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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): AUGUST 27, 1998
NETMANAGE, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 0-15067 77-0252226
(State of Incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
10725 NORTH DE ANZA BOULEVARD
CUPERTINO, CALIFORNIA 95014
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (408) 973-7171
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NetManage, Inc., a Delaware corporation ("NetManage"), hereby amends Item
1, "Acquisition or Disposition of Assets," and "Item 7, "Financial Statements,
Pro Forma Financial Information and Exhibits," of the Company's Report on Form
8-K dated August 27, 1998 in full to read as follows:
ITEM 1. ACQUISITION OR DISPOSITION OF ASSETS
On August 27, 1998, the Registrant, NetManage, Inc., a Delaware corporation
("NetManage" or the "Company"), acquired FTP Software, Inc., a Massachusetts
corporation ("FTP"), through the merger of Amanda Acquisition Corp., a
Massachusetts corporation and a wholly-owned subsidiary of NetManage ("Merger
Sub"), with and into FTP (the "Merger"), which survived the Merger as a
wholly-owned subsidiary of NetManage, pursuant to the Agreement and Plan of
Reorganization dated as of June 15, 1998, as amended as of June 30 and July 14,
1998 (the "Reorganization Agreement"), among FTP, NetManage and Merger Sub.
Pursuant to the Merger, each outstanding share of the Common Stock, par
value $0.01 per share, of FTP ("FTP Common Stock") and each associated right
granted under the Rights Agreement dated as of December 1, 1995 between FTP and
State Street Bank and Trust Company, as Rights Agent, as amended as of November
7, 1996, February 27, 1998 and June 15, 1998, was converted into the right to
receive 0.72767 of a share of the Common Stock, par value $0.01 per share, of
NetManage ("NetManage Common Stock"). As a result, the 34,035,463 shares of FTP
Common Stock outstanding immediately prior to the Merger were converted into
approximately 24,766,440 registered shares of NetManage Common Stock. In
addition, options to acquire approximately 5,587,528 shares of FTP Common Stock
outstanding under FTP's stock option plans for its employees and its
non-employee directors were assumed by NetManage and converted into options to
purchase approximately 4,065,351 shares of NetManage Common Stock. A
Registration Statement on Form S-8 with respect to the shares of NetManage
Common Stock underlying such options was filed by the Company on August 31,
1998.
In addition, immediately following the Merger, the Company began to effect
a reorganization plan for the combined company. In connection with this
reorganization, the Company incurred a one time pre-tax charge of approximately
$7.0 million in the third quarter of 1998, relating primarily to a reduction in
NetManage's worldwide workforce and the closing of certain NetManage facilities.
The reorganization plan is expected to be completed by the end of 1998 and to
result in a reduction in the combined company's worldwide workforce involving
approximately 200 employees in total by the end of 1998.
As described in the accompanying pro forma financial information, the
aggregate purchase price for the Merger of approximately $78.3 million consists
of NetManage Common Stock valued at $74.0 million, options assumed valued at
approximately $1.1 million, and direct acquisition costs of approximately $3.2
million. The Company has allocated the purchase price based upon the estimated
fair value of assets acquired and liabilities assumed. Liabilities assumed
includes approximately $9.7 million of costs relating to a reduction in FTP's
worldwide workforce and the consolidation of certain FTP worldwide sales and
development facilities. Based upon a preliminary allocation of the purchase
price, the Company has recorded approximately $27.8 million of acquired
intangible assets. The estimated valuation of acquired intangible assets and
the estimated useful life of acquired intangible assets are subject to
adjustment upon the final allocation of the purchase price. The Company expects
that a portion of the purchase price will be allocated to in-process research
and development and charged to expense in the three-month period ended September
30, 1998 (which charge currently cannot be estimated), which will result in a
corresponding reduction in the amount of acquired intangible assets recorded in
connection with the acquisition. The foregoing statements, in particular those
regarding allocation of the purchase price, the fair value of the assets
acquired and liabilities assumed, the amount of excess purchase price to be
allocated to in-process research and development, the amount of the reductions
in the amount of acquired intangible assets, if any, resulting from the
allocation of excess purchase price to in-process research and development, and
the estimated useful life of the remaining acquired intangible assets and
resulting periodic amortization expense, are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are subject risks and uncertainties. Actual results may
differ materially due to a number of factors, including, without limitation, the
results of an independent appraisal of the assets acquired and the estimated
useful life of those assets.
The summary of the provisions of the Reorganization Agreement set forth
above is qualified in its entirety by reference to the Reorganization Agreement,
which is incorporated herein by reference to Annex A to the Registration
Statement on Form S-4 of NetManage filed with the Securities and Commission (the
"Commission") on July 15, 1998. Certain statements contained above and are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve risks and
uncertainties, including risks associated with the integration of the operations
of NetManage and FTP, including the effect of the reorganization on the combined
company's business, operations and financial condition and performance and
NetManage's ability to retain and attract qualified employees.
2
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS
The consolidated financial statements of FTP Software, Inc. for the six
months ended June 30, 1998 and the years ended December 31, 1997, 1996 and 1995
are filed as an exhibit hereto and incorporated herein by reference.
(b) PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined balance sheet of NetManage, Inc.
and FTP Software, Inc. at June 30, 1998 and the related unaudited pro forma
condensed combined statements of operations for the six months ended June 30,
1998 and year ended December 31, 1997 are filed as an exhibit hereto and
incorporated herein by reference.
(c) EXHIBITS
3 Form of Certificate of Amendment of Certificate of Incorporation of
NetManage (1)
10 Composite Agreement and Plan of Reorganization dated as of June 15,
1998, as amended as of June 30 and July 14, 1998, among FTP Software,
Inc., NetManage, Inc. and Amanda Acquisition Corp. (2)
23 Consent of PricewaterhouseCoopers LLP.
99.1 Financial statements of FTP Software, Inc.(3)
99.2 Pro forma financial statements of NetManage, Inc.
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(1) Incorporated by reference to Exhibit 3.2 to NetManage's Registration
Statement on Form S-4, Registration No. 333-59101, filed with the
Securities and Exchange Commission on July 15, 1998 (the "Form S-4").
(2) Incorporated by reference to Annex A to the Form S-4.
(3) The financial statements of FTP Software, Inc. for the six months ended
June 30, 1998 are included in, and are incorporated by reference to, FTP
Software, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June
30, 1998. The financial statements of FTP Software, Inc. for the years
ended December 31, 1997, 1996 and 1995 are included in, and are
incorporated by reference to, the Form S-4.
3
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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 hereunto duly authorized.
NETMANAGE, INC.
Date: October 29, 1998 By: /s/ Gary R. Anderson
---------------------------------------
Gary R. Anderson,
Chief Financial Officer and Senior Vice
President, Finance
4
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EXHIBIT INDEX
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EXHIBIT NO. TITLE
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3 Form of Certificate of Amendment of Certificate of Incorporation
of NetManage.(1)
10 Composite Agreement and Plan of Reorganization dated as of June
15, 1998, as amended as of June 30 and July 14, 1998, among FTP
Software, Inc., NetManage, Inc. and Amanda Acquisition Corp.(2)
23 Consent of PricewaterhouseCoopers LLP.
99.1 Financial statements of FTP Software, Inc.(3)
99.2 Pro forma financial statements of NetManage, Inc.
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(1) Incorporated by reference to Exhibit 3.2 to NetManage's Registration
Statement on Form S-4, Registration No. 333-59101, filed with the
Securities and Exchange Commission on July 15, 1998 (the "Form S-4").
(2) Incorporated by reference to Annex A to the Form S-4.
(3) The financial statements of FTP Software, Inc. for the six months ended
June 30, 1998 are included in, and are incorporated by reference to, FTP
Software, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June
30, 1998. The financial statements of FTP Software, Inc. for the years
ended December 31, 1997, 1996 and 1995 are included in, and are
incorporated by reference to, the Form S-4.
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Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in NetManage, Inc.'s Form 8-K/A,
amending NetManage, Inc.'s Form 8-K dated August 27, 1998, of our reports dated
January 27, 1998, on our audits of the financial statements and financial
statement schedule of FTP Software, Inc. as of December 31, 1997 and 1996 and
for the years ended December 31, 1997, 1996 and 1995, appearing in the
registration statement on Form S-4 (Registration No. 333-59101) of NetManage,
Inc., filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933.
PRICEWATERHOUSECOOPERS LLP
Boston, MA
October 29, 1998
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EXHIBIT 99.2
NETMANAGE, INC. AND FTP SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On August 27, 1998, NetManage, Inc. ("NetManage" or the "Company") acquired
FTP Software, Inc. ("FTP") through the merger of Amanda Acquisition Corp., a
wholly-owned subsidiary of NetManage ("Merger Sub"), with and into FTP (the
"Merger"), which survived the Merger as a wholly-owned subsidiary of NetManage,
pursuant to the Agreement and Plan of Reorganization dated as of June 15, 1998,
as amended (the "Reorganization Agreement"), among FTP, NetManage and Merger
Sub.
Pursuant to the Merger, each outstanding share of the Common Stock, par
value $0.01 per share, of FTP ("FTP Common Stock") and each associated right
granted under the Rights Agreement dated as of December 1, 1995 between FTP and
State Street Bank and Trust Company, as Rights Agent, as amended, was converted
into the right to receive 0.72767 of a share of the Common Stock, par value
$0.01 per share, of NetManage ("NetManage Common Stock"). As a result, the
34,035,263 shares of FTP Common Stock outstanding immediately prior to the
Merger were converted into approximately 24,766,440 registered shares of
NetManage Common Stock. In addition, options to acquire approximately 5,587,528
shares of FTP Common Stock outstanding under FTP's stock option plans for its
employees and its non-employee directors were assumed by NetManage and converted
into options to purchase approximately 4,065,351 shares of NetManage Common
Stock. The aggregate purchase price of approximately $78.3 million, which
consists of NetManage Common Stock valued at $74.0 million, options assumed
valued at approximately $1.1 million, and direct acquisition costs of
approximately $3.2 million, was allocated to the estimated fair value of assets
acquired and liabilities assumed. Based upon a preliminary allocation of the
purchase price, the Company has recorded approximately $27.8 million of
acquired intangible assets. The estimated valuation of acquired intangible
assets and the estimated useful life of acquired intangible assets are subject
to adjustment upon the final allocation of the purchase price.
The following unaudited pro forma condensed combined consolidated financial
statements give effect to the Merger. The unaudited pro forma condensed combined
balance sheet has been prepared as if the Merger, which has been accounted for
as a purchase, was consummated on June 30, 1998. The unaudited pro forma
condensed combined balance sheet combines NetManage's balance sheet as of June
30, 1998 and FTP's balance sheet as of June 30, 1998.
The unaudited pro forma condensed combined consolidated statement of
operations for the six months ended June 30, 1998 gives effect to the Merger as
if the Merger had been completed on January 1, 1998 and combines NetManage's
statement of operations for the six months ended June 30, 1998 with FTP's
statement of operations for the six months ended June 30, 1998. The unaudited
pro forma condensed combined statement of operations for the year ended December
31, 1997 gives effect to the Merger as if the Merger had been completed on
January 1, 1997 and combines NetManage's statement of operations for the year
ended December 31, 1997 with FTP's statement of operations for the year ended
December 31, 1997.
This method of combining historical financial statements for the
preparation of the pro forma condensed combined consolidated financial
statements is for presentation purposes only. Actual statements of operations of
the companies will be combined from the closing date of the Merger with no
retroactive restatements. The unaudited pro forma condensed combined
consolidated financial statements are provided for illustrative purposes only
and are not necessarily indicative of the combined financial position or
combined results of operations that would have been reported had the Merger
occurred on the dates indicated, nor do they represent a forecast of the
combined financial position or results of operations for any future period. The
unaudited pro forma condensed combined consolidated financial statements should
be read in conjunction with the historical financial statements and accompanying
notes for each of NetManage and FTP included in its respective Annual Report on
Form 10-K for the year ended December 31, 1997 and its respective Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998 and the historical
financial statements and accompanying notes of FTP incorporated by reference
herein.
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NETMANAGE, INC. AND FTP SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
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PRO FORMA PRO FORMA
NETMANAGE FTP ADJUSTMENTS COMBINED
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Current assets:
Cash and cash equivalents $ 24,882 $ 38,596 $ 63,478
Short-term investments 26,032 10,564 36,596
Accounts receivable, net 10,492 4,611 15,103
Prepaid expenses and other current assets 12,944 5,086 18,030
--------- -------- ---------
Total current assets 74,350 58,857 133,207
Property and equipment, net 6,884 6,253 (667) (b) 12,470
Long-term investments 20,565 14,726 35,291
Goodwill and other intangibles, net 2,231 - 22,826 (c) 25,057
Other assets 9,491 3,115 (1,474) (a) 11,132
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$ 113,521 $ 82,951 $ 217,157
========= ======== =========
Current liabilities:
Accounts payable and accrued liabilities $ 4,999 $ 7,831 $ 12,211 (b) $ 25,041
Accrued payroll and payroll-related expenses 3,120 1,760 4,880
Deferred revenue 7,782 5,654 13,436
Income taxes payable 2,402 1,786 4,188
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Total current liabilities 18,303 17,031 47,545
Long-term liabilities 258 - 258
Stockholders' equity
Common stock and additional paid-in 93,177 137,163 (62,008) (d) 168,332
capital
Retained earnings (accumulated deficit) 3,823 (71,682) 70,482 (d) 2,623
Accumulated translation adjustment (2,040) 439 (1,601)
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Total stockholders' equity 94,960 65,920 169,354
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$ 113,521 $ 82,951 $ 217,157
========= ======== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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NETMANAGE, INC. AND FTP SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(in thousands, except per share data)
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<CAPTION>
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PRO
FORMA
ADJUST- PRO FORMA
NETMANAGE FTP MENTS COMBINED
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Net revenues $ 31,854 $ 19,256 $ (336) (e) $ 50,774
Cost of revenues 1,696 5,161 (692) (e) 6,165
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Gross margin 30,158 14,095 44,609
Expenses:
Research and development 9,103 7,126 (336) (e) 15,893
Sales and marketing 18,902 12,731 31,633
General and administrative 5,423 5,802 11,225
Amortization of goodwill and other intangibles 957 - 1,986 (f) 2,943
-------- -------- ---------
Loss from operations (4,227) (11,564) (17,085)
Other income, net 2,070 2,078 4,148
Provision for income taxes 16 150 166
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Net loss $ (2,173) $ (9,636) $ (13,103)
======== ========= =========
Net loss per share $ (0.05) $ (0.28) $ (0.19)
Basic and diluted weighted average common shares
and equivalents 43,944 34,024 (9,266) (g) 68,702
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
3
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NETMANAGE, INC. AND FTP SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
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PRO FORMA PRO FORMA
NETMANAGE FTP ADJUSTMENTS BALANCES
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<S> <C> <C> <C> <C>
Net revenues $ 61,524 $ 67,734 $ (1,319)(e) $ 127,939
Cost of revenues 4,093 21,129 (303)(e) 24,919
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Gross margin 57,431 46,605 103,020
Expenses:
Research and development 20,670 27,044 (619)(e) 47,095
Sales and marketing 41,455 45,196 86,651
General and administrative 10,428 16,289 26,717
Write-off of in-process research and development 20,643 - 20,643
Amortization of goodwill and other intangibles 1,137 - 3,971 (f) 5,108
Restructuring charge 5,172 18,330 23,502
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Loss from operations (42,074) (60,254) (106,696)
Other income, net 7,859 3,646 11,505
Provision (benefit) for income taxes (460) 1,208 748
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Net loss $(33,755) $(57,816) $ (95,939)
======== ======== =========
Net loss per share $ (0.78) $ (1.71) $ (1.41)
Basic and diluted weighted average common shares
and equivalents 43,385 33,842 (9,216)(g) 68,011
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
4
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NETMANAGE, INC. AND FTP SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AND
STATEMENTS OF OPERATIONS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined consolidated financial
statements included herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However,
the Company believes that the disclosures are adequate to make the information
presented not misleading.
NOTE 2. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
condensed combined consolidated balance sheet and statements of operations as
described below. As described above, the Company has allocated the purchase
price based upon the estimated fair value of assets acquired and liabilities
assumed. Based upon a preliminary allocation of the purchase price, the Company
has recorded approximately $27.8 million of acquired intangible assets. The
valuation of acquired intangible assets is subject to adjustment upon the final
allocation of the purchase price to the net assets acquired. The Company expects
that a portion of the purchase price will be allocated to in-process research
and development and charged to expense in the three-month period ended September
30, 1998 (which charge currently cannot be estimated), which will result in a
corresponding reduction in the amount of acquired intangible assets recorded in
connection with the acquisition.
(a) Reflects elimination of remaining unamortized purchased technology
balances related to intercompany revenues.
(b) Reflects exit, employee relocation and involuntary employee termination
costs ($9,054,000), asset impairment costs ($667,000) and expenses of the Merger
($3,157,000).
(c) Reflects the recording of acquired intangible assets from the
acquisition of FTP, to be amortized over a period of seven years. The estimated
valuation of acquired intangible assets and the estimated useful life of
acquired intangible assets are subject to adjustment upon the final allocation
of the purchase price.
(d) Reflects the elimination of FTP's stockholders' equity, the issuance of
24,766,440 shares of NetManage Common Stock valued at $74,000,000 in conjunction
with the acquisition, the value ($1,113,000) of options issued in conjunction
with the acquisition, an adjustment to retained earnings ($1,200,000) related to
remaining unamortized purchased technology and deferred revenue balances related
to intercompany revenues.
(e) Reflects the elimination of intercompany revenues and expenses.
(f) Reflects the amortization of acquired intangible assets related to the
acquisition over a period of seven years. The estimated useful life of acquired
intangible assets is subject to adjustment upon the final allocation of the
purchase price and determination of the estimated useful life of these assets.
(g) Reflects the conversion of FTP's weighted average common shares
outstanding to NetManage Common Stock at the Merger exchange ratio of 0.72767
and excludes anti-dilutive common stock equivalents.
5
