SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 8-K/A
AMENDMENT TO PRIOR REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 31, 1996
Datastream Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-25590 57-0813674
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
50 Datastream Plaza, Greenville, S.C. 29605
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 422-5001
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
On December 31, 1996, Datastream Systems, Inc. (the "Company") consummated
the acquisition of all of the capital stock and equity interests of SQL Group,
B.V., a corporation organized and existing under the laws of The Netherlands
("SQL"). The Company subsequently filed a Form 8-K reporting the acquisition.
Pursuant to Instruction (4) to Item 7 of Form 8-K, the Registrant omitted
certain required financial statements. The following financial statements are
now being filed:
SQL Systems Group, B.V.
ANNUAL REPORT page
Director's report 4
Financial statements:
Consolidated balance sheet as of December 31, 1996 5
Consolidated statement of earnings for the year ended
December 31, 1996 and 1995 6
Notes to the consolidated balance sheet and statement
of earnings 7-17
Parent company balance sheet as of December 31, 1996 18
Parent company statement of earnings for 1996 19
Notes to the parent company balance sheet 20-21
Additional information:
Allocation of result 22
Auditors' report 23
United States Generally Accepted Accounting Principles
(US GAAP) reconciliation 24-26
<PAGE>
SQL GROUP B.V.
ANNUAL REPORT 1996
<PAGE>
SQL Group B.V.
DIRECTOR'S REPORT
The directors herewith present their results for 1996, noting that 1996 was a
year of substantive (25%) growth in revenue. The push for growth impacted the
profitability of the Group. While the loss for the year was significant it must
be pointed out that the loss was amplified as a result of writing off certain
one time charges associated with restructuring the business. Additionally,
a change in accounting policy resulted in the write-off of all software
development and production costs in 1995 and 1996.
On 31 December 1996 the entire share capital of SQL Systems B.V. was acquired by
Datastream Systems, Inc. Joining the two companies resulted in broader product
offerings and geographic coverage.
Datastream products are marketed to clients desiring entry level to middle tier
client server based computerized maintenance management software (CMMS)
products. With the addition of SQL System's R5 CAMMS high end system,
Datastream is now able to offer a broader spectrum of CMMS products.
The acquisition expands the geographical coverage of the combined entity.
Until now, Datastream sales have been largely concentrated within the United
States with only 13% of total revenues arising from international sales. SQL
revenues have traditionally been derived from the European market. Datastream
plans to eventually market the Datastream products throughout Europe and has
already started distributing its products in the UK though SQL Systems(UK) Ltd.
Further Datastream product introductions are planned for the second quarter of
1997 in France, Germany and Spain. Similarly, Datastream intends to market SQL
products heavily into its large installed base of customers in the United
States.
The first quarter of 1997 also saw a significant reduction in operating costs
(salary expense, leases, travel expenditures, etc.) which should help the group
attain profitability in 1997.
The directors believe that SQL Group is now properly positioned to increase its
market share and sales revenue in 1997.
L. Blackwell
CEO Datastream Systems, Inc.
and subsidiaries
<PAGE>
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996
(before allocation of result)
1996 1995
NLG NLG
FIXED ASSETS Intangible fixed assets:
Goodwill 1,296,250 44,163
Software licenses 98,244 80,087
Costs of incorporation 0 7,566
1,394,494 131,816
Tangible fixed assets:
Other operating fixed assets 1,323,077 1,038,224
CURRENT ASSETS
Receivables:
Trade debtors 8,036,179 9,189,859
Other receivables and
prepayments 3,442,969 3,701,946
11,479,148 12,891,805
Cash 996,703 1,784,589
15,193,422 15,846,434
========== ==========
GROUP (DEFICIT) EQUITY (8,365,544) 1,867,990
LONG-TERM LIABILITIES
(SUBORDINATED)
Loans 5,715,805 3,691,789
SUM OF EQUITY AND
SUBORDINATED LIABILITIES (2,649,739) 5,559,779
LONG-TERM LIABILITIES
(UNSUBORDINATED)
Loans 105,000 1,053,750
CURRENT LIABILITIES
Due to banks 182,482 107,817
Loans (current portion) 1,752,225 388,500
Trade creditors 6,277,774 2,924,377
Taxes and social security
charges 2,941,081 1,724,609
Other creditors and accrued
liabilities 6,584,599 4,087,602
17,738,161 9,232,905
15,193,422 15,846,434
========== ==========
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS FOR 1996 FOR THE YEAR ENDED DECEMBER 31,
1996 AND 1995
1996 1995
NLG NLG
Net sales 29,219,606 24,074,431
Cost of sales 5,151,444 1,477,346
GROSS MARGIN 24,068,162 22,597,085
Wages and salaries 15,511,935 10,112,903
Social security charges 2,341,250 1,284,700
Selling expenses 2,869,689 1,053,085
General and administrative
expenses 17,386,767 10,556,695
Amortization/depreciation
of intangible/tangible
fixed assets 1,290,095 729,337
39,399,736 23,736,720
OPERATING RESULT (15,331,574) (1,139,635)
Interest income and
similar income 29,080 61,249
Interest expense and
similar charges (581,862) (483,544)
(552,782) (422,295)
RESULT ON ORDINARY
ACTIVITIES BEFORE
TAXATION (15,884,356) (1,561,930)
Corporate income tax 184,490 231,297
RESULT ON ORDINARY ACTI-
VITIES AFTER TAXATION (16,068,846) (1,793,227)
========== ===========
<PAGE>
NOTES TO THE CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS
ACTIVITIES
The corporation is engaged in the development, sale and maintenance of computer
software.
GENERAL
Major events in 1996:
SQL Systems B.V. established a French company, Sirlog S.A.; this
company acquired certain assets, liabilities and business activities
from Sinorg S.A. at Issy-les Moulineaux, France;
SQL Systems B.V. acquired an additional 25% interest in SQL Systems
Participaties B.V. and accordingly holds a 100% interest at year end;
SQL Systems B.V. established a 100% owned Brazilian subsidiary, SQL
Systems Ltda;
SQL Rapier France S.A. went into liquidation;
The liquidation of SQL Rapier Italia S.r.l. and SQL Rapier North
America Inc. was completed. These companies no longer exist at year end;
at the end of 1996 all shares of SQL Group B.V. were sold to Datastream
Systems Inc., at Greenville, South Carolina, USA.
CONTINUITY OF THE GROUP
In December 1996 SQL Group B.V. was acquired by Datastream Systems, Inc.
for US$34 million in cash and stock plus the assumption of liabilities. As
part of the acquisition, Datastream Systems, Inc. implemented a
restructuring plan that included revenue-enhancing plans, cost-cutting
measures and the pay-off of substantial portions of SQL Group B.V.'s debt.
As of the report date, approximately NLG 5,520,000 of SQL Group B.V.'s
long-term debt has been paid off by Datastream Systems, Inc. In addition,
Datastream Systems, Inc. has been financing the continuing operations of
SQL Group B.V. and plans to continue financing SQL Group B.V. until the
benefits of the restructuring plan are realized. Current revenue and
expense rates indicate the SQL Group B.V. will reach profitability in the
the second quarter of 1997. Through the restructuring plan and through
providing the needed financing, Datastream Systems, Inc. deems that
SQL Group B.V. is a going concern.
<PAGE>
ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared under the historical
cost convention. Exchange differences resulting from the translation of
financial statements of foreign subsidiaries are directly included in
stockholders' equity. The exchange differences relating to foreign exchange
transactions are accounted for in the statement of earnings.
CHANGE OF ACCOUNTING POLICY
In 1996 it was decided to expense all software development and production costs,
because it is uncertain that the value will be recovered. Comparative figures
for the financial year 1995 have been amended for this reason. The group equity
as of December 31, 1995 has been decreased by the book value of the software
development and production cost amounting to approximately NLG 2,130,000 and the
results for 1995 have been increased by the amended amortization amounting to
approximately NLG 302,000.
CONSOLIDATION
The consolidated financial statements include the financial statements of SQL
Group B.V. and its subsidiaries SQL Products B.V. and SQL Systems B.V. and its
majority participating interests, except SQL Systems Ltda, Brazil. That company
will be sold or closed down in the very near future and has been excluded from
consolidation because of the insignificance of its operations.
The consolidated financial statements have been prepared using the principles of
valuation and determination of result as applied by the parent company.
The consolidated participations are:
% of par-
ticipation
%
SQL Products B.V. at Rotterdam 100
SQL Products N.V. at Curacao 100
SQL Systems B.V. at Rotterdam 100
SQL Systems Participaties B.V. at Rotterdam 100
SQL Systems Deutschland Software GmbH at Dusseldorf 100
SQL Systems (UK) Ltd at Slough 100
SQL Rapier France Sarl at Sceaux 100
SQL Systems Inc. at Eden Prairie 100
Asystum Participations B.V. at Rotterdam 90
SQL Rapier France S.A. at Nanterre (in liquidation) 90
Sirlog S.A. at Grenoble, France 100
<PAGE>
PRINCIPLES FOR THE VALUATION OF ASSETS AND LIABILITIES AND FOR THE
DETERMINATION OF RESULT
ASSETS AND LIABILITIES
Intangible fixed assets
The goodwill as of December 31, 1996 relates to the acquisition of Sirlog S.A.
This goodwill is being amortized on a straight-line basis over five years.
Intangible fixed assets also include purchased computer software licenses. The
depreciation period is based on the estimated useful life of these assets,
applied on a straight-line basis over a period which varies from three to five
years.
Tangible fixed assets
The tangible fixed assets have been valued at cost less depreciation based on
the estimated useful lives of the related assets. The depreciation has been
applied on a straight-line basis and is based on the estimated useful life of
the asset concerned, which varies from 3 to 10 years.
Receivables, cash and liabilities
The receivables, cash and liabilities have been included at nominal value taking
into account a provision for doubtful accounts. Receivables, cash and
liabilities denominated in foreign currencies have been translated applying the
rates prevailing on the balance sheet date.
RESULT
Gross margin
The net sales are the revenues from supplies of goods and services to third
parties, less any discounts and taxes levied on the sales.
The cost of sales comprises the royalties payable to third parties concerning
licenses sold and the services of third parties, directly relating to sales.
The gross margin is determined as being the difference between the net sales and
cost of sales for the financial year, applying the valuation principles as
mentioned before.
<PAGE>
Revenue recognition
The Company's revenue consists primarily of fees for product licenses,
installation/implementation of the products, support, consultancy and projects.
Revenue from product licenses is recognized upon shipment of the product and
fulfillment of acceptance terms. After acceptance no significant vendor
obligations remain. Revenue from installation/implementation and consultancy is
recognized as services are provided. Revenue from support is recognized over the
support period. Revenue from projects is recognized upon fulfillment of
acceptance terms. Losses on transactions have been accounted for in the year in
which these losses occurred.
Corporate income tax
In general the tax is calculated on the basis of the operating result before
taxes.
NOTES TO SPECIFIC ITEMS OF THE CONSOLIDATED BALANCE SHEET AND THE
CONSOLIDATED STATEMENT OF EARNINGS AND OTHER NOTES
CONSOLIDATED BALANCE SHEET
Intangible fixed assets
cost of
software incorpo-
goodwill licenses ration total
NLG NLG NLG NLG
Book value as of,
December 31, 1995 44,163 80,087 7,566 131,816
Exchange differences 3,989 7,280 13 11,282
Investments 1,555,499 120,299 - 1,675,798
Amortization (307,401) (109,422) (7,579) (424,402)
1,296,250 98,244 - 1,394,494
========= ========= ========= =========
<PAGE>
Tangible fixed assets
Other operating fixed assets
- ----------------------------
NLG
Book value as of December 31, 1995 1,038,224
Exchange difference 78,580
Investments 1,115,008
Disposals (43,042)
Depreciation (865,693)
Book value as of December 31, 1996 1,323,077
==========
Receivables
Other receivables and prepayments
- ---------------------------------
Other receivables and prepayments include an amount of NLG 2,429,803 relating to
1996 sales to be invoiced for revenues related to shipped/installed and accepted
products or services (1995: NLG 2,510,728).
Group (deficit) equity
The movements for 1996 of the group (deficit) equity are the following:
issued and
paid-up accumu-
share share lated unallocated
capital premium deficit result total
NLG NLG NLG NLG NLG
Balance as of
December 31, 1995
59,524 6,890,476 (5,082,010) 1,867,990
Exchange
difference
participations 178,890 178,890
Issue of shares 9,352 5,647,070 5,656,422
Result 1996 (16,068,846) (16,068,846)
Balance as of
December 31,
1996 68,876 12,537,546 (4,903,120) (16,068,846) (8,365,544)
========== ========== ========== =========== ===========
<PAGE>
The authorized share capital amounts to NLG 200,000, divided into 150,000 common
shares and 50,000 cumulative preference shares, each of NLG 1 par value. In 1996
8,112 cumulative preference shares and 1,240 common shares were issued. The
share premium paid on these shares amounted to NLG 5,647,070. In December 1996
all cumulative preference shares were converted into common shares. On December
11, 1996 779 common shares of NLG 1 have been repurchased by the company. The
purchase price amounted to NLG nil.
The movements for 1995 of the shareholders' equity are the following:
issued and
paid up accumu- un-
share share lated allocated
capital premium deficit result total
NLG NLG NLG NLG NLG
Balance as of
December 31, 1994 48,000 992,000 (3,251,720) (2,211,720)
Exchange difference
participations (37,063) (37,063)
Issue of shares 11,524 5,898,476 5,910,000
Result 1995 (1,793,227) (1,793,227)
Balance as of
December 31, 1995 *) 59,524 6,890,476 (3,288,783) (1,793,227) 1,867,990
=========== ========== ========== ========== ==========
*) All common shares.
Long-term liabilities (subordinated)
Loans
- -----
1996 1995
NLG NLG
Former shareholders 3,620,580 3,691,789
Kvaerner AM Limited 666,225 0
De Nationale Investeringsbank N.V. 1,429,000 0
5,715,805 3,691,789
========== ==========
<PAGE>
Former shareholders NLG 3,620,580:
NLG
Balance as of December 31, 1995 3,691,789
Redeemed in 1996 71,209
Balance as of December 31, 1996 3,620,580
==========
These loans have been partially repaid by the new shareholder Datastream
Systems, Inc. in January 1997.
With respect to the repaid portion in 1997 Datastream Systems, Inc. will
provide the company with a long-term subordinated loan. The former shareholder
loans are subordinated to the claims of the ABN AMRO Bank under the credit
facility.
Kvaerner AM Limited NLG 666,225:
The company intends to repay this loan in 1997. The parent company intends to
furnish the necessary funding by way of a subordinated long-term loan. At
December 31, 1996 the loan was secured by a floating charge over the assets of
SQL Systems (UK) Ltd. The interest was payable at a rate of LIBOR (12 months)
plus 1% and was scheduled to be repaid in half-year installments of NLG 75,000.
De Nationale Investeringsbank N.V. NLG 1,429,000:
The comapny repaid this loan in 1997. The parent company intends to furnish
the necessary funding by way of a subordinated long-term loan. At December
31, 1996 the loan was repayable in half-year installments of NLG 357,000 and
the following collateral had been given:
first/second/third lien on receivables;
first lien on shares SQL Products B.V. and SQL Products N.V.;
first lien on intellectual ownership of software.
Long-term liabilities (unsubordinated)
Loans
- ----- 1996 1995
NLG NLG
Kvaerner AM Limited - 933,750
Other loan 105,000 120,000
105,000 1,053,750
========== ==========
<PAGE>
Other loan NLG 105,000:
Interest is payable at a rate of 6.5%.
The loan is repayable in yearly installments of NLG 15,000 per year (see current
liabilities "Loans (current portion)").
Current liabilities
Due to banks
- ------------
SQL Systems B.V. and SQL Products B.V. jointly have the following credit
facilities:
ABN AMRO Bank:
The ABN AMRO Bank has made available a credit line of NLG 500,000.
The following collateral has been given:
o first lien on the business furniture, fixtures and receivables;
o guarantee by shareholders, NLG 150,000 in total.
At December 31, 1996 nothing was borrowed under this facility.
Other creditors and accrued liabilities
- ---------------------------------------
Other creditors and accrued liabilities include an amount of NLG 2,085,794 (part
beyond one year: NLG 210,026), relating to amounts invoiced in advance and
deposits from customers (1995: NLG 1,345,979).
Contingent liabilities
Together with the acquisition of assets, liabilities and business activities
from Sinorg S.A. in France, SQL Systems B.V. and Sinorg S.A. agreed that
additional amounts of FF 100,000 (= approximately NLG 34,000) will be paid by
SQL to Sinorg for every Sinorg client in excess of 35 (clients), which will
migrate from the actual client base using GM, GP and PC (licenses with a value
over FF 250,000 only) to R5 during four years after the agreement has become
effective. The total amount due to this agreement will be limited to FF
2,000,000 (= approximately NLG 680,000). The four years period expires on
February 29, 2000. So far no amounts have been paid.
<PAGE>
Operating leases for offices and cars
- -------------------------------------
The financial commitments relating to office rent and lease cars are as follows
for 1997:
office rent lease cars
NLG NLG
Payments 1997 (approximately) 1,200,000 750,000
========== ==========
CONSOLIDATED STATEMENT OF EARNINGS
The revenue in the different countries can be specified as follows:
%
Austria 0.1
Belgium 0.5
Denmark 0.7
France 27.6
Germany 1.9
Greece 0.0
Israel 0.6
Italy 0.9
The Netherlands 27.1
Poland 0.0
Portugal 0.7
Surinam 0.1
Sweden 4.0
UK 17.0
USA 18.1
Venezuela 0.7
Total 100.0
=========
<PAGE>
The revenue divided over categories is as follows:
%
Product licenses 26.3
Other licenses 1.5
Projects 6.8
Consultancy 23.8
Installation 13.0
Support 25.0
Other 3.6
Total 100.0
=========
Social security charges
This item can be broken down as follows:
1996 1995
NLG NLG
Social security charges 1,497,759 913,683
Pension charges 843,491 371,017
2,341,250 1,284,700
========== ==========
Amortization/depreciation of intangible/tangible fixed assets
1996 1995
NLG NLG
Intangible fixed assets 424,402 173,135
Tangible fixed assets 865,693 556,202
1,290,095 729,337
========== ==========
Interest expense and similar charges This item can be broken down as follows:
1996 1995
NLG NLG
Interest charges for long-term liabilities 529,665 368,770
Other interest charges 52,197 114,774
581,862 483,544
========== ==========
<PAGE>
Taxation:
As shown in the consolidated statement of earnings the loss before taxation for
the year 1996 amounts to NLG 15,884,356. There is no possibility to carry back
the losses to the past. In general, it will be possible to offset losses against
future profits inside each taxing jurisdiction. Tax payable relates to taxable
income in France.
At December 31, 1996 tax losses carried forward of approximately NLG 15 million
existed relating to the Netherlands, Germany, the UK and the USA. The majority
of these losses have been realized in the Netherlands and have no expiration
date.
OTHER NOTES
Number of personnel:
In the financial year 1996 on average 166 persons were employed (1995: 134).
Remuneration of directors and supervisory board:
The remuneration of directors for the financial year amounted to NLG 1,151,698.
A total of NLG 40,000 was paid as remuneration to the supervisory board.
<PAGE>
PARENT COMPANY BALANCE SHEET AS OF DECEMBER 31, 1996
(before allocation of result)
1996 1995
NLG NLG
FIXED ASSETS
Financial fixed assets:
Participations in group
companies 3,176,933 3,317,939
Loans to group companies 0 2,105,339
3,176,933 5,423,278
CURRENT ASSETS
Receivables:
Group companies 136,501 136,501
3,313,434 5,559,779
========== ==========
STOCKHOLDERS' EQUITY
Issued and paid-up
share capital 68,876 59,524
Share premium 12,537,546 6,890,476
Accumulated deficit (4,903,120) (956,627)
Unallocated result (16,068,846) (4,125,383)
(8,365,544) 1,867,990
PROVISION FOR DEFICIT OF
GROUP COMPANY 5,558,398 0
LONG-TERM LIABILITIES
(SUBORDINATED)
Loans 5,049,580 3,691,789
CURRENT LIABILITIES
Loans (current portion) 1,071,000 0
3,313,434 5,559,779
========== ===========
<PAGE>
PARENT COMPANY STATEMENT OF EARNINGS FOR 1996
1996 1995
NLG NLG
Result of participating interests after taxes (16,012,282) (1,665,514)
Other income less expenses after taxes (56,564) (127,713)
RESULT AFTER TAXES (16,068,846) (1,793,227)
========== ==========
<PAGE>
NOTES TO THE PARENT COMPANY BALANCE SHEET
Reference is made to the notes to the consolidated balance sheet for any items
which are not further detailed.
Financial fixed assets
Participations in group companies
- ---------------------------------
NLG
Book value as of December 31, 1995 3,317,939
Exchange difference 178,890
Result 1996 (16,012,282)
Transferred to loans and provision 15,692,386
(319,896)
Book value as of December 31, 1996 3,176,933
==========
SQL Group B.V. wholly owns the issued share capital of:
net equity
nominal value as of
capital 31 December
NLG NLG
SQL Systems B.V. in Rotterdam 57,143 (21,012,551)
SQL Products B.V. in Rotterdam 57,143 3,176,933
Provision for deficit of group company:
The negative net equity value of SQL Systems B.V. amounts to NLG (21,012,551).
An amount of NLG 15,454,153 has been allocated as a provision on loans to group
companies. The remainder, amounting to NLG 5,558,398 has been recorded as a
provision.
<PAGE>
Loans to group companies
1996 1995
NLG NLG
Nominal value 15,454,133 7,425,505
Less: provision for equity deficit 15,454,133 5,320,166
Balance as of December 31, 1996 0 2,105,339
========== ==========
Commitments:
The company forms a fiscal unity with SQL Systems B.V. and SQL Products
B.V. for corporate income tax.
Joint and several liability exists with respect to the fiscal unity's tax
liabilities.
Rotterdam, 28 February 1997
Corporate executive board
J. Sterling L. Blackwell D.H. Christie
CEO SQL Systems B.V. CEO Datastream CFO Datastream Systems, Inc.
Systems, Inc. and subsidiaries
and subsidiaries
<PAGE>
ADDITIONAL INFORMATION
ALLOCATION OF RESULT
Statutory stipulation concerning allocation of result:
By virtue of article 24, any profit allocation is determined by the general
meeting of shareholders.
Proposed allocation of result:
It is proposed to add the loss of NLG 16,068,846 to the accumulated deficit. The
proposed allocation of result has not been included in the financial statements.
<PAGE>
SQL GROUP B.V.
N/431575/700306/cf
Date Reference
3 March, 1997 L. Saarloos Page 20
AUDITORS' REPORT
Introduction:
We have audited the financial statements 1996 of SQL Group B.V. at Rotterdam,
including the consolidated financial statements. 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.
Scope:
We conducted our audit in accordance with auditing standards generally accepted
in the Netherlands. 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 statements
presentation. We believe that our audit provides a reasonable basis for our
opinion.
Opinion:
In our opinion, the financial statements of SQL Group B.V. give a true and fair
view of the financial position of the company as of December 31, 1996 and of the
result for the year then ended in accordance with accounting principles
generally accepted in the Netherlands and comply with the legal requirements for
financial statements as included in Part 9, Book 2 of the Netherlands Civil
Code.
Deloitte & Touche Registeraccountants
<PAGE>
SQL GROUP B.V.
N/431575/700306/cf
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP)
a) Basis of Presentation
The accompanying financial statements are presented using Netherlands generally
accepted accounting principles (GAAP) and are denominated in Netherlands
guilders. The exchange rate at December 31, 1996 was 1.745. The functional
currency of the company's foreign subsidiaries is the applicable local currency.
Inclusion of separate parent company financial statements as a component of the
basic financial statements is a requirement under Netherlands GAAP. No similar
requirement exists under US GAAP.
b) Scope of Consolidation and Related Party Transactions
The Netherlands GAAP financial statements include the financial statements of
SQL Group B.V. and its subsidiaries SQL Products B.V. and SQL Systems B.V. and
its majority participating interests, except SQL Systems Ltda, Brazil. That
company will be sold or closed down in the very near future and has been
excluded from consolidation. Under both Netherlands GAAP and US GAAP this
investment has been valued at fair market value. SQL Systems Ltda does not have
any significant activities and the company is immaterial for the consolidated
financial statements of SQL Group B.V.
c) Pension plans
SQL Group B.V. and its subsidiaries are contributing to pension plans that are
defined contribution plans under US GAAP and accordingly no future liabilities
have to be recognized under FAS 87.
d) Income taxes
Under Netherlands GAAP the company is not required to record a deferred tax
asset. No reconciling item for US GAAP exists as the valuation allowance will
equal the amount of the deferred tax asset.
e) Fair value of financial instruments
The carrying amount of cash, accounts receivable, long-term debts and accounts
payable approximates fair value.
<PAGE>
SQL GROUP B.V. Page 3
N/431575/700306/cf
f) Use of estimates
The preparation of the company's consolidated financial statements requires
management to make estimates and assumptions that could affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the balance sheet dates and the reported amount of revenue and
expense during the reported periods. Actual results may vary from such
estimates.
g) Impairment
In the year ended December 31, 1996, the company adopted US FAS No. 121
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of" for purposes of applying US GAAP. This standard adopts an
approach for the evaluation of possible impairment for long-lived assets. Where
specific circumstances or events suggest that the net book value of such assets
to be held and used will not be recovered in future operating activities (or,
through disposal value it the intention is to dispose of the asset) the need to
record an impairment loss is considered by estimating future undiscounted cash
flows from the asset. In circumstances where such future estimated cash flows
are less than the carrying value of the asset, impairment is recorded to reduce
the asset to fair value, generally using discounted future cash flows estimates.
Application of this accounting standard in 1996 resulted in recording impairment
under US GAAP for the remaining book value of software development costs, which
did not differ from the result obtained when applying Netherlands GAAP.
h) Netherlands GAAP - US GAAP reconciliation
Since no significant differences exist between Netherlands GAAP as applied by
SQL Group B.V. and US GAAP, income in accordance with US GAAP equals income
under Netherlands GAAP, amounting to NLG 16,068,846 (loss).
Cash flow data is not required to be prepared under Netherlands GAAP. The
accompanying statements of cash flows have been prepared in accordance with US
GAAP.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996
AND 1995
1996 1995
NLG NLG
Net cash flows from operating activities (6,135,535) (4,235,755)
Net cash flows from investing activities (2,747,764) (2,000,807)
Net cash flows from financing activities 8,095,413 7,430,249
Net (decrease) increase in cash (787,886) 1,193,687
Cash and cash equivalents at beginning of period 1,784,589 590,902
Cash and cash equivalents at end of period 996,703 1,784,589
========== ==========
i) Leases
As Lessee:
The company leases office space, automobiles and equipment under agreements
which have been classified as operating leases for financial reporting purposes.
Future minimum lease payments under non-cancellable leases expiring at various
dates through 2001 are as follows:
NLG
1997 1,506,787
1998 625,017
1999 357,601
2000 163,999
2001 163,904
Total 2,817,308
==========
j) Business and credit concentrations
SQL Group B.V.'s product, R5, is a computerized maintenance management software
client/server system. R5 is written in Oracle Developer/2000 for Oracle
databases. While there is currently no concern about the continuity of
Oracle/Oracle databases, any changes in the continuing existence of Oracle
Corporation or its product could affect SQL's performance.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro Forma Financial Information.
On December 31, 1996, the Company consummated the acquisition of all of the
capital stock and equity interests of SQL Group, B.V. The Company subsequently
filed a Form 8-K reporting such acquisition. Pursuant to Instruction (4) to
Item 7 of Form 8-K, the Registrant omitted certain required pro forma financial
statements. The following financial statements are now being filed:
SQL Systems Group, B.V.
page
Pro Forma Combined Balance Sheet as of September 30. 1996 29
Pro Forma Combined Statement of Operations
for the year ended December 31, 1995 30
Pro Forma Combined Statement of Operations for the
nine months ended September 30, 1996 31
Notes to Pro Forma Combined Financial Statements 32-33
<PAGE>
Pro Forma Financial Information
On December 31, 1996, Datastream Systems, Inc. (the "Company") consummated the
acquisition of all of the capital stock and equity interests of SQL Group, B.V.,
a corporation organized and existing under the laws of The Netherlands ("SQL").
Founded in 1988, SQL is a leading vendor of computerized maintenance management
software in Europe. SQL developed and markets an Oracle-based client/server
maintenance management system with cross-platform capability that is available
in twelve languages. As consideration for the acquisition and pursuant to the
Share Purchase Agreement dated as of December 15, 1996 by and among the
Company, SQL and the stockholders of SQL (the "SQL Stockholders"), Datastream
paid the SQL Stockholders USD $17 million in cash and USD $17 million (751,381)
shares of the Common Stock of the Company, which consideration was determined
as a result of arm's length negotiations between the two unaffiliated parties.
The Company used funds from its initial public offering in 1995 and its
secondary offering in October 1996 to fund the acquisition. The acquisition
of SQL was accounted for under the purchase method of accounting.
The pro forma combined balance sheet reflects the acquisition of all of the
capital stock of SQL by the Company as if such transaction occurred on September
30, 1996.
The pro forma combined statements of operations reflect the above transaction as
if it had been completed as of the beginning of the respective periods and take
into account the following pro forma adjustments for items directly attributable
to the transactions: (i) the amortization of goodwill and other intangibles
recorded in the above transactions, (ii) the reduction of interest income
resulting from the use of cash previously invested required to complete the
above transactions, and (iii) the tax effect of the proforma adjustments. The
pro forma condensed combined statements of operations do not include the effect
of any nonrecurring charges directly attributable to the acquisition, such as
the write off of in process research and development.
The pro forma financial information does not purport to represent what the
Company's results of operations or financial position would actually have been
had the acquisition actually occurred on the dates set forth above or to project
the Company's results of operations for any future period.
The unaudited pro forma financial information should be read in connection with
the following: (i) the accompanying notes; (ii) the historical financial
statements and notes thereto of Datastream Systems, Inc. contained in its Form
10-K for the year ended December 31, 1995; (iii) the historical financial
statements and notes thereto of Datastream Systems, Inc. contained in its
Report 10-Q for the third quarter ended September 30, 1996, and (iv) the
accompanying historical financial statements and notes thereto of SQL Group B.V.
which are being filed herewith.
<PAGE>
DATASTREAM SYSTEMS, INC.
Pro Forma Combined Balance Sheet
September 30, 1996
(unaudited)
Datastream SQL Group, Pro forma
Systems, Inc. B.V.(1) Adjustments(1) Pro forma
------------- ---------- -------------- ---------
(In thousands)
Current assets:
Cash $ 3,176 $ 422 $ - $ 3,598
Accounts receivable 6,535 4,057 (3,685) 6,907
Interest receivable 157 - - 157
Inventory 261 - - 261
Prepaid expenses
and other assets 657 3,392 - 4,049
-------- -------- -------- --------
10,786 7,871 (3,685) 14,972
Investments held
to maturity 37,092 - (17,000) 20,092
Fixed Assets 7,650 965 (152) 8,463
Goodwill - 743 1,856 2,589
Capitalized Software 2,237 - 1,000 3,237
Other Intangibles - 57 5,569 5,626
-------- -------- -------- ---------
57,765 9,636 (12,422) 54,979
======== ======== ======== ========
Current liabilities:
Accounts payable $ 565 $ 2,844 $ - $ 3,409
Accrued expenses 351 1,709 2,382 4,442
Taxes payable 984 908 - 1,892
Deferred revenue 3,469 726 - 4,195
Current portion of
long term debt 20 - - 20
-------- -------- -------- --------
5,389 6,187 2,382 13,958
Long term debt 6 5,381 2,864 8,251
Deferred income
tax payable 478 - - 478
------- ------- ------- -------
5,873 11,568 5,246 22,687
Commitments
Stockholders equity:
Preferred stock - - - -
Common stock 85 35 (35) 91
6
Additional paid
in capital 41,576 4,088 (4,088) 55,570
13,994
Retained earnings 10,231 (6,055) 6,055 (23,369)
(33,600)
-------- -------- -------- --------
$ 57,765 $ 9,636 $(12,422) $ 54,979
======== ======== ========= ========
See accompanying notes to pro forma combined financial statements
<PAGE>
DATASTREAM SYSTEMS, INC.
Pro Forma Combined Statement of Operations
Year ended December 31, 1995
(unaudited)
Datastream SQL Group, Pro forma
Systems, Inc. B.V.(3) Adjustments Pro forma
------------- ---------- ----------- ---------
(In thousands,
except per share data)
Revenues:
Product $ 9,343 $ 6,162 $ - $ 15,505
Services 6,660 6,078 - 12,738
Support 4,343 2,713 - 7,056
-------- -------- -------- --------
20,346 14,953 - 35,299
Operating costs
and Expenses:
Cost of Product
Revenues 1,136 917 - 2,053
Cost of Service and
Support Revenues 4,082 4,891 - 8,973
Sales, General and
Administrative 9,216 9,381 - 18,597
Amortization - - 1,115 (4) 1,115
-------- -------- -------- --------
14,434 15,189 1,115 30,738
-------- -------- -------- --------
Operating Income 5,912 (236) (1,115) 4,561
Other Income (Expenses) 1,176 (262) (531) (5) 383
-------- -------- -------- --------
Income before tax 7,088 (498) (1,646) 4,944
Provision for
income taxes 2,742 144 (634) (6) 2,252
-------- ------- -------- --------
Net income (loss) $ 4,346 $ (642) $ (1,012) $ 2,692
========== ========== ========== ==========
Net income per share $ .61 $ .38
======== ========
Weighted average
shares outstanding 7,182,878 7,934,259 (7)
========= =========
See accompanying notes to pro forma combined financial statements
<PAGE>
DATASTREAM SYSTEMS, INC.
Pro Forma Combined Statement of Operations
Nine months ended September 30, 1996
(unaudited)
Datastream SQL Group, Pro forma Company
Systems, Inc. B.V. Adjustments Pro forma
(In thousands,
except per share data)
Revenues:
Product $ 9,983 $ 3,588 $ - $ 13,571
Services 8,372 5,186 - 13,558
Support 4,515 2,991 - 7,506
-------- -------- -------- --------
22,870 11,765 - 34,635
Operating costs and Expenses:
Cost of Product
Revenues 1,328 68 - 1,396
Cost of Service and
Support Revenues 5,118 6,679 - 11,797
Sales, General and
Administrative 10,007 7,523 - 17,530
Amortization - - 833 (4) 833
-------- -------- -------- --------
16,453 14,270 833 31,556
-------- -------- -------- --------
Operating Income 6,417 (2,505) (833) 3,079
Other Income (Expenses) 1,747 (221) (801) (5) 725
-------- -------- -------- --------
Income before tax 8,164 (2,726) (1,634) 3,804
Provision for
income taxes 3,145 - (629) (6) 2,516
-------- -------- -------- --------
Net income (loss) $ 5,019 $ (2,726) $ (1,005) $ 1,288
========== ========== ========== ==========
Net income per share $ .57 $ .13
======== ========
Weighted average
shares outstanding 8,850,754 9,670,886 (7)
========= =========
See accompanying notes to pro forma combined financial statements
<PAGE>
DATASTREAM SYSTEMS, INC.
Notes to Pro Forma Combined Financial Statements
(unaudited)
(1) The SQL Group, B.V. balance sheet as of September 30, 1996 is denominated
in US dollars. Amounts were converted from Netherlands guilders at the exchange
rate at September 30, 1996. The SQL Group, B.V. balance sheet was prepared using
Netherlands generally accepted accounting principles (GAAP). No significant
differences exist between Netherlands GAAP as applied by SQL Group, B.V. and US
GAAP.
(2) Reflects the consummation of the acquisition for $34 million, consisting of
$17 million in cash, which was recorded as a use of cash previously invested,
and $17 million (751,381 shares) in equity. A reserve against the purchase price
of $3 million (150,276 shares) has been recorded as a reduction in common stock
and paid in capital for items within the terms of the escrow agreement entered
into in connection with the acquisition.
The acquisition will be accounted for under the purchase method of accounting
and accordingly the assets and liabilities will be recorded at their fair value.
The purchase price allocation is not complete and adjustments may be made to the
amounts allocated and or useful lives. The estimated allocation of the purchase
price, including the write off of in process research and development is as
follows (in thousands):
Historical Value Fair Pro Forma
of net assets Value net assets
acquired Adjustments acquired
Cash $ 422 $ - $ 422
Receivables 4,057 (3,685) 372
Other Current Assets 3,392 - 3,392
Fixed Assets 965 (152) 813
Goodwill 743 1,846 2,589
Capitalized Software - 1,000 1,000
Other Intangibles 57 5,569 5,626
-------- -------- --------
Total Assets 9,636 4,578 14,214
Total Current Liabilities 6,187 2,382 8,569
Long Term Debt 5,381 2,864 8,245
-------- -------- --------
Total Liabilities 11,568 5,246 16,814
Common Stock 35 (35) -
Additional Paid In Capital 4,088 (4,088) -
Retained Earnings (6,055) 6,055 -
In process research and
development charge - (33,600) (33,600)
-------- -------- --------
Total Equity (1,932) (31,668) (33,600)
Total $ - $ 31,000 $ 31,000
======== ======== ========
<PAGE>
DATASTREAM SYSTEMS, INC.
Notes to Pro Forma Combined Financial Statements
(unaudited)
(3) The SQL Group B.V. statements of operation are denominated in US dollars.
Amounts were converted from Netherlands guilders at period end exchange rates at
December 31, 1995 and September 30, 1996 which do not differ significantly from
the average period rates. The SQL Group, B.V. statements of operations were
prepared using Netherlands generally accepted accounting principles (GAAP). No
significant differences exist between Netherlands GAAP as applied by SQL Group,
B.V. and US GAAP.
Year Nine Months
Ended Ended
December 31, September 30,
1995 1996
Adjustments to combined statements of operations:
(4) Amortization of goodwill
(over a 7 year period-
see note (2)) $ 374 $ 277
Amortization of other intangibles
(over 5 - 12 year period-
see note (2)) 741 556
------- -------
$ 1,115 $ 833
======= =======
(5) Reduction in interest income due to
use of cash previously invested $ 531 $ 801
======= =======
(6) Adjustments to the provision for
income taxes (at an assumed
rate of 38.5%) $ 634 $ 629
======= =======
(7) Pro forma weighted average shares
outstanding:
Historical weighted average
shares outstanding 7,182,878 8,919,505
Shares issued in acquisition 751,381 751,381
Pro forma weighted average shares 7,934,259 9,670,886
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
The following exhibits are filed herewith in accordance with the
provisions of Item 601 of Regulation S-K:
Exhibit No. Description of Exhibit
2.1* Share Purchase Agreement dated as of December 15, 1996 by and among
Datastream Systems, Inc., SQL Group, B.V. and the stockholders of SQL
Group, B.V. listed on the signature pages thereto.
4.1* Escrow Agreement dated as of December 31, 1996 by and among Datastream
Systems, Inc., the stockholders of SQL Group, B.V. listed on the
signature pages thereto and Robert J.J. Lijdsman, as Escrow Agent.
4.2* Registration Rights Agreement dated as of December 31, 1996 by and
among Datastream Systems, Inc., the stockholders of SQL Group, B.V.
listed on the signature pages thereto and Residentie Participaties
III CV, in its capacity as the SQL Stockholders' Representative.
* These exhibits were previously filed with the Form 8-K
which this filing amends.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATASTREAM SYSTEMS, INC.
Date: 03/13/97 /s/ Larry G. Blackwell, Ph.D., P.E.
-----------------------------------
Larry G. Blackwell, Ph.D., P.E.
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
2.1* Share Purchase Agreement dated as of December 15, 1996 by and among
Datastream Systems, Inc., SQL Group, B.V. and the stockholders of SQL
Group, B.V. listed on the signature pages thereto.
4.1* Escrow Agreement dated as of December 31, 1996 by and among
Datastream Systems, Inc., the stockholders of SQL Group, B.V. listed
on the signature pages thereto and Robert J.J.Lijdsman, as Escrow
Agent.
4.2* Registration Rights Agreement dated as of December 31, 1996 by and
among Datastream Systems, Inc., the stockholders of SQL Group, B.V.
listed on the signature pages thereto and Residentie Participaties
III CV, in its capacity as the SQL Stockholders' Representative.
* These exhibits were previously filed with the Form 8-K
which this filing amends.
