<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): JULY 18, 1996
COMMISSION FILE NUMBER 0-19207
QUARTERDECK CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 95-4320650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13160 MINDANAO WAY, MARINA DEL REY, CALIFORNIA 90292
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 309-3700
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 18, 1996, Quarterdeck Corporation (the "Company") consummated
the acquisition of Vertisoft Systems, Inc. ("Vertisoft"), pursuant to the terms
of the Agreement and Plan of Reorganization, dated as of July 15, 1996.
Vertisoft is a developer and publisher of innovative utilities software and a
leading direct mail marketer. Vertisoft markets its utilities software products
through major retailers and direct mail in the United States and Canada. The
acquisition is being treated as an "immaterial pooling of interests" for
accounting purposes.
Pursuant to the Reorganization Agreement, the Shareholders received an
aggregate of 3,500,000 shares (the "Shares") of common stock. Pursuant to the
terms of the Reorganization Agreement and the Escrow Agreement, dated as of July
18, 1996, by and among the Company, American Stock Transfer and Trust Company,
as Escrow Agent, Acquisition Sub and the Shareholders, 349,999 of the Shares
were placed in escrow to satisfy potential indemnification obligations of the
Shareholders under the Reorganization Agreement. The Shareholders entered into a
Registration Rights Agreement, dated as of July 18, 1996, pursuant to which the
Shareholders are entitled to certain registration rights with respect to the
Shares. Pursuant to the Registration Rights Agreement the Company filed a
registration statement on Form S-3 on August 14, 1996 with the Securities and
Exchange Commission in order to register the resale of the Shares, and once such
registration statement is declared effective, the Company has agreed to keep
such registration statement effective through July 18, 1997, subject to
extension under certain circumstances.
On August 14, 1996, Quarterdeck Corporation (the "Company")
consummated the acquisition of the remaining shares of Limbex Corporation
("Limbex"), pursuant to the terms of an Agreement and Plan of Reorganization,
dated as of August 13, 1996 (the "Reorganization Agreement"), by and among the
Company, Limbex, and the shareholders of Limbex (the "Shareholders"). Prior to
such acquisition, Quarterdeck owned approximately 20% of the outstanding
capital stock of Limbex. Limbex is the developer of the WebCompass product line.
The acquisition of Limbex was accomplished by way of a merger (the "Merger") of
a wholly-owned subsidiary of the Company with and into Limbex and as a result of
the Merger Limbex became a wholly-owned subsidiary of the Company. In connection
with the Merger, all of the outstanding shares of common stock of Limbex were
converted into 1,309,890 shares of common stock of the Company (all of which is
expected to be issued in the quarter ending September 30, 1996) and
approximately $150,000 (which is expected to be paid in January of 1997.) In
addition, the outstanding shares of preferred stock of Limbex were converted
into the right to receive $3,599,753 from the Company on August 14, 1997 (the
"Preferred Consideration Date"), which may be paid, at the Company's option, in
cash, a number of shares of common stock of the Company equal to $3,599,753
divided by the average closing sales price of common stock of the Company for
the period of five trading days ending on the trading day two trading days prior
to the Preferred Consideration Date, or a combination of cash and shares of the
Company's common stock. The Company also assumed vested options to purchase
102,991 of the shares of the Company's common stock.
Pursuant to the terms of the Reorganization Agreement and the Escrow
Agreement, dated as of August 13, 1996, by and among the Company, American Stock
Transfer and Trust Company, as Escrow Agent, and certain of the Shareholders, a
portion of the consideration will be placed in escrow to satisfy potential
indemnification obligations of certain of the Shareholders under the
Reorganization Agreement. In connection with the Merger, the Company and the
Shareholders entered into a Registration Rights Agreement, dated as of August
13, 1996, pursuant to which the Shareholders are entitled to certain
registration rights with respect to the shares of the Company's common stock to
be issued in the Merger.
ITEM 5. OTHER EVENTS
Current legal proceeding:
On or about September 3, 1996, a class action lawsuit, Merjorie
Williams, et al. v. Quarterdeck Corporation, was filed in the Circuit Court of
the Eight Judicial Circuit, Alachua County, Florida (Case No. 96-3041), by
Merjorie Williams and Penelope Claire Satterwhite on behalf of all licenses of
MagnaRam 2 (a Quarterdeck product) residing in the United States. The
complaint alleges that MagnaRam 2 fails to significantly increase Random Access
Memory or otherwise help Windows 95 and Windows 3.x users. Plaintiffs assert
the following causes of action: breach of express contract; breach of implied
contract; breach of express warranties; breach of implied warranty of
merchantability; breach of implied warranty of fitness for particular purpose;
fraudulent misrepresentation; negligence; and gross negligence. Plaintiffs
seek compensatory damages in an unspecified amount, injunctive relief, and
attorney fees and costs.
Quarterdeck intends to vigorously defend the lawsuit.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS
QUARTERDECK CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
(a) I Financial statements of Vertisoft Systems, Inc.
<S> <C>
Consent of Independent Certified Public Accountants......................................5
Independent Auditors' Report as of January 31, 1996......................................6
Balance Sheet as of January 31, 1996 ....................................................7
Statement of Operations for the year ended January 31, 1996 .............................8
Statements of Shareholders' Equity for the year ended January 31, 1996...................9
Statements of Cash Flows for the year ended January 31, 1996.............................10
Notes to Financial Statements - January 31, 1996 ........................................11
Unaudited Balance Sheet as of May 31, 1996...............................................14
Unaudited Statements of Operations for the four months
ended May 31, 1996 and 1995 ............................................................15
Unaudited Statements of Cash Flows for the four months ended
May 31, 1996 and 1995 ...................................................................16
Unaudited Notes to Financial Statements - May 31, 1996 ..................................17
(a) II Financial statements of Limbex Corporation.
Consent of Independent Certified Public Accountants......................................19
Independent Auditors' Report as of March 31, 1996........................................20
Balance Sheet as of March 31, 1996.......................................................21
Statement of Operations for the period from May 5, 1995 (Inception)
through March 31, 1996..................................................................22
Statement of Shareholders' Equity for the period from May 5, 1995 (Inception)
through March 31, 1996..................................................................23
Statement of Cash Flows for the period from May 5, 1995 (Inception)
through March 31, 1996..................................................................24
Notes to Financial Statements - March 31, 1996...........................................25
Unaudited Balance Sheet as of June 30, 1996.............................................29
Unaudited Statements of Operations for the three months
ended June 30, 1996 and 1995 ...........................................................30
Unaudited Statements of Cash Flows for the three months ended
June 30, 1996 and 1995...................................................................31
Unaudited Notes to Financial Statements - June 30, 1996 and 1995........................32
</TABLE>
3
<PAGE> 4
<TABLE>
(b) Unaudited Pro Forma Financial Information.
<S> <C>
Basis of Presentation....................................................................35
Unaudited Pro Forma Condensed Combining Balance Sheet as of
June 30, 1996........................................................................36, 37
Unaudited Pro Forma Condensed Combining Statements of Operations
for the nine month period ended June 30, 1996........................................38, 39
Notes to Unaudited Pro Forma Condensed Combining Financial Statements June 30, 1996......40
The accompanying unaudited pro forma condensed combining financial
statements of Quarterdeck Corporation, Vertisoft, and Limbex give
retroactive effect to the acquisitions. The Vertisoft acquisition is
being accounted for as an immaterial pooling of interests and
accordingly, the unaudited pro forma condensed combining balance sheet
and statement of operations are presented as if the combining companies
had been combined as of October 1, 1995.
The Limbex acquisition is being accounted for as a purchase and
accordingly, the unaudited pro forma condensed combining balance sheet
is presented as if the purchase had occurred on June 30, 1996; the
unaudited pro forma condensed combining statement of operations for
the nine months ended June 30, 1996 is presented as if the purchase
had occurred on October 1, 1995.
The unaudited pro forma condensed combining financial statements that
reflect the Vertisoft acquisition will become the historical financial
statements of Quarterdeck Corporation. The unaudited pro forma
condensed combining financial statements that reflect the Limbex
acquisition are supplied only to give the reader an understanding of
how the combined Company may have performed if the purchase occurred on
October 1, 1995. These statements will not become the historical
financial statements of Quarterdeck Corporation.
These unaudited pro forma condensed combining financial statements may
not be indicative of the results that actually may be obtained in the
future. The unaudited pro forma condensed combining financial
statements, including the notes thereto, should be read in conjunction
with the historical consolidated financial statements of Quarterdeck
Corporation, Vertisoft and Limbex.
SIGNATURES........................................................................................42
</TABLE>
4
<PAGE> 5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Vertisoft Systems, Inc.:
We consent to the incorporation by reference in the registration statements (No.
33-96064 and No. 333-4606) on Form S-3, the registration statement (No.
333-03723) on Form S-4 and the Registration statements (No. 333-01766 and No.
333-4602) on Form S-8 of Quarterdeck Corporation of our report dated September
13, 1996, with respect to the consolidated balance sheet of Vertisoft Systems,
Inc. as of January 31, 1996, and the related statements of operations,
shareholders' equity, and cash flows for the year then ended, which report
appears in the Form 8-K/A of Quarterdeck Corporation dated September 27, 1996.
\s\KPMG Peat Marwick LLP
- ------------------------
Los Angeles, California
September 25, 1996
5
<PAGE> 6
Independent Auditors' Report
The Board of Directors
Vertisoft Systems, Inc.:
We have audited the accompanying balance sheet of Vertisoft Systems, Inc. as of
January 31, 1996, and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with general accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vertisoft Systems, Inc. as of
January 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
\s\KPMG Peat Marwick LLP
- ------------------------
Los Angeles, California
September 13, 1996
6
<PAGE> 7
VERTISOFT SYSTEMS, INC.
BALANCE SHEET
JANUARY 31, 1996
ASSETS
<TABLE>
Current assets:
<S> <C>
Cash and cash equivalents $3,383,525
Trade accounts receivable, net 620,056
Inventories 63,082
Prepaid expenses 11,658
Deferred income taxes (Note 3) 975,200
----------
Total current assets 5,053,521
Equipment, at cost,
less accumulated depreciation of $103,487 86,036
Loans to affiliates (Note 4) 204,794
----------
Total Assets $5,344,351
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 779,924
Accrued marketing development funds 900,289
Due to related parties (Note 4) 535,753
Accrued liabilities 695,079
Income taxes payable (Note 3) 1,213,192
----------
Total current liabilities 4,124,237
Commitments and contingencies (Note 2)
Shareholders' equity:
Common stock - no par value, 1,000,000 authorized
shares; 86,300 shares issued and outstanding 43,500
Retained earnings 1,176,614
----------
Total shareholders' equity 1,220,114
----------
Total liabilities and shareholders' equity $5,344,351
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
VERTISOFT SYSTEMS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<S> <C>
Net revenues $16,977,455
Cost of revenues 4,597,389
-----------
Gross profit 12,380,066
Operating expenses:
Research and development 54,410
Sales and marketing 8,259,745
General and administrative 3,242,484
-----------
Total operating expenses 11,556,639
-----------
Operating income 823,427
Interest income, net 132,531
-----------
Income before income taxes 955,958
Provision for income taxes 387,884
-----------
Net income $ 568,074
===========
</TABLE>
The accompanying notes are an integral part of these financial statements
8
<PAGE> 9
VERTISOFT SYSTEMS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JANUARY, 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Total
Common Stock Retained Shareholders'
-------------------------------------
Shares Amount Earnings Equity
------------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Balance, January 31, 1995 86,300 $43,500 $608,540 $652,040
Net income -- -- 568,074 568,074
--------------------------------------------------------------------------
Balance, January 31, 1996 86,300 $43,500 $1,176,614 $1,220,114
==========================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
9
<PAGE> 10
VERTISOFT SYSTEMS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 31, 1996
Cash flows from operating activities:
<TABLE>
<S> <C>
Net income $ 568,074
-----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of equipment 37,743
Changes in assets and liabilities:
Trade accounts receivable 605,269
Inventories (63,082)
Deferred income taxes (347,126)
Prepaid expenses (11,658)
Other assets 75,000
Accounts payable 547,976
Accrued marketing development funds 762,060
Due to related parties 340,966
Accrued liabilities 360,165
Income taxes payable 605,125
-----------
Net cash provided by operating activities 3,480,512
-----------
Cash flows from investing activity - Purchases of equipment (82,713)
-----------
Cash flows from financing activity: - Loans to affiliates (204,794)
-----------
Net increase in cash and cash equivalents 3,193,005
Cash and cash equivalents at beginning of period 190,520
-----------
Cash and cash equivalents at end of period $ 3,383,525
===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ --
Income taxes $ 129,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
VERTISOFT SYSTEMS, INC.
JANUARY 31, 1996
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Vertisoft Systems, Inc. ("the Company") was incorporated as a California
corporation on February 1, 1989 and adopted a fiscal year end of January 31. The
Company derives revenue from the sale of computer software.
CASH AND CASH EQUIVALENTS
The Company considers investments with original maturities of three months or
less to be cash equivalents.
EQUIPMENT
Equipment is carried at cost. Depreciation of equipment is provided by the
straight-line method over the useful lives of the related assets, estimated to
be 5 to 7 years.
REVENUE RECOGNITION
Revenue from the sale of software products is recognized upon shipment, where
collection of the resulting receivable is probable and there are no significant
obligations remaining. The estimated cost to fulfill technical support
obligations to end users arising from the sale of software is accrued upon
shipment. Certain limited rights of return and exchange from customers exists as
defined by the Company's general distributor and reseller agreements. The
Company establishes allowances for estimated product returns and price
protections as a reserve against revenues. The reserve activity for the year is
approximately as follows:
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged End of
January 31, Item of the Year to Expenses Deductions the Year
----------- ---- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C>
1996 Reserve for returns and
price protection $ 49,000 $1,861,000 $232,000 $1,678,000
</TABLE>
INVENTORY
Inventory, consisting primarily of product packaging, documentation and media,
is stated at lower of cost or market (net realizable value). Cost is determined
by the first-in, first-out method.
INCOME TAX
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" ("FAS 109").
USE OF ESTIMATES
Company management has made a number of estimates and assumptions relating to
the reporting of assets and liabilities in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.
11
<PAGE> 12
NOTE 2. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various pending claims and lawsuits. Management
believes that the disposition of such matters will not have a material impact on
the Company's financial statements.
The Company leases facilities under operating leases that expire through 1997.
Rental expense for the year ended 1996 amounted to $73,000. The minimum annual
rental payments under the leases are as follows:
<TABLE>
<S> <C>
Year ending January 31, 1997 $47,000
Year ending January 31, 1998 19,000
-------
$66,000
=======
</TABLE>
NOTE 3. INCOME TAXES
The income tax provision for the year ended January 31, 1996 was:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal $ 570,010 $(269,100) $ 300,910
State 165,000 (78,026) 86,974
--------- --------- ---------
$ 735,010 $(347,126) $ 387,884
========= ========= =========
</TABLE>
FAS 109 requires the use of the liability method of accounting for deferred
income taxes. The deferred income tax asset at January 31, 1996 amounted to
$975,200. The deferred tax asset consisted of the tax effect of future reversal
of temporary differences, resulting primarily from reserves and deferred
compensation. Recognition of the deferred tax asset is dependent on a number of
factors, including the timing of reversal of the temporary differences and an
assessment of the future realizability of the deferred tax asset.
The actual income tax benefit differs from the "expected" income tax expense
computed by applying the effective Federal income tax rate of 34% to income
before taxes as follows:
<TABLE>
<S> <C>
Expected income tax expense $325,026
State income taxes, net of Federal income tax benefit 57,403
Other 5,455
--------
Income tax expense $387,884
========
Deferred tax assets are comprised of the following:
Reserves $769,300
Deferred compensation 205,900
--------
Gross deferred tax assets 975,200
Valuation allowance --
--------
Total net deferred tax asset $975,200
========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether or not it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets may be dependent upon the generation of future taxable income during
the periods in which those temporary differences become
12
<PAGE> 13
deductible or on the generation of future losses which may be carried back to
prior periods. Management believes that it is more likely than not that the
entire deferred tax asset will be realized based on future projection of future
taxable income and loss, as well as available tax planning strategies.
The Internal Revenue Service (IRS) has conducted a field audit of the company's
federal income tax returns for the years 1994 and 1995 and has proposed various
adjustments to increase taxable income. The major proposed adjustments to income
are a result of the IRS imposing a change in accounting method from cash to
accrual in one fiscal year which would result in an acceleration of tax
liability. If the Company had made this change in method on their own
initiative, they would have been able to apply this change over a four year
period The Company is attempting to finalize the field auditor's analysis and
determine the best course of action. The Company believes that it has
meritorious defenses to its position with respect to the claims. Management has
analyzed all of these matters and has provided for amounts which it believes are
adequate.
NOTE 4. RELATED PARTY TRANSACTIONS
In December 1995, the majority shareholder of the Company incorporated Vertisoft
Direct, Inc. and Vertisoft, Inc. and is the owner of 100% of the common stock of
these entities. These entities received loans from the Company. At January 31,
1996, loans to these entities were $102,397 each.
The majority shareholder earns a commission of 5% of gross sales collected.
Commission expense for the year was $832,000. There is an accrued liability to
the majority shareholder for commissions earned but not paid at year-end in the
amount of $514,753.
The Company paid $100,000 to a disk duplication company owned by the brother of
one of the minority shareholders of the Company. Amount payable to the related
company at year-end is $21,000.
NOTE 5. SUBSEQUENT EVENTS
The Company executed an Agreement and Plan of Reorganization on July 18, 1996.
The Agreement states that (i) Vertisoft Direct, Inc. will be merged with and
into the Company, (ii) immediately thereafter, VSI Acquisition Corporation, a
wholly-owned subsidiary of Quarterdeck Corporation (Quarterdeck), will be merged
with and into the Company in accordance with the terms of the Agreement and Plan
of Reorganization. As a result of these transactions, all of the outstanding
shares of common stock of the Company will be exchanged for shares of common
stock of Quarterdeck. Accordingly, Quarterdeck will own 100% of the Company.
13
<PAGE> 14
VERTISOFT SYSTEMS, INC.
UNAUDITED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MAY 31, JANUARY 31,
1996 1996
------ ------
Current assets:
<S> <C> <C>
Cash and short-term investments $3,806 $3,384
Trade accounts receivable 25 620
Inventory 111 63
Other current assets 12 12
Deferred taxes 879 975
------ ------
Total current assets 4,833 5,054
Equipment, net of accumulated depreciation 71 86
Loan to affiliates 102 204
------ ------
$5,006 $5,344
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,658 $ 780
Accrued marketing development funds 671 900
Due to related parties 532 535
Accrued liabilities 1,156 695
Income taxes payable 577 1,213
------ ------
Total current liabilities 4,594 4,123
Shareholders' equity:
Common stock - no par value, 1,000,000 authorized
shares; 86,300 shares issued and outstanding 44 44
Additional paid-in-capital
Retained earnings 368 1,177
------ ------
Total shareholders' equity 412 1,221
------ ------
Total liabilities and shareholders' equity $5,006 $5,344
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated unaudited
condensed financial statements.
14
<PAGE> 15
VERTISOFT SYSTEMS, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTH PERIODS ENDED
(Amounts in thousands)
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1996 1995
------- -------
<S> <C> <C>
Net revenues $ 3,109 $ 7,128
Cost of revenues 1,230 1,774
------- -------
Gross margin 1,879 5,354
Operating expenses:
Research and development 10 11
Sales and marketing 2,024 3,435
General and administrative 1,204 1,054
------- -------
Total operating expenses 3,238 4,500
------- -------
Operating income (loss) (1,359) 854
Interest income, net 10 48
------- -------
Income (loss) before income taxes (1,349) 902
Provision (benefit) for income taxes (540) 345
------- -------
Net income (loss) $ (809) $ 557
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated unaudited
condensed financial statements
15
<PAGE> 16
VERTISOFT SYSTEMS, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE FOUR MONTH PERIODS ENDED
(Amounts in thousands)
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1996 1995
------- -------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (809) $ 557
------- -------
Adjustments to reconcile net loss to net
cash (used) provided by operating activities:
Depreciation of equipment 18 12
Changes in assets and liabilities:
Trade accounts receivable 595 764
Inventory (48) (50)
Deferred taxes 96 --
Other current assets -- 75
Accounts payable 878 2,024
Accrued marketing development funds (229) 243
Due to related parties (3) 347
Accrued liabilities 461 (176)
Income taxes payable (636) 345
------- -------
Net cash provided by operating activities 323 4,141
------- -------
Cash flows from investing activities:
Capital expenditures (3) (29)
Repayment of loan to affilliate 102 --
------- -------
Net cash provided (used) by investing activities 99 (29)
------- -------
Cash flows from financing activities: (none)
Net increase (decrease) in cash and cash equivalents 422 4,112
Cash and cash equivalents at beginning of period 3,384 191
------- -------
Cash and cash equivalents at end of period $ 3,806 $ 4,302
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ -- $ --
Income tax $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated unaudited
condensed financial statements.
16
<PAGE> 17
VERTISOFT SYSTEMS, INC.
UNAUDITED NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 AND 1995
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Vertisoft Systems, Inc. ("the Company") was incorporated as a California
corporation on February 1, 1989 and adopted a fiscal year end of January 31. The
Company derives revenue from the sale of computer software.
CASH AND CASH EQUIVALENTS
The Company considers investments with original maturities of three months or
less to be cash equivalents.
EQUIPMENT
Equipment is carried at cost. Depreciation of equipment is provided by the
straight-line method over the useful lives of the related assets, estimated to
be 5 to 7 years.
REVENUE RECOGNITION
Revenue from the sale of software products is recognized upon shipment, where
collection of the resulting receivable is probable and there are no significant
obligations remaining. The estimated cost to fulfill technical support
obligations to end users arising from the sale of software is accrued upon
shipment. Certain limited rights of return and exchange from customers exists as
defined by the Company's general distributor and reseller agreements. The
Company establishes allowances for estimated product returns and price
protections as a reserve against revenues.
INVENTORY
Inventory, consisting primarily of product packaging, documentation and media,
is stated at lower of cost or market (net realizable value). Cost is determined
by the first-in, first-out method.
INCOME TAX
The Company accounts for income taxes in accordance with Financial Accounting
Standards Board Statement No. 109 "Accounting for Income Taxes" ("FAS 109").
USE OF ESTIMATES
Company management has made a number of estimates and assumptions relating to
the reporting of assets and liabilities in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.
NOTE 2. RELATED PARTY TRANSACTIONS
In December 1995, the majority shareholder of the Company incorporated Vertisoft
Direct, Inc. and Vertisoft, Inc. and is the owner of 100% of the common stock of
these entities. These entities received loans from the Company. During the four
months ended May 31, 1996, the loan to Vertisoft, Inc. was repaid to the
Company. At May 31, 1996, the loan to Vertisoft Direct totalled $102,397.
The majority shareholder earns commissions of 5% of gross sales collected. There
is an accrued liability to the majority shareholder for commissions earned but
not paid of $532,000 at May 31, 1996.
17
<PAGE> 18
NOTE 3. SUBSEQUENT EVENT
The Company and Quarterdeck Corporation executed an Agreement and Plan of
Reorganization on July 18, 1996. The Agreement states that (i) Vertisoft Direct,
Inc. will be merged with and into the Company, (ii) immediately thereafter, VSI
Acquisition Corporation, a wholly-owned subsidiary of Quarterdeck Corporation
(Quarterdeck), will be merged with and into the Company in accordance with the
terms of the Agreement and Plan of Reorganization. As a result of these
transactions, all of the outstanding shares of common stock of the Company will
be exchanged for shares of common stock of Quarterdeck. Accordingly, Quarterdeck
will own 100% of the Company.
18
<PAGE> 19
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Limbex Corporation:
We consent to the incorporation by reference in the registration statements (No.
33-96064 and No. 333-4606) on Form S-3, the registration statement (No.
333-03723) on Form S-4 and the Registration statements (No. 333-01766 and No.
333-4602) on Form S-8 of Quarterdeck Corporation of our report dated August 16,
1996, with respect to the consolidated balance sheet of Limbex Corporation as of
March 31, 1996, and the related statements of operations, shareholders' equity,
and cash flows for the period from May 5, 1995 (inception) through March 31,
1996, which report appears in the Form 8-K/A of Quarterdeck Corporation dated
September 27, 1996.
\s\KPMG Peat Marwick LLP
- ------------------------
Los Angeles, California
September 25, 1996
19
<PAGE> 20
Independent Auditors' Report
The Board of Directors
Limbex Corporation:
We have audited the accompanying balance sheet of Limbex Corporation as of March
31, 1996, and the related statements of operations, shareholders' equity, and
cash flows for the period from May 5, 1995 (inception) through March 31, 1996.
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 audit.
We conducted our audit in accordance with general accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Limbex Corporation as of March
31, 1996, and the results of its operations and its cash flows for the period
from May 5, 1995 (inception) through March 31, 1996 in conformity with generally
accepted accounting principles.
\s\KPMG Peat Marwick LLP
- ------------------------
Los Angeles, California
August 16, 1996
20
<PAGE> 21
LIMBEX CORPORATION
BALANCE SHEET
MARCH 31, 1996
ASSETS
Current assets:
<TABLE>
<S> <C>
Cash and cash equivalents $ 387,749
Employee receivable 4,000
-----------
Total current assets 391,749
Equipment, at cost, less accumulated depreciation of $ 11,666 47,866
License, net (Note 2) 519,334
-----------
Total assets $ 958,949
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,199
Accrued liabilities 93,164
Deferred revenue 45,500
-----------
Total current liabilities 151,863
Shareholders' equity (Note 3):
Series A preferred stock - $0.00001 par value, 800,000 shares authorized,
issued and outstanding ($800,000 liquidation preference) 8
Series B preferred stock - $0.00001 par value, 884,422 shares authorized,
issued and outstanding 9
Common stock - $0.00001 par value, 10,000,000 shares authorized;
2,335,678 shares issued and outstanding 23
Additional paid-in-capital 1,044,960
Accumulated deficit (237,914)
-----------
Net shareholders' equity 807,086
-----------
Total liabilities and shareholders' equity $ 958,949
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
LIMBEX CORPORATION
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 5, 1995 (INCEPTION)
THROUGH MARCH 31, 1996
<TABLE>
<S> <C>
Revenues $ 1,088,174
-----------
Costs and Expenses:
Research and development 719,470
Sales and marketing 50,864
General and administrative 567,934
-----------
Total Costs and Expenses 1,338,268
-----------
Operating loss (250,094)
Interest income, net 12,180
-----------
Net loss $ (237,914)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements
22
<PAGE> 23
LIMBEX CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 5, 1995 (INCEPTION) THROUGH MARCH 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Additional Total
Preferred Stock Common Stock Paid-In Accumulated Shareholders'
----------------------- --------------------------
Shares Amount Shares Amount Capital Deficit Equity
----------------------- -------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 5, 1995 (Inception) - $ - - $ - $ - $ - $ -
Issuance of Series A Preferred Stock 800,000 8 - - 799,992 - 800,000
(Note 3)
Issuance of Series B Preferred Stock 884,422 9 - - 219,991 - 220,000
(Note 3)
Issuance of Common Stock (Note 3) - - 2,335,678 23 24,977 - 25,000
Net loss - - - - - (237,914) (237,914)
----------------------------------------------------------------------------------------------
Balance, March 31, 1996 1,684,422 $17 2,335,678 $23 $1,044,960 $(237,914) $ 807,086
==============================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated unaudited
condensed financial statements
23
<PAGE> 24
LIMBEX CORPORATION
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MAY 5, 1995 (INCEPTION)
THROUGH MARCH 31, 1996
Cash flows from operating activities:
<TABLE>
<S> <C>
Net loss $(237,914)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation of equipment 11,666
Amortization of capitalized license agreement 300,666
Change in assets and liabilities:
Employee receivable (4,000)
Accounts payable 13,199
Accrued liabilities 93,164
Deferred revenue 45,500
---------
Net cash provided by operating activities 222,281
---------
Cash flows from investing activities:
Purchase of equipment (59,532)
Purchase of license agreement (600,000)
---------
Net cash used in investing activities (659,532)
---------
Cash flows from financing activities:
Proceeds from issuance of common stock 25,000
Proceeds from issuance of preferred stock 800,000
---------
Net cash provided by financing activities 825,000
---------
Net increase in cash and cash equivalents 387,749
Cash and cash equivalents at beginning of period 0
---------
Cash and cash equivalents at end of period $ 387,749
=========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ --
Income tax $ --
Supplemental disclosure of noncash information:
Payment for portion of license acquired with preferred stock $ 220,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 25
LIMBEX CORPORATION
MARCH 31, 1996
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Limbex Corporation ("the Company") was incorporated as a California corporation
on May 5, 1995. and adopted a fiscal year end of March 31. The Company derives
revenue from the sale of intelligent agent search technology under software
development contracts, as well as providing related ancillary services.
CASH AND CASH EQUIVALENTS
The Company considers investments with original maturities of three months or
less to be cash equivalents.
EQUIPMENT
Equipment is carried at cost. Depreciation of equipment is provided by the
straight-line method over the estimated useful lives of the related assets,
estimated to be three years.
REVENUE RECOGNITION
Software development revenue is recognized on a straight-line basis over the
contracted period of development. The Company recognizes non-refundable,
non-recoupable royalties as revenue when received.
INCOME TAX
The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes" ("FAS 109").
STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
Accounting for Stock-Based Compensation. SFAS No. 123 will be effective for
fiscal years beginning after December 15, 1995, and will require that the
Company either recognize in its financial statements costs related to its
employee stock-based compensation plans, such as stock option and stock purchase
plans, or make pro forma disclosures of such costs in a footnote to the
financial statements.
The Company expects to continue to use the intrinsic value-based method of
Accounting Principles Board Opinion No. 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans. Therefore, in
its financial statements for the year ended March 31, 1997, the Company will
make the required pro forma disclosures in a footnote to the financial
statements. SFAS No. 123 is not expected to have a material effect on the
Company's results of operations or financial position.
USE OF ESTIMATES
Company management has made a number of estimates and assumptions relating to
the reporting of assets and liabilities in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.
NOTE 2. LICENSE
The license represents rights to technology used to develop the initial version
of the Company's product. The Company paid $600,000 and issued 884,422 shares of
Series B Preferred Stock, valued at $220,000. In addition, the Company has
future royalty commitments based on the Company's revenues. The Company is
amortizing this license on the straight-line basis over the license term, 30
months, as research and development. Accumulated amortization at March 31, 1996
was $300,666.
25
<PAGE> 26
NOTE 3. SHAREHOLDERS' EQUITY
Series A Preferred Stock - The Company issued 800,000 shares of Series A
Preferred Stock and a Warrant to purchase 100,000 shares of Common Stock of the
Company for $1.00 per share. The warrant expires on May 8, 2000. The Series A
Preferred Stock has a stated value and liquidation preference of $1 per share.
In the event of liquidation, holders of Series A Preferred Stock shall be
entitled to receive out of the assets of the Company, whether such assets are
capital, surplus or earnings, an amount equal to $1 for each share of Series A
Preferred Stock before any payment shall be made or assets distributed on any
other class or series of the Company's capital stock, including without
limitation the Series B Preferred Stock or Common Stock.
Series B Preferred Stock - The Company issued 884,422 outstanding shares of
Series B Preferred Stock, valued at $220,000, in connection with the acquisition
of a license. In the event of liquidation, after payment or distribution to the
holders of Series A Preferred Stock of the full amounts due, the remaining
assets of the Company available for distribution to shareholders shall be
distributed ratably among the holders of Series B Preferred Stock and Common
Stock then outstanding (treating the Series B Preferred Stock as if converted
into Common Stock).
Each share of Preferred Stock (Series A and B) shall be convertible into the
number of shares of Common Stock which results from dividing $1.00 by the
Conversion Price for such series of Preferred Stock in effect at the time of
conversion. The initial conversion price per share for the Series A and Series B
Preferred Stock shall be $1.00, subject to certain adjustments.
Common Stock - The Company issued 2,235,176 shares of Common Stock to the
founders for no consideration. The Company issued 100,502 shares to a board
member for $25,000.
NOTE 4. STOCK OPTIONS AND WARRANTS
During the fiscal year, the Company adopted The Limbex Corporation 1995 Stock
Option Plan (the "Plan"). The Plan provides for employees to purchase shares of
the Common Stock of the Company pursuant to options that will qualify as
incentive stock options. In addition, employees, directors, consultants or other
persons may purchase shares of Common Stock of the Company pursuant to
non-qualified stock options. The aggregate combined number of shares of the
Company's Common Stock made subject to options granted under the Plan during the
term hereof, to all recipients in total shall not exceed one million shares.
Under the terms of the Plan, options shall expire no later than ten years from
the date on which the option is granted. Each option shall be exercisable during
the period prior to its expiration date in such installments as the Board of
Directors or Committee shall determine. In the event of a change in control, all
options will become fully vested. Incentive stock options are granted at 100% of
fair market value. During the fiscal year, the Company granted 186,000 incentive
stock options at an exercise price of $0.25 per share. In addition, the Company
granted 20,000 non-qualified stock options at an exercise price of $0.25 per
share. No options have been canceled or exercised and none of the outstanding
options are exercisable at March 31, 1996.
26
<PAGE> 27
NOTE 5. INCOME TAXES
FAS 109 requires the use of the liability method of accounting for deferred
income taxes. The deferred income taxes at March 31, 1996 amounted to $95,000
for which a full valuation allowance was provided. The deferred tax assets
consisted of the tax effect of future reversal of temporary differences,
resulting primarily from revenue from certain royalty and software development
agreements, which was not recognized for book purposes. Recognition of the
deferred tax assets is dependent on a number of factors, including the timing of
reversal of the temporary differences and an assessment of the future
realizability of the deferred tax assets.
The actual income tax benefit differs from the "expected" income tax benefit
computed by applying the effective Federal income tax rate of 34% to loss before
taxes as follows (in thousands):
<TABLE>
<S> <C>
Expected income tax benefit $(81,000)
State income taxes, net of Federal income tax benefit (14,000)
Valuation allowance 95,000
--------
Income tax benefit $ --
========
Deferred tax assets are comprised of the following:
Deferred revenue $ 18,000
Net operating loss carryforward 77,000
--------
Gross deferred tax assets 95,000
Valuation allowance 95,000
--------
Total net deferred tax assets $ --
========
</TABLE>
The Company has a federal net operating loss carryforward of $77,000 expiring in
2011.
The Company believes sufficient uncertainty exists regarding the realizability
of the deferred tax assets such that a full valuation allowance is required.
NOTE 6. RELATED PARTY TRANSACTIONS
Currently all of the Company's revenue is derived from a software development
agreement with the owner of the Series A Preferred Stock and warrant. At March
31, 1996, there was $45,500 of deferred revenue relating to the software
development agreement. In July 1996, the warrant was exercised and 100,000
shares of Common Stock were issued for $100,000.
The owner of the Series A Preferred Stock is providing certain facilities,
equipment and staff to the Company in connection with performance of the
Company's obligations under the terms of the software development agreement. In
addition, the owner of the Series A Preferred Stock is obligated to pay minimum
royalties to the Company in addition to a $400,000 advance that was paid to the
Company in January 1996.
27
<PAGE> 28
NOTE 7. SUBSEQUENT EVENTS
On July 31, 1996, 150,000 shares of Common Stock of the Company were issued in
exchange for the termination of certain future royalty obligations of the
Company, the release of certain claims and cross-licensing obligations, and
acquisition of technology currently licensed to the Company.
Agreement and Plan of Reorganization: The Company executed an Agreement and Plan
of Reorganization on August 14, 1996. The Agreement states that the owner of the
Series A Preferred Stock (Quarterdeck) will acquire all outstanding Common Stock
not owned, options to acquire Common Stock and Series B Preferred Stock. As a
result of this transaction Quarterdeck will own 100% of the Company.
The following will be issued in exchange for the Company's Common Stock, options
to acquire Common Stock and Series B Preferred Stock:
(i) The 150,000 shares of Common Stock issued in July 1996 shall be converted
into the number of shares of Quarterdeck Common Stock equal to $610,526 divided
by the average closing sales price of Quarterdeck Common Stock for the period of
five trading days ending on the trading day two trading days prior to the
closing date, (ii) all of the issued and outstanding shares of Series B
Preferred Stock shall automatically be converted into the right to receive
$3,599,753 from Quarterdeck on the first anniversary of the closing date, which
may be paid, at Quarterdeck's option, in cash or in Quarterdeck Common Stock,
(iii) the 100,502 shares of Common Stock owned by the Board member shall
automatically be converted into the right to receive (a) 34,984 shares of
Quarterdeck Common Stock on the closing date, and (b) cash in an amount equal to
the fair market value of 18,838 shares of Quarterdeck Common Stock based upon
the average closing sales price of Quarterdeck Common Stock for the period of
five trading days ending on the trading day two trading days prior to the
closing date. This cash amount is due no later than January 31, 1997, and (iv)
the 2,235,176 shares of Common Stock issued to the founders shall be converted
into the right to receive 1,197,009 shares of Quarterdeck Common Stock at the
date a Registration Statement including such shares is declared effective.
Each option to acquire Common Stock of the Company shall be assumed by
Quarterdeck at the closing and shall become an option to acquire 0.53553237 of a
share of Quarterdeck Common Stock for each share of the Company's Common Stock
previously subject to the Option at an exercise price equal to the exercise
price per share of the Company Common Stock divided by .53553237. Approximately
110,000 options to acquire Quarterdeck Common Stock shall be issued. The options
to acquire shares of Quarterdeck Common Stock shall be (x) (A) in the case of
the Company options that qualified as incentive stock options, incentive stock
options of Quarterdeck, (B) in the case of the Company options that are
non-qualified stock options, non-qualified stock options of Quarterdeck, (y)
fully vested at the assumption and (z) issued under Quarterdeck's Amended and
Restated 1990 Stock Incentive Plan.
The Company has recorded Accrued Acquisition Costs of $65,600 relating to this
acquisition.
28
<PAGE> 29
LIMBEX CORPORATION
UNAUDITED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
-------- ---------
<S> <C> <C>
Current assets:
Cash and short-term investments $ 24 $ 388
Receivable from related party 35 --
Other current assets 1 4
------ ------
Total current assets 60 392
Technology license, net of amortization 437 519
Equipment, net of accumulated depreciation 59 48
------ ------
$ 556 $ 959
------ ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56 $ 13
Accrued liabilities 94 93
Deferred revenue 33 46
------ ------
Total current liabilities 183 152
Shareholders' equity:
Series A preferred stock - $0.00001 par value,
(authorized: 800,000 shares, issued and outstanding:
800,000 shares) -- --
Series B preferred stock - $0.00001 par value,
(authorized: 884,422 shares, issued and outstanding:
884,422 shares) -- --
Common stock - $0.00001 par value,
(authorized: 10,000,000 shares; issued
and outstanding: 2,335,678 shares) -- --
Additional paid-in-capital 1,045 1,045
Accumulated deficit (672) (238)
------ ------
Total shareholders' equity 373 807
------ ------
Total liabilities and shareholders' equity $ 556 $ 959
====== ======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
29
<PAGE> 30
LIMBEX CORPORATION
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MAY 5, 1995 (Inception)
JUNE 30, THROUGH JUNE 30,
1996 1995
----- ----
<S> <C> <C>
Revenues $ 157 $145
----- ----
Operating expenses:
Research and development 349 97
Sales and marketing 43 6
General and administrative 199 89
----- ----
Total operating expenses 591 192
----- ----
Operating loss (434) (47)
Interest income, net 2 1
----- ----
Loss before income taxes (432) (46)
Provision (benefit) for income taxes (2) --
----- ----
Net loss $(434) $(46)
===== ====
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements
30
<PAGE> 31
LIMBEX CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MAY 5, 1995 (Inception)
JUNE 30, THROUGH JUNE 30,
1996 1995
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(434) $ (46)
----- -----
Adjustments to reconcile net loss to net
cash (used) provided by operating activities:
Depreciation of equipment 5 1
Amortization of capitalized license agreement 82 55
Changes in assets and liabilities:
Receivable from related party (35)
Other current assets 3
Accounts payable 43 30
Accrued liabilities 1
Deferred revenue (13) 181
----- -----
Total adjustments 86 267
----- -----
Net cash (used) provided by operating activities (348) 221
----- -----
Cash flows from investing activities:
Capital expenditures (16) (34)
Capitalized technology license - cash portion -- (100)
----- -----
Net cash used in investing activities (16) (134)
----- -----
Cash flows from financing activities:
Proceeds from issuance of preferred stock -- 200
Proceeds from issuance of common stock -- 25
----- -----
Net cash provided by financing activities -- 225
-----
Net increase (decrease) in cash and cash equivalents (364) 312
Cash and cash equivalents at beginning of period 388 --
----- -----
Cash and cash equivalents at end of period $ 24 $ 312
===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ -- $ --
Income tax $ -- $ --
Non-cash transaction:
Supplemental disclosure of non-cash flow information:
Payment for portion of license acquired with preferred stock $ -- $ 220
Payment for portion of license acquired with Note payable $ -- $ 500
Receivable for deferred issuance of Seies A Preferred stock $ -- $ 600
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONDENSED
FINANCIAL STATEMENTS.
31
<PAGE> 32
LIMBEX CORPORATION
JUNE 30, 1996
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Limbex Corporation ("the Company") was incorporated as a California corporation
on May 5, 1995. and adopted a fiscal year end of March 31. The Company derives
revenue from the sale of intelligent agent search technology under software
development contracts, as well as providing related ancillary services.
CASH AND CASH EQUIVALENTS
The Company considers investments with original maturities of three months or
less to be cash equivalents.
EQUIPMENT
Equipment is carried at cost. Depreciation of equipment is provided by the
straight-line method over the estimated useful lives of the related assets,
estimated to be three years.
REVENUE RECOGNITION
Software development revenue is recognized on a straight-line basis over the
contracted period of development. The Company recognizes non-refundable,
non-recoupable royalties as revenue when received.
INCOME TAX
The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes" ("FAS 109").
STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
Accounting for Stock-Based Compensation. SFAS No. 123 will be effective for
fiscal years beginning after December 15, 1995, and will require that the
Company either recognize in its financial statements costs related to its
employee stock-based compensation plans, such as stock option and stock purchase
plans, or make pro forma disclosures of such costs in a footnote to the
financial statements.
The Company expects to continue to use the intrinsic value-based method of
Accounting Principles Board Opinion No. 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans. Therefore, in
its financial statements for the year ended March 31, 1997, the Company will
make the required pro forma disclosures in a footnote to the financial
statements. SFAS No. 123 is not expected to have a material effect on the
Company's results of operations or financial position.
USE OF ESTIMATES
Company management has made a number of estimates and assumptions relating to
the reporting of assets and liabilities in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.
NOTE 2. LICENSE
The license represents rights to technology used to develop the initial version
of the Company's product. The Company paid $600,000 and issued 884,422 shares of
Series B Preferred Stock, valued at $220,000. In addition, the Company has
future royalty commitments based on the Company's revenues. The Company is
amortizing this license on the straight-line basis over the license term, 30
months, as research and development. Accumulated amortization at June 30, 1996
was $382,666.
32
<PAGE> 33
NOTE 3. SHAREHOLDERS' EQUITY
Series A Preferred Stock - The Company issued 800,000 shares of Series A
Preferred Stock and a Warrant to purchase 100,000 shares of Common Stock of the
Company for $1.00 per share. The warrant expires on May 8, 2000. The Series A
Preferred Stock has a stated value and liquidation preference of $1 per share.
In the event of liquidation, holders of Series A Preferred Stock shall be
entitled to receive out of the assets of the Company, whether such assets are
capital, surplus or earnings, an amount equal to $1 for each share of Series A
Preferred Stock before any payment shall be made or assets distributed on any
other class or series of the Company's capital stock, including without
limitation the Series B Preferred Stock or Common Stock.
Series B Preferred Stock - The Company issued 884,422 outstanding shares of
Series B Preferred Stock, valued at $220,000, in connection with the acquisition
of a license. In the event of liquidation, after payment or distribution to the
holders of Series A Preferred Stock of the full amounts due, the remaining
assets of the Company available for distribution to shareholders shall be
distributed ratably among the holders of Series B Preferred Stock and Common
Stock then outstanding (treating the Series B Preferred Stock as if converted
into Common Stock).
Each share of Preferred Stock (Series A and B) shall be convertible into the
number of shares of Common Stock which results from dividing $1.00 by the
Conversion Price for such series of Preferred Stock in effect at the time of
conversion. The initial conversion price per share for the Series A and Series B
Preferred Stock shall be $1.00, subject to certain adjustments.
Common Stock - The Company issued 2,235,176 shares of Common Stock to the
founders for no consideration. The Company issued 100,502 shares to a board
member for $25,000.
NOTE 4. STOCK OPTIONS AND WARRANTS
During the fiscal year, the Company adopted The Limbex Corporation 1995 Stock
Option Plan (the "Plan"). The Plan provides for employees to purchase shares of
the Common Stock of the Company pursuant to options that will qualify as
incentive stock options. In addition, employees, directors, consultants or other
persons may purchase shares of Common Stock of the Company pursuant to
non-qualified stock options. The aggregate combined number of shares of the
Company's Common Stock made subject to options granted under the Plan during the
term hereof, to all recipients in total shall not exceed one million shares.
Under the terms of the Plan, options shall expire no later than ten years from
the date on which the option is granted. Each option shall be exercisable during
the period prior to its expiration date in such installments as the Board of
Directors or Committee shall determine. In the event of a change in control, all
options will become fully vested. Incentive stock options are granted at 100% of
fair market value. During the fiscal year ended March 31, 1996 the Company
granted 186,000 incentive stock options at an exercise price of $0.25 per share.
In addition, the Company granted 20,000 non-qualified stock options at an
exercise price of $0.25 per share. No options have been canceled or exercised
and none of the outstanding options are exercisable at June 30, 1996.
NOTE 5. RELATED PARTY TRANSACTIONS
Currently all of the Company's revenue is derived from a software development
agreement with the owner of the Series A Preferred Stock and warrant. At June
30, 1996, there was $33,000 of deferred revenue and a $35,000 receivable
relating to the software development agreement. In July 1996, the warrant was
exercised and 100,000 shares of Common Stock were issued for $100,000.
The owner of the Series A Preferred Stock is providing certain facilities,
equipment and staff to the Company in connection with performance of the
Company's obligations under the terms of the software development agreement. In
addition, the owner of the Series A Preferred Stock is obligated to pay minimum
royalties to the Company in addition to a $400,000 advance that was paid to the
Company in January 1996.
33
<PAGE> 34
NOTE 6. SUBSEQUENT EVENTS
On July 31, 1996, 150,000 shares of Common Stock of the Company were issued in
exchange for the termination of certain future royalty obligations of the
Company, the release of certain claims and cross-licensing obligations, and
acquisition of technology currently licensed to the Company.
Agreement and Plan of Reorganization: The Company executed an Agreement and Plan
of Reorganization on August 14, 1996. The Agreement states that the owner of the
Series A Preferred Stock (Quarterdeck) will acquire all outstanding Common Stock
not owned, options to acquire Common Stock and Series B Preferred Stock. As a
result of this transaction Quarterdeck will own 100% of the Company.
The following will be issued in exchange for the Company's Common Stock, options
to acquire Common Stock and Series B Preferred Stock:
(i) The 150,000 shares of Common Stock issued in July 1996 shall be converted
into the number of shares of Quarterdeck Common Stock equal to $610,526 divided
by the average closing sales price of Quarterdeck Common Stock for the period of
five trading days ending on the trading day two trading days prior to the
closing date, (ii) all of the issued and outstanding shares of Series B
Preferred Stock shall automatically be converted into the right to receive
$3,599,753 from Quarterdeck on the first anniversary of the closing date, which
may be paid, at Quarterdeck's option, in cash or in Quarterdeck Common Stock,
(iii) the 100,502 shares of Common Stock owned by the Board member shall
automatically be converted into the right to receive (a) 34,984 shares of
Quarterdeck Common Stock on the closing date, and (b) cash in an amount equal to
the fair market value of 18,838 shares of Quarterdeck Common Stock based upon
the average closing sales price of Quarterdeck Common Stock for the period of
five trading days ending on the trading day two trading days prior to the
closing date. This cash amount is due no later than January 31, 1997, and (iv)
the 2,235,176 shares of Common Stock issued to the founders shall be converted
into the right to receive 1,197,009 shares of Quarterdeck Common Stock at the
date a Registration Statement including such shares is declared effective.
Each option to acquire Common Stock of the Company shall be assumed by
Quarterdeck at the closing and shall become an option to acquire 0.53553237 of a
share of Quarterdeck Common Stock for each share of the Company's Common Stock
previously subject to the Option at an exercise price equal to the exercise
price per share of the Company Common Stock divided by .53553237. Approximately
110,000 options to acquire Quarterdeck Common Stock shall be issued. The options
to acquire shares of Quarterdeck Common Stock shall be (x) (A) in the case of
the Company options that qualified as incentive stock options, incentive stock
options of Quarterdeck, (B) in the case of the Company options that are
non-qualified stock options, non-qualified stock options of Quarterdeck, (y)
fully vested at the assumption and (z) issued under Quarterdeck's Amended and
Restated 1990 Stock Incentive Plan.
The Company has recorded Accrued Acquisition Costs of $65,600 relating to this
acquisition.
34
<PAGE> 35
QUARTERDECK CORPORATION, VERTISOFT SYSTEMS, INC. AND
LIMBEX CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combining Balance Sheet as
of June 30, 1996 and the Unaudited Pro Forma Condensed Combining Statement of
Operations for the nine months ended June 30, 1996 has been prepared giving
effect to the acquisitions of Vertisoft Systems, Inc. ("Vertisoft"), and of
Limbex Corporation ("Limbex") by Quarterdeck Corporation ("Quarterdeck"). The
Unaudited footnotes that follow include a restatement of common shares
outstanding and earnings per share for the fiscal years ended September 30,
1995, 1994 and 1993, giving effect to the issuance of 3,500,000 common shares in
connection with the acquisition of Vertisoft but does not include the results of
operations of Vertisoft or of Limbex, nor the shares issued in the Limbex
purchase, as those results are immaterial to Quarterdeck.
On July 18, 1996, Quarterdeck acquired 100% of the common stock of
Vertisoft in exchange for 3,500,000 shares of Quarterdeck Common Stock. This
transaction has been accounted for as a pooling of interests, and, as a result,
the unaudited pro forma condensed combining financial statements are presented
as if the combining companies had been combined commencing October 1, 1995. The
retained earnings of Vertisoft as of September 30, 1995 and results of
operations for the year ended September 30, 1995 and prior are immaterial to
Quarterdeck. Accordingly, the financial statements prior to October 1, 1995 have
not been restated to reflect such financial statements of Vertisoft. However,
the number of shares issued in the Vertisoft pooling of interests is material
to Quarterdeck for all periods. Therefore, the number of common shares
outstanding and earnings per share have been restated (see Note 7) for all
periods after October 1, 1992, to reflect the 3,500,000 shares issued in such
transaction.
On August 14, 1996, Quarterdeck consummated the acquisition of the
remaining shares of Limbex not already owned, pursuant to the terms of an
Agreement and Plan of Reorganization, dated as of August 13, 1996 (the
"Reorganization Agreement"), by and among the Company, Limbex, and the
shareholders of Limbex (the "Shareholders"). Prior to such acquisition,
Quarterdeck owned approximately 20% of the outstanding capital stock of Limbex.
Limbex is the developer of the WebCompass product line. In connection with the
Merger, all of the outstanding shares of common stock of Limbex were converted
into 1,309,890 shares of common stock of the Company (all of which are expected
to be issued in the quarter ending September 30, 1996) and approximately
$150,000 (which is expected to be paid in January of 1997.) In addition, the
outstanding shares of preferred stock of Limbex were converted into the right to
receive $3,599,753 from the Company on August 14, 1997 (the "Preferred
Consideration Date"), which may be paid, at the Company's option, in cash, a
number of shares of common stock of the Company equal to $3,599,753 divided by
the average closing sales price of common stock of the Company for the period of
five trading days ending on the trading day two trading days prior to the
Preferred Consideration Date, or a combination of cash and shares of the
Company's common stock. The Company also assumed vested options to purchase
102,991 of the shares of the Company's common stock. This transaction is
accounted for as a purchase and the results of operations and financial position
of Limbex will be consolidated with the Company as of the purchase date. The Pro
forma presentation that follows combining the results from Limbex since October
1, 1995 with those of the Company is presented for the readers' information
only. A Pro-forma statement of operations for the year ended September 30, 1995
has not been presented as Limbex commenced operations in May of 1995 and such
results are immaterial.
35
<PAGE> 36
QUARTERDECK CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
AS OF JUNE 30, 1996
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
POOLING RESTATED
QUARTERDECK VERTISOFT ADJUSTMENTS HISTORICAL
HISTORICAL HISTORICAL (NOTE 5) POOLED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and short-term investments $ 14,409 $ 2,826 $ -- $ 17,235
Trade accounts receivable 12,623 310 (750)ii 12,183
Deferred tax assets 4,515 920 (530)i 4,905
Refundable income taxes 3,284 170 -- 3,454
Inventories 3,376 110 -- 3,486
Other current assets 5,021 -- -- 5,021
-------- -------- -------- -------
Total current assets 43,228 4,336 (1,280) 46,284
Building, net of accumulated depreciation 8,720 -- -- 8,720
Equipment and leasehold improvements 11,897 74 11,971
Capitalized software costs 4,433 -- 4,433
Other assets 8,795 2 8,797
-------- -------- -------- -------
$ 77,073 $ 4,412 $ (1,280) $80,205
======== ======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,855 $ 1,154 $ -- $ 9,009
Accrued liabilities 15,331 2,983 (750)ii 17,564
Current portion of long-term obligations 17 -- 17
Loan payable to bank 2,000 2,000
Accrued acquisition, restructuring and
other charges 3,380 -- 3,380
-------- -------- -------- -------
Total current liabilities 28,583 4,137 (750) 31,970
6% Convertible notes, due March 31, 2001 25,000 -- 25,000
Long-term obligations, less current portion 114 -- 114
-------- -------- -------- -------
53,697 4,137 (750) 57,084
Stockholders' equity: (see Note 5)
Preferred stock -- -- -- --
Common stock 31 44 (40)iii 35
Treasury stock (559) -- -- (559)
Additional paid-in capital 49,673 -- 40 iii 49,713
Retained earnings (25,185) 231 (530) (25,484)
Foreign currency translation adjustment (584) -- (584)
-------- -------- -------- -------
Total stockholders' equity 23,376 275 (530) 23,121
-------- -------- -------- -------
$ 77,073 $ 4,412 $ (1,280) $80,205
======== ======== ======== =======
</TABLE>
See notes to unaudited pro forma condensed combining balance sheet
36
<PAGE> 37
QUARTERDECK CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
AS OF JUNE 30, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
RESTATED PURCHASE
HISTORICAL LIMBEX ADJUSTMENTS PRO FORMA
POOLED HISTORICAL (NOTE 5) COMBINED
------ ---------- -------- --------
<S> <C> <C> <C> <C>
Current assets:
Cash and short-term investments $ 17,235 $ 24 $ -- $ 17,259
Trade accounts receivable 12,183 35 -- 12,218
Deferred tax asset 4,905 -- -- 4,905
Refundable income taxes 3,454 -- -- 3,454
Inventories 3,486 -- -- 3,486
Other current assets 5,021 1 (400) B 4,622
-------- ------ ------- --------
Total current assets 46,284 60 (400) 45,944
Building 8,720 8,720
Equipment and leasehold improvements 11,971 59 12,030
Capitalized software costs 4,433 437 904 E 5,774
Other intangible assets 328 E 328
Cost in excess of net assets acquired - net 14,861 A
1,336 B
(13,353) E
(373) D 2,471
Other assets 8,797 (936) B 7,861
-------- ------ ------- --------
$ 80,205 $ 556 $ 2,367 $ 83,128
======== ====== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 9,009 $ 56 $ -- $ 9,065
Accrued liabilities 17,564 41 3,240 A
148 A
342 C 21,335
Current portion of long-term obligations 17 -- 17
Loan payable to bank 2,000 -- 2,000
Accrued acquisition, restructuring and
other charges 3,380 86 3,466
-------- ------ ------- --------
Total current liabilities 31,970 183 3,730 35,883
6% Convertible notes, due March 31, 2001 25,000 -- 25,000
Long-term obligations, less current portion 114 -- 114
-------- ------ ------- --------
57,084 183 3,730 60,997
Stockholders' equity:
Preferred stock (authorized: 2,000 shares) --
Common stock (authorized: 50,000 shares) 35 1 A 36
Treasury stock (559) -- (559)
Additional paid-in capital 49,713 1,045 11,130 A
(1,045) D 60,843
Retained earnings (25,484) (672) 672 D
(12,121) E (37,605)
Foreign currency translation adjustment (584) -- (584)
-------- ------ ------- --------
Total stockholders' equity 23,121 373 (1,363) 22,131
-------- ------ ------- --------
Total liabilities and stockholders' equity $ 80,205 $ 556 2,367 $ 83,128
======== ====== ======= ========
</TABLE>
See notes to unaudited pro forma condensed combining balance sheet
37
<PAGE> 38
QUARTERDECK CORPORATION
UNAUDITED PRO FORMA CONDENSED
COMBINING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
RESTATED
QUARTERDECK VERTISOFT POOLING HISTORICAL
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Net revenues $105,683 $ 7,676 $113,359
Cost of revenues 36,045 2,285 38,330
-------- ------- ----- --------
Gross margin 69,638 5,391 75,029
Operating expenses:
Research and development 15,875 76 15,951
Sales and marketing 48,253 4,243 52,496
General and administrative 20,907 2,396 23,303
Restructuring and acquisition costs 9,130 -- 9,130
-------- ------- ----- --------
Total operating expenses 94,165 6,715 100,880
-------- ------- ----- --------
Operating loss (24,527) (1,324) (25,851)
Other income, net 1,718 44 1,762
-------- ------- ----- --------
Loss before income taxes (22,809) (1,280) (24,089)
Provision (Benefit) for income taxes (3,431) (512) 145 (3,798)
-------- ------- ----- --------
Net income (loss) $(19,378) $ (768) $(145) $(20,291)
======== ======= ===== ========
Net income (loss) per share: $ (0.62) $ (0.58)
======== ========
Shares used to compute net loss
per share: 31,421 3,500 34,921
======== ======= ========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
38
<PAGE> 39
QUARTERDECK CORPORATION
UNAUDITED PRO FORMA CONDENSED
COMBINING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
RESTATED
HISTORICAL LIMBEX PURCHASE PRO FORMA
COMBINED HISTORICAL ADJUSTMENTS COMBINED
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Net revenues $113,359 $ 921 (921) K $113,359
Cost of revenues 38,330 246 226 G 38,802
-------- ------ -------- --------
Gross margin 75,029 675 (1,147) 74,557
Operating expenses:
Research and development 15,951 522 16,473
Sales and marketing 52,496 70 24,150
General and administrative 23,303 530 317 F 24,150
Restructuring and acquisition costs 9,130 -- 9,130
Acquired research & development -- -- 12,121 J 12,121
-------- ------ -------- --------
Total operating expenses 100,880 1,122 12,438 114,440
-------- ------ -------- --------
Operating loss (25,851) (447) (13,585) (39,883)
Other income, net 1,762 11 (270) H 1,503
-------- ------ -------- --------
Loss before income taxes (24,089) (436) (13,855) (38,380)
Provision (Benefit) for income taxes (3,798) 2 (3,796)
-------- ------ -------- --------
Net loss $(20,291) $ (438) $(13,855) $(34,584)
======== ====== ======== ========
Net loss per share: $ (0.58) $ (0.95)
======== ========
Shares used to compute net loss
per share: 34,921 1,310 36,231
======== ====== ========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
39
<PAGE> 40
QUARTERDECK CORPORATION, VERTISOFT AND LIMBEX
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINING BALANCE SHEETS AND UNAUDITED PRO FORMA CONDENSED
COMBINING STATEMENTS OF OPERATIONS
1. The unaudited pro forma condensed combining balance sheet reflects the
financial position of Quarterdeck Corporation together with Vertisoft
Systems, Inc. and Limbex Corporation assuming the acquisitions occurred on
June 30, 1996.
2. The unaudited pro forma condensed combining statements of operations of
Quarterdeck together with Vertisoft Systems, Inc. and Limbex Corporation
were prepared as if the acquisitions occurred as of the beginning of the
period presented and are not necessarily indicative of operating results
which would have been achieved had the acquisition been consummated at the
beginning of such period and should not be construed as representative of
future operations.
3. The pro forma condensed combining financial statements should be read in
conjunction with the 1995 Annual Report on Form 10-K of Quarterdeck, the
current report on Form 8-K filed with the Securities and Exchange
Commission on June 25, 1996 which updated the financial data contained in
the Quarterdeck 1995 Form 10-K giving effect to material acquisitions
which occurred after the date of such report on Form 10-K and the
Quarterly Report on Form 10-Q of Quarterdeck for the period ended June 30,
1996.
On July 18, 1996, Quarterdeck acquired Vertisoft in exchange for 3,500,000
shares of Quarterdeck common stock in a transaction which was accounted
for as an immaterial pooling of interests. Accordingly, all financial
information subsequent to October 1, 1995, has been restated to reflect
the combined operations of Vertisoft and Quarterdeck.
On August 14, 1996, Quarterdeck consummated the acquisition of the
remaining shares of Limbex. Prior to such acquisition, Quarterdeck owned
approximately 20% of the outstanding capital stock of Limbex. Limbex is
the developer of the WebCompass product line. The acquisition of Limbex
was accomplished by way of a merger (the "Merger") of a wholly-owned
subsidiary of the Company with and into Limbex and as a result of the
Merger Limbex became a wholly-owned subsidiary of the Company. In
connection with the Merger, all of the outstanding shares of common stock
of Limbex were converted into 1,309,890 shares of common stock of the
Company (all of which is expected to be issued in the quarter ending
September 30, 1996) and approximately $150,000 (which is expected to be
paid in January of 1997.) In addition, the outstanding shares of preferred
stock of Limbex were converted into the right to receive $3,599,753 from
the Company on August 14, 1997 (the "Preferred Consideration Date"), which
may be paid, at the Company's option, in cash, a number of shares of
common stock of the Company equal to $3,599,753 divided by the average
closing sales price of common stock of the Company for the period of five
trading days ending on the trading day two trading days prior to the
Preferred Consideration Date, or a combination of cash and shares of the
Company's common stock. The Company also assumed vested options to
purchase 102,991 of the shares of the Company's common stock.
4. Adjustments have been made to reflect the exchange of Vertisoft's common
stock as well as the issuance of stock in connection with the purchase of
Limbex.
5. Certain adjustments and reclassifications have been made to the Vertisoft
and Limbex financial statements in the unaudited pro forma condensed
combining financial statements to conform to Quarterdeck presentation and
to revalue the Vertisoft deferred tax asset and to reflect the
revaluation of the acquired assets and liabilities of Limbex. Management
is in the process of reviewing the allocation of the Limbex purchase price
and may modify this preliminary allocation.
Quarterdeck and Vertisoft Pooling adjustments:
(i) To increase the valuation allowance of the deferred tax asset and
to state the asset at its current expected value.
Prior to acquisition Vertisoft did not have any valuation
allowance. Upon acquisition the recognition of the deferred tax
asset became less certain due to Quarterdeck's consolidated tax
filing requirements. Consequently, a valuation allowance has been
recorded to conservatively state the Quarterdeck consolidated
deferred tax asset.
(ii) To reclass Vertisoft's estimated liability for marketing funds
due to distributors to a reduction of receivables consistent with
Quarterdeck accounting policies.
(iii) To properly state the pooled common stock account.
(iv) To reduce the tax benefit consistent with (i.) above.
Quarterdeck and Limbex Purchase adjustments (in thousands):
A. To record the consideration of $14,861 relating to the acquisition
of Limbex as follows: $11,131 for 1,309,890 shares of Quarterdeck
stock issued at closing and the assumption of vested options to
acquire 102,991 additional shares of Quarterdeck common stock; $148
to be paid at a future date; $3,240, net of a discount of $360, due
in August of 1997 which may be paid in cash or shares of stock;
$342 for capitalized costs of acquisition.
B. To reclassify Quarterdeck's prior investment in, and prepaid
royalty advance to Limbex.
C. To accrue related acquisition costs.
D. To eliminate Limbex equity at June 30, 1996.
E. To allocate the purchase price to; In process research &
development (expense) $12,121; Capitalized software costs $904; and
Other intangible assets of $328.
F. To amortize intangible assets on a straight line basis over 2 to 3
years and goodwill on a straight line basis over a period of ten
years.
G. To amortize the capitalized software acquired on a straight line
basis over a period of three years.
H. To record the imputed interest expense associated with the
consideration due in August, 1997.
J. To expense the In process research & development acquired.
K. To eliminate intercompany revenue.
6. The Company will report acquisition and related restructuring costs
amounting to approximately $1,200,000 for financial advisory, legal,
accounting services, personnel severance and benefits, and other related
expenses in connection with the pooling of interests with Vertisoft.
These expenses have not been included in the Pro Forma Statements herein
but will be expensed during the quarter ending September 30, 1996.
7. The following table is a restatement of common shares outstanding and
earnings per share for the fiscal years ended September 30, 1995, 1994 and
1993, giving effect to the issuance of 3,500,000 common shares in
connection with the acquisition of Vertisoft. The table does not include
the results of operations of Vertisoft or of Limbex, nor the shares issued
in the Limbex purchase, as those results are immaterial to Quarterdeck.
In accordance with Pooling of interests accounting the historical
financial statements of Quarterdeck are restated (see Pro forma statements
above) to include Vertisoft as of October 1, 1995. Because the shares
issued in the Vertisoft pooling are material the number of common shares
outstanding as well as earnings (loss) per share are restated to include
such shares for all periods presented.
40
<PAGE> 41
QUARTERDECK CORPORATION AND SUBSIDIARIES
RESTATED EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Fiscal Year Ended September 30,
----------------- -------------------------------
June 30, 1996 1995 1994 1993
------------- ---- ---- ----
<S> <C> <C> <C> <C>
Quarterdeck Historical Net income (loss) $(19,378) $11,252 $(4,625) $10,469
Quarterdeck Historical Shares 31,421 32,999 28,675 29,721
Quarterdeck Historical Earnings -------- ------- ------- -------
per share $ (0.62) $ 0.34 $ (0.16) $ 0.35
======== ======= ======= =======
Restated net income (loss) $ 20,291 $11,252 $(4,625) $10,469
Shares issued in Vertisoft Pooling 3,500 3,500 3,500 3,500
Restated Shares Outstanding 34,921 36,499 32,175 33,221
-------- ------- ------- -------
Restated Net income (loss) per share $ (0.58) $ 0.31 $ (0.14) $ 0.32
======== ======= ======= =======
</TABLE>
41
<PAGE> 42
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.
QUARTERDECK CORPORATION
(REGISTRANT)
Date: September 27, 1996 \s\ King R. Lee
----------------
King R. Lee
Office of the President,
Director
Date: September 27, 1996 \s\ Frank Greico
----------------
Frank Greico
Sr. Vice President and
Chief Financial Officer
42
