<PAGE> 1
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): January 14, 2000
ACCRUE SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 000-26437 94-3238684
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
48634 Milmont Drive
FREMONT, CALIFORNIA 94538-7353
(Address of principal executive offices) (Zip code)
(510) 580-4500
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 14, 2000, Accrue Software, Inc., a Delaware corporation (the
"Company"), acquired NeoVista Software, Inc., a California corporation
("Target"), by the statutory merger (the "Merger") of NeoVista Acquisition
Corp., a California corporation and a wholly-owned subsidiary of the Company
("Merger Sub"), with and into Target. The Merger was accomplished pursuant to an
Agreement and Plan of Merger and Reorganization, dated as of November 17, 1999,
among the Company, Merger Sub and Target (the "Merger Agreement") and a related
Agreement of Merger (collectively, the "Merger Agreements"). As a result of the
Merger, the Company became the owner of 100% of the issued and outstanding
shares of Target's Common Stock and each outstanding share of Target Common
Stock was converted into 0.0484220818 shares of the Company's Common Stock.
A total of approximately 2,328,827 shares of the Company's Common Stock
will be issued to former Target shareholders and optionholders in exchange for
the acquisition by the Company of all outstanding Target capital stock and all
unexpired and unexercised options to acquire Target capital stock. The shares
issued to Target shareholders were issued pursuant to an exemption from the
registration requirements under Section 3(a)(10) of the Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, constitute "exempt
securities" within the meaning of the Securities Act. The shares will be
eligible for resale beginning no later than March 1, 2000 after the expiration
of lock-up restrictions set forth in the Merger Agreement and in accordance with
Rule 145 of the Securities Act. Target options to purchase Target Common Stock
were assumed by the Company and remain outstanding as options to purchase shares
of the Company's Common Stock. The Company's Common Stock that is issuable upon
exercise of Target options will be eligible for resale upon the Company's filing
of a registration statement on Form S-8, which is expected to occur on or before
February 1, 2000.
Under the terms of the Merger Agreement and a related Depository
Agreement dated January 14, 2000, ten percent of the shares of the Company's
Common Stock issued in connection with the Merger will be held in escrow for the
purpose of indemnifying the Company, Merger Sub, and each of their respective
affiliates, officers, directors, employees, representatives and agents against
any damages that relate to or arise from a breach of any of Target's
representations and warranties contained in the Merger Agreement. Such escrow
will expire on January 14, 2001.
In connection with the Merger, certain employees of Target entered into
noncompetition agreements with the Company, which agreements restrict the
ability of such persons to compete with Target or the Company during the period
commencing on the effective date of the Merger and ending on the one year
anniversary of the effective date of the Merger.
The number of shares of the Company's Common Stock to be issued to the
shareholders of Target was determined by arm's-length negotiations among the
parties.
Target is a provider of applications that employ advanced technologies
for prediction and description of consumer behavior and trends used for customer
segmentation, profiling, targeting and merchandise assortment planning. The
Company intends to continue to use the assets acquired to conduct such business.
-2-
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
(1) The balance sheets of NeoVista Software, Inc. as of
December 31, 1999 and 1998 and the results of its operations and its cash
flows for the years then ended are filed as an amendment to the initial report
filed January 31, 2000.
(2) The unaudited balance sheet of NeoVista Software, Inc. as
of September 30, 1999 and the results of its operations for the nine months
ended September 30, 1999 and September 30, 1998 are filed as an amendment to
the initial report filed January 31, 2000.
(b) Unaudited Pro Forma Combined Condensed Financial Statements.
The unaudited pro forma combined condensed balance sheet as
of December 31, 1999 and the unaudited pro forma combined condensed statements
of operations for the year ended March 31, 1999 and the nine months ended
December 31, 1999 are filed as an amendment to the initial report filed January
31, 2000.
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<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
NeoVista Software, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of shareholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of NeoVista Software,
Inc. at December 31, 1997 and 1998, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1998, in
conformity with accounting principles generally accepted in the United States.
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 of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 18, 2000
<PAGE> 5
NEOVISTA SOFTWARE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,128 $ 3,512 $ 425
Accounts receivable, net.......................... 979 640 667
Prepaid expenses and other assets................. 128 225 282
-------- -------- --------
Total current assets........................... 2,235 4,377 1,374
Property and equipment, net......................... 397 531 379
-------- -------- --------
Total assets................................... $ 2,632 $ 4,908 $ 1,753
======== ======== ========
LIABILITIES, PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payables................................. $ 231 $ 270 $ 232
Accrued liabilities............................... 977 550 423
Deferred revenue and advances..................... 534 470 635
Notes and accrued interest payable to
shareholders................................... -- -- 1,936
Current portion of long-term debt................. 1,629 430 457
-------- -------- --------
Total current liabilities................. 3,371 1,720 3,683
Long-term debt, net of current portion.............. 171 218 89
-------- -------- --------
Total liabilities.............................. 3,542 1,938 3,772
-------- -------- --------
Commitments and contingencies (Note 5)
Preferred stock:
$0.01 par value; 37,399 authorized; shares
outstanding: 8,876, 19,599 and 19,599 issued
and outstanding in 1997, 1998 and 1999,
respectively................................... 15,813 23,869 23,869
Shareholders' equity (deficit):
Common stock: no par value; 50,000 shares
authorized; 3,273, 3,366 and 3,413 issued and
outstanding in 1997, 1998 and 1999,
respectively................................... 57,802 57,821 80,221
Unearned compensation............................. -- -- (20,591)
Accumulated deficit............................... (74,525) (78,720) (85,518)
-------- -------- --------
Total shareholders' equity (deficit)........... (16,723) (20,899) (25,888)
-------- -------- --------
Total liabilities, preferred stock and
shareholders' equity (deficit)............... $ 2,632 $ 4,908 $ 1,753
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 6
NEOVISTA SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED FOR THE NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
------------------ --------------------
1997 1998 1998 1999
------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Licenses..................................... $ 1,172 $ 1,324 $ 1,122 $ 732
Maintenance and service...................... 1,862 1,616 1,328 996
Systems hardware and maintenance............. 2,371 1,392 1,089 620
------- ------- ------- -------
Total revenues............................ 5,405 4,332 3,539 2,348
------- ------- ------- -------
Operating expenses:
Cost of revenues............................. 2,477 2,415 1,792 1,908
Research and development..................... 1,923 2,172 1,593 1,890
Selling, general and administrative.......... 4,019 3,903 2,692 3,462
Stock-based compensation expense............. -- -- -- 1,800
------- ------- ------- -------
Total operating expenses.................. 8,419 8,490 6,077 9,060
------- ------- ------- -------
Loss from operations........................... (3,014) (4,158) (2,538) (6,712)
------- ------- ------- -------
Other income (expense):
Interest income.............................. 54 125 72 59
Interest expense............................. (201) (160) (135) (145)
Other........................................ (13) 4 4 --
------- ------- ------- -------
Total other income (expense).............. (160) (31) (59) (86)
------- ------- ------- -------
Net loss....................................... $(3,174) $(4,189) $(2,597) $(6,798)
======= ======= ======= =======
Net loss per share, basic and diluted.......... $ (0.98) $ (1.26) $ (0.80) $ (2.02)
======= ======= ======= =======
Shares used in computing net loss per share,
basic and diluted............................ 3,245 3,320 3,239 3,366
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 7
NEOVISTA SOFTWARE, INC.
STATEMENT OF PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
---------------- ---------------- UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT COMPENSATION DEFICIT TOTAL
------ ------- ------ ------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997................... 6,140 $13,133 3,217 $57,791 $ -- $(71,334) $(13,543)
Issuance of Series V preferred stock for
cash, net of costs of $65................. 2,736 2,671 -- -- -- -- --
Dividend on share adjustment................ -- 17 -- -- -- (17) (17)
Series II and III issuance costs............ -- (8) -- -- -- -- --
Common stock issued for services............ -- -- 27 5 -- -- 5
Exercise of stock options for cash.......... -- -- 30 6 -- -- 6
Common stock repurchased.................... -- -- (1) -- -- -- --
Net loss.................................... -- -- -- -- -- (3,174) (3,174)
------ ------- ----- ------- -------- -------- --------
Balances, December 31, 1997................. 8,876 15,813 3,273 57,802 -- (74,525) (16,723)
Issuance of Series V preferred stock for
cash...................................... 246 244 -- -- -- -- --
Issuance of Series VI preferred stock for
cash, net of costs........................ 10,477 7,806 -- -- -- -- --
Exercise of stock options for cash.......... -- -- 93 19 -- -- 19
Accretion on redeemable preferred stock..... -- 6 -- -- -- (6) (6)
Net loss.................................... -- -- -- -- -- (4,189) (4,189)
------ ------- ----- ------- -------- -------- --------
Balances, December 31, 1998................. 19,599 23,869 3,366 57,821 -- (78,720) (20,899)
Unearned compensation related to grants of
stock options............................. -- -- -- 22,391 (22,391) -- --
Exercise of stock options for cash.......... -- -- 47 9 -- -- 9
Amortization of unearned stock
compensation.............................. -- -- -- -- 1,800 -- 1,800
Net loss.................................... -- -- -- -- -- (6,798) (6,798)
------ ------- ----- ------- -------- -------- --------
Balances, September 30, 1999 (unaudited).... 19,599 $23,869 3,413 $80,221 $(20,591) $(85,518) $(25,888)
====== ======= ===== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 8
NEOVISTA SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
YEARS ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------- -----------------
1997 1998 1998 1999
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(3,174) $(4,189) $(2,597) $(6,798)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 231 296 210 245
Accrued interest on subordinated promissory notes....... 223 -- -- --
Common stock issued for services........................ 5 -- -- --
Stock-based compensation expense........................ -- -- -- 1,800
Loss on disposal of fixed assets........................ -- 2 -- --
Change in assets and liabilities:
Accounts receivables.................................. 152 339 249 (95)
Prepaid expenses and other assets..................... 292 (97) (116) 11
Accounts payables..................................... (3) 39 78 (38)
Accrued liabilities................................... 286 (427) (444) (137)
Deferred revenue and advances......................... (91) (64) (136) 165
------- ------- ------- -------
Net cash used in operating activities.............. (2,079) (4,101) (2,756) (4,847)
------- ------- ------- -------
Cash flows from investing activities:
Purchase of property and equipment........................ (223) (432) (300) (93)
------- ------- ------- -------
Net cash used in investing activities.............. (223) (432) (300) (93)
------- ------- ------- -------
Cash flows from financing activities:
Borrowings under line of credit, net...................... 29 104 87 104
Repayments on bank term loans............................. (332) (556) (556) --
Borrowings under subordinated promissory notes............ -- 359 -- --
Repayments on subordinated promissory notes............... (102) (1,024) (733) (175)
Repayments on license agreements.......................... (678) (35) (28) (21)
Repayments on capital lease obligations................... (28) -- -- --
Issuance of preferred stock, net of costs................. 2,663 8,050 7,938 --
Note payable to shareholders.............................. -- -- -- 1,936
Exercise of stock options................................. 6 19 19 9
------- ------- ------- -------
Net cash provided by financing activities.......... 1,558 6,917 6,727 1,853
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents........ (744) 2,384 3,671 (3,087)
Cash and cash equivalents, beginning of period.............. 1,872 1,128 1,128 3,512
------- ------- ------- -------
Cash and cash equivalents, end of period.................... $ 1,128 $ 3,512 $ 4,799 $ 425
======= ======= ======= =======
Noncash investing and financing activities:
Deemed dividend on convertible preferred stock............ $ 17 $ -- $ -- $ --
======= ======= ======= =======
Accretion of redeemable preferred stock................... $ -- $ 6 $ -- $ --
======= ======= ======= =======
Unearned compensation related to grants of stock
options................................................. $ -- $ -- $ -- $22,391
======= ======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 202 $ 272 $ 204 $ 145
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 9
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- NATURE OF OPERATIONS:
NATURE OF OPERATIONS
NeoVista Software, Inc. (the "Company") was incorporated under the name
MasPar Computer Corporation (MasPar) in 1987. MasPar designed, manufactured,
marketed, serviced and supported high-performance data-parallel computer systems
and associated software development tools.
In February of 1996, MasPar announced a restructuring of its operations
resulting in MasPar exiting the high-performance data-parallel computer system
business and refocusing its efforts on the development of software applications.
In connection with the restructuring, the Company renamed the corporation
NeoVista Software, Inc. NeoVista Software, Inc. designs, develops and markets
business intelligence software products, which allows users to discover
meaningful relationships for competitive marketing and business decision
purposes.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The financial statements as of September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 are unaudited but have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and the rules of the Securities and Exchange Commission and do not
include all disclosures required by generally accepted accounting principles for
annual financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
have been included. The results of operations of any interim period are not
necessarily indicative of the results of operations for the full year.
FINANCIAL STATEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments acquired with
original maturities of ninety days or less to be cash equivalents. The recorded
carrying value of cash equivalents approximates fair market value.
PROPERTY AND EQUIPMENT
Property and equipment including leasehold improvements, are stated at
cost. Depreciation and amortization are computed using the straight-line method
over the shorter of the estimated useful lives, generally two to five years, or
the lease terms, as appropriate.
-8-
<PAGE> 10
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Maintenance and repairs are charged to expense as incurred. When assets are
sold or retired, the cost and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in operations.
SOFTWARE DEVELOPMENT COSTS
Costs for the development of new software products and substantial
enhancements to existing software products are expensed as incurred until
technological feasibility has been established, at which time any additional
costs would be capitalized in accordance with Statement of Financial Accounting
Standards No. 86, "Computer Software To Be Sold, Leased or Otherwise Marketed."
To date, the Company has essentially completed its software development
concurrently with the establishment of technological feasibility, and,
accordingly, no costs have been capitalized.
REVENUE RECOGNITION
Revenue consists of fees for licenses of the Company's software products,
maintenance and systems sales related to MasPar products.
LICENSE REVENUE
Revenue from software licenses is recognized upon shipment of the software
or delivery of authorization codes if collection of the resulting receivable is
probable, the fee is fixed or determinable and vendor-specific objective
evidence exists to allocate a portion of the total fee to any undelivered
elements of the arrangement. Such undelivered elements in these arrangements
typically consist of services.
MAINTENANCE AND SERVICE REVENUE
Maintenance revenue is recognized ratably over the term of the maintenance
contract. If maintenance is included in an arrangement that includes a license
agreement, amounts related to maintenance are allocated based on vendor specific
objective evidence. Revenues from contract services are generally recognized
based upon the attainment of milestones, which approximate the percentage of
completion method of accounting. Revenue from customer training and consulting
services is recognized as the services are performed.
SYSTEMS REVENUE
Systems product revenues are recognized upon shipment.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents and
accounts receivables. Cash and cash equivalents are held with one credit-worthy
financial institution. The Company invests primarily in certificates of
-9-
<PAGE> 11
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
deposit. The Company sells its products primarily to large organizations in
diversified industries worldwide and generally does not require its customers to
provide collateral or other security to support accounts receivable. To reduce
credit risk, management performs ongoing credit evaluations of its customers'
financial condition and continually analyzes the allowance for doubtful
accounts. Sales to one customer accounted for 25% of revenue in 1997. Sales to
three customers accounted for 43% of revenue in 1998. Sales to two customers
accounted for 55% of revenue for the nine months ended September 30, 1999. The
Company had three customers in 1997 that accounted for 26%, 24% and 10% of
accounts receivable, four customers in 1998 that accounted for 33%, 18%, 15% and
12% of accounts receivable, and four customers at September 30, 1999 that
accounted for 27%, 17%, 15% and 11% of accounts receivable. Export sales were
$248 and none for the years ending December 31, 1997 and 1998, respectively, and
none and $52 for the nine months ended September 30, 1998 and 1999,
respectively. These sales were primarily to the Pacific Rim.
The Company participates in a dynamic high technology industry and believes
that changes in any of the following areas could have a material adverse effect
on the Company's future financial position or results of operations: advances
and trends in new technologies; competitive pressures in the form of new
products or price reductions on existing products; changes in the overall demand
for products and services offered by the Company; changes in certain strategic
partnerships or customer relationships; litigation or claims against the Company
based on intellectual property, patent, product, regulatory or other factors;
risks associated with changes in domestic and international economic and/or
political conditions or regulations; and the Company's ability to attract and
retain employees necessary to support its growth.
STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees using the
intrinsic value method in accordance with Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees" and presents
disclosures required by Statement of Financial Accounting Standard No. 123
("SFAS No. 123").
LONG-LIVED ASSETS
The Company assesses the impairment of long-lived assets when events or
circumstances indicate that the carrying value of an asset may not be
recoverable. No such impairments have been identified to date.
INCOME TAXES
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
The provision for income tax expense is comprised of income taxes payable for
the current period, plus the net change in deferred tax amounts during the
period.
-10-
<PAGE> 12
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NET LOSS PER SHARE
Basic and diluted net loss per share are computed using the weighted
average number of common shares outstanding. Options and warrants were not
included in the computation of diluted net loss per share because the effect
would be antidilutive.
Antidilutive securities which are excluded in the diluted net loss per
share calculation for the periods:
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- ------------------
1997 1998 1998 1999
------ ------ ------- -------
<S> <C> <C> <C> <C>
Common stock options............................... 2,392 2,608 2,488 11,822
Convertible preferred shares....................... 10,354 31,501 31,501 31,501
Common stock warrants.............................. 1,669 1,669 1,669 1,669
Preferred stock warrants........................... 60 60 60 60
------ ------ ------ ------
14,475 35,838 35,718 45,052
====== ====== ====== ======
</TABLE>
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This standard
requires companies to capitalize qualifying computer software costs, which are
incurred during the application development stage and amortize them over the
software's estimated useful life. SOP 98-1 is effective for fiscal years
beginning after December 15, 1998. The Company is currently evaluating the
impact of SOP 98-1 on its financial statements and related disclosures.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires companies to record
derivatives on the balance sheet as assets or liabilities measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. SFAS 133, as amended, will be effective for the
Company's fiscal year ending December 31, 2000. Management believes that this
statement will not have a significant impact on the Company's financial
position, results of operations or cash flows.
In December 1998, the Accounting Standards Executive Committee, or AcSEC,
issued Statement of Position 98-9, or SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 to require that an entity recognize revenue for multiple element
arrangements by means of the "residual method" when (1) there is vendor-specific
objective evidence, or VSOE, of the fair values of all the undelivered elements
that are not accounted for by means of long-term contract accounting, and (2)
VSOE of fair value does not exist for one or more of the delivered elements, and
(3) all revenue recognition criteria of SOP 97-2 and SOP 98-9 will be effective
for transactions that are entered into in fiscal
-11-
<PAGE> 13
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
years beginning after March 15, 1999. Retroactive application is prohibited. The
Company does not expect SOP 98-9 to have any effect on its results of
operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 or SAB 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. Management
believes that the impact of SAB 101 will not have a material effect on the
financial position or results of operations of the Company.
COMPREHENSIVE LOSS
Statements of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires that an enterprise report, by major components
and as a single total, the changes in its net assets during the period from
nonowner sources. For the years ended December 31, 1997 and 1998, and the nine
months ended September 30, 1998 and 1999, comprehensive loss was equal to net
loss.
NOTE 3 -- BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE:
Accounts receivable.................................. $ 1,122 $ 880 $ 688
Less: Allowance for doubtful accounts................ (143) (240) (21)
------- ------- -------
$ 979 $ 640 $ 667
======= ======= =======
PROPERTY AND EQUIPMENT:
Machinery and equipment.............................. $ 2,193 $ 1,640 $ 1,721
Demonstration and spares............................. 167 232 232
Purchased software................................... 446 307 318
Furniture and fixtures............................... 171 59 59
Leasehold improvements............................... 161 161 161
------- ------- -------
Total................................................ 3,138 2,399 2,491
Less: Accumulated depreciation and amortization...... (2,741) (1,868) (2,112)
------- ------- -------
Property and equipment, net.......................... $ 397 $ 531 $ 379
======= ======= =======
ACCRUED LIABILITIES:
Compensation and benefits............................ $ 567 $ 341 $ 337
Other................................................ 410 209 86
------- ------- -------
$ 977 $ 550 $ 423
======= ======= =======
</TABLE>
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<PAGE> 14
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4 -- BANK FINANCING ARRANGEMENTS AND LONG-TERM DEBT:
Bank financing arrangements and long-term debt consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1997 1998 1999
------- ----- -------------
<S> <C> <C> <C>
Bank line of credit..................................... $ 68 $ 172 $ 266
Bank term loans......................................... 556 -- --
Notes and accrued interest payable to shareholders...... -- -- 1,936
Subordinated promissory notes........................... 1,110 445 270
License agreement....................................... 66 31 10
------- ----- -------
Total................................................... 1,800 648 2,482
Less: Current portion................................... (1,629) (430) (2,393)
------- ----- -------
Long-term debt.......................................... $ 171 $ 218 $ 89
======= ===== =======
</TABLE>
BANK LINE OF CREDIT AND TERM LOANS
The Company has a Loan and Security Agreement with a domestic bank which
provides for a maximum credit facility of $4,000. The credit facility is limited
to 80% of the Company's eligible receivables, as defined, plus term loans
outstanding with the bank. Borrowings are collateralized by the receivables
balances against which they are borrowed. The Agreement provides for automatic
extensions annually in June, unless terminated by the bank.
Borrowings under the Loan and Security Agreement (both the term loans and
revolving line of credit) bear a total monthly minimum interest charge of $3 or
monthly interest at the highest "LIBOR Rate" (5.1% at December 31, 1998) in
effect during each month plus 5.75% per annum but not less than 9% per annum.
Principal payments are due as defined in the note agreements, generally monthly
over a defined period or upon maturity. Borrowings under the credit facility
totaling $624, $172 and $266 were outstanding at December 31, 1997, December 31,
1998 and September 30, 1999, respectively.
At December 31, 1997, borrowings of $500 under the Loan and Security
Agreement were guaranteed by one of the Company's stockholders. In exchange for
such guarantee, the Company issued the stockholder warrants to purchase common
stock ("the Guarantee Warrants") (see Note 6). Such borrowings were fully repaid
in 1998.
SUBORDINATED PROMISSORY NOTES
As of December 31, 1997, December 31, 1998 and September 30, 1999, the
Company had $1,110, $445 and $270, respectively, outstanding under a line of
credit. The outstanding borrowings are collateralized by the capital equipment
purchases made under the line of credit. In connection therewith, the Company
issued the creditor warrants to purchase Series III preferred stock ("the Loan
and Security Warrants") (see Note 6). The notes bear interest at effective rates
ranging from
-13-
<PAGE> 15
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
13.7% to 14.7% per annum. Payments are due in equal monthly installments over a
36-month period, with final payment equal to 10% of the face value of the
respective notes.
NOTES AND ACCRUED INTEREST PAYABLE TO SHAREHOLDERS
In May 1999, the Company obtained financing from various shareholders. The
promissory notes issued to the shareholders bear interest at a rate of 10% per
annum and mature on December 31, 1999. The accrued interest on the notes as at
September 30, 1999 was $70.
LICENSE AGREEMENT
The Company executed a software license and distribution agreement (the
"Software Agreement"). Pursuant to the Software Agreement, the Company acquired
a perpetual license to certain software source code to be integrated into the
Company's products. The Company acquired the source code at a purchase price of
$150 and the issuance of 29 shares of the Company's common stock. The net value
of the cash payments (using a discount rate of 11%) plus the value of the common
stock totaled approximately $208 and was charged to research and development
expense during 1996. At December 31, 1997, December 31, 1998 and September 30,
1999, the Company has outstanding balances of $66, $31 and $10, respectively,
under the Software Agreement.
CREDITOR NOTES
Pursuant to the reorganization (see Note 1), the Company entered into a
Workout Agreement with certain of its creditors. Pursuant to such agreement, the
Company paid approximately $770 and issued promissory notes aggregating
approximately $734 against outstanding obligations. Such borrowings were fully
repaid in fiscal year 1998. In connection with such promissory notes, the
Company also agreed to issue such creditors warrants to purchase common stock
(the "Creditor Warrants") (see Note 6). No value has been assigned to such
warrants as the number of shares and the exercise price has not been determined.
NOTE 5 -- COMMITMENTS AND CONTINGENCIES:
LEASES
The Company's facilities are leased under a noncancelable operating lease
scheduled to expire in October 1999. Future minimum annual rental payments under
the operating lease are $300 for fiscal year 1999.
Facilities rent expense for the year ended December 31, 1997 and 1998 was
approximately $401 and $357, respectively and for the nine months ended
September 30, 1998 and 1999 was $300 and $270, respectively.
-14-
<PAGE> 16
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
JOINT MARKETING AGREEMENT
During 1996, the Company entered into a Joint Marketing Agreement (the
"JMA") for the purpose of providing additional sales opportunities for the
Company's products and enhanced services to its customers. The JMA provides for
discounts and commissions on certain services, as defined, provided by the
Company or its JMA partner and provides the JMA partner with the right, upon
dissolution of the Company, to acquire the defined product for a minimum of
$2,000. The JMA has an initial term of three years and will automatically renew
for successive terms of two years until terminated. In connection with entering
into the JMA, the JMA partner purchased approximately 1,500 shares of the
Company's Series M convertible preferred stock and warrants to purchase 800
shares of common stock (the "JMA Warrant") for $2,500 (see Note 6).
CONTINGENCY
The Company is involved in litigation arising in the normal course of
business. In the opinion of management, the ultimate resolution of these matters
will not have a material adverse effect on the Company's financial position or
results of operations.
NOTE 6 -- PREFERRED STOCK AND SHAREHOLDERS' EQUITY:
In July 1998, the Company's shareholders authorized additional funding (the
"1998 Funding"). Pursuant to the 1998 funding, the Company issued (i) 10,477
shares of Series VI convertible redeemable preferred stock for net proceeds of
approximately $7,806 (ii) changed the authorized shares of common and preferred
stock to 50,000 and 37,400, respectively, and (iii) increased the number of
shares reserved for issuance under the Stock Option/Purchase Plan to 5,345.
In accordance with the 1997 and 1998 Investors Rights Agreements, the
Company was required to meet certain performance milestones during fiscal years
1997 and 1998. The Company did not meet the milestones and, in accordance with
the agreements, the conversion price of the Series VI convertible redeemable
preferred stock and the Series V convertible preferred stock were subsequently
adjusted where by such shareholders will receive an additional 9,167 and 526
common shares upon conversion, respectively.
-15-
<PAGE> 17
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PREFERRED STOCK
Preferred stock consists of:
<TABLE>
<CAPTION>
OUTSTANDING
----------------------------------------------------------
COMMON
SHARES
ISSUABLE
SHARES CARRYING LIQUIDATION UPON LIQUIDATION
DESIGNATED SHARES AMOUNT PREFERENCE CONVERSION PREFERENCE
---------- ------ -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series I...................... 549 549 $ 5,261 $ 5,490 549 $ 10.0
Series II..................... 1,200 1,200 599 3,000 1,200 2.50
Series II-A................... 1,200 -- -- -- -- --
Series III.................... 5,882 2,920 4,831 4,964 4,504 1.70
Series III-A.................. 5,882 1,471 2,434 2,500 1,923 1.70
Series IV..................... 1,177 -- -- -- -- --
Series IV-A................... 1,177 -- -- -- -- --
Series V...................... 7,000 2,982 2,932 2,982 3,681 1.00
Series VI..................... 13,333 10,477 7,812 7,858 19,644 $ 0.75
------ ------ ------- ------- ------
Total....................... 37,400 19,599 $23,869 $26,794 31,501
====== ====== ======= ======= ======
</TABLE>
Significant terms of the Series I, II, II-A, III, III-A, IV, IV-A and V
convertible preferred stock (collectively, the "preferred stock") are as
follows:
- Each share of Series I, II, II-A, III-A, IV and IV-A convertible
preferred stock is convertible, at the option of the holder, into one
share of common stock (subject to adjustment for events of dilution) and
has the same voting rights as the common stock into which it is
convertible. Each share of Series III and V convertible preferred stock
is convertible, at the option of the holder, into 1.463 and 1.234 shares
of common stock, respectively (subject to adjustments for events of
dilution). and has the same voting rights as the common stock into which
it is convertible. Shares will automatically be converted into common
stock upon the closing of a public offering meeting certain criteria. In
addition, shares will automatically be converted upon written consent of
not less than 67% of the outstanding shares of preferred stock voting
together as a single class.
- In the event of liquidation, dissolution or winding up of the Company,
the preferred shareholders will be entitled to receive, on a pro rata
basis, the liquidation preferences disclosed in the table above plus
declared but unpaid dividends. Upon satisfaction of the Series VI
liquidation preference, such liquidation preferences will be paid first
to holders of Series V, second to holders of Series IV and IV-A, third to
holders of Series III and III-A, fourth to holders of Series II and II-A
and fifth to holders of Series I. Any remaining assets will be
distributed ratably among the holders of preferred stock (up to an
additional 200% of the liquidated preference) and common stock, pro rata,
based on the number of shares of common stock held by each shareholder on
an as-converted basis.
-16-
<PAGE> 18
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- The holders of Series II and II-A, the holders of Series III, III-A, IV
and IV-A, and the holders of Series V are entitled to annual
noncumulative, dividends, prior to payments of dividends declared on
common stock, of $0.05 per share, $0.17 per share and $0. 10 per share,
respectively, as declared by the Board of Directors. Holders of Series V
are entitled to share in dividends paid to common shareholders pro rata
based on the number of shares of common stock held by each shareholder on
an as-converted basis. No dividends were declared in fiscal 1998 and 1997
and the nine months ended September 30, 1999.
- Holders of at least 200 shares of convertible preferred stock ("Major
Investors") have the right of first offer with respect to future sales by
the Company of its shares on a pro rata basis.
Significant terms of the Series VI convertible redeemable preferred stock:
- Each share is convertible, at the option of the holder, into 1.875 shares
of common stock (subject to adjustment for events of dilution) on or
prior to the redemption date. Shares will automatically be converted into
common stock upon the closing of a public offering meeting certain
criteria. In addition, shares will automatically be converted upon
written consent of not less than 67% if the outstanding shares of
preferred stock voting together as a single class.
- In the event of liquidation, dissolution or winding up of the Company,
the preferred shareholders will be entitled to receive, prior in
preference, $0.75 per share plus declared but unpaid dividends. Upon
satisfaction of the Series I, II, II-A, III, III-A, IV, IV-A and V
convertible preferred stock, any remaining assets will be distributed
ratably among the holders of preferred stock (up an additional 200% of
the liquidation preference) and common stock, pro rata, based on the
number of shares of common stock held by each shareholder on an as-
converted basis.
- The holders of Series VI are entitled to annual noncumulative dividends,
prior to any payments dividends declared on common stock of $0.075 per
share. No dividends were declared in fiscal 1997 and 1998 and the nine
months ended September 30, 1999.
- Holders of at least 200 shares of convertible preferred stock ("Major
Investors') have the right to first offer with respect of future sales by
the Company of its shares on a pro rata basis.
- At the option of the shareholders, beginning on July 30, 2002, the Series
VI preferred shareholders shall receive the price paid plus an amount
equal to the declared but unpaid dividends. Such payments shall be made
in four semi-annual installments beginning on the fourth anniversary
date. Issuance costs are being amortized over a four-year period to
accrete the carrying value of the stock to $7,858.
GUARANTEE WARRANTS
In connection with the Loan and Security Agreement (see Note 4) a guarantee
was provided by one of the Company's stockholders. In exchange for such
guarantee, and extension thereof, the Company issued the stockholder warrants to
purchase an aggregate of 1,600 shares of common stock. The warrants are
exercisable at $0.20 per share and expire through November 2000, or earlier in
the
-17-
<PAGE> 19
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
event of an initial registered public offering, as defined. The value of such
warrants, aggregating approximately $415 was recorded as additional interest
expense in the periods issued.
LOAN AND SECURITY WARRANTS
In connection with the Capital Equipment Line of Credit (see Note 4), the
Company issued warrants to purchase 60 shares of Series III preferred stock
(convertible into 71 shares of common stock due to certain anti-dilution
adjustments). The warrants are exercisable at $1.00 per share and expire on
December 2, 2006. The aggregate value of warrants issued totaled approximately
$43 and was charged to interest expense in the period issued.
CREDITOR WARRANTS
In connection with the Creditor Notes (see Note 4) the Company has an
obligation to issue warrants to purchase common stock. The number of warrants
and the exercise price are to be determined, as defined, by the per share
offering price in an initial public offering. The warrants are exercisable upon
the initial public offering.
JMA WARRANTS
In connection with the Joint Marketing Agreement (see Note 5), the Company
issued warrants to purchase 800 shares of common stock. The warrants expire at
the earlier of the acquisition of the Company by another entity, the closing of
an initial public offering by the Company, as defined, or May 1999. The exercise
price ranges from $0.75 per share to $1.70 per share based on the percentage of
the Company's revenue attributable to its JMA partner, as defined. The warrants
become exercisable upon the attainment of certain sales levels by the Company,
as defined. As of September 30, 1999, the warrants were not exercisable.
OTHER WARRANTS
In connection with the Series III convertible preferred stock sale, the
Company issued warrants to its placement agent for the purchase of 69 shares of
common stock. The warrants are exercisable at $1.70 per share and expire on May
9, 2001, or earlier in the event of an initial registered public offering, as
defined.
STOCK OPTION/PURCHASE PLAN
Under the Company's 1991 Incentive and Non-Qualified Stock Option Plans,
the Board of Directors is authorized to grant to employees, consultants and
others at fair market value, or a defined discount therefrom, rights to
ownership of up to 5,345 shares of common stock either though issuance of non
qualified or incentive stock options, purchase of restricted stock or a
combination of these alternatives. Such options and restricted stock are
exercisable immediately, generally vest over 50 months for employees and over
the service term for consultants and expire ten years after the date of grant.
Should an employee or consultant terminate, any unvested restricted stock grant
shares
-18-
<PAGE> 20
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
acquired may be repurchased by the Company at the initial issuance price. At
December 31, 1998, no restricted stock grant shares were subject to repurchase.
The Company has the right of first refusal on the sale of any stock purchase
pursuant to the Plans.
A summary of stock option activity is as follow:
<TABLE>
<CAPTION>
OUTSTANDING
------------------
NUMBER WEIGHTED
OF AVERAGE
SHARES PRICE
------ --------
<S> <C> <C>
Balances, January 1, 1997..................................... 1,651 $0.20
Granted (weighted average fair value of $0.06).............. 943 0.20
Exercised................................................... (30) 0.20
Canceled.................................................... (172) 0.20
------
Balances, December 31, 1997................................... 2,392 0.20
Granted (weighted average fair value of $0.04).............. 837 0.20
Exercised................................................... (93) 0.20
Canceled.................................................... (528) 0.20
------
Balances, December 31, 1998................................... 2,608 $0.20
Granted (weighted average fair value of $2.15) (unaudited).. 10,997 0.20
Exercised (unaudited)....................................... (47) 0.20
Canceled (unaudited)........................................ (1,736) 0.20
------
Balances, September 30, 1999 (unaudited)...................... 11,822 $0.20
======
</TABLE>
Additional information regarding options outstanding and exercisable as of
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------
WEIGHTED
AVERAGE WEIGHTED
RANGE OF REMAINING AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE
PRICES OF SHARES LIFE (YEARS) PRICE
-------- --------- ------------ --------
<S> <C> <C> <C>
0$.20.. 2,608 8.2 $0.20
</TABLE>
At December 31, 1998, options for 1,561 shares were exercisable at a
weighted average price of $0.20 and options to purchase 2,567 shares of common
stock were available for future grant under the plans.
STOCK-BASED COMPENSATION
During 1999, the Company issued stock purchase rights and options to
certain employees under the Plan with exercise prices below the deemed fair
market value of the Company's common stock at the date of grant. In accordance
with the requirements of APB 25, the Company has recorded unearned compensation
for the differences between the purchase price of stock issued to employees
-19-
<PAGE> 21
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
under stock purchase rights or the exercise price of the stock options and the
deemed fair market value of the Company's stock at the date of grant. This
unearned compensation is amortized to expense over the period during which the
Company's right to repurchase the stock lapses or options become exercisable,
generally four years. At September 30, 1999, the Company has recorded unearned
compensation related to these options in the total amount of $22,391, of which
$1,800 had been amortized to expense during the nine months ended September 30,
1999.
The following information is presented in accordance with the disclosure
requirements of SFAS 123. The fair value of each option grant to employees has
been estimated on the date of grant using the minimum value method with the
following weighted average assumptions used for grants:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Risk-free interest rates.................................... 6.60% 6.19%
Expected life............................................... 5 years 5 years
Expected dividends.......................................... -- --
</TABLE>
The weighted average fair value of the options granted was $0.06 and $0.04
per share for the years ended December 31, 1997 and 1998, respectively.
Had compensation expense for the stock plans been determined based on the
fair value at the grant date for options granted in 1997 and 1998, consistent
with the provisions of SFAS 123, the pro forma net loss would have been reported
as follows:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C> <C>
Net loss -- as reported........................... $(3,174) $(4,189)
Net loss -- pro forma............................. $(3,202) $(4,220)
Net loss per share -- as reported................. $ (0.98) $ (1.26)
Net loss per share -- pro forma................... $ (0.99) $ (1.27)
</TABLE>
COMMON SHARES RESERVED FOR ISSUANCE
At December 31, 1998, the Company has reserved shares of common stock for
issuance as follows:
<TABLE>
<S> <C>
Conversion of Series I preferred stock...................... 549
Conversion of Series II preferred stock..................... 1,200
Conversion of Series III preferred stock.................... 6,427
Exercise and conversion of Series III preferred stock
warrants.................................................. 71
Conversion of Series V preferred stock...................... 3,681
Conversion of Series VI redeemable preferred stock.......... 19,644
Exercise of common stock warrants........................... 2,469
Exercise of common stock options............................ 5,176
------
Total..................................................... 39,217
======
</TABLE>
-20-
<PAGE> 22
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7 -- INCOME TAXES:
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires an asset and liability approach to accounting for income taxes.
The components of the net deferred tax asset as of December 31 were as
follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Net operating loss carryforwards.......................... $ 17,479 $ 17,874
Research and development credits.......................... 2,962 3,172
Capitalized license fee................................... 238 14
Tax basis depreciation.................................... 39 29
Inventory and receivable reserves recognized in different
periods................................................. 2,590 2,958
Accruals recognized in different periods.................. 288 171
Capitalized research and development...................... 2,510 3,148
Valuation allowance....................................... (26,106) (27,366)
-------- --------
Total................................................... $ -- $ --
======== ========
</TABLE>
At December 31, 1998, the Company had net operating loss and research and
development credit carryforwards which expire as follows:
<TABLE>
<CAPTION>
NET RESEARCH
OPERATING AND
EXPIRATION YEARS LOSS CREDITS
---------------- --------- -----------
<S> <C> <C>
2002...................................................... $ 505 $ 20
2003...................................................... 5,294 243
2004...................................................... 10,315 328
2005...................................................... 10,013 259
2006...................................................... 649 139
2007...................................................... 3,950 268
2008...................................................... 5,703 213
2009...................................................... 3,425 242
2010...................................................... 917 99
2011...................................................... 5,150 85
2012...................................................... 2,960 118
2013...................................................... 3,728 2,132
------- ------
$52,609 $4,146
======= ======
</TABLE>
-21-
<PAGE> 23
NEOVISTA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CALIFORNIA STATE
------------------------
NET RESEARCH AND
OPERATING DEVELOPMENT
EXPIRATION YEARS LOSS CREDITS
---------------- --------- ------------
<S> <C> <C>
1999..................................................... $ 3,340 $ --
2000..................................................... 2,374 --
2001..................................................... 1,727 --
2002..................................................... 2,890 --
2003..................................................... 1,492 --
2004..................................................... 1,964 --
No expiration date....................................... -- 1,040
------- ------
$13,787 $1,040
======= ======
</TABLE>
The California tax return net operating loss differs from the federal
primarily due to capitalization of certain research and development costs and
limitations on the use of tax loss carryforwards under California Law.
Current federal and California tax laws include provisions limiting the
annual use of net operating loss carryforwards in the event of certain defined
changes in stock ownership. The Company's capitalization described herein may
have resulted in such a change. Accordingly, the annual use of the Company's net
operating loss carryforwards will be limited according to these provisions.
Management has not yet determined the extent of such limitation. Such limitation
may result in the loss of carryforward benefits due to their expiration.
NOTE 8 -- EMPLOYEE BENEFIT PLAN:
The Company has a 401(k) tax-deferred savings plan, whereby eligible
employees may contribute between 2% and 20% of their eligible compensation,
subject to certain limitations. Company contributions are at the discretion of
the Board of Directors. No Company contributions have been made since the
inception of the plan.
NOTE 9 -- SUBSEQUENT EVENTS
In October 1999, the Company obtained financing of $795 from various
shareholders. The promissory notes issued to the shareholders bear interest at
10% per annum. The promissory notes mature on April 21, 2000.
In November 1999, the Company entered into an agreement with Accrue
Software, Inc. ("Accrue") in which Accrue will purchase all of the Company's
outstanding common and preferred stock. The transaction was consummated on
January 14, 2000.
-22-
<PAGE> 24
(b) Pro Forma Financial Information.
ACCRUE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following unaudited pro forma combined condensed financial statements
for Accrue Software, Inc. ("Accrue") consist of the Unaudited Pro Forma Combined
Condensed Statement of Operations for the year ended March 31, 1999 and the nine
months ended December 31, 1999, and the Unaudited Pro Forma Combined Condensed
Balance Sheet as of December 31, 1999. These pro forma financial statements give
effect to Accrue's acquisition of NeoVista Software, Inc. ("NeoVista") in a
business combination accounted for as a purchase, which closed January 14, 2000.
In exchange for the acquisition of all of NeoVista's outstanding capital stock,
Accrue issued NeoVista shareholders approximately 1,779 shares of its common
stock and reserved approximately 550 additional shares for issuance upon the
exercise of stock options and warrants of NeoVista which will be converted into
options and warrants to purchase shares of Accrue stock.
The Unaudited Pro Forma Combined Condensed Statement of Operations combine
Accrue's historical results of operations for the year ended March 31, 1999 with
NeoVista's historical results of operations for the year ended December 31, 1998
and Accrue's historical results of operations for the nine months ended December
31, 1999 with NeoVista's historical results of operations for the nine months
ended September 30, 1999. The Unaudited Pro Forma Combined Condensed Balance
Sheet combines Accrue's historical balance sheet at December 31, 1999 and
NeoVista's historical balance sheet at September 30, 1999. The pro forma
financial statements are not necessarily indicative of what the actual operating
results or financial position would have been for the combined company had the
transaction taken place on April 1, 1998, and do not purport to indicate the
results of future operations.
BASIS OF PRESENTATION
The unaudited pro forma combined condensed financial statements reflect the
NeoVista acquisition accounted for using the purchase method of accounting and
have been prepared on the basis of assumptions described in the notes thereto
including assumptions related to the allocation of the amount of consideration
paid to the assets and liabilities of NeoVista based upon preliminary estimates
of their fair value. The actual allocation of the consideration to be paid may
differ from those assumptions reflected in the pro forma financial statements
after valuations and other procedures to be performed related to the NeoVista
acquisition are completed.
In connection with the acquisition of NeoVista, Accrue expects to record a
charge to operations related to in-process research and development, currently
estimated to be $0.9 million. The Unaudited Pro Forma Combined Condensed Balance
Sheet includes the effect of this charge but the Unaudited Pro Forma Combined
Condensed Statement of Operations does not reflect this charge because of its
nonrecurring nature. The charge related to in-process research and development
will be reflected in Accrue's consolidated financial statements for the year
ending March 31, 2000. The pro forma financial statements do not include the
estimated costs of integration as these costs will affect future operations and
do not qualify as liabilities in connection with a purchase business combination
under EITF 95-3, "Recognition of Liabilities in Connection with A Purchase
Business Combination".
The pro forma financial statements should be read in conjunction with the
related notes included in this document and the audited consolidated financial
statements and notes of Accrue and the audited financial statements and notes of
NeoVista included elsewhere in this prospectus.
-23-
<PAGE> 25
ACCRUE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ACCRUE NEOVISTA COMBINED
AS OF AS OF AS OF
DECEMBER 31, SEPTEMBER 30, PRO FORMA DECEMBER 31,
1999 1999 ADJUSTMENTS 1999
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......... $ 37,931 $ 425 $ -- $ 38,356
Accounts receivable, net.......... 4,350 667 -- 5,017
Prepaid expenses and other current
assets......................... 542 282 -- 824
-------- -------- -------- --------
Total current assets........... 42,823 1,374 -- 44,197
Property and equipment, net......... 1,835 379 -- 2,214
Intangibles and goodwill............ -- -- 129,039(E) 129,039
Other assets........................ 860 -- -- 860
-------- -------- -------- --------
Total assets.............. $ 45,518 $ 1,753 $129,039 $176,310
======== ======== ======== ========
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................. $ 1,081 $ 232 $ -- $ 1,313
Accrued liabilities............... 2,305 423 5,000(A) 7,728
Accrued liabilities, merger....... 597 -- -- 597
Deferred revenue.................. 2,659 635 -- 3,294
Notes and accrued interest payable
to Shareholders................ -- 1,936 -- 1,936
Current portion of long-term
debt........................... -- 457 -- 457
-------- -------- -------- --------
Total current liabilities...... 6,642 3,683 5,000 15,325
Long-term debt, net of current
portion........................... -- 89 -- 89
-------- -------- -------- --------
Total liabilities.............. 6,642 3,772 5,000 15,414
-------- -------- -------- --------
Preferred stock..................... -- 23,869 (23,869)(C) --
-------- -------- -------- --------
Stockholders' Equity
Common stock...................... 25 80,221 (80,219)(B) 27
Additional paid-in capital........ 67,470 -- 122,898(B) 190,368
Notes receivable from
stockholders................... (213) -- -- (213)
Unearned compensation............. (5,154) (20,591) 20,591(G) (5,154)
Accumulated deficit............... (23,252) (85,518) 84,638(D,H) (24,132)
-------- -------- -------- --------
Total stockholders' equity..... 38,876 (25,888) 147,908 160,896
-------- -------- -------- --------
Total liabilities, preferred
stock and stockholders'
equity....................... $ 45,518 $ 1,753 $129,039 $176,310
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma
combined condensed financial statements.
-24-
<PAGE> 26
ACCRUE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ACCRUE NEOVISTA COMBINED
FOR THE NINE FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, PRO FORMA DECEMBER 31,
1999 1999 ADJUSTMENTS 1999
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenue:
Software license................... $ 9,049 $ 732 $ -- $ 9,781
Maintenance and service............ 2,304 996 -- 3,300
Systems hardware and maintenance... -- 620 -- 620
-------- ------- -------- --------
Total revenue................... 11,353 2,348 -- 13,701
Cost of revenue:
Cost of revenue.................... 1,493 1,908 -- 3,401
-------- ------- -------- --------
Gross profit......................... 9,860 440 -- 10,300
-------- ------- -------- --------
Operating expenses:
Research and development........... 2,815 1,890 -- 4,705
Selling, general and
administrative.................. 10,285 3,462 -- 13,747
Merger costs....................... 3,560 -- -- 3,560
Amortization of intangibles and
goodwill........................ -- -- 32,260(F) 32,260
Stock-based compensation expense... 3,427 1,800 -- 5,227
-------- ------- -------- --------
Total operating expenses........ 20,087 7,152 32,260 59,499
-------- ------- -------- --------
Loss from operations................. (10,227) (6,712) (32,260) (49,199)
Other income, net.................... 788 59 -- 847
Interest expense..................... (42) (145) -- (187)
-------- ------- -------- --------
Net loss........................ $ (9,481) $(6,798) $(32,260) $(48,539)
======== ======= ======== ========
Net loss per share, basic and
diluted............................ $ (0.67) $ (2.02) $ (3.04)
======== ======= ========
Shares used in computing net loss per
share, basic and diluted........... 14,183 3,366 (1,587) 15,962
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma
combined condensed financial statements.
-25-
<PAGE> 27
ACCRUE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACCRUE NEOVISTA
FOR THE YEAR FOR THE YEAR PRO FORMA
ENDED ENDED COMBINED FOR
MARCH 31, DECEMBER 31, PRO FORMA THE YEAR ENDED
1999 1998 ADJUSTMENTS MARCH 31, 1999
------------ ------------ ----------- --------------
<S> <C> <C> <C> <C>
Net revenue:
Software license.............. $ 3,640 $ 1,324 -- $ 4,964
Maintenance and service....... 1,044 1,616 -- 2,660
Systems hardware and
maintenance................ -- 1,392 -- 1,392
------- ------- -------- --------
Total revenue.............. 4,684 4,332 -- 9,016
Cost of revenue:
Cost of revenue............... 469 2,415 -- 2,884
------- ------- -------- --------
Gross profit.................... 4,215 1,917 -- 6,132
------- ------- -------- --------
Operating expenses
Research and development...... 3,166 2,172 5,338
Selling, general and
administrative............. 7,375 3,903 -- 11,278
Merger costs.................. -- -- -- --
Amortization of intangibles
and goodwill............... -- -- 43,015(F) 43,015
Stock-based compensation
expense.................... 1,325 -- -- 1,325
------- ------- -------- --------
Total operating expenses... 11,866 6,075 43,015 60,956
------- ------- -------- --------
Loss from operations............ (7,651) (4,158) (43,015) (54,824)
Other income, net............... 96 129 -- 225
Interest expense................ (46) (160) -- (206)
------- ------- -------- --------
Net loss................... $(7,601) $(4,189) $(43,015) $(54,805)
======= ======= ======== ========
Net loss per share, basic and
diluted....................... $ (1.63) $ (1.26) $ (8.50)
======= ======= ========
Shares used in computing net
loss per share, basic and
diluted....................... 4,670 3,320 (1,541) 6,449
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma
combined condensed financial statements.
-26-
<PAGE> 28
ACCRUE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1999 AND NINE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- BASIS OF PRO FORMA PRESENTATION:
The pro forma financial statements give effect to Accrue's acquisition of
NeoVista, in a business combination to be accounted for as a purchase, which was
consummated on January 14, 2000. Upon the effective date of the acquisition, all
outstanding common and preferred stock of NeoVista were converted into shares of
Accrue common stock, and all outstanding stock options and warrants to purchase
shares of NeoVista common stock were converted into options and warrants to
purchase shares of Accrue stock. The aggregate Accrue shares, options and
warrants to be issued to the NeoVista stockholders, option holders, and warrant
holders will equal 2,329.
The pro forma financial statements have been prepared on the basis of
assumptions described in the following notes and include assumptions relating to
the allocation of the consideration paid for the assets and liabilities of
NeoVista based on preliminary estimates of their fair value. The actual
allocation of the consideration to be paid may differ from those assumptions
reflected in the pro forma financial statements after valuations and other
procedures to be performed related to the NeoVista acquisition have been
completed. Accrue does not expect the final allocation of the purchase price
will differ materially from the preliminary allocation. In the opinion of
Accrue's management, all adjustments necessary to present fairly such pro forma
financial statements have been made based on the terms and structure of the
NeoVista acquisition. The Unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended March 31, 1999 and the nine months ended December
31, 1999 gives effect to this transaction as if it had taken place on April 1,
1998. The Unaudited Pro Forma Combined Condensed Balance Sheet as of December
31, 1999 gives effect to the transaction as if it had taken place on December
31, 1999.
The pro forma financial statements are not necessarily indicative of what
the actual financial results would have been had the transaction taken place on
April 1, 1998, and do not purport to indicate the results of future operations.
Accrue issued approximately 1,779 shares of its common stock, valued at
$53.62 per share, the average market price per share of Accrue common stock in a
range three trading days before and after the announcement date (November 17,
1999) of the acquisition. In addition, Accrue issued approximately 550 options
and warrants to purchase shares of its common stock in exchange for all options
and warrants to purchase shares of NeoVista common stock. The value of options
and warrants to be issued by Accrue was determined by estimating their fair
value as of November 17, 1999 using the Black-Scholes option pricing model. The
total estimated consideration including acquisition related expenses is
$127,900.
Tangible assets of NeoVista principally include cash and cash equivalents,
accounts receivable, fixed assets and other assets. Liabilities of NeoVista
assumed principally include accounts payable, accrued liabilities, and long-term
debt.
-27-
<PAGE> 29
ACCRUE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 1999 AND NINE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Below is a table of the estimated purchase price allocation and annual
amortization of the intangible assets and goodwill acquired:
<TABLE>
<CAPTION>
ANNUAL
AMORTIZATION
AMORTIZATION OF
LIFE INTANGIBLES
------------ ------------
<S> <C> <C> <C>
Purchase price allocation:
Tangible net liabilities acquired....................... $ (2,019) -- --
Intangible net assets acquired:
Developed technology.................................. 1,101 3 367
In-process research and development................... 880 -- --
Assembled workforce................................... 1,456 3 485
Sales channel/customer relationships.................. 105 3 35
Trademarks/tradenames................................. 49 3 16
Goodwill.............................................. 126,328 3 42,112
--------
Total.............................................. $127,900
========
</TABLE>
To determine the value of the developed technology, the expected future
cash flows attributable to all existing technology was discounted, taking into
account risks related to the characteristics and applications of the developed
technology, existing and future markets, and assessments of the stage of the
technology's life cycle. The analysis resulted in a valuation for developed
technology that had reached technological feasibility and therefore was
capitalizable. The developed technology will be amortized on a straight line
basis over three years.
The value allocated to projects identified as in-process research and
development will be charged to expense during the quarter ending March 31, 2000
but has not been reflected in the Accrue Unaudited Pro Forma Combined Condensed
Statement of Operations as it is non-recurring in nature.
The write-off will be necessary because the acquired in-process research
and development has not yet reached technological feasibility and has no future
alternative uses. These products under development may not achieve commercial
viability. The nature of the efforts required to develop the purchased
in-process research and development into commercially viable products
principally relate to the completion of all planning, designing, prototyping,
verification and testing activities that are necessary to establish that the
product can be produced to meet its design specifications, including functions,
features and technical performance requirements.
The value of the purchased in-process research and development was
determined by estimating the projected net cash flows related to the products,
including costs to complete the development of the technology and the future
revenues to be earned upon commercialization of the products. These cash flows
were then discounted back to their net present value. The projected net cash
flows from the projects were based on management's estimates of revenues and
operating profits related to the projects.
To determine the revenue attributable to the in-process research
technology, consideration was also given to the contribution of the existing
technology which will be utilized in the development of
-28-
<PAGE> 30
ACCRUE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 1999 AND NINE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
the in-process technology, referred to as "core technology." The value allocated
to the core technology was determined by assigning a leverage factor to the
estimated projected net cash flows related to the products under development
after analysis of both the effort and work completed as well as the expected
value of the in-process technology. The projected net cash flows from the
products assigned to core technology using the leverage factor were then
discounted back to their net present value. The core technology is being
amortized over its estimated useful life of three years.
The value allocated to the assembled workforce is attributable to the
NeoVista workforce in place after the acquisition which eliminates the need to
hire new replacement employees. The value was determined by estimating the cost
involved in assembling a new workforce including costs of salaries, benefits,
training and recruiting. The value of the assembled workforce will be amortized
on a straight-line basis over three years.
Goodwill is determined based on the residual difference between the amount
of consideration to be paid and the values assigned to identified tangible and
intangible assets. The goodwill will be amortized on a straight line basis over
three years.
NOTE 2 -- PRO FORMA NET LOSS PER SHARE:
Pro forma basic and diluted net loss per share are based on the weighted
average number of shares of Accrue common stock outstanding during the period
and the number of shares of Accrue common stock issued in connection with the
NeoVista acquisition. The following have not been included in the computation of
pro forma diluted net loss per share because their effect would be antidilutive.
<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, DECEMBER 31,
1999 1999
--------- ------------
<S> <C> <C>
Potential common securities:
Accrue options, warrant, shares of common stock
subject to repurchase and preferred stock not
included in loss per share calculations............ 14,319 3,792
Options and warrants to be issued in connection with
the NeoVista acquisition........................... 550 550
------ -----
14,869 4,342
====== =====
</TABLE>
NOTE 3 -- PRO FORMA ADJUSTMENTS:
A. To reflect the accrual of direct acquisition costs arising from the
NeoVista acquisition, including legal, banking, and accounting fees.
B. To eliminate NeoVista's outstanding common stock ($80,219) and
reflect the issuance of approximately 1,779 shares of Accrue's common stock
and approximately 550 options and warrants to purchase Accrue's common
stock in connection with the acquisition ($122,900).
-29-
<PAGE> 31
ACCRUE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 1999 AND NINE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
C. To eliminate NeoVista's outstanding preferred stock ($23,869).
D. To eliminate NeoVista's accumulated deficit ($85,518).
E. To record acquired intangible assets and goodwill.
F. To record the amortization of acquired intangible assets and
goodwill.
G. To eliminate unearned stock compensation recorded on NeoVista's
financial statements.
H. To record the in-process research and development charge ($880).
-30-
<PAGE> 32
(c) Exhibits.
2.1* Form of Agreement and Plan of Merger and
Reorganization dated as of September 14, 1999, among
the Company, Merger Sub and Target.
20.1* Press release dated November 17, 1999 announcing the
execution of the Agreement and Plan of Merger and
Reorganization.
20.2* Press release dated January 19, 2000 announcing the
completion of the acquisition of Target by the
Company.
* Incorporated by reference from Current Report on Form 8-K previously
filed by the Registrant on January 31, 2000 with the Securities and
Exchange Commission via Edgar, and dated January 14, 2000.
-31-
<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ACCRUE SOFTWARE, INC.
Date: March 28, 2000 By: /s/ Gregory C. Walker
-------------------------------------
Gregory C. Walker
Vice President of Finance and
Chief Financial Officer
-32-
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
2.1* Form of Agreement and Plan of Merger and Reorganization, dated as of November 17, 1999, among
the Company, MergerSub and Target.
20.1* Press Release dated November 17, 1999 announcing the execution of the Agreement and Plan of
Merger and Reorganization.
20.2* Press release dated January 19, 2000 announcing the completion of the acquisition of Target by
the Company.
</TABLE>
* Incorporated by reference from Current Report on Form 8-K previously filed by
the Registrant on January 31, 2000 with the Securities and Exchange Commission
via Edgar, and dated January 14, 2000.
