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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 30, 1998
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Date of Report
(Date of earliest event reported)
INTERLINQ SOFTWARE CORPORATION
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(Exact name of registrant as specified in its charter)
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Washington 0-21402 91-1187540
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
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11980 N.E. 24th Street
Bellevue, Washington 98005
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(Address of principal executive offices, including zip code)
(425) 827-1112
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(Registrant's telephone number, including area code)
11255 Kirkland Way
Kirkland, Washington 98033
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(Former Address, if changed since last report)
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This Current Report on Form 8-K/A No. 2 amends and supersedes, to the
extent set forth herein, subsection (b) and subsection (c) of "Item 7. Financial
Statements, Pro Forma Financial Information and Exhibits" of the Registrant's
Current Report on Form 8-K/A, as filed on September 14, 1998. The Registrant has
restated certain of its historical fiscal year end June 30, 1998, audited
financial statements to reflect a change in the method used to value in-process
research and development that was recorded and written off in connection with
the Registrant's acquisition of Logical Software Solutions Corporation on June
30, 1998. The Registrant has also restated the related tax impact of said
acquisition.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As previously reported under Item 2 in INTERLINQ Software Corporation's
(the "Company") Current Report on Form 8-K dated June 30, 1998, the Company
acquired all of the right, title and interest in and to substantially all of the
assets and business of Logical Software Solutions Corporation, a Maryland
corporation ("LSSC"), an enterprise application integration developer and
service provider, pursuant to an Asset Purchase Agreement, dated June 30, 1998,
by and among the Company, LSSC and certain shareholders of LSSC.
Included under Item 7 hereof are the historical financial statements of
LSSC, together with certain pro forma information of the Company, as adjusted to
give effect to the LSSC acquisition.
ITEM 7. FINANCIAL STATEMENTS, RESTATED PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Filed as Exhibit 99.1 are the audited historical financial statements,
for the periods indicated, of LSSC.
(b) RESTATED PRO FORMA FINANCIAL INFORMATION
Filed as Exhibit 99.2 is certain restated unaudited pro forma financial
information regarding the Company, as adjusted to give effect to the LSSC
acquisition.
(c) EXHIBITS
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Exhibit Number Description
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23.1 Consent of KPMG LLP - Independent Auditors
(previously filed with Form 8-K/A on
September 14, 1998).
99.1 Financial Statements, as of December 31, 1997,
(with independent auditors' report thereon), for
Logical Software Solutions Corporation (previously
filed with Form 8-K/A on September 14, 1998).
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99.2 Restated unaudited pro forma condensed statement
of operations and related footnotes for INTERLINQ
Software Corporation.
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SIGNATURE
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 hereunto duly authorized.
INTERLINQ SOFTWARE CORPORATION
Dated: March 9, 1999
By /s/ STEPHEN A. YOUNT
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Stephen A. Yount
Executive Vice President,
Chief Financial Officer and
Secretary
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INDEX TO EXHIBITS
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Exhibit
Number Description
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23.1 Consent of KPMG LLP - Independent Auditors (previously filed
with Form 8-K/A on September 14, 1998).
99.1 Financial Statements, as of December 31, 1997, (with
independent auditors' report thereon), for Logical
Software Solutions Corporation (previously filed with
Form 8-K/A on September 14, 1998).
99.2 Restated unaudited pro forma condensed statement of operations
and related footnotes.
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EXHIBIT 99.2
Exhibit 99.2 Restated Pro Forma Financial Information
On June 30, 1998, INTERLINQ Software Corporation completed the acquisition of
Logical Software Solutions Corporation. Under the terms of the acquisition,
substantially all of the assets and business of LSSC were acquired for
$3,600,000 in cash and 233,334 unregistered shares of common stock of the
Company, valued at approximately $1,400,000. The stock is subject to vesting
over six years (with certain accelerated vesting provisions). The Company
incurred direct acquisition costs of approximately $400,000 related to this
transaction. The acquisition was accounted for using the purchase method of
accounting.
The following Unaudited Pro Forma Condensed Consolidated Statement of
Operations ("Pro Forma Statement of Operations") for the year ended June 30,
1998, gives effect to the acquisition of LSSC as if it had occurred on
July 1, 1997. The Pro Forma Statement of Operations is based on historical
results of operations of INTERLINQ and LSSC for the year ended June 30, 1998.
LSSC's fiscal year ended on December 31, 1997, and as such the information
presented has been conformed to the June 30, 1998, fiscal year end of the
Company. The Pro Forma Statement of Operations and the accompanying notes
("Pro Forma Financial Information") should be read in conjunction with and
are qualified by the historical financial statements and notes thereto of
INTERLINQ.
Subsequent to the filing with the Securities and Exchange Commission of its
Annual Report on Form 10-K for the year ended June 30, 1998, and its Current
Report on Form 8-K/A dated June 30, 1998, (as filed previously on September
14, 1998) the Company's management, based on discussions with the Staff of
the Commission, determined that issues existed regarding (a) the Company's
accounting for its acquisition of Logical Software Solutions Corporation
("LSS") and specifically the charge for in-process research and development
that the Company recorded on the date of acquisition, and (b) the Company's
accounting for the valuation allowance placed on its deferred tax assets.
The intangible assets of LSS, included in-process technology, among other
assets, which was related to research and development that had not reached
technological feasibility and for which there was no alternative future use.
Pursuant to applicable accounting pronouncements, the amount of the purchase
price allocated to this technology was expensed. In previously issued
financial statements, the Company recorded a write-off for in-process
research and development of $3,615,304 for the fiscal year ended June 30,
1998. After discussions with the Staff of the Commission, the Company has
reduced the amount of the write-off to $1,349,616. This resulted in a
corresponding increase to goodwill, which is being amortized over its useful
life of four years on a straight-line basis. As a result of the significant
decrease in the amount of acquired in-process research and development, there
was also a significant decrease in the corresponding deferred tax asset.
Given this decrease, the Company has determined that a valuation allowance
is no longer necessary.
The Pro Forma Financial Information is intended for information purposes only
and is not necessarily indicative of the combined results that would have
occurred had the acquisition taken place on July 1, 1997, nor is it
necessarily indicative of results that may occur in the future.
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EXHIBIT 99.2
INTERLINQ SOFTWARE CORPORATION
RESTATED UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1998
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PRO FORMA
INTERLINQ LSSC ADJUSTMENTS PRO FORMA
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Total net revenues $ 18,346,393 $ 1,131,224 $ -- $ 19,477,617
Total cost of revenues 5,082,557 941,665 (1,532)(a) 6,022,690
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Gross margin 13,263,836 189,559 1,532 13,454,927
Operating expenses:
Product development 1,608,840 103,085 -- 1,711,925
Sales and marketing 5,674,475 212,815 -- 5,887,290
General and administrative 3,754,222 375,098 (30,000)(b) 4,099,320
Purchase of in-process R&D 1,349,616 (1,349,616)(c) --
Amortization of goodwill
and other intangible assets 847,590 (d) 847,590
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Total operating expenses 12,387,153 690,998 (532,026) 12,546,125
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Operating income (loss) 876,683 (501,439) 533,558 908,802
Net interest and other income
(expense) 744,865 (903) -- 743,962
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Income (loss) before
income taxes 1,621,548 (502,342) 533,558 1,652,764
Income tax expense 616,066 -- (4,543)(e) 611,523
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Net income (loss) $ 1,005,482 $ (502,342) $ 538,101 $ 1,041,241
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Net income per sahre -
basic $ .19 $ .19
Net income per share -
diluted $ .19 $ .19
Shares used to calculate basic
net income per share 5,213,000 5,446,000(f)
Shares used to calculate diluted
net income per share 5,376,000 5,609,000(f)
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EXHIBIT 99.2
INTERLINQ SOFTWARE CORPORATION
NOTES TO THE RESTATED UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(a) The pro forma adjustment represents $231,325 of amortization of capitalized
software acquired, less $232,857 of amortization included in the historical
financial statements of LSSC. Total capitalized software acquired was
$777,110 which has an estimated useful life of four years.
(b) The pro forma adjustment represents the elimination of $30,000 of direct
transaction related costs incurred by LSSC.
(c) The pro forma adjustment represents the purchase of in-process R&D. This
item has been excluded from the pro forma results of operations as it is
not expected to have a continuing impact on INTERLINQ's results of
operations. Purchase of in-process R&D represents a one-time charge
incurred by the Company upon acquisition of LSSC. The Company believes
that the technology obtained in this acquisition requires significant
enhancements so that it may be successfully integrated with the existing
MortgageWare products and so that it may successfully compete in the
Enterprise Application Integration market, and has no future alternative
uses. As such, $1,349,616 of the purchase price was recorded as
in-process R&D and expensed on the date of acquisition.
(d) The pro forma adjustment represents an addition to operating expenses of
$847,590 for the amortization of goodwill and other intangible assets.
Goodwill and other intangible assets acquired totaled $3,198,021 and are
being amortized over their estimated useful lives of three to four years.
(e) The pro forma adjustment reflects the tax benefit of losses incurred by
LSSC offset by additional tax expense associated with the pro forma
adjustments for the period presented.
(f) Pro forma basic and diluted net income per share is computed by dividing
the pro forma net income by the pro forma weighted average number of
common shares outstanding and the weighted average common and common
equivalent shares outstanding, respectively.
The following table reconciles shares used to compute historical basic and
diluted net loss per share to shares used to compute pro forma basic and
diluted net income per share (rounded):
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Shares used to compute historical basic
and diluted net loss per share 5,213,000
Impact of shares issued in acquisition -
assumed outstanding from July 1, 1997 233,000
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Shares used to compute pro forma basic
net income per share 5,446,000
Impact of INTERLINQ common equivalent
shares outstanding 163,000
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Shares used to compute pro forma diluted
net income per share 5,609,000
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