<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 26, 1997
The Vantive Corporation
(Exact name of registrant as specified in charter)
- --------------------------------------------------------------------------------
Delaware 0-26592 77-0266662
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
- --------------------------------------------------------------------------------
2455 Augustine Drive, Santa Clara, California 95054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 982-5700
---------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
The undersigned registrant hereby amends the following item of its
Current Report dated August 26, 1997 on Form 8-K as set forth in the pages
attached thereto:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE VANTIVE CORPORATION.
Date: November 3, 1997 By: /s/ David Schellhase
-------------------------------------
David Schellhase
Vice President and General Counsel
3
<PAGE> 4
THE VANTIVE CORPORATION
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) The following exhibits are attached hereto and filed herewith:
7.1 Financial statements of Innovative Computer Concepts, Inc. for the
year ended December 31, 1996.
4
<PAGE> 5
THE VANTIVE CORPORATION
INDEX TO EXHIBITS
EXHIBIT DOCUMENT
7.1 Fiancial Statements of Innovative Computer Concepts, Inc.
for the year ended December 31, 1996.
<PAGE> 1
Exhibit 7.1
INNOVATIVE COMPUTER CONCEPTS, INC.
(A Wholly-Owned Subsidiary of The Vantive Corporation)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Innovative Computer Concepts, Inc.:
We have audited the accompanying balance sheet of Innovative Computer Concepts,
Inc. (a Delaware corporation) as of December 31, 1996, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended. 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 in accordance with generally accepted auditing standards.
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 statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Innovative Computer Concepts,
Inc. as of December 31, 1996, and the result of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
Boston, Massachusetts
October 6, 1997
<PAGE> 3
INNOVATIVE COMPUTER CONCEPTS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, ----------JUNE 30,-----------
1996 1997 1996
(unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 2,264 $ 43,508 $ 48,596
Accounts receivable 22,320 36,112 245,567
Prepaid and other current assets 4,674 3,787 3,989
----------- ----------- -----------
Total current assets 29,258 83,407 298,152
----------- ----------- -----------
PROPERTY AND EQUIPMENT, AT COST 205,601 218,894 205,729
Less--Accumulated depreciation and amortization 109,265 123,821 72,140
----------- ----------- -----------
96,336 95,073 133,589
OTHER ASSETS 2,561 2,561 3,102
----------- ----------- -----------
$ 128,155 $ 181,041 $ 434,843
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit $ 100,000 $ 100,000 $ --
Accounts payable 142,701 223,514 65,247
Accrued expenses 37,154 38,261 14,299
Deferred revenue 98,525 58,000 195,915
Capital lease obligation 18,661 9,712 26,941
Notes payable -- 175,000 --
----------- ----------- -----------
Total current liabilities 397,041 604,487 302,402
----------- ----------- -----------
NOTES PAYABLE, LESS CURRENT PORTION -- 280,000 --
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value-
Authorized--5,000,000 shares
Issued and outstanding--3,400,000 shares at
December 31, 1996, and 4,203,448 and 3,300,000
shares at June 30, 1997 and 1996, respectively 34,000 42,034 33,000
Additional paid-in capital 55,860 440,172 27,360
Deferred compensation (27,360) (65,980) (17,860)
Retained earnings (deficit) (331,386) (1,119,672) 89,941
----------- ----------- -----------
Total stockholders' equity (deficit) (268,886) (703,446) 132,441
----------- ----------- -----------
$ 128,155 $ 181,041 $ 434,843
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
INNOVATIVE COMPUTER CONCEPTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -------------------
1996 1997 1996
(unaudited)
<S> <C> <C> <C>
REVENUES:
Services $ 997,165 $ 324,938 $ 697,080
Product license 196,415 11,200 25,000
---------- ---------- ----------
Total revenue 1,193,580 336,138 722,080
---------- ---------- ----------
COST OF REVENUES 780,557 442,759 353,571
---------- ---------- ----------
Gross profit (loss) 413,023 (106,621) 368,509
---------- ---------- ----------
OPERATING EXPENSES:
Research and development 375,282 186,607 178,462
Sales and marketing 111,612 17,108 54,269
General and administrative 412,072 175,613 203,794
---------- ---------- ----------
Total operating expenses 898,966 379,328 436,525
---------- ---------- ----------
Loss from operations (485,943) (485,949) (68,016)
INTEREST INCOME 1,162 -- 930
INTEREST EXPENSE (6,191) (302,337) (2,559)
---------- ---------- ----------
Net loss $ (490,972) $ (788,286) $ (69,645)
========== ========== ==========
Net loss per common share $(0.15) $(0.21) $(0.02)
====== ====== ======
Weighted average common shares outstanding 3,318,630 3,825,200 3,295,856
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
INNOVATIVE COMPUTER CONCEPTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------------- ADDITIONAL RETAINED STOCKHOLDERS'
NUMBER $.01 PAR PAID-IN DEFERRED EARNINGS EQUITY
OF SHARES VALUE CAPITAL COMPENSATION (DEFICIT) (DEFICIT)
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
DECEMBER 31, 1995
(UNAUDITED) 3,250,000 $ 32,500 $ -- $ -- $ 159,586 $ 192,086
Common stock
issued in lieu
of cash bonuses 100,000 1,000 19,000 -- -- 20,000
Sale of common
stock 50,000 500 9,500 -- -- 10,000
Deferred
compensation
related to
grants of
common stock
options -- -- 27,360 (27,360) -- --
Net loss -- -- -- -- (490,972) (490,972)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE,
DECEMBER 31, 1996 3,400,000 $ 34,000 $ 55,860 $ (27,360) $ (331,386) $ (268,886)
Common stock
issued in lieu
of payroll
(unaudited) 67,706 677 33,176 -- -- 33,853
Common stock
issued in
connection
with loans
payable
(unaudited) 727,742 7,277 245,954 -- -- 253,231
Exercise of
common stock
options
(unaudited) 8,000 80 -- -- -- 80
Issuance of
common stock
warrants
(unaudited) -- -- 55,392 -- -- 55,392
Compensation
expense
related to
grants of
common stock
options
(unaudited) -- -- -- 11,170 -- 11,170
Deferred
compensation
related to
grants of
common stock
options
(unaudited) -- -- 49,790 (49,790) -- --
Net loss
(unaudited) -- -- -- -- (788,286) (788,286)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30,
1997 (UNAUDITED) 4,203,448 $ 42,034 $ 440,172 $ (65,980) $(1,119,672) $ (703,446)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
INNOVATIVE COMPUTER CONCEPTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------------
1996 1997 1996
(unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(490,972) $(788,286) $ (69,645)
Adjustments to reconcile net loss to net cash used
in operating activities-
Noncash expense related to issuance of common
stock, warrants and stock options 20,000 353,646 10,000
Depreciation and amortizaton 74,748 14,556 37,380
Loss from disposal of property 4,906 -- --
Changes in current assets and liabilities-
Accounts receivable (18,990) (13,792) (242,237)
Prepaids and other current assets (1,146) 887 (1,000)
Accounts payable 126,502 80,813 49,047
Accrued expenses (13,095) 1,105 (35,950)
Deferred revenue (97,890) (40,525) (500)
--------- --------- ---------
Net cash used in operating activities (395,937) (391,596) (252,905)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (35,136) (13,293) (30,116)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit 100,000 -- --
Proceeds from notes payable -- 455,000 --
Proceeds from sale of common stock 10,000 -- --
Proceeds from the issuance of stock options -- 80 --
Principal payments on capital lease obligation (15,914) (8,947) (7,634)
--------- --------- ---------
Net cash provided by (used in) financing
activities 94,086 446,133 (7,634)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH (336,987) 41,244 (290,655)
CASH, BEGINNING OF YEAR 339,251 2,264 339,251
--------- --------- ---------
CASH, END OF YEAR $ 2,264 $ 43,508 $ 48,596
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 6,191 $ 1,205 $ 3,459
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
ACTIVITIES:
Common stock issued in lieu of cash bonuses and
payroll $ 20,000 $ 33,853 $ 10,000
========= ========= =========
Common stock issued in connection with notes
payable $ -- $ 253,230 $ --
========= ========= =========
Property and equipment purchased under capital
lease obligation $ 34,564 $ -- $ 34,564
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
INNOVATIVE COMPUTER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) SUMMARY OF OPERATIONS
Innovative Computer Concepts, Inc. (the Company), a Delaware Subchapter S
corporation, designs and produces software and provides related services
that improve spare parts management for global field service operations.
The Company is subject to risks common to rapidly growing technology-based
companies, including limited operating history, dependence on key
personnel, raising capital, rapid technological change, competition from
substitute products and larger companies and the continued market
acceptance of the Company's products and services.
In August 1997, the Company was sold to The Vantive Corporation (Vantive)
in exchange for approximately 655,571 shares of Vantive common stock,
32,381 options to purchase Vantive common stock and $125,000 in cash.
Including acquisition costs, the total purchase price was approximately
$21.0 million.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Interim Financial Statements
The accompanying balance sheet as of June 30, 1997 and June 30, 1996,
the statements of operations and statements of cash flows for the six
months ended June 30, 1997 and June 30, 1996 and the statement of
changes in stockholders' equity (deficit) for the period ended June
30, 1997 are unaudited, but, in the opinion of management, have been
prepared on a basis substantially consistent with the audited
financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of
the results of these interim periods. The results for the six months
ended June 30, 1997 are not necessarily indicative of the results to
be expected for the entire year.
(b) Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect 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.
<PAGE> 8
INNOVATIVE COMPUTER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(Continued)
(c) Revenue Recognition
Product revenues are recognized upon shipment or upon the completion
of all significant obligations by the Company, whichever is later.
The Company recognizes service revenues from consulting and training
upon performance of the services. Software maintenance fees are
recognized as revenue ratably over the period to which they relate.
(d) Depreciation
The Company provides for depreciation using both accelerated and
straight-line methods and charges to operations amounts estimated to
allocate the cost of the assets over their estimated useful lives as
follows:
<TABLE>
<CAPTION>
ASSET CLASSIFICATION ESTIMATED
USEFUL LIFE
<S> <C>
Computer equipment 5 years
Furniture and fixtures 7 years
Leasehold improvements Life of lease
</TABLE>
(e) Research and Development and Software Development Costs
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 86, "Accounting for the Costs of Computer Software To Be Sold,
Leased or Otherwise Marketed," the Company has evaluated the
establishment of technological feasibility of its various products
during the development phase. Due to the dynamic changes in the
market, the Company has concluded that it cannot determine
technological feasibility until a fully functional working model is
complete. The time period during which costs could be capitalized
from the point of reaching technological feasibility until the time
of general product release is very short and, consequently, the
amounts that could be capitalized are not material to the Company's
financial position or results of operations. In addition, the Company
believes that the estimated useful life of any potential product is
uncertain due to the rapid technological changes in the industry.
Therefore, the Company charges all research and development expenses
to operations in the period incurred.
<PAGE> 9
INNOVATIVE COMPUTER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(Continued)
(f) Concentration of Credit Risk
SFAS No. 105, "Disclosure of Information About Financial Instruments
with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk," requires disclosure of any
significant off-balance-sheet and credit risk concentrations. The
Company had one significant customer which represented approximately
88% of the Company's total revenue for the year ended December 31,
1996, and 24% and 98% of the Company's total revenue for the six
months ended June 30, 1997 and June 30, 1996, respectively.
Additionally, a customer represented approximately 89% of the Company
accounts receivable as of June 30, 1996.
(g) Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash, accounts
receivable, accounts payable, revolving line of credit and capital
lease obligation. The carrying amounts of the Company's financial
instruments approximate fair value.
(h) Postretirement Benefits
The Company has established the Innovative Computer Concepts, Inc.
401(k) Plan (the Plan) for the employees of the Company who may elect
to contribute a limited percentage of their salary, as defined, to
the Plan. The Company, at its option, may make discretionary
contributions to the Plan. No such contributions were made to the
Plan by the Company in 1996.
The Company has no other obligations for postretirement benefits
under SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."
(i) Income Taxes
The Company has elected to be treated as a S Corporation for federal
income tax purposes, whereby its taxable income (loss) is includable
in the individual tax returns of its stockholders.
(j) Carrying Value of Assets
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets To Be Disposed Of," is effective for fiscal
years beginning after December 15, 1995. The adoption of SFAS No. 121
did not have a material impact on the Company's financial statements.
<PAGE> 10
(k) Net Loss Per Common Share
Net loss per common share was computed by dividing net loss by the
weighted average number of common shares outstanding. Fully diluted
net loss per common share has not been presented as it is not
materially different from primary net loss per common share.
On March 31, 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128, "Earnings Per Share," which establishes
standards for computing and presenting earnings per share. SFAS No.
128 is effective for fiscal years ending after December 15, 1997 and
early adoption is not permitted. The Company believes that the
adoption of SFAS No. 128 will not have a material effect on its
financial statements.
(3) REVOLVING LINE OF CREDIT
During 1996, the Company entered into an unsecured revolving line of
credit agreement with a bank, which allows the Company to borrow up to a
maximum of $100,000. Borrowings bear interest at the bank's prime rate
(8.25% at December 31, 1996) plus 2%. The revolving line of credit is due
on demand and is personally guaranteed by two of the officers/stockholders
of the Company. As of June 30, 1997, there was $100,000 outstanding on the
revolving line of credit.
In connection with the purchase of the Company by Vantive, the outstanding
amount of the line of credit was paid off in October 1997.
(4) NOTES PAYABLE
Between January and March 1997, the Company issued five convertible notes
payable of $175,000. The notes bore interest at a rate of prime plus 1%
per annum, and were payable on the sooner of approximately six months or
on the date of additional financing, as defined. In connection with the
notes, the Company issued 279,742 shares of common stock to the
noteholders. The notes were convertible into common stock at the option of
the noteholder as defined. All of the notes were repaid in full as of
September 30, 1997.
Between March and July 1997, the Company issued various notes payable in
exchange for $710,000 in proceeds. The notes bore interest at a monthly
rate of 1% and were due two years from the date of issuance. In connection
with the notes, the Company issued 1,136,000 shares of common stock to the
noteholders. Additionally, the notes accrued warrants monthly to purchase
common stock at $.60 per share. As of June 30, 1997 these notes had
accrued 77,500 warrants. The notes were repaid in full in August 1997.
<PAGE> 11
INNOVATIVE COMPUTER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(Continued)
(5) STOCK OPTIONS
The Company has established the Innovative Computer Concepts, Inc. 1994
Stock Incentive Plan (the Stock Incentive Plan), which provides for a
maximum of 750,000 shares of common stock to be issued as stock
appreciation rights, performance shares, restricted and unrestricted
stock, incentive stock options (ISOs) and nonqualified stock options. ISOs
may be granted at no less than fair market value on the date of grant, as
determined by the Company's Board of Directors. The outstanding options
vest over a period of up to five years.
Activity under the Stock Incentive Plan for the year ended December 31,
1996 is as follows:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AVERAGE
NUMBER OF PRICE PER OPTION
SHARES SHARE PRICE
<S> <C> <C> <C>
Balance, December 31, 1995 230,500 $ .01 .01
Granted 144,000 $ .01 .01
--------- ------ -----
Balance, December 31, 1996 374,500 $ .01 $ .01
========= ====== =====
Exercisable, December 31, 1996 71,500 $ .01 $ .01
========= ====== =====
</TABLE>
The Company accounts for its stock-based compensation plan under
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees." In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which is effective for fiscal
years beginning after December 15, 1995. SFAS No. 123 establishes a
fair-value-based method of accounting for stock-based compensation plans.
The Company has adopted the disclosure-only alternative for options
granted to employees and directors under SFAS No. 123, which requires
disclosure of the pro forma effects on earnings as if SFAS No. 123 had
been adopted, as well as certain other information.
The Company has computed the pro forma disclosure required under SFAS No.
123 for all stock options granted in 1995 and 1996 using the Black-Scholes
option pricing model prescribed by SFAS No. 123.
<PAGE> 12
INNOVATIVE COMPUTER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(Continued)
The assumptions used and the weighted average information for the years
ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Dividend rate -- --
Risk-free interest rates 6.34% 6.50%
Expected lives 7.5 years 7.5 years
Expected volatility -- --
Weighted average grant-date fair value
of options granted during the period $ .19 $ .01
Weighted average exercise price $ .01 $ .01
Weighted average remaining contractual
life of options outstanding 8.63 years 9.15 years
Weighted average exercise price of none
and 71,500 options exercisable at
December 31, 1995 and 1996 respectively $ .01 $ --
</TABLE>
Under the Black-Scholes model, options granted to individuals during the
year ended December 31, 1995 had no value and the total value of the
options granted to individuals during the year ended December 31, 1996 was
approximately $27,360. None of this amount would be charged to operations
for the year ended December 31, 1996 as it would be amortized over the
remaining vesting periods.
In connection with the purchase of the Company by Vantive, the outstanding
options under the Company's Stock Incentive Plan were assumed by Vantive
and will be subject to the same terms and conditions. Each option holder
will receive the number of options in Vantive that they were entitled to
receive pursuant to the acquisition agreement had such holder exercised
such option in full immediately prior to the acquisition at the
acquisition price per share, as defined.
<PAGE> 13
INNOVATIVE COMPUTER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(Continued)
(6) COMMITMENTS
The Company has operating lease commitments for its facilities and certain
equipment as well as capital lease commitments for certain equipment,
which expire through August 1999. The approximate future minimum payments
under these leases as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR OPERATING CAPITAL
LEASE LEASE
<S> <C> <C>
1997 $ 66,544 $ 20,330
1998 50,544 --
1999 25,884 --
-------- --------
Total future minimum lease
payments $142,972 $ 20,330
======== ========
Less--Amount representing interest 1,669
--------
Present value of future
minimum lease payments $ 18,661
========
</TABLE>
Rent expense included in the accompanying statements of operations, was
approximately $68,000 for the year ended December 31, 1996, and
approximately $37,000 and $19,000 for the six months ended June 30, 1997
and June 30, 1996, respectively.
<PAGE> 14
THE VANTIVE CORPORATION AND
INNOVATIVE COMPUTER CONCEPTS, INC.
PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(UNAUDITED)
In August 1997, The Vantive Corporation (the "Company" or "Vantive") completed
the acquisition of Innovative Computer Concepts, Inc., a privately owned
software company in New Hampshire ("ICC"). The acquisition of ICC has been
accounted for as a purchase.
The accompanying unaudited pro forma combined condensed statements of operations
for the fiscal year ended December 31, 1996 and six months ended June 30, 1997
assumes that the acquisition took place as of the beginning of each period, and
combines the Company's and ICC's statement of operations for each company's
respective period. The unaudited pro forma combined condensed balance sheet has
been prepared as if the acquisition was consummated as of June 30, 1997.
The purchase price allocation reflected in the accompanying pro forma combined
condensed financial statements has been prepared on an estimated basis. The
effects resulting from any differences in the final allocation of the purchase
price are not expected to have a material effect on the Company's financial
statements.
The method of combining historical financial statements for the preparation of
the pro forma combined condensed financial statements is for presentation only.
Actual statements of income of the companies will be combined commencing on the
date of acquisition.
The accompanying pro forma combined condensed financial statements should be
read in conjunction with the historical financial statements and related notes
thereto for both the Company and ICC.
<PAGE> 15
THE VANTIVE CORPORATION AND
INNOVATIVE COMPUTER CONCEPTS, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
----------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
VANTIVE ICC ADJUSTMENTS COMBINED
----------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 23,342 $ 43 $ (125)(a) $ 23,260
Short-term investments 9,802 -- 9,802
Accounts receivable, net of allowance for
doubtful accounts 18,103 36 18,139
Prepaid expenses and other current assets 5,359 4 5,363
-------- -------- --------
Total current assets 56,606 83 56,564
Property and equipment, net 9,961 95 10,056
Other assets 1,503 3 1,506
Excess of cost of investment over fair value
of net assets acquired -- -- 680 (a) 680
-------- -------- --------
$ 68,070 $ 181 $ 68,806
======== ======== ========
Revolving line of credit $ -- $ 100 $ 100
Accounts payable and accrued liabilities 9,980 271 1,318 (a) 11,569
Commissions payable 2,804 -- 2,804
Consulting expenses payable 1,110 -- 1,110
Deferred revenue 7,943 58 8,001
Notes payable -- 175 175
-------- -------- --------
Total current liabilities 21,837 604 23,759
Notes payable, net of current portion -- 280 280
Other 524 -- 524
-------- -------- --------
Total long-term liabilities 524 280 804
Common stock 24 42 (41)(a) 25
Additional paid-in capital 34,048 440 19,214 (a) 53,702
Deferred compensation -- (66) 66 (a) --
Retained earnings/(accumulated deficit) 11,637 (1,119) (20,002)(a) (9,484)
-------- -------- --------
Total stockholders' equity 45,709 (703) 44,243
-------- -------- --------
$ 68,070 $ 181 $ 68,806
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 16
THE VANTIVE CORPORATION AND
INNOVATIVE COMPUTER CONCEPTS, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
VANTIVE ICC ADJUSTMENTS COMBINED
--------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE:
License $ 41,513 $ 196 $ 41,709
Service 22,761 997 23,758
-------- ------ --------
Total revenue 64,274 1,193 65,467
-------- ------ --------
COST OF REVENUE:
License 392 -- 392
Service 12,263 780 13,043
-------- ------ --------
Total cost of revenue 12,655 780 13,435
-------- ------ --------
GROSS PROFIT 51,619 413 52,032
-------- ------ --------
OPERATING EXPENSES:
Sales and marketing 24,676 112 24,788
Research and development 7,261 375 7,636
General and administrative 5,389 412 5,801
Amortization of excess of cost
of investment over fair value
of net assets
assets acquired -- -- 136 (b) 136
-------- ------ --------
Total operating expenses 37,326 899 38,361
-------- ------ --------
Income (loss) from operations 14,293 (486) 13,671
INTEREST AND OTHER INCOME (EXPENSE), net 1,286 (5) 1,281
-------- ------ --------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 15,579 (491) 14,952
PROVISION FOR INCOME TAXES 4,674 -- (188) (d) 4,486
-------- ------ --------
NET INCOME (LOSS) $ 10,905 $ (491) $ 10,466
======== ====== ========
NET INCOME (LOSS) PER SHARE $ 0.42 $ 0.39
======== ========
PRO FORMA WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES 25,847 26,535 (e)
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 17
THE VANTIVE CORPORATION AND
INNOVATIVE COMPUTER CONCEPTS, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
-----------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
VANTIVE ICC ADJUSTMENTS COMBINED
-----------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
License $ 31,919 $ 11 $ 31,930
Service 16,614 325 16,939
-------- ----- --------
Total revenue 48,533 336 48,869
-------- ----- --------
COST OF REVENUE:
License 302 -- 302
Service 9,019 443 9,462
-------- ----- --------
Total cost of revenue 9,321 443 9,764
-------- ----- --------
GROSS PROFIT (LOSS) 39,212 (107) 39,105
-------- ----- --------
OPERATING EXPENSES:
Sales and marketing 20,336 17 20,353
Research and development 6,909 186 7,095
General and administrative 3,756 176 3,932
Amortization of excess of cost of
investment over fair value of net
assets acquired -- -- 68 (c) 68
-------- ----- --------
Total operating expenses 31,001 379 31,448
-------- ----- --------
Income (loss) from operations 8,211 (486) 7,657
INTEREST AND OTHER INCOME (EXPENSE), net 757 (302) 455
-------- ----- --------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 8,968 (788) 8,112
PROVISION FOR INCOME TAXES 3,314 -- (313) (d) 3,001
-------- ----- --------
NET INCOME (LOSS) $ 5,654 $(788) $ 5,111
======== ===== ========
NET INCOME (LOSS) PER SHARE $ 0.22 $ 0.19
======== ========
PRO FORMA WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES 26,178 26,866 (e)
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 18
THE VANTIVE CORPORATION AND
INNOVATIVE COMPUTER CONCEPTS
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
combined condensed financial statements as described below:
(a) Reflects the acquisition of ICC for approximately $20,980,000
($125,000 in cash, $19,655,000 in common stock and options to
purchase common stock and $1,200,000 of acquisition expenses).
Also reflects the allocation of $680,000 to goodwill, $21,121,000
to in-process research and development costs and the elimination
of the ICC equity accounts at the acquisition date.
(b) Reflects amortization for twelve months of the excess of cost of
investment over the fair value of net assets acquired of
approximately $680,000, which will be amortized on a straight
line basis over five years.
(c) Reflects amortization for six months of the excess of cost of
investment over the fair value of net assets acquired of
approximately $680,000, which will be amortized on a straight
line basis over five years.
(d) Reflects the income tax benefit to the consolidated entity due to
goodwill amortization and net operating losses incurred by ICC,
based on the effective tax rates of 30% and 37% for the periods
ended December 31, 1996 and June 30, 1997, respectively.
(e) Reflects the impact of common stock issued in the acquisition as
if outstanding from the beginning of each period and options
issued in the acquisition using the treasury stock method for
each period.
NOTE 2. PURCHASE PRICE ALLOCATION
In connection with the acquisition, the Company paid $19,780,000 to the
shareholders of ICC consisting of $125,000 in cash, 655,571 shares of common
stock (valued at $28.60 per share) and options to acquire 32,381 shares of
Vantive common stock. The Company also accrued acquisition-related costs of
approximately $1,200,000.
In connection with the purchase price allocation, the Company received an
appraisal of the intangible assets which indicated that approximately
$21,121,000 of the acquired intangible assets consisted of in process product
development. Because there can be no assurance that the Company will be able to
successfully complete the development and integration of the ICC products or
that the acquired technology has any alternative future use, the acquired in
process product development was charged to expense by Vantive in its quarter
ended September 30, 1997 and is reflected, as a decrease in retained earnings,
in the accompanying pro forma combined condensed balance sheet as of June 30,
1997.
