<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
-------------------
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
-------------------
Date of Report (Date of earliest event reported): October 14, 1998
-------------------
SENTO CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
UTAH 000-06425 87-0284979
- ---------------------------- --------------------- -------------------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
</TABLE>
808 EAST UTAH VALLEY DRIVE
AMERICAN FORK, UT 84003
(Address of principal executive offices, including zip code)
(801) 492-2000
(Registrant's telephone number, including area code)
================================================================================
<PAGE> 2
Amendment No. 1
1. This Amendment No. 1 to the Current Report on Form 8-K/A dated December
28, 1998 is being filed by the Registrant to provide the financial
statements and pro forma financial information contemplated by the Current
Report on Form 8-K filed on October 29, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired
PAGE
----
Report of Independent Public Accountants F-1
Balance Sheets as of June 30, 1998 and June 30, 1997 F-3
Statements of Operations for the years ended June 30, 1998 and F-4
June 30,1997
Statements of Retained Earnings for the years ended June 30, 1998
and June 30, 1997 F-5
Statements of Cash Flows for the years ended June 30, 1998 and
June 30, 1997 F-6
Notes to Financial Statements F-7
(b) Pro forma financial information
Preface to Pro forma financial information F-12
Unaudited Pro forma condensed Balance Sheets as of September 30,
1998 for Sento Corporation and June 30, 1998 for Functional
Software Pty, Ltd. F-13
Unaudited Pro forma condensed Statements of Operations for the
year ended March 31, 1998 for Sento Corporation and Functional
Software Pty, Ltd. F-14
Unaudited Pro forma condensed Statements of Operations for the
six months ended September 30, 1998 for Sento Corporation and
Functional Software Pty, Ltd. F-15
Notes to Unaudited Pro forma Condensed Consolidated
Financial Statements F-16
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to Current Report to be signed
on its behalf by the undersigned thereunto duly authorized.
SENTO CORPORATION
/s/ KIETH E. SORENSON
-----------------------------------------
Name: Kieth E. Sorenson
Title: Chief Executive Officer, President
and Chairman of the Board
Date: December 28, 1998
<PAGE> 4
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
FUNCTIONAL SOFTWARE PTY LIMITED
We have audited the special purpose financial statements, being the Income
Statement, Balance Sheet, Statement of Stockholders Equity, Statement of Cash
Flows and notes to and forming part of the financial statements of Functional
Software Pty Limited for the year ended 30 June 1998. The company's directors
are responsible for the financial statements. We have conducted an independent
audit of these financial statements in order to express an opinion on them to
the members of the company.
The financial statements have been prepared in accordance with United States of
America generally accepted accounting principles for inclusion in a report to
be lodged with the Securities Exchange Commission.
Our audit has been conducted in accordance with Australian Auditing Standards
to provide reasonable assurance as to whether the financial statements are free
of material misstatement. Our procedures included examination, on a test basis,
of evidence supporting the amounts and other disclosures in the financial
statements and the evaluation of accounting policies and significant accounting
estimates. These procedures have been undertaken to form an opinion whether, in
all material respects, the financial statements are presented fairly in
accordance with United States of America generally accepted accounting
principles so as to present a view which is consistent with our understanding
of the company's financial position, the results of its operations and cash
flows.
The audit opinion expressed in this report has been formed on the above basis.
In our opinion, the financial statements of Functional Software Pty Limited are
properly drawn up:
(a) so as to present fairly, in all material respects, the financial
position of the company's as at 30 June 1998, and the results of
operations and cash flows for the financial year ended on that date of
the company; and
(b) in accordance with United States of America generally accepted
accounting principles.
Signed at Sydney, Australia this 18th day of December 1998
/s/ MOORE STEPHENS
MOORE STEPHENS
Chartered Accountants
/s/ D. W. SINCLAIR
D. W. SINCLAIR
Partner
F-1
<PAGE> 5
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF
FUNCTIONAL SOFTWARE PTY LIMITED
We have audited the special purpose financial statements, being the Income
Statement, Balance Sheet, Statement of Stockholders Equity, Statement of Cash
Flows and notes to and forming part of the financial statements of Functional
Software Pty Limited for the year ended 30 June 1997. The company's directors
are responsible for the financial statements. We have conducted an independent
audit of these financial statements in order to express an opinion on them to
the members of the company.
The financial statements have been prepared in accordance with United States of
America generally accepted accounting principles for inclusion in a report to
be lodged with the Securities Exchange Commission.
Our audit has been conducted in accordance with Australian Auditing Standards
to provide reasonable assurance as to whether the financial statements are free
of material misstatement. Our procedures included examination, on a test basis,
of evidence supporting the amounts and other disclosures in the financial
statements and the evaluation of accounting policies and significant accounting
estimates. These procedures have been undertaken to form an opinion whether, in
all material respects, the financial statements are presented fairly in
accordance with United States of America generally accepted accounting
principles so as to present a view which is consistent with our understanding
of the company's financial position, the results of its operations and cash
flows.
The audit opinion expressed in this report has been formed on the above basis.
In our opinion, the financial statements of Functional Software Pty Limited are
properly drawn up:
(a) so as to present fairly, in all material respects, the financial
position of the company as at 30 June 1997, and the results of
operations and cash flows for the financial year ended on that date of
the company; and
(b) in accordance with United States of America generally accepted
accounting principles.
Signed at Sydney, Australia this 18th day of December 1998
/s/ MOORE STEPHENS
MOORE STEPHENS
Chartered Accountants
/s/ D. W. SINCLAIR
D. W. SINCLAIR
Partner
F-2
<PAGE> 6
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
BALANCE SHEETS
AS AT JUNE 30 1998
<TABLE>
<CAPTION>
30/6/98 30/6/97
$USD $USD
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents 431,681 28,400
Receivables, net of $22,947 allowance for doubtful
accounts 272,421 401,081
Prepaid expenses and other current assets -- 13,873
---------- --------
Total Current Assets 704,102 443,354
---------- --------
Property, plant and equipment, net 82,228 97,086
Other Assets:
Loans receivable, related parties 27,270 --
Investments 215,668 --
---------- --------
Total Other Assets 242,938 --
---------- --------
TOTAL ASSETS 1,029,268 540,440
========== ========
LIABILITIES AND SHAREHOLDER'S EQUITY:
Current Liabilities:
Accounts payable and accrued expenses 28,247 15,346
Bank overdraft 64,280 --
Accrued payroll and related expenses 29,937 --
Income taxes payable 49,757 --
---------- --------
Total Current Liabilities 172,221 15,346
---------- --------
Loans payable, related parties 67 248
---------- --------
Total Liabilities 172,288 15,594
---------- --------
Shareholder's Equity:
Common Stock 34,089 34,089
(72,000 share authorised, 45,004 shares issued and
outstanding)
Cumulative translation adjustment (203,196) (6,636)
Retained earnings 1,026,087 497,393
---------- --------
Total Shareholders Equity 856,980 524,846
---------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY 1,029,268 540,440
========== ========
</TABLE>
See accompanying notes to Financial Statements
F-3
<PAGE> 7
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
30/6/98 30/6/97
$USD $USD
<S> <C> <C>
REVENUES 2,771,812 2,049,429
DIRECT COSTS (1,075,923) (745,824)
---------- ----------
GROSS PROFIT 1,695,889 1,303,605
SELLING, GENERAL AND ADMINISTRATIVE (1,155,683) (1,220,791)
---------- ----------
NET OPERATING INCOME / (LOSS FROM OPERATIONS) 540,206 82,314
OTHER INCOME / (EXPENSE)
Interest income 32,189 8,284
Other income / (expense) 25,120 6,641
---------- ----------
Total Other Income/(Expense), Net 57,308 14,925
---------- ----------
NET INCOME BEFORE INCOME TAXES 597,514 97,739
INCOME TAX EXPENSE (68,820) --
---------- ----------
NET INCOME 528,694 97,739
---------- ----------
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 8
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
STATEMENT OF RETAINED EARNINGS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1998
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE TOTAL
---------------------- RETAINED TRANSLATION STOCKHOLDERS
SHARES AMOUNT EARNINGS ADJUSTMENT EQUITY
------ ------ -------- ----------- ------------
$USD $USD $USD $USD
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1996 45,004 34,089 399,654 13,139 446,882
Net income -- -- 97,739 -- 97,739
Translation adjustment -- -- -- (19,775) (19,775)
------ ------ --------- -------- --------
Balance at June 30, 1997 45,004 34,089 497,393 (6,636) 524,846
------ ------ --------- -------- --------
Net income -- -- 528,694 -- 528,694
Translation adjustment -- -- -- (196,560) (196,560)
------ ------ --------- -------- --------
Balance at June 30, 1998 45,004 34,089 1,026,087 (203,196) 856,980
====== ====== ========= ======== ========
</TABLE>
F-5
<PAGE> 9
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
30/6/98 30/6/97
$USD $USD
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income 528,694 97,739
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortisation 33,886 44,316
Provision for diminution 96,618 --
Changes in assets and liabilities
(Increase)/decrease in assets:
Receivables 76,148 (60,035)
Prepaid expenses and other current assets (3,997) (2,802)
Increase/(decrease) in liabilities:
Accounts payable and accrued expenses 17,653 (55,655)
Accrued payroll and related expenses 33,477 --
Income taxes payable 55,639 --
-------- -------
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 838,118 23,563
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for property, plant and equipment (19,030) (24,286)
Loans advanced during year (30,644) --
Payment for investments (312,286) --
-------- -------
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES (361,960) (24,286)
-------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (137,157) (246)
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 339,001 (969)
-------- -------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 28,400 29,369
-------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR 367,401 28,400
======== =======
SUPPLEMENT CASH FLOW INFORMATION:
Income tax paid 13,181 --
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE> 10
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED JUNE 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Functional Software Pty Limited is organised under the laws of Australia.
The operating business of the company as of June 30, 1998 were as follows:
o Selling system management products into Unix based multi vendor
environments
o Provision of specialist system management professional services
in support of the COSMOS product set
o Management and support of international resellers
o Development and porting of the COSMOS product set for Unix, and
more recently NT
The company operates within Australia, and has several overseas distributors.
BASIS OF PRESENTATION
The Company's financial statements are prepared using the accrual basis under
generally accepted accounting principals.
PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment are brought to account at cost or at independent
or directors valuation less, where applicable, any accumulated depreciation or
amortisation. The depreciable amount of all fixed assets, but excluding freehold
land, are depreciated over their useful lives commencing from the time the asset
is held ready for use.
The estimated useful lives of the individual classes of assets are as follows:
<TABLE>
<CAPTION>
ASSETS LIFE
<S> <C>
Plant and Equipment 2-8 years
Office Equipment 2-8 years
</TABLE>
Properties held for investment purposes are not subject to a depreciation
charge.
INVESTMENTS
Investments are valued either at cost less amounts written off for other than
temporary diminution in the value of the investments, or at directors'
valuation.
F-7
<PAGE> 11
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED JUNE 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognised for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and deferred tax liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and deferred tax liabilities of a change in tax rates is recognised in
income in the period that includes the enactment date.
The Australian company tax rate for the years ended June 30 1998 and 1997 was
36% (1996: 36%).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of certain assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities. Accordingly,
the actual amounts could differ from those estimates. Any adjustments applied to
estimated amounts are recognised in the year in which such adjustments are
determined.
CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, cash includes cash at bank and
cash equivalents. The company considers all highly liquid instruments purchased
with any maturity of three months or less to be cash equivalents.
FOREIGN CURRENCY FINANCIAL STATEMENTS TRANSLATION METHOD
The company conducts all transactions in Australian dollars. Therefore, for the
purposes of translating the financial statements the functional currency is
Australian dollars. All monetary assets and liabilities are translated at the
exchange rate at the end of the period. Non-monetary assets and liabilities,
movements are translated at the average exchange rate for the period, with
account balances reflecting the historical movements in the exchange rate.
Income and expense items are translated using the average rate for the period.
Resulting translation adjustments are recognised as a reserve forming part of
stockholders' equity.
CONCENTRATION OF CREDIT RISK
In the normal course of business, the Company provides unsecured credit terms to
its customers. Accordingly, the Company performs ongoing credit evaluations of
its customers and maintains allowances for possible losses which, when realised,
have been within the range of management's expectations.
F-8
<PAGE> 12
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED JUNE 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
EMPLOYEE ENTITLEMENTS
Provision is made for the company's liability for employee entitlements arising
from services rendered by employees to the period end. These entitlements
expected to be paid within one year are recorded at their nominal amount.
Employee entitlements payable later than one year (ie Long Service Leave) are
recorded at the present value of the estimated future cash outflows relating to
those entitlements.
2. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
30/6/98 30/6/97
$USD $USD
<S> <C> <C>
Plant and equipment at cost 219,115 206,316
Less: Accumulated depreciation (168,737) (145,122)
-------- --------
50,378 61,194
Office equipment at cost 56,820 50,590
Less: Accumulated depreciation (24,970) (14,698)
-------- --------
31,850 35,892
-------- --------
82,228 97,086
======== ========
</TABLE>
Depreciation expense charged to operations was $USD33,887 and $USD44,317 for
1998 and 1997.
3. INVESTMENTS
<TABLE>
<S> <C> <C> <C>
Shares:
- - in subsidiary (a) 96,493 --
- - in associated company (b) 96,618 --
Less: provision for diminution (96,618) --
- - in other related party (c) 119,175 --
------- ----
215,668 --
======= ====
</TABLE>
(a) On November 11, 1997 the company acquired 100% of Functional
Software (Asia Pacific) Pty Limited.
(b) On December 15, 1997 the company acquired 45% of Systems
Management Services SDN BHD (Malaysia).
(c) On December 2, 1997 the company acquired 17.5% of Rama
Technologies Pty Limited.
F-9
<PAGE> 13
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED JUNE 30, 1998
4. RETIREMENT PLAN
The Company has a statutory obligation under the laws of Australia to contribute
certain amounts into a regulated superannuation fund on behalf of all employees,
except where certain exemptions apply. The Company has no involvement with the
management, control or organisation of the Fund. The participants are fully
vested at all times in both employee contributions and statutory employer
contributions. Employer contributions to superannuation funds of $USD43,699 and
$USD27,324 have been expensed in the financial statements for 1998 and 1997.
5. COMMON STOCK
The Company has not issued any options, warrants or other placements over its
common stock to any employees or outside parties during the year ended June 30,
1998 or as at June 30, 1998
6. RELATED PARTY TRANSACTIONS
Transactions between related parties are on normal commercial terms and
conditions no more favourable than those available to other parties unless
otherwise stated.
Transactions with related parties:
<TABLE>
<CAPTION>
(i) DIRECTORS JUNE 30, 1998 JUNE 30, 1997
$USD $USD
<S> <C> <C>
Loans payable to directors 67 248
Loans receivable from directors 27,270 --
</TABLE>
Loans payable and receivable are on interest free terms.
(ii) DIRECTORS SHAREHOLDINGS
Directors and director - related entities hold directly, indirectly or
beneficially as at the reporting date all of the company's equity.
7. SUBSEQUENT EVENTS
Pursuant to a Business Asset Agreement dated September 30, 1998 the company sold
substantially all assets of the business to Sento Corporation as well as to
Sento Australia Pty Limited.
The assets sold include plant and equipment and office equipment which were
recognised in the financial statements. Assets not reflected in the financial
statements which were also sold under the Business Assets Agreement include the
goodwill associated with the company's products, reputation and name, the
company's interest in distribution and Licence agreements, its customer and
suppliers lists and its consultancy business.
F-10
<PAGE> 14
FUNCTIONAL SOFTWARE PTY LTD
ACN 009 421 194
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED JUNE 30, 1998
7. SUBSEQUENT EVENTS (CONT'D)
Pursuant to a Intellectual Property Business Assets Agreement dated September
30, 1998 the company also transferred all rights to intellectual property of the
company's computer software business including documentation and development to
Sento Corporation.
F-11
<PAGE> 15
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Sento Corporation (the Company) provides integrated information
technology. On October 14, 1998, the Company entered into an asset purchase
agreement with Functional Software PTY LTD (Functional) whereby, the Company
acquired property, equipment, intellectual property, and assumed certain accrued
liabilities from Functional. Total consideration included approximately $450,000
in cash and 129,656 shares of the Company's common stock valued at $2.71 per
share. The acquisition has been accounted for under the purchase method of
accounting. The total of the excess purchase price over the fair value of the
net assets acquired has been allocated and classified as described in the notes
to the unaudited pro forma condensed combined financial statements. The
acquisition is described more fully in the previously filed Form 8-K dated
October 29, 1998.
The following statements have been prepared using the historical
financial statements of the Company, and the historical financial statements of
Functional. The pro forma financial information reflects the adjustments that
would result from the acquisition as if it had occurred as of the beginning of
the period presented with respect to pro forma statements of operations data and
as of the balance sheet date with respect to pro forma balance sheet data. The
pro forma financial data is provided for analysis purposes only and does not
purport to indicate the results which actually would have been obtained if the
acquisition had been effected on the dates indicated, or of the results which
may be obtained in the future.
The pro forma adjustments are described in the accompanying notes to
the unaudited pro forma condensed combined financial statements. The unaudited
pro forma condensed combined financial statement of operations combines the
results of the Company for the year ended March 31, 1998 (as previously reported
in the Company's annual report), and the six months ended September 30, 1998 (as
previously reported on the Company's form 10-QSB) with the results of Functional
for the respective periods then ended. The unaudited pro forma condensed
combined balance sheet shows the combined positions of the Company and
Functional as of September 30, 1998 and June 30, 1998 respectively.
F-12
<PAGE> 16
SENTO CORPORATION AND FUNCTIONAL SOFTWARE PTY LTD
UNAUDITED PROFORMA CONDENSED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL FUNCTIONAL
SENTO SOFTWARE PTY PRO FORMA
CORPORATION LTD ADJUSTMENTS COMBINED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 3,989,371 $ 431,681 $ (450,000) (1) $ 3,971,052
Accounts receivable (net) 2,994,174 272,421 3,266,595
Inventories 229,564 - 229,564
Other current assets 1,886,813 - 1,886,813
-------------------------------------------- ------------
Total current assets 9,099,922 704,102 (450,000) 9,354,024
Net fixed assets 2,931,480 82,228 3,013,708
Intangible assets 1,830,311 775,200 (1) 2,493,511
(112,000) (3)
Investments 215,668 (215,668) (2) --
Other assets 268,195 27,270 (27,270) (2) 268,195
-------------------------------------------- ------------
TOTAL ASSETS $ 14,129,908 $ 1,029,268 $ (29,738) $ 15,129,438
============================================= ============
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Current portion of long-term debt $ 505,961 $ -- $ -- $ 505,961
Accounts payable 2,474,393 92,527 2,566,920
Accrued liabilities 1,705,340 79,694 1,785,034
Deferred revenue 1,519,238 - 1,519,238
-------------------------------------------- ------------
Total current liabilities 6,204,932 172,221 -- 6,377,153
-------------------------------------------- ------------
Long-term liabilities:
Long-term debt, excl. current portion 1,187,193 -- 1,187,193
Due from related parties 67 (67) (2) --
Convertible bonds 827,517 827,517
Deferred tax liability 271,539 271,539
-------------------------------------------- ------------
Total long-term liabilities 2,286,249 67 (67) 2,286,249
-------------------------------------------- ------------
Minority interest 31,919 31,919
-------------------------------------------- ------------
Stockholders' equity:
Common stock 1,467,631 34,089 32,414 (1) 1,500,045
(34,089) (2)
Additional paid-in capital 6,367,010 292,786 (1) 7,161,905
614,109 (2)
(112,000) (3)
Treasury stock (174,000) (174,000)
Deferred compensation (273,667) (273,667)
Cumulative translation adjustment (61,811) (203,196) 203,196 (2) (61,811)
Retained earnings (deficit) (1,718,355) 1,026,087 (1,026,087) (2) (1,718,355)
-------------------------------------------- ------------
Total stockholders' equity 5,606,808 856,980 (29,671) 6,434,117
-------------------------------------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,129,908 $ 1,029,268 $ (29,738) $ 15,129,438
============================================ ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
F-13
<PAGE> 17
SENTO CORPORATION AND FUNCTIONAL SOFTWARE PTY LTD
UNAUDITED PROFORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL FUNCTIONAL
SENTO SOFTWARE PTY PRO FORMA
CORPORATION LTD ADJUSTMENTS COMBINED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 20,639,845 $3,223,620 $ 23,863,465
Cost of Sales 14,227,071 1,510,637 15,737,708
--------------------------------------------- -------------
Gross Profit 6,412,774 1,712,983 -- 8,125,757
Selling, general and administrative 9,401,037 916,893 221,000 (4) 10,538,930
Research and development expense 78,875 78,875
--------------------------------------------- -------------
Income from operations (3,067,138) 796,090 (221,000) (2,492,048)
Other income:
Interest income, net 271,948 25,119 297,067
Other income, net 3,160,255 23,925 3,184,180
--------------------------------------------- -------------
Net income before income tax 365,065 845,134 (221,000) 989,199
Income tax expense 302,090 68,820 370,910
--------------------------------------------- -------------
Net Income $ 62,975 $ 776,314 $ (221,000) $ 618,289
============================================= =============
Net Income per common share
Basic $ 0.01 $ 0.12
============ =============
Diluted $ 0.01 $ 0.11
============ =============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
F-14
<PAGE> 18
SENTO CORPORATION AND FUNCTIONAL SOFTWARE PTY LTD
UNAUDITED PROFORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
HISTORICAL
HISTORICAL FUNCTIONAL
SENTO SOFTWARE PTY PRO FORMA
CORPORATION LTD ADJUSTMENTS COMBINED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 10,751,128 $ 814,530 $ 11,565,658
Cost of Sales 7,312,695 424,831 7,737,526
--------------------------------------------- ------------
Gross Profit 3,438,433 389,699 -- 3,828,132
Selling, general and administrative 6,941,280 947,369 110,500 (5) 7,999,149
--------------------------------------------- ------------
Loss from operations (3,502,847) (557,670) (110,500) (4,171,017)
Other income:
Interest income, net 70,013 17,817 87,830
Other income, net 837,213 3,862 841,075
--------------------------------------------- ------------
Net loss before income tax (2,595,621) (535,991) (110,500) (3,242,112)
Income tax benefit 300,000 64,319 364,319
--------------------------------------------- ------------
Net loss $(2,295,621) $(471,672) $(110,500) $ (2,877,793)
============================================= ============
Net loss per common share
basic $ (0.24) $ (0.49)
=========== ============
diluted $ (0.24) $ (0.49)
=========== ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
F-15
<PAGE> 19
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The total estimated purchase price of the assets acquired by the Company
($450,000 cash plus $352,000 representing the estimated market value of 129,656
shares of the Company's common stock) has been allocated to acquired assets as
follows:
<TABLE>
<S> <C>
Property and equipment $ 76,800
Intellectual property 664,500
Less liabilities assumed (50,000)
Goodwill 110,700
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Estimated value of stock and cash consideration $ 802,000
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</TABLE>
The following pro forma adjustments have been made to the historical condensed
consolidated balance sheet of the Company, given the effect to the acquisition
of Functional. Current assets not acquired and current liabilities not assumed
as part of the acquisition have not been eliminated in the pro forma condensed
consolidated balance sheet as these assets and liabilities would have been
generated and/or incurred through ongoing operations.
Pro forma adjustments:
1 To record intangible assets and consideration given for acquired assets
2 To eliminate non-operating assets not acquired and non-operating
liabilities not assumed as part of the purchase, and to eliminate equity
accounts of Functional
3 To write off estimated in-process research and development costs
acquired as part of purchased intellectual property
4 To record twelve months of amortization relating to intangible assets
acquired as if the acquisition had taken place on April 1, 1997
5 To record six months of amortization relating to intangible assets
acquired as if the acquisition had take place on April 1, 1998
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