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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 25, 1998
SystemSoft Corporation
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(Exact name of Registrant as specified in Charter)
Delaware 0-24418 04-3121799
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(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
One Innovation Drive, Natick, Massachusetts 01760
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508) 651-0088
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(Former Name or Former Address, if Changed Since Last Report)
Total Number of Sequentially Numbered Pages 10.
Exhibit Index Appears on Page 4.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 25, 1998, the Company and its wholly-owned subsidiary, SystemSoft
Taiwan Corporation, entered into a letter of understanding with Great Wide
Technologies Limited ("GWT"), a Taiwan-based corporation, regarding the
Company's agreement to enter into an exclusive (even as to the Company),
irrevocable, worldwide License Agreement with GWT for the Company's BIOS
business. The Company and GWT are currently negotiating the aforesaid License
Agreement, which will be effective as of September 1, 1998. Pursuant to said
License Agreement, GWT will be obligated to pay the Company a 10% royalty on
revenue from the BIOS business up to an aggregate amount of $2.0 million. GWT
has agreed to prepay $674,000 of said royalties upon execution of the License
Agreement. Once GWT has paid the Company $2.0 million in royalties, GWT will
have a fully paid-up license and the Company has agreed to assign all of its
right, title and interest in and to the BIOS products (as described in the
License Agreement) and all related documentation, including copyrights, patents
and trade secrets relating thereto. The Company has also agreed not to compete
with GWT in the worldwide BIOS-related business (as defined in said License
Agreement) for a period of ten years.
The terms of the transaction and the consideration received by the Company
were the result of arms'-length negotiations between the representatives of the
Company and GWT. The terms of the transaction are more fully described in the
License Agreement, a copy of which will be filed under cover of Form 8-K as
soon as practicable. See also the press release dated August 27, 1998, a copy of
which is attached as Exhibit 99.01 to this Current Report on Form 8-K.
ITEM 5. OTHER EVENTS.
On August 26, 1998, the Company's Board of Directors elected Frank A. Sola,
Chief Executive Officer, succeeding Robert F. Angelo who will remain as
Chairman of the Board. Mr. Sola was also elected as a director of the Company.
Effective August 25, 1998, Deborah Besemer resigned as President, Chief
Operating Officer and a Director of the Company. See also the press release
dated August 27, 1998, a copy of which is attached as Exhibit 99.01 to this
Current Report on Form 8-K.
On August 27, 1998, the Company issued a press release regarding, among
other things, second quarter results, a copy of which is attached as Exhibit
99.01 to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information. It is impracticable to provide the pro
forma financial information required pursuant to Article 11 of Regulation S-X at
the time this report is filed. Such required pro forma financial information
will be filed under cover of Form 8-K as soon as practicable but not later than
November 8, 1998.
(c) Exhibits.
Exhibit No. Exhibit
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2.01* License Agreement dated as of September 1, 1998
by and between SystemSoft Corporation, SystemSoft
Taiwan Corporation and Great Wide Technology
Limited.*
99.01 Press Release of the Company dated August 27, 1998.
* To be filed by amendment to this Current Report on Form 8-K.
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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.
SYSTEMSOFT CORPORATION
Dated: September 9, 1998 By: /s/ Paul J. Pedevillano
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Paul J. Pedevillano,
Vice President, Finance and
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No. Description Page No.
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2.01* License Agreement dated as of September 1, 1998 by and
between SystemSoft Corporation, SystemSoft Taiwan
Corporation and Great Wide Technology Limited.*
99.01 Press Release of the Company dated August 27, 1998. __
* To be filed by amendment to this Current Report on Form 8-K.
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EXHIBIT 99.01
FOR RELEASE AT 4:00 PM EST
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SYSTEMSOFT REPORTS SECOND QUARTER RESULTS
ANNOUNCES SIGNIFICANT CHANGES TO OPERATIONAL FOCUS, MANAGEMENT TEAM AND
STRATEGIC OBJECTIVES
NATICK, Mass. - Aug. 27, 1998 - SystemSoft Corp., (NASDAQ: SYSF), a provider of
problem-resolution technologies, today reported results for the fiscal second
quarter ended July 31, 1998.
Revenue for second quarter was $2.6 million, compared to $12.9 million in the
comparable quarter of last year. SystemSoft reported a net loss of $6.3 million
or ($0.23) per basic share before taxes compared to net income of $749,000 or
$0.03 per basic share in the same quarter last year.
For the six months ended July 31, 1998, revenues were $6.6 million compared to
$25.4 million in the same period last year. SystemSoft reported a net loss of
$12.2 million or ($0.46) per basic share before taxes compared to net income of
$2.8 million and net income of $0.11 per basic share for the same six-month
period in the prior year.
"It is unacceptable to management and our Board that our revenue goals were not
met," said Robert F. Angelo, SystemSoft's founder and chairman. "The actions we
are announcing today demonstrate that we have adopted a systematic and decisive
plan designed to return the Company to profitability. This plan includes the
appointment of a new CEO, the sale of our Japanese subsidiary, and the licensing
of our BIOS technologies to a Taiwan-based strategic partner."
SystemSoft said the goal of its refocused business strategy is to strengthen the
company's focus on its support products business and divest or eliminate
non-core businesses for cash and expense relief.
"We will focus more effort on our growth-oriented products, reduce our exposure
to the Asia economies, and reduce the distractions of non-synergistic product
lines," said Angelo.
EXECUTIVE MANAGEMENT CHANGES
In support of its refocused business strategy, SystemSoft completed a
restructuring of its executive team, with the appointment of Frank A. Sola, 54,
who assumed the position of chief executive officer. He was also elected a
director of the Company.
Sola brings more than 25-years experience in corporate support and services to
SystemSoft. He had been CEO of Service Strategies Inc., a company he founded in
1987 to provide support and services consulting to world-class software
companies such as AT&T, GTE Commercial Services and Legent (prior to its
acquisition by Computer Associates). He has served as chairman and CEO of a
variety of privately financed and VC-backed companies including APX Labs and The
Net Collaborative Inc.
Previously, he had been vice president - extended support & consulting division
for Cullinet Software (later acquired by Computer Associates), and founder,
president and chief operating officer of Computer Partners (later acquired by
Computer Sciences Corp). Sola currently serves on the board of Intersolv, Inc.
He earned a B.S. degree in management engineering from Rensselaer Polytechnic
Institute in 1966.
Mr. Sola's primary responsibility will be the development of distribution
channels and strategic alliances in the corporate market. In addition, he will
focus, along with Mr. Angelo, on pursuing other strategic alternatives to
enhance shareholder value.
SystemSoft founder Robert Angelo will remain chairman of the board. Mr. Angelo
will continue to be actively involved in
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the Company's operations and will be responsible for the OEM business, overall
product direction and technology vision.
The Company also announced that Deborah Besemer has resigned as president, chief
operating officer and board member to pursue other interests.
SALE OF JAPANESE SUBSIDIARY
SystemSoft reported that it sold Pacific SystemSoft KK (PSKK), its subsidiary
which provided sales and support services to its customers in Japan, to Toyo
Microsystems Corporation (TMC) of Tokyo, Japan. TMC is a majority-owned
subsidiary of Hauppauge, N.Y.-based Standard Microsystems Corporation (NASDAQ:
SMSC).
Under the terms of a Stock Purchase Agreement, TMC has acquired all issued and
outstanding common stock of PSKK from SystemSoft. Financial terms were not
announced. PSKK's staff of eleven full-time personnel have been retained by
PSKK, which will now operate as a wholly-owned subsidiary of TMC.
Concurrent with the sale, SystemSoft and PSKK also signed a Distribution
Agreement, under which PSKK will remain SystemSoft's exclusive representative
and distributor in Japan, underscoring the commitment of both SystemSoft and TMC
to ensuring continuity of service and support for existing and future customers
of SystemSoft products.
BIOS TECHNOLOGIES LICENSED TO TAIWAN-BASED PARTNER
SystemSoft reported an agreement in principle to enter into an exclusive
worldwide License Agreement with Taiwan-based Great Wide Technologies (GWT) for
the Company's BIOS technologies. In consideration of the License, the Company
expects to receive maximum royalties of $2.0-million.
Approximately 45 SystemSoft employees specifically related to BIOS development
and marketing are expected to be hired by GWT to ensure ongoing and
uninterrupted service and support of existing SystemSoft BIOS customers.
Under the agreement, GWT will also become the Company's exclusive representative
in Taiwan for other SystemSoft products.
A definitive agreement between SystemSoft and GWT is expected to be completed
during the third quarter.
REFOCUSED BUSINESS STRATEGY
In addition to these actions, SystemSoft is currently undertaking an evaluation
of the recoverability of certain technology-based assets as a result of
anticipated lower revenue levels. SystemSoft expects that this evaluation plus
the headcount reductions will result in a charge of approximately $4.5 to $5.5
million in its fiscal third quarter. Other than the headcount-related expenses,
this charge is expected to be non-cash.
On a go-forward basis, SystemSoft anticipates headcount of approximately 75
employees.
"SystemSoft has been redefined," said new CEO Sola. "Our objective now is to
focus all of our marketing, sales and development energies around the Wizard
family of products, including SystemWizard and CardWizard, as the continued hub
of our business."
ABOUT SYSTEMSOFT
SystemSoft is a worldwide provider of support technologies. SystemSoft licensees
include PC manufacturers Acer, Dell, Hewlett- Packard, Micron, Packard Bell NEC
and Toshiba, as well as corporate partners such as Computer Associates and Sykes
Enterprises. Information on SystemSoft products and services is available on the
World Wide Web at http:\\www.systemsoft.com.
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"SAFE HARBOR" STATEMENT
Under the Private Securities Litigation Reform Act of 1995: Any statements that
are not historical facts contained in this release (including statements
regarding future plans and goals for the Company, its various businesses and
subsidiaries, and the size of any charges and headcount estimates) are forward
looking statements that involve risks and uncertainties, including but not
limited to those relating to product demand, pricing, market acceptance, the
effect of economic conditions, intellectual property rights, competitive
products, risks in product and technology development, and other risks
identified in the Company's Securities and Exchange Commission filings.
# # #
For more information contact:
John Ambrose Cynthia DeMonte
SystemSoft DeMonte Associates
508-651-0088 212-473-3700
[email protected] [email protected]
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SYSTEMSOFT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, January 31,
In Thousands 1998 1998
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(Unaudited)
<S> <C> <C>
ASSETS
Cash $ 2,241 $ 10,764
Restricted cash 1,000 --
Accounts receivable, net 3,084 6,328
Prepaid royalties 2,632 2,554
Other current assets 1,879 2,727
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Total current assets 10,836 22,373
Property and equipment, net 6,208 6,807
Purchased software costs and software development costs, net 2,598 3,560
Other assets 315 819
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Total assets $ 19,957 $ 33,559
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and
other current liabilities 6,786 7,506
Deferred revenue 815 629
Other long-term liabilities 580 1,480
Common stock 269 268
Additional paid-in capital 83,453 83,328
Treasury stock (427) (427)
Accumulated other comprehensive income (881) (744)
Accumulated deficit (70,638) (58,481)
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Total stockholders' equity 11,776 23,944
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Total liabilities and stockholders' equity $ 19,957 $ 33,559
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</TABLE>
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SYSTEMSOFT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended July 31, Six Months Ended July 31,
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In Thousands, except per share data 1998 1997 1998 1997
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(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Software license fees $ 2,197 $ 10,429 $ 5,602 $21,285
Engineering services 399 2,476 1,006 4,096
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Total revenues 2,596 12,905 6,608 25,381
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Cost of revenues:
Software license fees 1,285 1,359 2,650 2,331
Engineering services 515 1,472 1,096 2,932
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Total cost of revenues 1,800 2,831 3,746 5,263
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Gross profit 796 10,074 2,862 20,118
Operating expenses:
Research and development 3,145 3,208 6,675 6,343
Sales and marketing 2,174 3,619 5,124 6,525
General and administrative 1,736 2,238 3,182 3,224
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Total operating expenses 7,055 9,065 14,981 16,092
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(Loss) income from operations (6,259) 1,009 (12,119) 4,026
Interest income (expense), net 17 75 (15) 104
Foreign exchange (loss) income (16) (23)
34 2
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(Loss) income before provision for income taxes (6,258) 1,118 (12,157) 4,132
Provision for income taxes -- 369 -- 1,364
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Net (loss) income ($ 6,258) $ 749 ($12,157) $ 2,768
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Per share net (loss) income
Basic ($ 0.23) $ 0.03 ($ 0.46) $ 0.11
Diluted ($ 0.23) $ 0.03 ($ 0.46) $ 0.10
Weighted average shares outstanding
Basic 26,712 26,181 26,696 25,603
Diluted 26,712 27,149 26,696 27,003
</TABLE>
