SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 16, 1995
The Software Developer's Company, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
1-10139 04-2911320
(Commission file number) (I.R.S. Employer
Identification No.)
90 Industrial Park Road, Hingham, Massachusetts 02043
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 740-0101
------------------------------------------------------
(Former name or address, if changed since last report)
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
November 16, 1995 as set forth in the pages attached hereto:
(1) Item 7. Financial Statements and Exhibits
(2) Exhibit Index
(3) Filing of Additional Exhibits
The Software Developer's Company, Inc. (the "Company") hereby amends
its Current Report on Form 8-K dated November 16, 1995 (the "Current Report") by
deleting Item 7(a), Item 7(b) and Item 7(c) of the Current Report and replacing
it with the following new Item 7(a), 7(b) and 7(c) so that as so amended said
Item 7(a), 7(b) and 7(c) shall read in its entirety as follows:
(1) Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The financial information of Internet Security Corporation is
attached hereto as Exhibit 7.06.
(b) Pro Forma Financial Information.
The unaudited pro forma combined financial information of the
Company and Internet Security Corporation is attached hereto
as Exhibit 7.07.
(c) Exhibits.
7.01 Agreement and Plan of Merger among The Software
Developer's Company, Inc., ISC Acquisition Corp.,
Internet Security Corporation and Richard Kosinski
dated as of October 17, 1995.
7.02 Amendment No. 1 to the Agreement and Plan of Merger
among The Software Developer's Company, Inc., ISC
Acquisition Corp., Internet Security Corporation and
Richard Kosinski dated as of November 16, 1995.
7.03 Employment and Noncompetition Agreement by and among
Richard Kosinski and The Software Developer's
Company, Inc. and Internet Security Corporation.
7.04 Holdback Agreement by and among The Software
Developer's Company, Inc. and Richard Kosinski dated
November 16, 1995.
<PAGE>
7.05 Consent of Arthur Andersen LLP
7.06 The report of Arthur Andersen LLP, independent public
accountants, on the audited Financial Statements of
Internet Security Corporation:
Balance Sheet as of December 31, 1994;
Statement of Operations from period of inception
(June 15, 1994) to December 31, 1994;
Statement of Stockholder's Equity for the period
of inception (June 15, 1994) to December 31,
1994;
Statement of Cash Flows for the period from
inception (June 15, 1994) to December 31, 1994;
Notes to Financial Statements for the year ending
December 31, 1994.
7.07 The following unaudited pro form combined Financial
Statements of the Company and Internet Security
Corporation:
Pro forma Consolidated Statement of Earnings for
the fiscal year ended March 31, 1995;
Pro forma Consolidated Statement of Earnings for
the six months ending September 30, 1995;
Pro forma Consolidated Balance Sheet as of
September 30, 1995.
<PAGE>
(2) Exhibit Index.
The Company hereby amends its Current Report by adding the following
information to the Exhibit Index in the Current Report.
<TABLE>
<CAPTION>
Exhibit Number Exhibit Page Number
<S> <C> <C>
7.05 Consent of Arthur Andersen LLP
7.06 The report of Arthur Andersen LLP, independent public
accountants, on the audited Financial Statements of Internet
Security Corporation:
Balance Sheet as of December 31, 1994;
Statement of Operations from period of inception (June 15, 1994)
to December 31, 1994;
Statement of Stockholder's Equity for the period of inception
(June 15, 1994) to December 31, 1994;
Statement of Cash Flows for the period from inception (June 15,
1994) to December 31, 1994;
Notes to Financial Statements for the year ending
December 31, 1994.
7.07 The following unaudited pro form combined Financial Statements of the
Company and Internet Security Corporation:
Pro forma Consolidated Statement of Earnings for the fiscal year
ended March 31, 1995;
Pro forma Consolidated Statement of Earnings for the six months
ending September 30, 1995;
Pro forma Consolidated Balance Sheet as of September
30, 1995.
</TABLE>
<PAGE>
(3) Filing of Additional Exhibits.
The Company hereby amends its Current Report by filing the additional
exhibits attached hereto and as listed in (2) above.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SOFTWARE DEVELOPER'S COMPANY, INC.
By: /s/Barry N. Bycoff
Barry N. Bycoff
President, Chief Executive Officer and
Director
Dated: January 29, 1996
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit Page Number
<S> <C> <C>
7.05 Consent of Arthur Andersen LLP
7.06 The report of Arthur Andersen LLP, independent public
accountants, on the audited Financial Statements of Internet
Security Corporation:
Balance Sheet as of December 31, 1994;
Statement of Operations from period of inception (June 15, 1994)
to December 31, 1994;
Statement of Stockholder's Equity for the period of inception
(June 15, 1994) to December 31, 1994;
Statement of Cash Flows for the period from inception (June 15,
1994) to December 31, 1994;
Notes to Financial Statements for the year ending
December 31, 1994.
7.07 The following unaudited pro form combined Financial Statements of the
Company and Internet Security Corporation:
Pro forma Consolidated Statement of Earnings for the fiscal year
ended March 31, 1995;
Pro forma Consolidated Statement of Earnings for the six months
ending September 30, 1995;
Pro forma Consolidated Balance Sheet as of September
30, 1995.
</TABLE>
ARTHUR ANDERSEN LLP
Exhibit 7.05
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K/A Amendment No. 1 to Form 8-K Current Report
(Date of Report: November 16, 1995), into the Company's previously filed Form
8-K Current Report (Date of Report: November 16, 1995).
By: /s/ Arthur Andersen LLP
Boston, Massachusetts
January 26, 1996
INTERNET SECURITY CORPORATION
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Internet Security Corporation:
We have audited the accompanying balance sheet of Internet Security Corporation
(a Massachusetts corporation) as of December 31, 1994, and the related
statements of operations, stockholder's equity and cash flows for the period
from inception (June 15, 1994) to December 31, 1994. 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 generally 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 Internet Security Corporation
as of December 31, 1994, and the results of its operations and its cash flows
for the period from inception (June 15, 1994) to December 31, 1994, in
conformity with generally accepted accounting principles.
By: /s/ Arthur Andersen LLP
--------------------------
Boston, Massachusetts
December 6, 1995
<PAGE>
INTERNET SECURITY CORPORATION
BALANCE SHEET--DECEMBER 31, 1994
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Accounts receivable $ 621,055
Prepaid expenses and other current assets 49,065
------------
Total current assets 670,120
-------
FIXED ASSETS, AT COST:
Computer equipment 8,636
Less--Accumulated depreciation and amortization (3,342)
------
5,294
$ 675,414
============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Cash overdraft $ 10,507
Accounts payable 321,870
Accrued expenses 58,657
Deferred revenue 71,944
Advance from officer/stockholder 15,592
------------
Total current liabilities 478,570
------------
COMMITMENTS (Note 5)
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value-
Authorized--200,000 shares
Issued and outstanding--2,500 shares 25
Additional paid-in capital 2,475
Retained earnings 194,344
------------
Total stockholder's equity 196,844
------------
$ 675,414
============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
INTERNET SECURITY CORPORATION
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 15, 1994) TO DECEMBER 31, 1994
<TABLE>
<S> <C>
REVENUES:
Software license fees $ 794,206
-----------
EXPENSES:
Cost of software license fees 463,888
Selling, general and administrative 135,974
-----------
Total expenses 599,862
-----------
Net income $ 194,344
===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
INTERNET SECURITY CORPORATION
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 15, 1994) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
Common Stock Additional Total
Number $.01 Paid-in Retained Stockholder's
of Shares Par Value Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK 2,500 $ 25 $ 2,475 $ - $ 2,500
Net income - - - 194,344 194,344
---------- ------ --------- ----------- -----------
BALANCE, DECEMBER 31, 1994 2,500 $ 25 $ 2,475 $ 194,344 $ 196,844
========== ====== ========= =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
INTERNET SECURITY CORPORATION
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 15, 1994) TO DECEMBER 31, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 194,344
Adjustments to reconcile net income to net cash used for operating activities-
Depreciation and amortization 3,342
Changes in assets and liabilities-
Accounts receivable (621,055)
Prepaid expenses and other current assets (49,065)
Accounts payable 321,870
Accrued expenses 58,657
Deferred revenue 71,944
---------------
Net cash used for operating activities (19,963)
---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (8,636)
---------------
Net cash used for investing activities (8,636)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,500
Proceeds from advance from officer/stockholder 15,592
---------------
Net cash provided by financing activities 18,092
---------------
NET DECREASE IN CASH (10,507)
CASH, BEGINNING OF PERIOD -
---------------
CASH, END OF PERIOD $ (10,507)
===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
INTERNET SECURITY CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
(1) ORGANIZATION AND OPERATIONS
Internet Security Corporation (the Company) was incorporated in the
Commonwealth of Massachusetts and began operations on June 15, 1994. The
Company was formed to market and distribute certain software products and
services under a distribution and reseller agreement with Check Point
Software Technologies Ltd. (Check Point), an Israel-based software
company.
Since inception, the Company has devoted substantially all of its efforts
toward product marketing and selling. On November 16, 1995, the Company
was acquired by Software Developer's Company, Inc. (SDC). Under the
merger agreement, the stockholder of the Company agreed to exchange all
of the issued and outstanding stock of the Company in exchange for
465,838 shares of SDC stock.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Revenue Recognition
The Company recognizes revenue in accordance with the provisions
of Statement of Position (SOP) No. 91-1, Software Revenue
Recognition. The Company generates revenue from licensing the
rights to use software products developed by Check Point to end
users and resellers. The Company also generates revenues from
consulting and training services performed for license customers
and from support and software update rights (maintenance).
Revenues from perpetual software license agreements are recognized
as revenue upon delivery of the software if there are no
significant postdelivery obligations.
Revenues for maintenance are recognized ratably over the term of
the support period. If maintenance is included in a license
agreement, such amounts are unbundled from the license fee at
their fair market value based on the value established by
independent sale of such maintenance to customers. Consulting
revenues are primarily related to implementation services
performed under separate service arrangements related to the
installation of the Company's software products. Such services do
not include customization or modification of the underlying
software code. If included in a license agreement, such services
are unbundled at their fair market value based on the value
established by the independent sale of such services to customers.
Revenues from consulting and training services are recognized as
the services are performed. All maintenance and service revenues
were deferred at December 31, 1994. Cost of software license fees
consist of media and tapes on which products are delivered and
royalties due to Check Point.
<PAGE>
INTERNET SECURITY CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Depreciation
The Company provides for depreciation of its computer equipment
over 3 years using the straight-line method.
(c) Income Taxes
The Company has elected for federal and Massachusetts state income
tax purposes to be treated as an S corporation. Under this
election, the taxable income or loss of the Company will be
reported by the stockholder of the Company on his individual
income tax return. Accordingly, the accompanying statement of
operations does not include a provision for federal or
Massachusetts state income taxes.
(d) Advance from Officer/Stockholder
In 1994, an officer/stockholder advanced the Company approximately
$15,600. Subsequent to year-end, the advance was repaid.
(3) STOCK
Common Stock
In 1994, the Company sold 2,500 shares of common stock to the president
of the Company at $1.00 per share.
(4) RESELLER AGREEMENT
In 1994, the president of the Company entered into a reseller agreement
with Check Point. The president of the Company has the rights to sell
Check Point's product, Fire Wall, in the United States. Under the terms
of the agreement, the Company must meet certain sales goals, as defined.
In connection with the merger with SDC, the president of the Company
assigned his rights under the reseller agreement to ISC.
<PAGE>
INTERNET SECURITY CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
(Continued)
(5) COMMITMENTS
Facilities
The Company conducts its operations in a 956-square foot facility and is
obligated to pay monthly rent through May 1996, subject to an early
termination clause. Rental expense charged to operations in the period
ended December 31, 1994 was approximately $6,400.
The minimum future rental commitments under this operating lease
agreement are as follows:
Year Ended December 31,
1995 $ 15,300
1996 5,100
---------
$ 20,400
=========
THE SOFTWARE DEVELOPER'S COMPANY, INC.
PROFORMA CONSOLIDATED STATEMENT OF EARNINGS
RESTATED FOR THE ACQUISTION OF THE INTERNET SECURITY CORPORATION
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SOFTWARE DEVELOPERS INTERNET SECURITY CORP.
FISCAL YEAR ENDED FOR THE NINE MONTHS
MARCH 31, 1995 ENDING MARCH 31, 1995 TOTAL
<S> <C> <C> <C>
Net Revenue:
Product Sales $ 34,964,445 $ 1,151,746 $ 36,116,191
Marketing Services 4,733,290 - 4,733,290
-------------------- --------------------- -------------
39,697,735 1,151,746 40,849,481
Costs and Expenses:
Cost of Product Sold 28,511,277 643,296 29,154,573
Cost of Marketing Services 3,022,666 - 3,022,666
Selling, general & administrative 7,842,864 306,101 8,148,965
-------------------- --------------------- -------------
39,376,807 949,397 40,326,204
Net Income (Loss) before interest
and taxes 320,928 202,349 523,277
Interest Expense - Third Party 181,251 - 181,251
Interesy Expense - Related Party 36,000 - 36,000
Other 29,324 - 29,324
Provision for Income Taxes - 3,420 3,420
-------------------- --------------------- -------------
Net Income $ 74,353 $ 198,929 $ 273,282
==================== ===================== =============
</TABLE>
<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
RESTATED FOR THE ACQUISTION OF THE INTERNET SECURITY CORPORATION
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
SOFTWARE DEVELOPERS INTERNET SECURITY CORP.
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 TOTAL
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 981,233 $ 560,447 $ 1,541,680
Accounts Receivable Trade - Gross 5,538,280 429,907 5,968,187
Allowance for Doubtful Accounts (393,607) - (393,607)
Accounts Receivable Product - Net 22,147 - 22,147
Inventory 1,697,293 - 1,697,293
Other Current Assets 347,744 112,871 460,615
---------------------- ---------------------- --------------
TOTAL CURRENT ASSETS 8,193,090 1,103,225 9,296,315
Equipment and Leasehold Improvements, net 448,810 51,366 500,176
Intangible Assets, Net, Including Goodwill of -
$682,139 900,764 - 900,764
Other Assets 73,476 2,158 75,634
---------------------- ---------------------- ----------------
$ 9,616,140 $ 1,156,749 $ 10,772,889
====================== ====================== ================
</TABLE>
<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
RESTATE FOR THE ACQUISTION OF THE INTERNET SECURITY CORPORATION
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
SOFTWARE DEVELOPERS INTERNET SECURITY CORP.
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 TOTAL
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts Payable - Trade 4,838,792 478,895 5,317,687
Line of Credit 1,423,470 - 1,423,470
Other Accrued Expenses 657,106 221,677 878,783
Accrued Payroll 199,902 90,446 290,348
Customer Advances 172,799 - 172,799
Capitalized Lease Obligiations 7,880 - 7,880
------------------------- ------------------------- --------------------
TOTAL CURRENT LIABILITIES 7,299,949 791,018 8,090,967
LONG TERM NOTES PAYABLE 300,000 - 300,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value authorized
5,000,000 shares:
Series C, voting, non-cumulative 760,968
shares issued and outstanding. 7,610 - 7,610
Common Stock, voting $.01 par value for
both companies.
SDC, 25,000,000 authorized, 7,469,599 issued
and 7,444,498 outstanding at 9/30/95 74,697 74,697
ISC, 200,000 shares authorized, issued and
outstanding - 2,500 shares 25 25
Additional paid-in capital 9,952,185 365,706 10,317,891
Cumulative translation adjustment 31,068 - 31,068
Cumulative deficit (7,965,712) - (7,965,712)
------------------------- ------------------------- --------------------
2,099,848 365,731 2,465,579
Less treasury stock, at cost
25,101 shares (83,657) - (83,657)
------------------------- ------------------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 2,016,191 365,731 2,381,922
------------------------- ------------------------- --------------------
$ 9,616,140 $ 1,156,749 $ 10,772,889
========================= ========================= ====================
</TABLE>
<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
PROFORMA CONSOLIDATED STATEMENT OF EARNINGS
RESTATED FOR THE ACQUISTION OF THE INTERNET SECURITY CORPORATION
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SOFTWARE DEVELOPERS INTERNET SECURITY CORP.
FOR THE SIX MONTHS ENDING FOR THE SIX MONTHS ENDING
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 TOTAL
<S> <C> <C> <C>
Net Revenue:
Product Sales $ 23,911,602 $ 1,265,528 $ 25,177,130
Marketing Services 2,655,583 - 2,655,583
----------------------- ------------------------ -----------------------
26,567,185 1,265,528 27,832,713
Costs and Expenses:
Cost of Product Sold 20,002,253 738,374 20,740,627
Cost of Marketing Services 1,577,346 - 1,577,346
Selling, general & administrative 4,729,976 371,502 5,101,478
----------------------- ------------------------ -----------------------
26,309,575 1,109,876 27,419,451
Net Income (Loss) before interest
and taxes 257,610 155,652 413,262
Interest Expense - Third Party 63,555 (6,729) 56,826
Interesy Expense - Related Party 18,000 - 18,000
Other - - -
Provision for Income Taxes - 62,261 62,261
----------------------- ------------------------ -----------------------
Net Income $ 176,055 $ 100,120 $ 276,175
======================== ======================== =======================
</TABLE>
