<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): SEPTEMBER 22, 2000
HNC SOFTWARE INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-26146 33-0248788
(Commission File Number) (I.R.S. Employer Identification Number)
5935 CORNERSTONE COURT WEST, SAN DIEGO, CA 92121
(Address of Principal Executive Offices)
(858) 546-8877
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
CONTENTS
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<S> <C>
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED....................... 2
The Registrant herewith files the following financial statements of
Systems/Link Corporation ("Systems/Link"):
(i) Audited balance sheet as of December 31, 1999 and related
statements of operations, shareholders' deficit and cash flows
for the year then ended.
(ii) Unaudited balance sheet as of June 30, 2000 and the unaudited
statements of operations and cash flows for the six months
ended June 30, 2000 and 1999.
(b) PRO FORMA FINANCIAL INFORMATION................................. 19
The following unaudited pro forma financial information is filed
herewith:
(i) Unaudited pro forma condensed consolidated balance sheet of
HNC Software Inc. as of June 30, 2000;
(ii) Unaudited pro forma condensed consolidated statement of
operations of HNC Software Inc. for the six months ended June
30, 2000;
(iii) Unaudited pro forma condensed consolidated statement of
operations of HNC Software Inc. for the year ended December
31, 1999;
(iv) Notes to unaudited pro forma financial information.
(c) EXHIBITS........................................................ 25
SIGNATURES...................................................... 26
</TABLE>
1
<PAGE> 3
HNC Software Inc. ("HNC") originally filed a report on Form 8-K on September 22,
2000 to report, under Item 2 of Form 8-K, HNC's acquisition of Systems/Link
Corporation (the "Original 8-K"). Pursuant to the provisions of paragraphs (a)
(4) and (b) (2) of Item 7 of Form 8-K, HNC indicated in the Original 8-K that
it would file certain financial information relating to the subject matter of
the Original 8-K no later than the date required by Item 7 of Form 8-K. This
Amendment No. 1 on Form 8-K/A is being filed to provide such additional
financial information:
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Systems/Link Corporation
In our opinion, the accompanying balance sheet and the related statements of
operations, shareholders' deficit, and cash flows present fairly, in all
material respects, the financial position Systems/Link Corporation as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
As described in Note 3, the December 31, 1999 financial statements, previously
audited by other independent accountants, have been restated with respect to
revenues, accrued royalties and depreciation.
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
November 7, 2000
2
<PAGE> 4
SYSTEMS/LINK CORPORATION
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets
Cash $ 840,501
Accounts receivable 3,571,541
Prepaid expenses 38,173
-----------
Total current assets 4,450,215
Property and equipment, net 1,178,698
Other assets 438,356
-----------
Total assets $ 6,067,269
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses $ 1,021,341
Deferred revenue 4,276,588
Due to former shareholder, current portion 667,269
Bank loan payable, current portion 1,082,437
Notes payable, current portion 122,192
Deferred state and local income taxes 13,000
-----------
Total current liabilities 7,182,827
Due to former shareholder, less current portion 685,302
Bank loan payable, less current portion 1,376,025
Notes payable, less current portion 57,396
-----------
Total liabilities 9,301,550
===========
Shareholders' Deficit
Common stock - par value $.001 (25,000,000 shares authorized;
11,664,122 shares issued and outstanding) 11,664
Additional paid-in capital 6,756
Retained earnings 497,299
Treasury stock at cost (3,664,122 shares) (3,750,000)
-----------
Total shareholders' deficit (3,234,281)
-----------
Total liabilities and shareholders' deficit $ 6,067,269
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
SYSTEMS/LINK CORPORATION
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
Revenue $ 13,364,940
Cost of revenue 4,608,764
------------
Gross profit 8,756,176
------------
OPERATING EXPENSES
General and administrative 2,783,639
Sales and marketing 2,698,063
Research and development 2,752,986
------------
Total operating expenses 8,234,688
------------
Income from operations 521,488
OTHER INCOME (EXPENSE)
Interest income 31,481
Interest expense (291,100)
------------
Income before state and local income taxes 261,869
Provision for state and local income taxes 38,000
------------
Net income $ 223,869
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
SYSTEMS/LINK CORPORATION
STATEMENT OF SHAREHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------- PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK DEFICIT
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1998 11,664,122 $ 11,664 $ 6,756 $ 351,506 $(3,750,000) $(3,380,074)
Distributions to shareholders (78,076) (78,076)
Net income 223,869 223,869
----------- ----------- ----------- ----------- ----------- -----------
Balance as of December 31, 1999 11,664,122 $ 11,664 $ 6,756 $ 497,299 $(3,750,000) $(3,234,281)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
SYSTEMS/LINK CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 223,869
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 670,550
Deferred state and local income taxes (19,000)
Changes in assets and liabilities
Accounts receivable (848,373)
Other assets (291,038)
Accounts payable and accrued expenses 221,575
Deferred revenue 2,695,340
-----------
Net cash provided by operating activities 2,652,923
-----------
INVESTING ACTIVITIES
Purchases of property and equipment (710,414)
-----------
Net cash used in investing activities (710,414)
FINANCING ACTIVITIES
Distributions to shareholders (78,076)
Proceeds from bank loan payable 120,000
Principal payments on bank loan payable (599,038)
Principal payments on notes payable (118,119)
Principal payments to former shareholder (650,618)
-----------
Net cash used in financing activities (1,325,851)
-----------
Net increase in cash 616,658
Cash - January 1, 1999 223,843
-----------
Cash - December 31, 1999 $ 840,501
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for
Interest $ 291,100
===========
Income taxes $ 24,317
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 8
SYSTEMS/LINK CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Systems/Link Corporation (the "Company") designs, develops and markets
diversified data management software and consulting services to the
wireless telephone industry. The Company's products are specifically
structured for use with wireless carrier applications in the areas of
fraud control, roaming services and prepaid billing software. The
Company's revenues are primarily derived from its RoamEx and FraudTec
products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Company have been prepared
on the accrual basis of accounting. The significant accounting policies
followed are described below.
RISKS AND UNCERTAINTIES
The Company is subject to all of the risks inherent in a business in the
technology/communications industry. These risks include, but are not
limited to, rapidly changing communications hardware, the software and
e-commerce business environment, reliance on third parties, the
competitive nature of the industry, dependence on skilled resources and
the on-going evolution, development and maintenance of communication
technologies.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Software revenue is recognized upon meeting all of the following
criteria: execution of a written purchase order, license agreement, or
contract; delivery of software; a fixed and determinable license fee;
collectibility of the proceeds is assessed as being probable; and
vendor-specific objective evidence exists to allocate the total fee to
elements of the arrangement. Vendor-specific objective evidence is based
on the price charged when an element is sold separately, or if not yet
sold separately, is established by authorized management.
Revenue from periodic software license and maintenance agreements is
generally recognized ratably over the respective license periods.
Revenue from short-term periodic software license and maintenance
agreements with guaranteed minimum license fees is recognized as related
services are performed. Transactional fees are recognized as revenue
based on system usage or when fees based on system usage exceed the
monthly minimum license fees. Revenue from perpetual licenses of the
Company's software for which there are no significant continuing
obligations and collection of the related receivables is probable is
recognized on delivery of the software and acceptance by the customer.
Revenue from network service agreements is recognized ratably over the
respective service periods. Installation fees associated with network
service agreements are recognized ratably over the longer of the
contractual or expected customer service periods.
Deferred revenue consists primarily of deferred installation and setup
fees and maintenance revenue.
7
<PAGE> 9
SYSTEMS/LINK CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
RECOVERABILITY OF LONG-LIVED ASSETS
The Company reviews the recoverability of its long-lived assets on a
periodic basis in order to identify business conditions or other
uncertainties which may indicate a possible impairment. The assessment
for potential impairment is based primarily on the Company's ability to
recover the unamortized balance of its long-lived assets from expected
future cash flows from its operations on an undiscounted basis.
SOFTWARE DEVELOPMENT COSTS
The Company has capitalized purchased software, which is included in
property and equipment. These costs are amortized based on the
straight-line method over their estimated useful lives. Development
costs for software to be licensed or sold that are incurred from the
time technological feasibility is established until the product is
available for general release to customers are capitalized and reported
at the lower of cost or net realizable value. Through December 31, 1999,
no significant development costs were incurred after technological
feasibility was reached.
PROPERTY AND EQUIPMENT, NET
Property and equipment are carried at cost less accumulated
depreciation. Depreciation for financial accounting purposes is computed
using the straight-line method over the estimated useful lives of the
assets, which range from three to seven years. Leasehold improvements
are amortized over the shorter of their estimated useful lives or the
remaining term of the related lease.
Expenditures for maintenance and repairs are charged to expense as
incurred. Major renewals and improvements are capitalized and
depreciated over their estimated useful lives.
INCOME TAXES
The Company accounts for income taxes under the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized based upon differences arising from the
carrying amounts of the Company's assets and liabilities for tax and
financial reporting purposes using enacted tax rates in effect for the
year in which the differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period when the change in tax rates is
enacted. A valuation allowance is established when it is determined that
it is more likely than not that some portion or all of the deferred tax
assets will not be realized.
The Company, with the consent of its shareholders, is taxed under the
Internal Revenue Code as an S Corporation, cash basis, for federal and
state income tax purposes. In lieu of corporate income taxes, the
shareholders of an S Corporation are taxed on their proportionate share
of the Company's taxable income. As a result, the Company is not subject
to federal income taxes. The accompanying financial statements include
provisions for certain state and local income taxes which were imposed
at the corporate level.
STOCK-BASED COMPENSATION
The Company measures compensation expense for its stock compensation
plans using the intrinsic value method, and provides pro forma
disclosures of net income as if a fair value-based method had been
applied in measuring stock compensation expense.
8
<PAGE> 10
SYSTEMS/LINK CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities", or FAS 133. This statement
establishes a new model for accounting for derivatives and hedging
activities. Under FAS 133, all derivatives must be recognized as assets
and liabilities and measured at fair value. In July 1999, the FASB
issued Statement of Accounting Standards No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" which defers the adoption
requirement to the first quarter of 2001. The Company has not yet
determined the impact of the adoption of this new accounting standard on
its consolidated financial position, results of operations or
disclosures.
December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements", or SAB 101, which provides additional guidance in applying
generally accepted accounting principles for the recognition and
reporting of revenue for certain transactions that existing accounting
rules do not specifically address. An amendment in June 2000 delayed SAB
101's effective date until the fourth quarter of 2000. The Company has
not yet determined the impact of the adoption of this new accounting
standard on its consolidated financial position, results of operations
or disclosures.
In January 1999, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-9, or SOP 98-9, "Modification of SOP
97-2, `Software Revenue Recognition,' with Respect to Certain
Transactions." This SOP extends the deferral of the application of
certain provisions of SOP 97-2 to the Company's first quarter of 2000.
The adoption of SOP 98-9 in the first quarter of 2000 did not have a
significant impact on the Company's consolidated financial position,
results of operations or disclosures.
In January 2000, the Financial Accounting Standards Board's Emerging
Issues Task Force published Issue No. 00-2 "Accounting for Web Site
Development Costs", or EITF 00-2. EITF 00-2 applies the guidance given
in the American Institute of Certified Public Accountants's Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use", or SOP 98-1, to Web site development
costs. Under SOP 98-1, software development costs, consisting of
internally developed software and Web site development costs, including
internal and external costs incurred to develop internal-use computer
software during the application development stage are capitalized.
Application development stage costs generally include software
configuration, coding, installation to hardware and testing. Costs of
significant upgrades and enhancements that result in additional
functionality are also capitalized. Costs incurred for maintenance and
minor upgrades and enhancements are expensed as incurred. The estimated
useful lives are based on planned or expected significant modification
or replacement of software applications, in response to the rapid rate
of change in the internet industry and technology in general. Adoption
of EITF 00-2 was required for the third quarter of 2000. The adoption of
EITF 00-2 in the third quarter of 2000 did not have a significant impact
on the Company's consolidated financial position, results of operations
or disclosures.
3. RESTATEMENT
The financial statements as of and for the year ended December 31, 1999
were previously audited by other independent accountants. These
financial statements have been restated herein to reflect the impact of
revenue adjustments relating to software licenses and service
installation fees, additional accruals for royalties payable and
accelerated depreciation expense for certain fixed assets.
9
<PAGE> 11
SYSTEMS/LINK CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following at December 31,
1999:
<TABLE>
<CAPTION>
LIVES
-----
<S> <C> <C>
Furniture and fixtures $ 323,117 7 years
Office equipment 1,443,162 5 years
Software 354,106 3 years
Network equipment 245,529 3 years
Leasehold improvements 200,477 5 years
-----------
2,566,391
Less accumulated depreciation (1,387,693)
-----------
$ 1,178,698
===========
</TABLE>
5. CONCENTRATION OF CREDIT RISK
The Company extends credit to its customers in the ordinary course of
business. As of December 31, 1999, ten customers accounted for 56% of
accounts receivable. For the year ended December 31, 1999, these same
customers accounted for 35% of revenue.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at
December 31, 1999:
<TABLE>
<S> <C>
Accounts payable $ 197,280
Accrued royalties 457,559
Accrued professional fees 100,706
Accrued commissions 86,453
Accrued benefits and other 179,343
----------
$1,021,341
==========
</TABLE>
7. INCOME TAXES
The provision for state and local income taxes consists of the
following for the year ended December 31, 1999:
<TABLE>
<S> <C>
Current - state and local $ 57,000
Deferred - state and local (19,000)
--------
Provision for income taxes $ 38,000
========
</TABLE>
Net deferred tax liabilities as of December 31, 1999 arise from the
Company's status as a cash basis tax-payer.
8. OPERATING LEASES
The Company leases various office space with leases expiring at various
times through 2003. The leases provide for escalations based upon
increases in real estate taxes,
10
<PAGE> 12
SYSTEMS/LINK CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
operating expenses and cost of living increases. Total rent expense for
the year ended December 31, 1999 was $372,480.
The future minimum annual lease payments are as follows for the years
ending December 31:
<TABLE>
<S> <C>
2000 $310,473
2001 303,796
2002 273,100
2003 38,084
--------
$925,453
========
</TABLE>
9. NOTES PAYABLE
The Company financed the purchase of computer hardware and related
equipment with term loans from a financial institution. The original
amounts of the loans were $181,588 payable monthly in installments of
$12,143, including interest at approximately 11%. The loans, which come
due through September 1, 2001, are guaranteed by the two majority
shareholders of the Company and were incorporated under the Term Loan
described in Note 11.
10. STOCK OPTION PLANS
In 1999, the Board of Directors and Shareholders of the Company adopted
a stock option plan (the "Plan") under which certain officers and
employees may be granted the right to purchase shares of common stock at
an exercise price determined by the Company's Board of Directors. The
Plan provides that the exercise price may be less than, equal to or
greater than the fair market value of the common stock on the date of
grant. The Company has reserved an aggregate of 1,675,882 shares of
common stock for issuance under the Plan.
A summary of the stock option transactions under the Plan is presented
below:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE
NUMBER OF PRICES
SHARES PER SHARE
--------- ---------
<S> <C> <C>
Outstanding as of December 31, 1998 -- $ --
Granted 1,512,882 1.90
Exercised -- --
Forfeited -- --
--------- ---------
Outstanding as of December 31, 1999 1,512,882 $ 1.90
========= =========
</TABLE>
11
<PAGE> 13
SYSTEMS/LINK CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The following table summarizes information about stock options
outstanding and exercisable as of December 31, 1999.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- ------------------------------
WEIGHTED-
NUMBER WEIGHTED- AVERAGE WEIGHTED-
RANGE OF OUTSTANDING AT AVERAGE REMAINING AVERAGE
EXERCISE DECEMBER 31, EXERCISE CONTRACT NUMBER EXERCISE
PRICES 1999 PRICE LIFE EXERCISABLE PRICE
------------- -------------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$1.04 - $1.84 759,365 $ 1.29 9 yrs. 759,365 $ 1.29
$2.45 - $3.14 753,517 2.51 9 yrs. 668,017 2.45
--------- --------- --------- --------- ---------
1,512,882 $ 1.90 9 yrs. 1,427,382 $ 1.84
========= ========= ========= ========= =========
</TABLE>
Pro forma net income using the fair value based method of accounting is
summarized as follows for the year ended December 31, 1999:
<TABLE>
<S> <C>
Net income
As reported $223,869
Pro forma 153,619
</TABLE>
The estimated fair value at date of grant for options granted during
1999 was approximately $281,000. The fair value of each option is
estimated on the date of grant using the Black-Scholes option-pricing
method with weighted average assumptions for risk free interest rate
(5.8%), expected dividend yield ($0) and expected life of option (1-4
years). Because the Company does not have actively traded equity
securities, volatility is not considered in determining the value of
options granted to employees. As additional options are expected to be
granted in future years and the options vest over several years, the
above pro forma results are not necessarily indicative of future pro
forma results.
11. SHAREHOLDER LITIGATION
In October 1997, a then shareholder of the Company commenced a lawsuit
for wrongful termination against the Company and three of its officers,
who are also directors and shareholders of the Company. On August 31,
1998, a Stipulation of Settlement Agreement (the "Settlement Agreement")
was entered into by the parties to the litigation. A closing of the
transactions contemplated by the Settlement Agreement was completed on
October 7, 1998. In conjunction with the Settlement Agreement, the
Company paid to the shareholder $74,400 for the purchase of the
shareholder's 1,200 shares, $2,325,600 in settlement of the claims which
related to the value of the shareholder's shares, $500,000 in
consideration of the settlement of employment claim and $100,000 for an
agreement from the shareholder not to compete. The summation of the
aforementioned amounts is $3,000,000 and was paid to the former
shareholder under the term loan described below. In addition to the
above, the Company agreed to pay to the former shareholder a total of
$2,100,000 which is payable at the rate of $700,000 on the first, second
and third year anniversaries of the closing, of which $250,000 of each
payment relates to employment claims and $450,000 relates to Treasury
Stock. In connection with the loan and security agreement executed by
the Company, as described below, the former shareholder executed a
Subordination Agreement in regard to the $2,100,000 owed to him by the
Company. No payment of any kind may be made under the Subordination
Agreement, if such payment would create an event of default or if the
12
<PAGE> 14
SYSTEMS/LINK CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Company is in default on any senior debt, as defined. If no event of
default exists or would exist if a scheduled payment was made, then the
Company may pay the scheduled $700,000 payments. Any amounts owed to the
former shareholder will become immediately due under certain
circumstances, primarily relating to a change in control of the Company
or a sale or other disposition of substantially all of the Company's
assets.
In connection with the funding of the payments required by the
settlement, the Company entered into a loan and security agreement with
a bank on October 7, 1998 (the "Term Loan"). The $3,000,000 proceeds
from the Term Loan were paid to the former shareholder to satisfy the
amounts due currently under the Settlement Agreement.
The Term Loan also enables the Company to borrow an additional $250,000
under a revolving credit facility which matures on June 30, 2001. The
$3,000,000 Term Loan is due on September 30, 2001 and annual maturities
for the years following December 31, 1999 are as follows for the years
ending December 31:
<TABLE>
<S> <C>
2000 $1,082,437
2001 1,376,025
----------
$2,458,462
==========
</TABLE>
Interest on the Term Loan is based upon a Libor Rate. The interest rate
on the revolving credit facility is at the Prime Rate plus 50 basis
points.
All tangible and intangible property of the Company has been pledged to
secure any outstanding bank debt, which is also guaranteed by the two
majority shareholders of the Company. The Term Loan contains convenants
regarding various financial statement amounts, ratios and activities of
the Company, as well as establishing a cash collateral account and a
receivable lock box with the lender.
12. ROYALTY EXPENSE
The Company developed certain software with a third party. The Company
and the third party have an agreement which provides that the Company
will compensate the third party 10% and 15% of the gross fees billed to
any licensee for the maintenance and license, respectively, from the
aforementioned software. Royalties are accrued for as a component of
accounts payable and accrued expenses. While the Company is presently in
negotiations with the third party to retroactively terminate the payment
of license fees as of June 1998, the outcome of these negotiations is
not yet determinable.
13. RETIREMENT PLAN
The Company maintains a 401(k) profit sharing plan. The plan covers all
eligible employees who elect to participate. Participants may contribute
up to 15% of eligible compensation, up to the maximum permitted under
the Internal Revenue Code. The Company, at its sole discretion, may
elect to make matching contributions for all or any part of the
participants' contributions. The Company also, at its own discretion,
may elect to make profit sharing contributions. All participants,
whether making elective contributions or not, will receive this
discretionary contribution.
13
<PAGE> 15
SYSTEMS/LINK CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
For the year ended December 31, 1999, the Company made a matching
contribution of $86,881.
14. SUBSEQUENT EVENT
On September 8, 2000, the Company was acquired by a wholly-owned
subsidiary of HNC Software, Inc. ("HNC") in a reverse triangular merger
transaction (the "Merger"). The Company's shareholders received
approximately 594,000 shares of HNC common stock and approximately $5.5
million in cash. In connection with the Merger, HNC also repaid the
liabilities (both current and long-term) reflected on the balance sheet
of i) due to former shareholder; ii) bank loan payable; and, iii) notes
payable.
14
<PAGE> 16
SYSTEMS/LINK CORPORATION
UNAUDITED BALANCE SHEET
JUNE 30, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash $ 433,088
Accounts receivable 2,289,306
Prepaid expenses 94,664
-----------
Total current assets 2,817,058
Property and equipment, net 1,253,014
Other assets 106,398
-----------
Total assets $ 4,176,470
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses $ 1,054,299
Deferred revenue 3,544,151
Due to former shareholder, current portion 667,269
Bank loan payable, current portion 954,931
Notes payable, current portion 57,880
Deferred state and local income taxes 13,000
-----------
Total current liabilities 6,291,530
Due to former shareholder, less current portion 685,302
Bank loan payable, less current portion 1,313,526
Notes payable, less current portion 57,396
-----------
Total liabilities 8,347,754
-----------
Shareholders' Deficit
Common stock - par value $.001 (25,000,000 shares authorized;
11,664,122 shares issued and outstanding) 11,664
Additional paid-in capital 6,756
Retained earnings (439,704)
Treasury stock at cost (3,664,122 shares) (3,750,000)
-----------
Total shareholders' deficit (4,171,284)
-----------
Total liabilities and shareholders' deficit $ 4,176,470
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 17
SYSTEMS/LINK CORPORATION
UNAUDITED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenue $ 7,573,731 $ 6,260,033
Cost of revenue 1,878,165 1,846,505
----------- -----------
Gross profit 5,695,566 4,413,528
----------- -----------
OPERATING EXPENSES
General and administrative 1,943,433 1,109,783
Sales and marketing 1,411,005 1,149,890
Research and development 2,090,516 1,216,060
Depreciation and amortization
----------- -----------
Total operating expenses 5,444,954 3,475,733
----------- -----------
Income from operations 250,612 937,795
OTHER INCOME (EXPENSE)
Interest income 13,203 3,089
Interest expense (113,255) (124,392)
----------- -----------
Income before state and local income taxes 150,560 816,492
Provision for state and local income taxes 20,563 7,316
----------- -----------
Net income $ 129,997 $ 809,176
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 18
SYSTEMS/LINK CORPORATION
UNAUDITED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 129,997 $ 809,177
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 335,689 264,518
Changes in assets and liabilities
Accounts receivable 1,282,235 (20,191)
Other assets 243,509 (73,209)
Accounts payable and accrued expenses 32,958 (400,342)
Deferred revenue (732,437) 701,316
----------- -----------
Net cash provided by operating activities 1,291,951 1,281,269
----------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment (378,047) (343,308)
----------- -----------
Net cash used in investing activities (378,047) (343,308)
FINANCING ACTIVITIES
Distributions to shareholders (1,067,000) --
Principal payments on bank loan payable (190,005) (107,159)
Principal payments on notes payable (64,312) (57,415)
----------- -----------
Net cash used in financing activities (1,321,317) (164,574)
----------- -----------
Net increase in cash (407,413) 773,387
Cash - Beginning of period 840,501 223,843
----------- -----------
Cash - End of period $ 433,088 $ 997,230
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for
Interest $ 113,255 $ 124,392
=========== ===========
Income taxes $ 20,563 $ 7,316
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 19
SYSTEMS/LINK CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying balance sheet as of June 30, 2000 and the statements of
operations and cash flows for the six months ended June 30, 2000 and 1999 are
unaudited and do not necessarily include all information and footnotes required
for audited financial statements. These unaudited financial statements have been
prepared on the same basis as the audited financial statements, and in the
opinion of management include all adjustments (consisting only of normal
recurring adjustments) necessary to state fairly the financial information for
all periods presented, in accordance with generally accepted accounting
principles. These unaudited financial statements and notes thereto should be
read in conjunction with the audited financial statements and notes thereto for
the year ended December 31, 1999, presented elsewhere herein.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - SUBSEQUENT EVENT
On September 8, 2000, the Company was acquired by a wholly-owned subsidiary of
HNC Software, Inc. ("HNC") in a reverse triangular merger transaction (the
"Merger"). The Company's shareholders received approximately 594,000 shares of
HNC common stock and approximately $5.5 million in cash. In connection with the
Merger, HNC also repaid the liabilities (both current and long-term) reflected
on the balance sheet of i) due to former shareholder; ii) bank loan payable;
and, iii) notes payable.
18
<PAGE> 20
(b) PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information
has been prepared to give effect to the acquisition of Systems/Link as well as
the distribution of our former wholly owned subsidiary, Retek Inc. ("Retek"), to
our stockholders. The acquisition of Systems/Link occurred on September 8, 2000
-- For more information, please see the Form 8-K filed on September 22, 2000.
The distribution of Retek common stock to our stockholders occurred on September
29, 2000 -- for more information regarding the final distribution, please see
the Form 8-K filed on October 13, 2000. The pro forma condensed consolidated
financial information is based on the following:
1. Our unaudited historical condensed consolidated financial
statements as of June 30, 2000 and for the six month period
then ended;
2. Systems/Link's unaudited historical financial statements as
of June 30, 2000 and for the six month period then ended;
3. Retek's unaudited historical consolidated financial
statements as of June 30, 2000 and for the six months then
ended;
4. Our audited historical consolidated financial statements for
the year ended December 31, 1999;
5. Systems/Link's audited historical financial statements for
the year ended December 31, 1999;
6. Retek's audited historical financial statements for the year
ended December 31, 1999; and
7. Pro forma adjustments as described in the accompanying
notes.
The pro forma condensed consolidated balance sheet at June 30, 2000 gives effect
to the acquisition of Systems/Link and the distribution of Retek as if they
occurred as of June 30, 2000. The pro forma condensed consolidated statements of
operations for the six months ended June 30, 2000 and the year ended December
31, 1999 give effect to the acquisition of Systems/Link and the distribution of
Retek as if they occurred as of January 1, 2000 and 1999, respectively. The
related adjustments are described in the accompanying notes. The unaudited pro
forma condensed consolidated financial information is based upon available
information and certain assumptions set forth in the notes to the unaudited pro
forma condensed consolidated financial information, which have been made solely
for purposes of developing such unaudited pro forma financial information. The
unaudited pro forma condensed consolidated financial information does not
purport to represent what our results of operations or financial condition would
actually have been had the acquisition of Systems/Link or the distribution of
our investment in Retek to our stockholders occurred as of January 1, 2000 or
1999, respectively, or to project our results of operations or financial
condition for any future period or date.
The unaudited pro forma condensed consolidated financial information should be
read in conjunction with our historical financial statements and notes thereto,
including the Annual Report on Form 10-K/A for the year ended December 31, 1999
and the Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2000,
Retek's historical financial statements and notes thereto, including Retek's
Annual Report on Form 10-K for the year ended December 31, 1999 and Retek's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, and the
historical financial statements of Systems/Link and notes thereto, including
Systems/Link's audited financial statements for the year ended December 31, 1999
and Systems/Link's unaudited balance sheet as of June 30, 2000 and unaudited
statements of operations and cash flows for the six months ended June 30, 2000
and 1999, included herein.
19
<PAGE> 21
HNC SOFTWARE INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(In thousands)
<TABLE>
<CAPTION>
HNC DISTRIBUTION PRO FORMA ACQUISITION OF PRO FORMA PRO FORMA
AS REPORTED OF RETEK CORE HNC SYSTEMS/LINK ADJUSTMENTS COMBINED HNC
----------- ------------ --------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 80,983 $ (38,379)(a) $ 42,604 $ 433 $ (5,512)(b) $ 37,525
Short-term investments available
for sale-debt 55,397 (3,898)(a) 51,499 -- -- 51,499
Short-term investments available
for sale-equity 1,833 -- 1,833 -- -- 1,833
Trade accounts receivable, net 62,938 (22,044)(a) 40,894 2,289 -- 43,183
Current portion of deferred
income taxes 1,454 (121)(a) 1,333 -- -- 1,333
Other current assets 16,040 (9,861)(a) 6,179 95 -- 6,274
--------- --------- --------- --------- --------- ---------
Total current assets 218,645 (74,303) 144,342 2,817 (5,512) 141,647
--------- --------- --------- --------- --------- ---------
Long term investments available
for sale-debt 76,654 (6,045)(a) 70,609 -- -- 70,609
Equity investments 11,469 -- 11,469 -- -- 11,469
Property and equipment, net 34,585 (17,078)(a) 17,507 1,253 -- 18,760
Intangible assets, net 137,501 (32,978)(a) 104,523 -- 53,190 (c) 157,713
Deferred income taxes, less
current portion 54,719 (36,688)(a) 18,031 -- -- 18,031
Other assets 4,883 415 (a) 5,298 106 -- 5,404
--------- --------- --------- --------- --------- ---------
Total assets $ 538,456 $(166,677) $ 371,779 $ 4,176 $ 47,678 $ 423,633
========= ========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 33,276 $ (9,094)(a) $ 24,182 $ 1,054 $ 624 (d) $ 25,860
Deferred revenue 45,286 (33,766)(a) 11,520 3,544 (1,850)(e) 13,214
Other current liabilities 3,539 (4,256)(a) (717) 1,693 -- 976
--------- --------- --------- --------- --------- ---------
Total current liabilities 82,101 (47,116) 34,985 6,291 (1,226) 40,050
--------- --------- --------- --------- --------- ---------
Noncurrent liabilities 5,325 -- 5,325 2,056 9,050 (f) 16,431
--------- --------- --------- --------- --------- ---------
Convertible Subordinated Notes 100,000 -- 100,000 -- -- 100,000
--------- --------- --------- --------- --------- ---------
Deferred revenue, net of current portion -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Contingencies
Minority interest in consolidated
subsidiaries 14,855 (14,855)(a) -- -- -- --
--------- --------- --------- --------- --------- ---------
Total liabilities 202,281 (61,971) 140,310 8,347 7,824 156,481
--------- --------- --------- --------- --------- ---------
Stockholders' equity:
Preferred stock -- -- -- -- -- --
Common stock 27 -- 27 12 (12)(g) 28
1 (h)
Common stock in treasury (15,507) -- (15,507) (3,750) 3,750 (g) (15,507)
Paid-in capital 389,214 (120,500)(a) 268,714 7 (7)(g) 305,919
37,205 (h)
Retained earnings (accumulated deficit) (20,152) -- (20,152) (440) 440 (g) (20,882)
(730)(i)
Accumulated other comprehensive
income (loss) (2,120) 1,240 (a) (880) -- -- (880)
Unearned stock-based compensation (15,287) 14,554 (a) (733) -- (793)(h) (1,526)
--------- --------- --------- --------- --------- ---------
Total stockholders' equity 336,175 (104,706) 231,469 (4,171) 39,854 267,152
--------- --------- --------- --------- --------- ---------
Total liabilities and stockholders'
equity $ 538,456 $(166,677) $ 371,779 $ 4,176 $ 47,678 $ 423,633
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial information.
20
<PAGE> 22
HNC SOFTWARE INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HNC DISTRIBUTION PRO FORMA PRO FORMA PRO FORMA
AS REPORTED OF RETEK CORE HNC SYSTEMS/LINK ADJUSTMENTS COMBINED HNC
----------- ------------ --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues 121,995 (33,553)(j) 88,442 7,574 -- 96,016
Operating expenses:
Cost of revenues 59,750 (20,860)(j) 38,890 1,878 -- 40,768
Research and development 35,186 (16,794)(j) 18,392 2,091 -- 20,483
Sales and marketing 35,160 (18,313)(j) 16,847 1,411 -- 18,258
General and administrative 16,832 (5,018)(j) 11,814 1,943 -- 13,757
Stock-based compensation 4,537 (5,424)(j) (887) -- 141 (k) (746)
Acquisition-related amortization 15,512 (2,542)(j) 12,970 -- 6,664 (l) 19,634
Acquired in-process research and
development 6,472 (4,000)(j) 2,472 -- -- 2,472
--------- --------- --------- --------- --------- ---------
Total operating expenses 173,449 (72,951) 100,498 7,323 6,805 114,626
Operating income (loss) (51,454) 39,398 (12,056) 251 (6,805) (18,610)
Other income (expense):
Interest and other income, net 6,335 (1,451)(j) 4,884 (100) -- 4,784
Interest expense related to
convertible debt (2,684) -- (2,684) -- -- (2,684)
Minority interest in income (loss) of
consolidated subsidiary 5,419 (5,419)(j) -- -- -- --
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes (42,384) 32,528 (9,856) 151 (6,805) (16,510)
Income tax provision (benefit) (10,023) 11,447 (j) 1,426 21 (1,131)(m) 316
-- 2 (j) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) $ (32,361) $ 21,079 $ (11,282) $ 130 $ (5,674) $ (16,826)
========= ========= ========= ========= ========= =========
Earnings per share:
Basic net income (loss) per common
share $ (1.22) $ (0.43) $ (0.62)(n)
========= ========= =========
Diluted net income (loss) per
common share $ (1.22) $ (0.43) $ (0.62)(n)
========= ========= =========
Shares used in computing basic net
income (loss) per common share 26,529 26,529 27,123 (n)
========= ========= =========
Shares used in computing diluted net
income (loss) per common share 26,529 26,529 27,123 (n)
========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial information.
21
<PAGE> 23
HNC SOFTWARE INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HNC DISTRIBUTION PRO FORMA PRO FORMA PRO FORMA
AS REPORTED OF RETEK CORE HNC SYSTEMS/LINK ADJUSTMENTS COMBINED HNC
----------- ------------ --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues 216,889 (69,159)(o) 147,730 13,365 -- 161,095
Operating expenses:
Cost of revenues 82,189 (22,983)(o) 59,206 4,609 -- 63,815
Research and development 49,055 (22,612)(o) 26,443 2,753 -- 29,196
Sales and marketing 45,818 (19,625)(o) 26,193 2,698 -- 28,891
General and administrative 24,547 (6,257)(o) 18,290 2,784 -- 21,074
Stock-based compensation 11,985 (1,908)(o) 10,077 -- 282 (p) 10,359
Acquisition-related amortization 8,599 (1,390)(o) 7,209 -- 13,328 (q) 20,537
Acquired in-process research and
development 1,480 (1,480)(o) -- -- -- --
--------- --------- --------- --------- --------- ---------
Total operating expenses 223,673 (76,255) 147,418 12,844 13,610 173,872
Operating income (loss) (6,784) 7,096 312 521 (13,610) (12,777)
Other income (expense):
Interest and other income, net 6,149 (30)(o) 6,119 (259) -- 5,860
Interest expense related to
convertible debt (5,823) -- (5,823) -- -- (5,823)
Minority interest in income
(loss) of consolidated subsidiary 722 (722)(o) -- -- -- --
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes (5,736) 6,344 608 262 (13,610) (12,740)
Income tax provision (benefit) 536 1,697 (o) 2,648 38 (2,263)(m) 423
-- 415 (o) -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) $ (6,272) $ 4,232 $ (2,040) $ 224 $ (11,347) $ (13,163)
========= ========= ========= ========= ========= =========
Earnings per share:
Basic net income (loss) per
common share $ (0.25) $ (0.08) $ (0.51)(n)
========= ========= =========
Diluted net income (loss) per
common share $ (0.25) $ (0.08) $ (0.51)(n)
========= ========= =========
Shares used in computing basic
net income (loss) per common share 24,969 24,969 25,563 (n)
========= ========= =========
Shares used in computing diluted net
income (loss) per common share 24,969 24,969 25,563 (n)
========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial information.
22
<PAGE> 24
HNC SOFTWARE INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- BASIS OF PRESENTATION
On September 8, 2000, we acquired all of the outstanding stock of Systems/Link
Corporation, or Systems/Link, in exchange for approximately 634 shares of our
common stock, including 40 shares representing options we exchanged, and $5,512
in cash. We applied the purchase method of accounting for the acquisition of
Systems/Link, which resulted in a purchase price of $42,549. The fair value of
the HNC common stock issued to effect the purchase was approximately $59.77 per
share based on the average closing price of HNC common stock for the three day
period ending on the acquisition date. The average fair value of the 40
exchanged options was approximately $42.59 per share, determined using the
Black-Scholes option pricing model assuming a 6.11% risk-free interest rate,
100% volatility, and an expected life of 2.0 years, resulting in a total
estimated fair value of $1,703. Of this total amount, $910 was allocated to the
purchase price and $793 was allocated to unearned stock-based compensation. The
total purchase price also included approximately $624 of acquisition costs we
accrued.
The allocation of the purchase price using balances at September 8, 2000 is
summarized below:
<TABLE>
<S> <C>
Goodwill $ 24,428
Software development costs 17,060
In-process research and development 730
Other identified intangible assets 5,148
Net liabilities assumed (4,817)
----------
Total purchase price $ 42,549
==========
</TABLE>
The purchase price was based upon the estimated fair values of the acquired
assets and assumed liabilities and an independent appraisal of intangible
assets. The amount allocated to in-process research and development represents
the purchased in-process research and development for projects that, as of the
date of the acquisition, had not yet reached technological feasibility and had
no alternative future use. The value of these projects was determined by
estimating the resulting net cash flows from the sale of the products from
completion of the projects, reduced by the portion of revenue attributable to
developed technology and the percentage completion of the project. The resulting
cash flows were then discounted back to their present value at appropriate
discount rates. The amounts allocated to in-process research and development
were charged to our statement of operations in the third quarter of 2000.
NOTE 2 -- PRO FORMA ADJUSTMENTS
(a) Reflects the distribution to our stockholders of Retek common stock in
the form of a dividend, inclusive of pro forma income tax adjustments to
present HNC Software Inc. on a stand-alone basis without Retek.
23
<PAGE> 25
(b) Reflects cash we paid to Systems/Link shareholders.
(c) Reflects goodwill and other intangible assets resulting from the
acquisition based on the purchase price allocation described in Note 1
as if the acquisition had occurred on June 30, 2000.
(d) Reflects accrued liabilities related to transactions costs incurred by
HNC.
(e) Reflects the adjustment of Systems/Link's assets and liabilities to
fair value.
(f) Reflects net deferred tax liabilities resulting from the acquisition and
the purchase price allocation described in Note 1.
(g) Reflects the elimination of Systems/Link's equity accounts.
(h) Reflects the estimated value of common stock and options issued to
effect the purchase, less amounts allocated to unearned stock-based
compensation.
(i) Reflects amount allocated to in-process research and development based
on the purchase price allocation described in Note 1.
(j) Reflects the reported results of operations of Retek Inc. as if our
distribution of Retek Inc. common stock to our stockholders occurred as
of January 1, 2000.
(k) Reflects amortization of unearned stock-based compensation recorded in
connection with the acquisition, as if the acquisition had occurred on
January 1, 2000
(l) Reflects amortization of goodwill, software development costs and other
identified intangible assets over their estimated useful lives of 3 to 4
years as if the acquisition had occurred on January 1, 2000.
(m) Reflects the estimated tax benefit related to the change in deferred tax
liabilities resulting from the amortization of the intangible assets
recorded as part of the acquisition.
(n) Basic and diluted net earnings per share is computed using the weighted
average number of common stock outstanding during the period. Unaudited
pro forma basic and diluted net earnings per share include 594 shares of
common stock issued in connection with our acquisition of Systems/Link
but exclude 40 shares of common stock issuable in connection with
replacement stock options because their effect would anti-dilutive.
(o) Reflects the reported results of operations of Retek Inc. as if our
distribution of Retek Inc. common stock to our stockholders occurred as
of January 1, 1999.
(p) Reflects amortization of unearned stock-based compensation recorded in
connection with the acquisition, as if the acquisition had occurred on
January 1, 1999.
(q) Reflects amortization of goodwill, software development costs and other
identified intangible assets over their estimated useful lives of 3 to 4
years as if the acquisition had occurred on January 1, 1999.
24
<PAGE> 26
(c) EXHIBITS
23.1 Consent of PricewaterhouseCoopers LLP(1)
99.1 Agreement and Plan of Reorganization dated as of September 8, 2000 among
Registrant, Systems/Link and SLC Merger Corp. Pursuant to Item 601(b)(2)
of Regulation of S-K, certain schedules have been omitted but will be
furnished supplementally to the Commission upon request(2)
------------
(1) Filed herein.
(2) Incorporated by reference to Exhibit 2.01 of HNC Software Inc.'s Report
on form 8-K filed on September 22, 2000.
25
<PAGE> 27
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 thereunto duly authorized.
HNC SOFTWARE INC.
By:
Date: November 21, 2000 /s/ Kenneth J. Saunders
-----------------------------
Kenneth J. Saunders,
Chief Financial Officer and
Secretary
By:
/s/ Russell C. Clark
-----------------------------
Russell C. Clark,
Vice President, Corporate Finance
and Assistant Secretary
26
