compensation expense is recognized when stock options are issued. Any
consideration paid on exercise of stock options is credited to share
capital.
(j) Unaudited financial information:
The financial information as at March 31, 2000 and for the three
months ended March 31, 2000 and 1999 is unaudited; however, such
financial information reflects all adjustments (consisting solely of
normal recurring adjustments) which are in the opinion of management,
required for a fair presentation of the financial information for the
interim periods presented. The policies applied by the Company in the
preparation of this interim financial information , as described
above, are consistent with these applied in the consolidated financial
statements for the year ended December 31, 1999.
(k) Income taxes:
In December 1997, the Accounting Standards Board of the Canadian
Institute of Chartered Accountants ("CICA") issued Section 3465 of the
CICA Handbook, Income Taxes ("Section 3465"). Section 3465 requires a
change from the deferred method of accounting for income taxes to the
asset and liability method of accounting for income taxes that was
previously applied.
Under the asset and liability method of Section 3465, future tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Future tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under Section 3465, the effect on future tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Pursuant to the deferral method, which was applied in 1999 and prior
years, deferred income taxes were recognized for income and expense
items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the
year of the calculation. Under the deferral method, deferred taxes
were not adjusted for subsequent changes in tax rates.
<PAGE>
SIMBA TECHNOLOGIES INCORPORATED
Notes to Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
2. Differences between Canadian and United States Generally Accepted
Accounting Principles:
These interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in Canada. There
are no material measurement differences to these interim consolidated
financial statements to accounting principles generally accepted in the
United States of America and the policies of the Securities and Exchange
Commission for interim financial statements, except as indicated below. In
accordance with the policies of the Securities and Exchange Commission, the
Company would classify its redeemable preferred shares outside of
shareholders' equity and the 10% per annum increase in the redemption price
would be accounted for as a charge to equity. The impact of this accounting
for redeemable preferred shares is as follows:
<TABLE>
======================================================================================================
March 31, December 31,
2000 199
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carrying value of redeemable preferred shares under US GAAP 8,437,474 8,368,760
======================================================================================================
Share capital under Canadian GAAP $ 6,141,232 $ 6,139,514
Adjustment for redeemable preferred shares under US GAAP (6,014,649) (6,014,649)
------------------------------------------------------------------------------------------------------
Share capital under US GAAP $ 126,583 $ 124,865
======================================================================================================
Shareholders' deficit under Canadian GAAP $ 4,920,339 $ 4,130,696
Adjustment for increase in redemption price under US GAAP 2,422,825 2,354,111
------------------------------------------------------------------------------------------------------
Shareholders' deficit under US GAAP $ 7,343,164 $ 6,484,807
======================================================================================================
</TABLE>
3. Subsequent events:
On June 24, 2000, the Company sold the Simba Tools business unit, the
primary operating business unit, to a third party.
On June 26, 2000 all of the shares of the Company were purchased by Pivotal
Corporation. As a result of the purchase, the Company incurred
restructuring costs of approximately $100,000 which have not been reflected
in this financial information.
<PAGE>
(b) Pro Forma Financial Information
Unaudited Pro Forma Condensed Combined Financial Statements:
Unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 2000
Unaudited Pro Forma Condensed Combined Statements of Operations
for the Nine Months Ended March 31, 2000
Unaudited Pro Forma Condensed Combined Statements of Operations
for the Year Ended June 30, 1999
Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE>
<TABLE>
PIVOTAL CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Expressed in United States dollars; all amounts in thousands except per share data)
(Unaudited)
March 31, 2000
---------------------------------------------------------------------------------
Historical Historical Historical Pro forma Pro forma
Pivotal Exactium Simba Adjustments Combined
-------------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............... $ 5,818 $ 18 $ 793 $ - $ 6,629
Short term investments .................. 42,882 - - (13,605) (b) 29,277
Accounts receivable ..................... 15,061 2,530 408 - 17,999
Investment tax credits receivable ....... - - 350 - 350
Prepaid expenses ........................ 3,304 62 46 - 3,412
-------------------------------------------------------------- ------------
Total current assets .................... 67,065 2,610 1,597 (13,605) 57,667
Property and equipment, net ............. 5,447 403 279 - 6,129
Other assets ............................ 1,415 677 - 54,918 (a) $ 57,010
-------------------------------------------------------------- ------------
Total assets ............................ $ 73,927 $ 3,690 $ 1,876 41,313 $ 120,806
============================================================== ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities. $ 12,095 542 351 - $ 12,988
Line of credit .......................... - 71 - - 71
Current portion of obligations
under capital leases..................... - - 36 - 36
Deferred revenue ........................ 7,678 169 212 - 8,059
Total current liabilities ............... 19,773 782 599 - 21,154
-------------------------------------------------------------- ------------
Other noncurrent liabilities............. - 6,439 56 (5,402) (b) 1,093
-------------------------------------------------------------- ------------
Shareholders' equity (deficit):
Share capital .......................... 62,455 5 6,141 42,979 (b)(c) 111,580
Additional paid-in capital ............. - 8,258 - (8,258) (c) -
Deferred share-based compensation ...... (249) - - - (249)
Capital reserves........................ - (259) - 259 (c) -
Accumulated deficit .................... (8,052) (11,535) (4,920) 11,735 (c)(d) (12,772)
Total shareholders' equity (deficit) .... 54,154 (3,531) 1,221 46,715 98,559
-------------------------------------------------------------- ------------
Total liabilities and
shareholders' equity (deficit) ....... $ 73,927 $ 3,690 $ 1,876 $ 41,313 $ 120,806
============================================================== ============
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
<PAGE>
<TABLE>
PIVOTAL CORPORATION
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(Expressed in United States dollars; all amounts in thousands except per share data)
(Unaudited)
Nine months ended March 31, 2000
------------------------------------------------------------------------------
Historical Historical Historical Pro forma Pro forma
Pivotal Exactium Simba Adjustments Combined
------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses .......................... $ 24,248 $ 883 $ 2,975 $ - $ 28,106
Services and Maintenance .......... 10,506 1,246 - - 11,752
------------------------------------------------------------- -------------
Total revenues ......................... 34,754 2,129 2,975 - 39,858
------------------------------------------------------------- -------------
Cost of revenues:
Licenses .......................... 1,329 37 312 - 1,678
Services and maintenance .......... 5,476 865 - - 6,341
------------------------------------------------------------- -------------
Total cost of revenues ................. 6,805 902 312 - 8,019
------------------------------------------------------------- -------------
Gross profit ........................... 27,949 1,227 2,663 - 31,839
------------------------------------------------------------- -------------
Operating expenses:
Sales and marketing ............... 20,846 1,346 931 - 23,123
Research and development .......... 6,103 1,266 1,681 - 9,050
General and administrative ........ 2,872 1,047 518 - 4,437
Amortization of goodwill .......... 129 - - 13,899 14,028
------------------------------------------------------------- -------------
Total operating expenses ............... 29,950 3,659 3,130 13,899 50,638
------------------------------------------------------------- -------------
Loss from operations ................... (2,001) (2,432) (467) (13,899) (18,799)
Interest and other income (loss) ....... 1,715 (180) 22 - 1,557
------------------------------------------------------------- -------------
Loss before taxes ...................... (286) (2,612) (445) (13,899) (17,242)
Income taxes ........................... 340 - - - 340
------------------------------------------------------------- -------------
Net loss ............................... $ (626) $ (2,612) $ (445) $ (13,899) $ (17,582)
============================================================= =============
Earnings (loss) per share:
Basic................................... $ (0.03) $ (0.90)
Diluted ................................ $ (0.03) $ (0.90)
Pro forma basic and diluted ....... $ (0.03) $ (0.83)
Weighted average number of shares used
to calculate loss per share
Basic................................... 17,951 19,606
Diluted ........................... 17,951 19,606
Pro forma basic and diluted ....... 19,513 21,168
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
<PAGE>
<TABLE>
PIVOTAL CORPORATION
PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(Expressed in United States dollars; all amounts in thousands except per share data)
(Unaudited)
Year ended June 30, 1999
-----------------------------------------------------------------------------
Historical Historical Historical Pro forma Pro forma
Pivotal Exactium Simba Adjustments Combined
------------------------------------------------------------ -------------
Revenues:
<S> <C> <C> <C> <C> <C>
Licenses ......................... $ 18,819 $ 555 $ 4,023 $ - $ 23,397
Services and Maintenance ......... 6,508 689 - - 7,197
------------------------------------------------------------ ------------
Total revenues ........................ 25,327 1,244 4,023 - 30,594
------------------------------------------------------------ ------------
Cost of revenues:
Licenses ......................... 536 - 1,408 - 1,944
Services and Maintenance ......... 3,078 569 - - 3,647
------------------------------------------------------------ ------------
Total cost of revenues ................ 3,614 569 1,408 - 5,591
------------------------------------------------------------ ------------
Gross profit .......................... 21,713 675 2,615 - 25,003
------------------------------------------------------------ ------------
Operating expenses:
Sales and marketing .............. 16,830 1,088 1,030 - 18,948
Research and development ......... 4,958 1,566 1,185 - 7,709
General and administrative ....... 2,466 983 540 - 3,989
Amortization of goodwill ......... - - - 18,531 (a) 18,531
------------------------------------------------------------ ------------
Total operating expenses .............. 24,254 3,637 2,755 18,531 49,177
------------------------------------------------------------ ------------
Loss from operations .................. (2,541) (2,962) (140) (18,531) (24,174)
Interest and other .................... (24) (40) (54) - (118)
------------------------------------------------------------ ------------
Loss before income taxes .............. (2,565) (3,002) (194) (18,531) (24,292)
Income taxes .......................... 243 - - - 243
------------------------------------------------------------ ------------
Net loss .............................. $ (2,808) $ (3,002) $ (194) $ (18,531) $ (24,535)
============================================================ ============
Loss per share:
Basic ............................ $ (0.72) $ (4.43)
Diluted .......................... $ (0.72) $ (4.43)
Pro forma basic and diluted ...... $ (0.18) $ (1.39)
Weighted average number of shares used
to calculate loss per share
Basic ............................ 3,888 5,543
Diluted .......................... 3,888 5,543
Pro forma basic and diluted ...... 15,940 17,595
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
<PAGE>
1. BASIS OF PRESENTATION
The following unaudited pro forma condensed combined financial statements
give effect to the acquisitions of Exactium Ltd. ("Exactium") and Simba
Digital Technologies, a division of Simba Technologies Incorporated,
("Simba") by Pivotal Corporation (the "Company" or "Pivotal").
Effective June 7, 2000, the Company acquired 100% of Exactium. The purchase
price of $45,140 consisted of the issuance of common shares and options to
purchase common shares of the Company with a fair value of $31,990 and cash
of $13,150 including a shareholder loan repayment of $5,402 and acquisition
related expenditures of $775. Exactium, an Israeli company, based in
Atlanta, Georgia, provides e-selling solutions for internet and Microsoft
standards.
On June 26, 2000, the Company acquired 100% of Simba. The purchase price of
$17,590 consisted of the issuance of common shares and options to purchase
common shares of the Company with a fair value of $17,135 and cash of $455
for acquisition related expenditures. Simba develops ebusiness software
solutions which aggregate and analyze internet customer interactions
including email, web chat sessions and web site surfing.
The pro forma condensed combined balance sheet assumes the acquisitions
took place on March 31, 2000 and combines the March 31, 2000 balance sheets
of Pivotal, Exactium and Simba. The pro forma condensed combined statement
of operations for Pivotal's fiscal year ended June 30, 1999 assumes the
acquisitions took place as of the beginning of the fiscal year and combines
the historical results of Pivotal for the fiscal year ended June 30, 1999
and Exactium and Simba for the twelve months ended June 30, 1999, with pro
forma adjustments. The pro forma condensed combined statement of operations
for the nine months ended March 31, 2000 assumes the acquisitions took
place as of July 1, 1999 and combines the historical results of Pivotal,
Exactium and Simba for the nine months ended March 31, 2000, with pro forma
adjustments. Both Exactium and Simba have a December 31 fiscal year end.
Since the fiscal years of Pivotal, Exactium and Simba differ, the financial
statements of Exactium and Simba have been recast for the 1999 completed
fiscal year of Pivotal and are presented for the twelve month period ended
June 30, 1999.
The unaudited pro forma condensed combined balance sheet reflects the
appropriate pro forma adjustments to record the acquisitions of Exactium
and Simba using the purchase method of accounting as described in Note 2.
Acquisition costs and allocation of the excess of acquisition costs over
net assets acquired are set forth below:
<PAGE>
1. BASIS OF PRESENTATION (Continued)
<TABLE>
Exactium Simba Total
---------- ---------- ---------
<S> <C> <C> <C>
Cash (including acquisition related expenditures of $775
and $455 respectively).............................................. 13,150 455 13,605
Fair value of common shares of Pivotal issued and share purchase
options of Pivotal exchanged for Exactium and
Simba shares and options outstanding ............................... 31,990 17,135 49,125
---------- ---------- ---------
Total acquisition costs .............................................. 45,140 17,590 62,730
Less: net tangible assets acquired .................................. 1,194 1,221 2,415
---------- ---------- ---------
Excess of acquisition costs over net tangible assets acquired 43,946 16,369 60,315
========== ========== =========
Allocation to:
Goodwill and other intangibles ..................................... 41,116 14,479 55,595
In process research and development ................................ 2,830 1,890 4,720
</TABLE>
The fair value of shares of Pivotal common stock was determined by taking
an average of the opening and closing price of Pivotal common stock for a
short period just before and just after the terms of the transactions were
agreed to by the parties and announced to the public. The purchase price
was increased by the estimated fair value of the Pivotal share purchase
options exchanged for the Exactium and Simba options outstanding.
The unaudited pro forma condensed consolidated statements of operations
reflect additional amortization expense resulting from the increase in
goodwill and other intangible assets due to these acquisitions. The charge
for in process research and development has been reflected in the unaudited
pro forma condensed combined balance sheet. The charge for in process
research and development has not been included in the unaudited pro forma
condensed combined statements of operations as these statements do not give
effect to nonrecurring merger costs related to the transaction. In the
opinion of management, the acquired in process research and development had
not yet reached technological feasibility and had no alternative future
uses. Accordingly, the Company recorded a charge of $4,720 in its fourth
quarter of fiscal 2000 related to the acquired in process technology
($2,830 in respect of Exactium and $1,890 in respect of Simba). The
unallocated excess of acquisition costs over net tangible assets acquired
has been allocated to goodwill and other intangibles, which will be
amortized over three years.
The pro forma combined financial statements included herein have been
prepared by Pivotal, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. However, Pivotal believes that the disclosures are
adequate to make the information not misleading. These pro forma combined
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in Pivotal's Form F-1,
as amended, for the fiscal year ended June 30, 1999, the consolidated
financial statements and the notes thereto included in Pivotal's Form 10-Q
for the nine months ended March 31, 2000, the financial statements of
Exactium included in Pivotal's Form 8-K filed August 16, 2000 and the
financial statements of Simba included in this filing.
2. FORMA ADJUSTMENTS
The pro forma condensed combined balance sheet reflects the following
adjustments:
<PAGE>
(a) To record goodwill and other intangibles acquired.
(b) To record the acquisition of Exactium by the issuance of 1,116,955
shares of Pivotal common stock and 108,435 options to purchase Pivotal
common stock and payment of $13,150 cash (including repayment of
shareholder loan of $5,402) to purchase 100% of the equity of
Exactium. To record the acquisition of Simba by the issuance of
537,833 shares of Pivotal common stock and 299,645 options to purchase
Pivotal common stock and payment of $455 cash to purchase 100% of the
equity of Simba.
(c) To eliminate the share capital, additional paid-in capital, capital
reserves and accumulated deficit of each of Exactium and Simba.
(d) To record allocation of purchase price to in process research and
development
The pro forma combined statements of operations reflect the following
adjustments with respect to the acquisitions:
(a) To record amortization of purchased intangibles, other than in process
research and development, over estimated useful lives of three years.
3. LOSS PER SHARE
Basic and diluted net loss per share for each period is calculated by
dividing pro forma net loss by the shares used to calculate net loss per
share in the historical period plus the effect of the common stock and
options of Pivotal which were exchanged for all issued and outstanding
shares of Exactium and Simba.
(c) Exhibits
Exhibit
Number Description
------ -----------
2.1* Share Purchase Agreement among Pivotal Corporation and David
Pritchard, Kirk Herrington, Michael Satterfield, Calvin Mah,
VW B.C. Technology Investment Fund, Limited Partnership,
Venrock Associates, Venrock Associates II, Limited
Partnership, Working Ventures Canadian Fund Inc., Bank of
Montreal Capital Corporation, Sussex Capital Inc. and the
Other Shareholders of Simba Technologies Inc. Concerning all
of the Shares of Simba Technologies Inc. dated May 29, 2000.
23.1 Consent of KPMG LLP
-----------
* Previously filed
<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.
PIVOTAL CORPORATION
Date: October 5, 2000 By /s/ George W. Reznik
-------------------------------------
George W. Reznik
Vice President, Finance
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
------ ----------- ----
2.1* Share Purchase Agreement among Pivotal Corporation
and David Pritchard, Kirk Herrington, Michael
Satterfield, Calvin Mah, VW B.C. Technology Investment
Fund, Limited Partnership, Venrock Associates, Venrock
Associates II, Limited Partnership, Working Ventures
Canadian Fund Inc., Bank of Montreal Capital Corporation,
Sussex Capital Inc. and the Other Shareholders of Simba
Technologies Inc. Concerning all of the Shares of Simba
Technologies Inc. dated May 29, 2000
23.1 Consent of KPMG LLP
------------
* Previously filed
