<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 21, 2000
LEADINGSIDE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-21860 06-1232140
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
ONE CANAL PARK, CAMBRIDGE, MASSACHUSETTS 02141
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(617) 621-0820
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 21, 2000, LeadingSide, Inc. ("LeadingSide") sold certain of its
assets to Open Text Corporation ("Open Text") for an aggregate purchase price of
$2,700,000 in cash and a $300,000 promissory note, and Open Text assumed
approximately $1,300,000 in liabilities of LeadingSide. The transaction was
consummated pursuant to an Asset Purchase Agreement between LeadingSide and Open
Text, a copy of which is filed as Exhibit 2.1 hereto and is incorporated herein
by reference.
In this transaction, LeadingSide sold Open Text its "BRS", "Net Answer",
"CD Author", "InQuery", "Query Server", "InFilter" and "Publisher" software
products and the related intellectual property, customer contracts and certain
related maintenance receivables as well as the business assets related to
several of its offices. LeadingSide retained certain rights in such software
products in order to continue to provide services to customers of its solutions
business, which LeadingSide retained. Open Text assumed certain liabilities of
LeadingSide, including obligations under existing software maintenance contracts
and certain operating leases. Open Text, in conjunction with the Purchase
Agreement, also agreed to collect certain net receivables. Open Text offered
employment to the LeadingSide employees involved in the transferred business,
and LeadingSide's total head count was reduced from 171 to 135 as a result of
the transaction. The consideration for the sale was determined by negotiation
between LeadingSide and Open Text and was based on the estimated fair value of
the assets transferred and liabilities assumed. Before the transaction, there
had been no material relationship between Open Text and LeadingSide or any of
its affiliates, directors or officers, or any associate of any director or
officer of LeadingSide.
ITEM 7. FINANCIAL STATEMENTS, PRO FORM FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information
The Unaudited Pro Forma Condensed Consolidated Financial Statements
illustrate the effect of the Company's disposition of certain of its assets and
liabilities (the "disposition") to Open Text Corporation on November 21, 2000.
The Unaudited Condensed Consolidated Balance Sheet reflects the financial
position of the Company after giving effect to the sale as if it had occurred at
September 30, 2000. The Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the nine months ended September 30, 2000 and for the year ended
December 31, 1999 give retroactive effect to the disposition as if it had
occurred on January 1, 1999.
Unaudited Pro Forma Condensed Consolidated Financial Statements of
LeadingSide, Inc. as of September 30, 2000 and for the nine months ended
September 30, 2000 and the year ended December 31, 1999, include the following:
(a) Pro Forma Condensed Consolidated Balance Sheet as of September
30, 2000;
(b) Pro Forma Condensed Consolidated Statement of Operations for the
nine months ended September 30, 2000;
(c) Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1999; and
(d) Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
(c) Exhibits
2.1 Asset Purchase Agreement dated November 21, 2000, between LeadingSide
and Open Text. Pursuant to Item 601(b)(2) of Regulation S-K, the
schedules or exhibits referred to in the Purchase Agreement are
omitted. LeadingSide hereby undertakes to furnish supplementally a
copy of any omitted schedule or exhibit to the Commission upon
request.
SIGNATURES
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 hereunto duly authorized.
Date: December 6, 2000 LEADINGSIDE, INC.
By: /s/ Michael Gonnerman
-----------------------
Michael Gonnerman
Vice President and Chief Financial Officer
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EXHIBIT INDEX
Exhibit
No. Description
------- -----------
2.1 Asset Purchase Agreement dated November 21, 2000, between LeadingSide,
Inc. and Open Text Corporation. Pursuant to Item 601(b)(2) of
Regulation S-K, the schedules or exhibits referred to in the Asset
Purchase Agreement are omitted. LeadingSide, Inc. hereby undertakes
to furnish supplementally a copy of any omitted schedule or exhibit to
the Commission upon request.
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LeadingSide, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Software license fees $ 14,829 $(13,677) A $ 1,152
Services 11,905 (6,587) A 5,318
-------- -------- --------
Total revenues 26,734 (20,264) 6,470
-------- -------- --------
Cost of revenues:
Software license fees 3,658 (1,938) A 1,720
Services 9,320 1,533 A,B 10,853
-------- -------- --------
Total cost of revenues 12,978 (405) 12,573
-------- -------- --------
Gross profit 13,756 (19,859) (6,103)
-------- -------- --------
Operating expenses:
Sales and marketing 11,695 (2,210) A 9,485
Product development 7,123 (7,123) A,B ---
General and administrative 6,254 (829) A 5,425
-------- -------- --------
Total operating expenses 25,072 (10,162) 14,910
-------- -------- --------
Loss from operations (11,316) (9,697) (21,013)
Interest income, net 634 --- 634
Gain on Investment in Northern Light 5,056 --- 5,056
Other income, net 543 --- 543
-------- -------- --------
Loss before income taxes (5,083) (9,697) (14,780)
Income tax benefit (153) --- (153)
-------- -------- --------
Net loss $ (4,930) $ (9,697) $(14,627)
======== ======== ========
Net loss per common share -- basic and diluted $ (0.52) $ (1.02) $ (1.54)
======== ======== ========
Weighted average number of common shares
outstanding - basic and diluted 9,516 9,516 9,516
======== ======== ========
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated
financial statements are an integral part of these financial statements.
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LeadingSide, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the nine months ended September 30, 2000
(In thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Software license fees $ 3,818 $ (3,701) A $ 117
Services 9,755 (4,428) A 5,327
-------- -------- --------
Total revenues 13,573 (8,129) 5,444
-------- -------- --------
Cost of revenues:
Software license fees 1,553 (698) A 855
Services 11,086 (3,542) A,B 7,544
-------- -------- --------
Total cost of revenues 12,639 (4,240) 8,399
-------- -------- --------
Gross profit 934 (3,889) (2,955)
-------- -------- --------
Operating expenses:
Sales and marketing 5,402 (1,017) A 4,385
Product development 1,113 (1,113) A,B ---
General and administrative 8,733 (1,375) A 7,358
Restructuring and special items 1,035 --- 1,035
Restructuring and special items - noncash 308 --- 308
-------- -------- --------
Total operating expenses 16,591 (3,505) 13,086
-------- -------- --------
Loss from operations (15,657) (384) (16,041)
Interest expense, net (37) --- (37)
Other expense, net (26) --- (26)
-------- -------- --------
Net loss (15,720) (384) (16,104)
Preferred stock beneficial conversion feature (1,382) --- (1,382)
-------- -------- --------
Net loss applicable to common shareholders $(17,102) $ (384) $(17,486)
======== ======== ========
Net loss per common share -- basic and diluted $ (1.64) $ (0.04) $ (1.68)
======== ======== ========
Weighted average number of common shares
outstanding - basic and diluted 10,438 10,438 10,438
======== ======== ========
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated
financial statements are an integral part of these financial statements.
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LeadingSide, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2000
(in thousands)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,314 $ 2,700 A $ 4,014
Promissory note receivable --- 300 A 300
Accounts receivable, net 4,293 (900) B,C 3,393
Prepaid expenses and other current assets 828 (12) B 816
-------- -------- --------
Total current assets 6,435 2,088 8,523
Property and equipment, net 3,248 (614) B 2,634
Computer software costs, net 442 (179) B 263
Investment in Northern Light 256 --- 256
Goodwill, net 1,615 (1,615) D ---
-------- -------- --------
Total assets $ 11,996 $ (320) $ 11,676
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,884 $ --- $ 2,884
Accrued compensation 897 (92) B 805
Other accrued expenses 1,374 425 E 1,799
Income taxes payable 248 --- 248
Deferred revenue 2,659 (1,561) B 1,098
-------- -------- --------
Total current liabilities 8,062 (1,228) 6,834
-------- -------- --------
Total stockholders' equity
Total stockholders' equity 3,934 908 4,842
-------- -------- --------
Total liabilities and stockholders' equity $ 11,996 $ (320) $ 11,676
======== ======== ========
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated
financial statements are an integral part of these financial statements.
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LeadingSide, Inc.
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements
NOTE 1 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS
A The pro forma adjustment to cash and cash equivalents and promissory note
receivable reflects the gross proceeds of $3,000,000 from the asset sale.
The promissory note, which is non-interest bearing, represents a portion of
the purchase price held back by Open Text as security for any
indemnification obligations of LeadingSide. Any amount not applied to such
obligations will be paid in May 2001 if at least 60% of the LeadingSide
employees who were offered employment by Open Text remained in the
employment of Open Text in February 2001.
B The pro forma adjustments reflect the transfer of assets and liabilities in
accordance with the asset purchase agreement.
C The pro forma adjustment reflects expected collections as set forth in an
agreement for Open Text to collect certain outstanding receivables of
LeadingSide.
D The pro forma adjustment to goodwill reflects the write-off of goodwill due
to the sale of substantially all of the assets purchased from Sovereign
Hill in 1998.
E The pro forma adjustment reflects professional service fees and other
expenses directly related to the transaction.
NOTE 2 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTMENTS
A The pro forma adjustments reflect total revenues, total costs of revenues,
sales and marketing, product development and general and administrative
expense related to the assets sold to Open Text.
B The pro forma adjustment reflects the reclassification of certain product
development expenses to cost of services, representing costs related to
employees who would have been transferred from the development of software
products to the delivery of solutions services.
