-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CBZ9inBnDgJv+3ka6J3LtXx4m5OcRhvQYvjZr6aX8ky9KG10vMIXSZH4RSpFj5jQ RRO9BE8XLb/aFRZJkBXpjQ== 0000928385-99-002034.txt : 19990615 0000928385-99-002034.hdr.sgml : 19990615 ACCESSION NUMBER: 0000928385-99-002034 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990330 ITEM INFORMATION: FILED AS OF DATE: 19990614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXENT TECHNOLOGIES INC CENTRAL INDEX KEY: 0001007997 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 870393420 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-28100 FILM NUMBER: 99646143 BUSINESS ADDRESS: STREET 1: 2400 RESEARCH BLVD STREET 2: STE 200 CITY: ROCKVILLE STATE: MD ZIP: 20850 BUSINESS PHONE: 3012585403 MAIL ADDRESS: STREET 1: 2400 RESEARCH BLVD STREET 2: SUITE 200 CITY: ROCKVILLE STATE: MD ZIP: 20850 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 to FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): March 30, 1999 --------------------------- AXENT TECHNOLOGIES, INC. ------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-28100 87-0393420 ---------- ------- ---------- (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 2400 Research Boulevard, Suite 200 Rockville, Maryland 20850 ---------------------------------------------- (Address of principal executive offices) (Zip Code) (301) 258-5403 ------------------------------- (Registrant's telephone number) Not applicable ------------------------------------- (Former name or former address, if changed since last report) On April 13, 1999, AXENT Technologies, Inc. ("AXENT") filed a Form 8-K reporting that on March 30, 1999, AXENT had acquired all of the issued share capital of CKS Limited ("CKS") under a Share Exchange Agreement dated as of March 29, 1999. In that transaction, CKS and its operating subsidiaries, PassGo Technologies Limited, PassGo Group Limited and PassGo Technologies SARL, became subsidiaries of AXENT, and AXENT agreed to issue a total of one million five hundred fifty thousand (1,550,000) shares of AXENT common stock for all of the equity interests in CKS. In this Amendment No.1 to Form 8-K, AXENT files the consolidated financial statements of CKS and its subsidiaries for its last fiscal year ended December 31, 1998 and the pro forma financial statements required under Regulation S-X to be filed as part of this report. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. Page Number ----------------------------------------- ----------- CKS Limited - --- ------- Report of Independent Auditors................................................ 3 Consolidated Profit and Loss Account for the year ended December 31, 1998..... 4 Consolidated Statement of Total Recognized Gains and Losses for the year ended December 31, 1998...................................................... 5 Consolidated Balance Sheet as of December 31, 1998............................ 6 Consolidated Cash Flow Statement for the year ended December 31, 1998......... 7 Notes to the Consolidated Financial Statements................................ 8 (b) Pro Forma Financial Information. ------------------------------- Unaudited Pro Forma Consolidated Financial Information....................... 24 Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 1998........................................ 25 Notes to the Unaudited Pro Forma Consolidated Statements of Operations....... 27 Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1998....... 29 Notes to Unaudited Pro Forma Consolidated Balance Sheet...................... 31 (c) Signatures.............................................................. 32 ----------
1 (d) Exhibits. -------- Exhibit Number Exhibit Name -------------- ------------ 10.37 The Share Exchange Agreement. 10.39 Consent of Ernst and Young 2 CKS LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998 REPORT OF INDEPENDENT AUDITORS To the Board of Directors of CKS Limited We have audited the accompanying consolidated balance sheet of CKS Limited at 31 December 1998 and the related consolidated profit and loss account and consolidated statement of total recognized gains and losses and cash flow 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 consolidated financial statements based on our audit. We conducted our audit in accordance with United Kingdom auditing standards which do not differ in any significant respect from United States 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 consolidated financial position of CKS Limited at 31 December 1998 and the consolidated results of its operations and its consolidated cash flow for the year then ended, in conformity with accounting principles generally accepted in the United Kingdom which differ in certain respects from those generally accepted in the United States (see Note 23 of Notes to Financial Statements). Ernst & Young Bristol, England Date 14 June 1999, 3 CKS LIMITED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1998 (amounts in British Pounds Sterling)
1998 -------------------- Turnover (Note 2) (Pounds) 8,526,056 Administrative expenses (10,008,767) -------------------- (1,482,711) Operating loss Bank interest receivable 20,800 Interest payable and similar charges (Note 6) (200,623) Deficit arising on revaluation of freehold land and buildings (405,262) -------------------- Loss on ordinary activities before taxation (Note 3) (2,067,796) Tax on loss on ordinary activities (Note 7) 11,262 -------------------- Loss for the financial year* (2,056,534) Other appropriations Non-equity shares 29,474 -------------------- Retained loss for the year (Pounds) (2,027,060) ====================
__________ * A summary of the significant adjustments to loss for the financial year that would be required if U.S. generally accepted accounting principles were to be applied instead of those generally accepted in the United Kingdom is set forth in Note 23 of Notes to Financial Statements. The accompanying notes are an integral part of these financial statements. 4 CKS LIMITED CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES FOR THE YEAR ENDED DECEMBER 31, 1998 (amounts in British Pounds Sterling)
1998 -------------------- Loss for the financial year (Pounds) (2,056,534) Exchange loss on retranslation of net assets of subsidiary undertaking and foreign branches (91,168) -------------------- Total recognized gains and losses relating to the year (Pounds) (2,147,702) ====================
______________ The statement of comprehensive income required under U.S. generally accepted accounting principles is set forth in Note 23 of Notes to Financial Statements. The accompanying notes are an integral part of these financial statements. 5 CKS LIMITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 (amounts in British Pounds Sterling)
1998 ------------------ Fixed Assets Intangible fixed assets (Note 8) (Pounds) 792,512 Tangible fixed assets (Note 9) 1,328,971 ------------------ 2,121,483 ------------------ Current Assets Debtors (Note 10) 3,741,497 Cash at bank and in hand (Note 11) 298,578 ------------------ 4,040,075 ------------------ Creditors: amounts falling due within one year (Note 12) 4,846,409 ------------------ Net Current Liabilities (806,334) ------------------ Total Assets Less Current Liabilities 1,315,149 Creditors: amounts falling due after more than one year (Note 13) 574,062 ------------------ (Pounds) 741,087 ================== Capital and Reserves* Called up share capital (Note 17) (Pounds) 6,703,552 Share premium account (Note 18) 382,879 Capital redemption reserve (Note 18) 278,200 Profit and loss account (Note 18) (6,623,544) ------------------ (Pounds) 741,087 ================== Shareholders' Funds Equity (Pounds)(4,121,144) Non equity (Note 19) 4,862,951 ------------------ (Pounds) 741,087 ====================
____________________ * A summary of the significant adjustments to capital and reserves that would be required if U.S. generally accepted accounting principles were to be applied instead of those generally accepted in the United Kingdom is set forth in Note 23 of Notes to Financial Statements. The accompanying notes are an integral part of these financial statements. 6 CKS LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1998 (amounts in British Pounds Sterling)
1998 ---------------------- Net Cash Outflow From Operating Activities (Note 3b) (Pounds) (1,868,323) ---------------------- Returns On Investments And Servicing Of Finance Interest received 20,800 Interest paid (187,372) Interest element of hire purchase repayments (13,251) Finance costs on issue of non equity shares (60,606) ---------------------- (240,429) ---------------------- Taxation U.K. corporation tax paid (158,669) ---------------------- Capital Expenditure And Financial Investment Purchase of tangible fixed assets (176,899) ---------------------- Net Cash Outflow Before Financing (2,444,320) ---------------------- Financing Issue of preference shares 1,090,909 Issue of ordinary shares 131,513 Finance costs on issue of equity shares (10,339) Repayment of capital element of hire purchase contracts (26,885) Net movement on bank borrowings (946,303) ---------------------- Net Inflow From Financing 238,895 ---------------------- Decrease In Cash (Note 11) (Pounds) (2,205,425) ====================== Reconciliation Of Net Cash Flow To Movement In Net Debt Decrease in cash (Pounds) (2,205,425) Repayments of capital element of hire purchase contracts 26,885 Net movement in bank borrowings 946,303 ---------------------- Change in net debt resulting from cash flows (1,232,237) New hire purchase contracts (51,337) ---------------------- Movement In Net Debt (1,283,574) Net Funds At January 1, 1998 (Note 11) 145,548 ---------------------- Net Debt At December 31, 1998 (Note 11) (Pounds) (1,138,026) ======================
__________________ The significant differences between the cash flow statement presented above and that required under U.S. generally accepted accounting principles is set forth in Note 23 of Notes to Financial Statements. The accompanying notes are an integral part of these financial statements. 7 CKS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Accounting convention-The financial statements are prepared under the historical cost convention and applicable U.K. accounting standards. Basis of consolidation-The consolidated profit and loss account and balance sheet include the financial statements of the company and its subsidiary undertaking made up to 31 December 1998. Intra-group sales and profits are eliminated fully on consolidation. Goodwill-Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. Goodwill, which had previously been eliminated against reserves, has not been reinstated on 1 January 1998 as permitted by FRS 10. Tangible assets-The cost of tangible assets is their purchase cost, together with any incidental expenses of acquisition. Depreciation-Depreciation is calculated so as to write off the cost of tangible fixed assets, less their estimated residual values, on a straight- line basis over the expected useful economic lives of the assets concerned. The annual rates used for this purpose are: Plant and equipment 25% Motor vehicles 25% Fixtures and fittings 25% Property improvements 20% Freehold property 2% Freehold property-Freehold property is made up of a listed building, an unlisted building and improvements to property. These are carried at open market value. Freehold property has previously not been depreciated as it is maintained to a sufficient condition so that the difference between the carrying value and realizable value and the amount of depreciation would not be material. The freehold property has been revalued in the year as detailed in Note 9. 8 Intangible assets-Development expenditure relating to the specific internal and external costs of creating software products for commercial exploitation is capitalised as intangible fixed assets once commercial feasibility has been achieved. Costs incurred prior to this are written off as incurred. Capitalised development costs are amortised over the period of benefit to the group from distribution and maintenance revenues from the commencement of sales. In respect of the MyNet product, this period of benefit is expected to be five years, which commenced in 1997. Leasing and hire purchase commitments-Where fixed assets are acquired under hire purchase agreements, the assets are treated as if they had been purchased outright and are included in tangible fixed assets. The capital element of the hire purchase commitments are shown as obligations under hire purchase. The repayments are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligations and the interest element is charged against profit in proportion to the reducing capital element outstanding. Assets held under hire purchase agreements are depreciated over the shorter of the hire term and the useful lives of equivalent owned assets. Rentals payable under operating leases are charged in the profit and loss account on a straight-line basis over the lease term. Foreign currencies-Assets and liabilities of branches denominated in foreign currencies are translated into sterling at rates of exchange ruling at the end of the financial year. Differences on exchange arising from the translation of the opening net assets of the branches are taken to reserves and reported in the statement of total recognized gains and losses. All other foreign exchange differences are taken to the profit and loss account as incurred. Deferred taxation-Provision is made for deferred taxation, using the liability method, on all material timing differences to the extent that it is probable a liability will crystallise. Pensions-A subsidiary undertaking operates a defined contribution pension scheme, which is independent of that company's finances. Contributions are fixed by the fund managers and are charged against profits in the period they are made. 2. TURNOVER Turnover, which is stated net of value-added tax and trade discounts, represents the invoiced value of goods and services supplied. Income from maintenance contracts is recognized pro-rata over the life of the contract corresponding to delivery of the service. Turnover is attributable to one continuing activity, the development, sale, distribution and maintenance of technical software. 9 An analysis of turnover by geographical market is as follows:
1998 ------------------------ United Kingdom (Pounds) 2,204,313 Rest of Europe 3,145,196 United States 3,176,547 ------------------------ (Pounds) 8,526,056 ========================
3. LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (a) Loss on ordinary activities before taxation is stated after charging/(crediting):
1998 ------------------ Depreciation of owned fixed assets (Pounds) 172,977 Depreciation of fixed assets held under hire purchase contracts 28,001 Amortization of deferred development expenditure 264,171 Auditors' remuneration 17,000 Loss on disposal of fixed assets 1,215 Operating lease rentals - plant, machinery and vehicles 506,355 Operating lease rentals - land and buildings 273,768 Profit on foreign exchange (33,291) ==================
(b) Reconciliation of operating loss to net cash outflow from operating activities:
1998 -------------------- Operating loss (Pounds) (1,482,711) Depreciation of tangible fixed assets 200,978 Amortization of development costs 264,171 Loss on sale of tangible fixed assets 1,215 Increase in debtors (1,429,958) Increase in creditors 669,150 Exchange loss arising on retranslation of net assets of subsidiary undertaking and foreign branches (91,168) -------------------- Net cash outflow from operating activities (Pounds) (1,868,323) ====================
10 4. DIRECTORS' EMOLUMENTS
1998 ---------------------- Emoluments (Pounds) 139,484 ====================== Company contributions paid to money purchase pension scheme (Pounds) 10,175 ====================== No Member of money purchase pension scheme 1 ======================
5. STAFF COSTS
1998 ------------------- Wages and salaries (Pounds) 3,852,100 Social security costs 417,233 Other pension costs 155,849 ------------------- (Pounds) 4,425,182 ===================
The average monthly number of persons employed by the group during the year was as follows:
1998 --------------------- No Production and distribution 94 Administration 15 --------------------- 109 ===================== 6. INTEREST PAYABLE AND SIMILAR CHARGES 1998 ------------------- Bank loans and overdraft (Pounds) 187,372 Finance charges payable under hire purchase contracts 13,251 ------------------- (Pounds) 200,623 ===================
11 7. TAX ON LOSS ON ORDINARY ACTIVITIES
1998 ------------------- U.K. corporation tax (Pounds) --- Over provision in respect of prior years (44,000) Irrecoverable withholding tax written off 32,738 ----------------- (Pounds) (11,262) =================
As a result of available losses there is no current year U.K. corporation tax charge. Losses available to carry forward at 31 December 1998 are estimated at (Pounds)1.7 million. 8. INTANGIBLE FIXED ASSETS
Development Costs --------------------- Cost: At January 1, 1998 and December 31, 1998 (Pounds) 1,320,854 ===================== Amortization: At January 1, 1998 264,171 Provided during the year 264,171 ===================== At December 31, 1998 528,342 ===================== Net book value at December 31, 1998 (Pounds) 792,512 ===================== Net book value at January 1, 1998 (Pounds) 1,056,683 =====================
Development costs relate to specific projects undertaken by the group's development department based at Horton Cross. The major project to date is the creation of a single sign on product, which has been styled "MyNet". Intensive work began on this project in October 1995. The product became commercially available in 1997 and is being amortized over a five-year period from that time. 12 9. TANGIBLE FIXED ASSETS
Vehicles, Freehold fixtures and property equipment Total ------------------- --------------------- -------------------- Cost: At January 1, 1998 (Pounds) 1,190,507 (Pounds) 1,468,365 (Pounds) 2,658,872 Exchange adjustment --- 4,815 4,815 Additions --- 228,236 228,236 Transfer 61,598 (61,598) --- Disposals --- (9,724) (9,724) Deficit arising on revaluation (452,105) --- (452,105) ------------------- --------------------- -------------------- At December 31, 1998 800,000 1,630,094 2,430,094 ------------------- --------------------- -------------------- Depreciation: At January 1, 1998 22,203 930,451 952,654 Exchange adjustment --- 2,843 2,843 Transfer 12,320 (12,320) --- Provided during the year 12,320 188,658 200,978 Disposals --- (8,509) (8,509) Elimination on revaluation (46,843) --- (46,843) ------------------- --------------------- -------------------- At December 31, 1998 --- 1,101,123 1,101,123 ------------------- --------------------- -------------------- Net book value at December 31, 1998 (Pounds) 800,000 (Pounds) 528,971 (Pounds) 1,328,971 =================== ===================== ==================== Net book value at January 1, 1998 (Pounds) 1,168,304 (Pounds) 537,914 (Pounds) 1,706,218 =================== ===================== ====================
The net book value of vehicles, fixtures and equipment includes an amount of (Pounds)179,626 in respect of assets held under hire purchase contracts. Freehold land and buildings were valued at their open market valuation, in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors, on 14 September 1998 by Alder King, Property Consultants. 13 On the historical cost basis, these freehold land and buildings would have been included as follows: Cost: At January 1, 1998 (Pounds) 1,084,621 ====================== At December 31, 1998 (Pounds) 1,146,219 ====================== Cumulative depreciation based on cost: At January 1, 1998 (Pounds) 22,203 ====================== At December 31, 1998 (Pounds) 46,843 ======================
10. DEBTORS
1998 ---------------------- Trade debtors (Pounds) 3,296,266 Corporation tax 214,972 Other debtors 105,907 Prepayments and accrued income 124,352 ---------------------- (Pounds) 3,741,497 ======================
Included within trade debtors is (Pounds)14,412, which falls due after more than one year. Included within other debtors is (Pounds)27,000 relating to an amount owed by an officer of the company. 11. ANALYSIS OF CHANGES IN NET FUNDS/(DEBT)
At At January 1, 1998 Cash Flow Other Changes December 31, 1998 ------------------ ------------------- ---------------- ------------------ Cash at bank and in hand (Pounds)1,832,393 (Pounds)(1,533,815) (Pounds) ___ (Pounds) 298,578 Bank overdraft (29,984) (671,610) ___ (701,504) ------------------ ------------------- ---------------- ------------------ 1,802,499 (2,205,425) ___ (402,926) Loans due within one year (128,000) --- ___ (128,000) Loans due after one year (1,458,303) 946,303 --- (512,000) Hire purchase contracts (70,648) 26,885 (51,337) (95,100) ------------------ ------------------- ---------------- ------------------ (Pounds) 145,548 (Pounds)(1,232,237) (Pounds)(51,337) (Pounds)(1,138,026) ================== =================== ================ ==================
14 12. CREDITORS: amounts falling due within one year
1998 --------------------- Current installment due on bank loan (see Note 14) (Pounds) 128,000 Overdraft 701,504 Obligations under hire purchase contracts (see Note 15) 33,038 Trade creditors 348,850 Taxation and social security costs 244,097 Other creditors 187,308 Accruals and deferred income 3,203,612 --------------------- (Pounds) 4,846,409 =====================
Accruals and deferred income include (Pounds)2,585,837 in respect of deferred maintenance revenue. Bank overdrafts include a Revolving Credit Facility with Greyrock Business Credit of (Pounds)3 million made available up to 31 October 1999 at an aggregate interest rate of 4.5% per annum over LIBOR. This facility is secured by a debenture containing fixed and floating charges in favor of Greyrock Business Credit over the subsidiary undertaking's obligations under the facility. The fixed charge is over all present and future equipment of the subsidiary undertaking together with any investments held (whether marketable or not) in whatever form. All book and other debtors (excluding any bank deposits and credit balances with Lloyds Bank Plc) and revenues both present and future are also covered, together with any interests in patents, trade marks and/or goodwill held or acquired by the subsidiary undertaking. The floating charge is over all other property assets of the subsidiary undertaking not subject to the fixed charge under the debenture. 13. CREDITORS: amounts falling due after more than one year
1998 ------------------- Loan (see Note 14) (Pounds) 512,000 Obligations under hire purchase contracts (see Note 15) 62,062 ------------------- (Pounds) 574,062 ===================
15 14. LOAN
1998 ------------------------ The bank loan is repayable as follows: In one year or less (Pounds) 128,000 Between one and two years 128,000 Between two and five years 384,000 ------------------------- (Pounds) 640,000 =========================
During the year the group rearranged its debt financing through the repayment of the existing facility with Lloyds Bank Plc. This facility was replaced by the Revolving Credit Facility with Greyrock Business Credit (see note 12) and a Treasury Loan Facility with Barclays Bank PLC of (Pounds)640,000 repayable over 5 years in equal quarterly installments of (Pounds)32,000. Interest is payable under this facility at an aggregate interest rate of 3.5% per annum above LIBOR plus the associated cost rate to reflect the cost of the lender's dealings with the Bank of England. This facility is secured under a floating charge over all of the undertaking, property and assets of the subsidiary undertaking and a first legal charge over Horton Manor and the land at Horton Cross. The parties to these arrangements and the subsidiary undertaking are subject to an inter lender deed which regulates the respective rights of recourse to the assets of the subsidiary undertaking. 15. OBLIGATIONS UNDER HIRE PURCHASE CONTRACTS Amounts due under hire purchase contracts:
1998 ---------------------------- Amounts payable: In one year or less (Pounds) 41,367 Between one and two years 37,128 Between two and five years 31,273 ---------------------------- 109,768 Less: finance charges allocated to future periods (14,668) ---------------------------- (Pounds) 95,100 ============================ Hire purchase contracts are analyzed as follows: Current obligations (Pounds) 33,038 Non-current obligations 62,062 ---------------------------- (Pounds) 95,100 ============================
16 16. PROVISIONS FOR LIABILITIES AND CHARGES Deferred taxation which has been fully provided in the accounts is as follows:
1998 ---------------------------- Accelerated capital allowances (Pounds) 147,000 Losses available for offset (147,000) ---------------------------- (Pounds) - ============================
17. CALLED UP SHARE CAPITAL
1998 1998 No. of Shares Amount ------------------- ------------------ Authorized Preference shares of U.S. $1 each 6,272,500 (Pounds) 3,772,042 'A' preference shares of U.S. $1 each 1,800,000 1,090,909 Ordinary shares of 20p each 8,968,595 1,793,719 'A' ordinary shares of 20p each 4,381,405 876,281 ------------------- ------------------ 21,422,500 (Pounds) 7,532,951 =================== ================== Allotted, called up and fully paid Preference shares of U.S. $1 each 6,272,500 (Pounds) 3,772,042 'A' preference shares of U.S. $1 each 1,800,000 1,090,909 Ordinary shares of 20p each 6,076,665 1,215,333 'A' ordinary shares of 20p each 3,126,338 625,268 ------------------- ------------------ 17,275,503 (Pounds) 6,703,552 =================== ==================
On 12 January 1998 1,954 ordinary shares of (Pounds)1 each were issued at par for cash of (Pounds)1,954 following the exercise of a number of share options. The company undertook a significant share capital restructuring exercise on 20 January 1998. A 100: 1 bonus issue occurred for the holders of the ordinary shares and 'A' ordinary shares and, subsequent to this, the existing (Pounds)1 share options held over the ordinary and 'A' ordinary share capital have been adjusted accordingly. At the same time, the (Pounds)1 ordinary shares and (Pounds)1 'A' ordinary shares were divided into 20p ordinary shares and 20p 'A' ordinary shares. On 31 May 1998 Mr. R Davis exercised the options held over 39,895 ordinary shares of 20p each at their par value for a consideration of (Pounds)7,979. A further U.S.$2m was raised through a number of share issues on 25 August 1998. 1,800,000 'A' preference shares of U.S.$1 each were issued at their par value for cash of (Pounds)1,090,909. These 'A' preference shares rank equally in all respects with the existing U.S.$1 17 preference shares, except for the entitlement of U.S.$1.1109 per share in the event of a winding up or redemption. 45,000 of these shares were issued to Mr. G Reyes, a director of the company. In addition, 607,903 'A' ordinary shares of 20p each were issued at their par value for cash of (Pounds)121,580 together with a matching number of equity warrants to subscribe for further 'A' ordinary shares of 20p each. At 31 December 1998 these warrants were exercisable at any time in the five-year period ending 25 August 2003 at an exercise price of U.S.$3.29 per share. 15,198 of these shares and 15,198 equity warrants were issued to Mr. G Reyes. Finally, equity warrants to subscribe for 30,395 ordinary shares of 20p each at an exercise price of U.S.$3.29 per share were also issued. At 31 December 1998 these warrants were also exercisable at any time between the date of issue and 25 August 2003. The 'A' ordinary shares rank pari passu for capital and dividends and in all other respects with the existing ordinary shares in issue. The U.S.$1 preference shares carry a fixed cumulative preferential dividend of 6% per share per annum. However, no accrual has been made as ultimate payment is considered to be remote. These preference shares are redeemable at the earlier of: a) the company becoming listed on a recognized stock exchange; b) July 2001. At 31 December 1998 one organization was entitled within five years from 9 July 1997 to exercise a warrant to subscribe for 91,405 ordinary shares of 20p each in the capital of the company at a price of U.S.$3.285 per share. The same organization was entitled within five years from 18 December 1997 to exercise a warrant to subscribe for 30,300 ordinary shares of 20p each in the capital of the company at a price of U.S.$3.285 per share. At 31 December 1998 this same organization was also entitled to subscribe for 30,395 ordinary shares of 20p each within five years from 25 August 1998 at a price of U.S.$ 3.29 per share. At 31 December 1998 one shareholder was entitled within five years from 18 December 1997 to exercise a warrant to subscribe for 592,986 'A' ordinary shares of 20p each in the capital of the company at a price of U.S.$3.285 per share. The same shareholder was also entitled within 5 years from 25 August 1998 to subscribe for 592,705 'A' ordinary shares of 20p each of the company at a price of U.S.$ 3.29 per share. At 31 December 1998 Mr. Reyes was entitled within five years from 18 December 1997 to exercise a warrant to subscribe for 15,127 'A' ordinary shares in the capital of the company and for 15,198 'A' ordinary shares within five years from 25 August 1998, both at a price of U.S.$3.29 per share. 18 18. RECONCILIATION OF SHAREHOLDERS' FUNDS AND MOVEMENT ON RESERVES
Capital Profit Share Share redemption and loss Capital premium reserve account Total ---------------- ------------------ ---------------- ------------------- ----------------- At January 1, 1998 (Pounds)3,816,503 (Pounds)2,147,924 (Pounds) 278,200 (Pounds)(4,505,316) (Pounds)1,737,311 Retained loss for the financial year -- -- -- (2,027,060) (2,027,060) New shares issued 1,222,423 -- -- -- 1,222,423 Utilized on bonus issue 1,694,100 (1,694,100) -- -- -- Share issue costs -- (70,945) -- -- (70,945) Loss on retranslation of net assets of subsidiary undertaking and foreign branches -- -- -- (91,168) (91,168) Retranslation of U.S.$ preference shares (29,474) -- -- -- (29,474) ----------------- ----------------- --------------- ------------------ --------------- At December 31, 1998 (Pounds)6,703,552 (Pounds)382,879 (Pounds)278,200 (Pounds)(6,623,544) (Pounds)741,087 ================= ================= =============== ================== ===============
19. NON-EQUITY SHAREHOLDERS' FUNDS Non-equity shareholders' funds are attributable as follows:
1998 ------------------------ U.S.$1 preference shares (Pounds) 3,772,042 U.S.$1 'A' preference shares 1,090,909 ----------------------- (Pounds) 4,862,951 =======================
20. FINANCIAL COMMITMENTS At 31 December 1998 the group had annual commitments under non-cancelable operating leases as set out below:
Land and Buildings Other 1998 1998 --------------------- ------------------- Operating leases which expire: Within one year (Pounds) 23,913 (Pounds) 444,617 Between two and five years inclusive 88,327 98,737 After more than five years 145,169 -- ----------------------- ----------------------- (Pounds) 257,409 (Pounds) 543,354 ======================= =======================
19 21. PENSION COMMITMENT A subsidiary undertaking operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the group in an independently administered fund. 22. COMPANIES ACT 1985 These consolidated financial statements do not constitute "statutory accounts" within the meaning of the Companies Act 1985 of Great Britain. Statutory accounts for the year ended 31 December 1998 will be delivered to the Registrar of Companies for England and Wales. The auditor's report on these statutory accounts was unqualified and did not contain statements under Section 237(2) and (3) of the Companies Act 1985. 23. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AFFECTING THE FINANCIAL STATEMENTS The financial statements are prepared in conformity with accounting principles generally accepted in the United Kingdom (U.K. GAAP), which differ in certain significant respects from those applicable in the U.S., (U.S. GAAP). The differences applicable to the group are described below: Goodwill and other intangible assets-Under U.K. GAAP in force at the time of the acquisition, goodwill arising has been charged to reserves. Under U.S. GAAP, goodwill is capitalised and amortised by charges against income over its estimated useful life, not to exceed 40 years. For U.S. GAAP, goodwill has been amortised over a period of seven years. Deferred taxation -Under U.K. GAAP, provision is made for deferred taxation only to the extent that it is probable that an actual liability or asset will crystallise in the foreseeable future. U.S. GAAP require full provision for deferred income taxes under the liability method on all temporary differences and, if required, a valuation allowance is established to reduce gross deferred taxation assets to the amount which is more likely than not to be realised. Revaluation of fixed assets-Under U.K. GAAP, the group has revalued certain fixed assets. Upward revaluations are not permitted under U.S. GAAP. However, impairments have to be recognised by writing down long-lived assets to their fair value. The write down under U.K. GAAP establishes a new basis under U.S. GAAP, and no reconciling adjustment is required. Current assets and liabilities-Under U.K. GAAP, current assets include amounts, which fall due after more than one year. Under U.S. GAAP, such assets would be classified as non-current assets. 20 Foreign exchange-Under U.K. GAAP, the results of foreign branches and the subsidiary undertaking for the year are translated into sterling at the closing rate of exchange. U.S. GAAP require translation of the results at the average rate of exchange ruling for the year. Revenue recognition-The group includes a warranty period with the majority of its sales contracts under which they agree to offer technical support and any relevant product upgrades during the term of this warranty. The revenue relating to the warranty element of new sales contracts is recognised in full at the time of invoicing in the U.K. Under U.S. GAAP the revenue relating to this element of the sale is required to be deferred and recognised pro-rata over the period covered by the warranty. Effect on loss for the financial year of differences between U.K. and U.S. GAAP:
1998 --------------------- Loss for the financial year as reported under U.K. GAAP (Pounds)(2,056,534) U.S. GAAP adjustments: Amortization of goodwill (506,283) Foreign exchange (74,840) Deferred taxation 343,011 Revenue recognition (89,715) --------------------- Net loss under U.S. GAAP (Pounds) (2,384,361) ===================== Comprehensive income: 1998 --------------------- Net loss under U.S. GAAP (Pounds)(2,384,361) Other comprehensive income: Foreign exchange translation (91,168) --------------------- Comprehensive income under U.S. GAAP (Pounds)(2,475,529) =====================
21 Effect on shareholders' funds of differences between U.K. and U.S. GAAP:
1998 ---------------------- Shareholders' funds as reported under U.K. GAAP (Pounds) 741,087 U.S. GAAP adjustments: Goodwill at cost 3,543,984 Accumulated amortization (2,025,133) ---------------------- 1,518,851 Deferred taxation 450,579 Revenue recognition (309,516) ---------------------- (Pounds) 2,401,001 ======================
Cash flow-The principal difference between U.K. GAAP and U.S. GAAP is in respect of classification. Under U.K. GAAP the group presents its cash flows for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, acquisitions and disposals, equity dividends paid, management of liquid resources and financing. U.S. GAAP requires only three categories of cash flow activities which are operating, investing and financing. Cash flows arising from taxation and returns on investments and servicing of finance under U.K. GAAP would, with the exception of dividends paid, be included as operating activities under U.S. GAAP; dividend payments would be included as a financing activity under U.S. GAAP. In addition, capital expenditure and financial investment, acquisition and disposals and management of liquid resources under U.K. GAAP would be presented as investing activities under U.S. GAAP. U.K. GAAP defines cash as cash in hand and deposits repayable on demand less overdrafts held with any qualifying financial institution. U.S. GAAP defines cash and cash equivalents as cash in hand and short term highly liquid investments with original maturities exceeding three months or less. Cash flows in respect of short-term deposits with original maturities exceeding three months are included in investing activities under U.S. GAAP and are included in capital expenditure and financial investment under U.K. GAAP. 22 Under U.S. GAAP the following amounts would be reported:
1998 --------------------- Net cash used in operating activities (Pounds) (2,176,253) Net cash used in investing activities (176,899) Net cash provided by financing activities 910,505 Effect of changes in exchange rate (91,168) --------------------- Net decrease in cash and cash equivalents (1,533,815) Cash and cash equivalents at beginning of year 1,832,393 Cash and cash equivalents at end of year --------------------- (Pounds) 298,578 =====================
23 AXENT TECHNOLOGIES, INC. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following Unaudited Pro Forma Consolidated Balance Sheet at December 31, 1998 presents, on a pro forma basis, AXENT Technologies, Inc.'s (the "Company") consolidated financial position assuming the acquisition of CKS Limited ("CKS") had been consummated on December 31, 1998. The following Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1998 (collectively with the Unaudited Pro Forma Consolidated Balance Sheet, the "Pro Forma Financial Information") present, on a pro forma basis, the Company's consolidated results of operations assuming (i) the acquisition of CKS and (ii) the issuance by the Company of 1,486,146 shares of common stock to stockholders of CKS had each occurred on January 1, 1998. The acquisition has been accounted for as a purchase business combination and, accordingly, the purchase price has been allocated to tangible assets acquired and liabilities assumed, based upon their respective fair values, with the excess allocated to intangible assets to be amortized over the estimated economic lives of the intangible assets from the respective dates of acquisition. The Company received an independent third party valuation to establish the allocation of the total purchase price of this acquisition to the various assets acquired, including in-process research and development and the liabilities assumed. The portion of the purchase price allocated to in-process research and development will be recognized in the historical financial statements in the period in which the acquisition occurred. The consolidated accumulated deficit reflected in the Unaudited Pro Forma Consolidated Balance Sheet reflects the write-off of intangible assets attributable to the value of purchased in-process research and development associated with the acquisition of CKS. The expense related to in-process research and development is not reflected in the Unaudited Pro Forma Consolidated Statements of Operations because such expense will not have a continuing impact. The Pro Forma Financial Information is not intended to be indicative of the results which would actually have been obtained had the transactions described above occurred on the dates indicated or which may be obtained in the future. The pro forma adjustments are based upon available information and assumptions that the Company believes are reasonable in the circumstance. The Pro Forma Financial Information should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1998 as filed with the Securities and Exchange Commission (the "Commission") and the financial statements of CKS included elsewhere in this Form 8-K. 24 AXENT TECHNOLOGIES, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (amounts in thousands of U.S. dollars, except per share amounts)
CKS Pro Forma Pro Forma AXENT Limited Adjustments Consolidated (a) (b) (c) (d) --------------- --------------- ---------------- ------------------ Net revenues: Product licenses $ 80,912 $ 8,265 $ - $ 89,177 Services 20,118 5,695 - 25,813 --------------- --------------- ---------------- ------------------ Total net revenues 101,030 13,960 - 114,990 Cost of net revenues 9,804 1,158 - 10,962 --------------- --------------- ---------------- ------------------ Gross profit 91,226 12,802 - 104,028 Operating expenses: Sales and marketing 41,209 8,776 - 49,985 Research and development 18,956 2,816 - 21,772 General and administrative 5,995 5,006 - 11,001 Amortization of acquired intangible 450 437 4,043 2a 4,930 assets Acquisition-related charges 17,422 - - 17,422 --------------- --------------- ---------------- ------------------ Total operating expenses 84,032 17,035 4,043 105,110 --------------- --------------- ---------------- ------------------ Profit (loss) before royalties, interest and taxes 7,194 (4,233) (4,043) (1,082) Interest income and other 4,895 (298) - 4,597 Royalty income 1,862 - - 1,862 Income tax benefit (provision) (7,507) 586 - (6,921) --------------- --------------- ---------------- ------------------ Net income (loss) $ 6,444 $(3,945) $(4,043) $ (1,544) ================= ================= ================== ================== Net income (loss) per common share (basic): $0.26 $(0.06) ================= ================== Number of shares used in computing net income (loss) per common share outstanding (basic) 25,205 1,486 2b 26,691 ================= ================== ================== Net income (loss) per common share (diluted): $0.24 $(0.06) ================= ================== Number of shares used in computing net income (loss) per common share outstanding (diluted) 26,740 (49) 3 26,691 ================= ================== ==================
The accompanying notes are an integral part of these financial statements. 25 (a) Reflects the unaudited consolidated results of operations of the Company restated for the acquisition of Internet Tools, Inc. ("ITI") for the year ended December 31, 1998. On January 12, 1999 the Company consummated its merger with ITI in which it acquired 100% of the outstanding stock of ITI. The ITI business combination has been accounted for by the pooling-of- interests method of accounting and, accordingly, the assets, liabilities and stockholders' equity of ITI were combined with the Company's historical accounts at recorded values. This acquisition did not meet the criteria for a significant business combination and as such pro forma disclosures were not included in the audited results of operations for the year ended December 31, 1998 as presented in the Company's annual report for 1998 on Form 10-K. (b) Amounts have been derived from the translated historical British pound sterling denominated results of operations of CKS for the twelve month period ended December 31, 1998 prepared in accordance with accounting principles generally accepted in the United States. The historical statement of operations of CKS has been converted to U.S. dollars at the weighted average exchange rate for the period presented. Certain amounts have been reclassified to conform with the Company's presentation. (c) See Note 2 to Unaudited Pro Forma Consolidated Statements of Operations. (d) Reflects the results of operations of the Company, on a pro forma basis, assuming (i) the acquisition of CKS and (ii) the issuance by the Company of 1,486,146 shares of common stock to stockholders of CKS, had each been consummated on January 1, 1998. See notes to Pro Forma Financial Information 26 AXENT TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 Note 1 - Basis of Presentation The Unaudited Pro Forma Consolidated Statements of Operations do not give effect to potential cost savings and synergies that could result from the acquisition included therein. Management believes that the assumptions used in preparing the Unaudited Pro Forma Consolidated Statements of Operations provide a reasonable basis for presenting the significant effects for the acquisition included therein, that the pro forma adjustments give appropriate effect to those assumptions and that the pro forma adjustments are properly applied in the Unaudited Pro Forma Consolidated Statements of Operations. Note 2 - Pro Forma Adjustments The pro forma adjustments outlined below relate to the acquisition of CKS Limited. The purchase price has been allocated to tangible assets acquired and liabilities assumed, based upon their respective fair values, with the excess allocated to intangible assets to be amortized over the estimated economic lives of the intangible assets from the date of acquisition. The Company received an independent third party valuation to determine the allocation of the total purchase price of CKS. For purposes of this Pro Forma Financial Information, the Company has attributed the excess of the purchase price over the acquired net tangible assets for CKS of approximately $25 million to goodwill and other intangible assets with useful lives of between three and seven years. The actual goodwill recorded as of the acquisition date was approximately $26 million. The difference between the actual goodwill amount and the amount included in the pro forma balance sheet herein is due to the change in the net assets of CKS between December 31, 1998 and the acquisition date. Based on the results of the independent third party valuation, $2 million of the purchase price was allocated to in-process research and development and is being expensed in the Company's consolidated operating results in the period in which the acquisition occurred. The expense related to purchased in-process research and development has not been reflected in the accompanying Unaudited Pro Forma Consolidated Statement of Operations because the charge will not have a continuing impact. For the Year Ended December 31, 1998: (a) Reflects the increase in goodwill amortization resulting from the allocation of the purchase price to the acquired net tangible and intangible assets (principally tradename, customer relationships, goodwill, assembled workforce and existing technology) relating to the acquisition included therein. The assigned lives of the acquired intangible assets range from three to seven years. 27 (b) Reflects the adjustment to weighted average shares assuming the issuance of 1,486,146 shares of common stock to stockholders of CKS Limited had occurred on January 1, 1998. Note 3 - Basic and Diluted Net Loss per Share Basic and diluted net loss per share are computed using net loss available to common stockholders divided by the weighted average number of shares of the Company's common stock that were outstanding during the period presented and assumes that the issuance of 1,486,146 shares of common stock to stockholders of CKS Limited had occurred on January 1, 1998. As all common stock equivalents are antidilutive, basic and diluted net loss per share are the same for the period presented. 28 AXENT TECHNOLOGIES, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 (amounts in thousands of U.S. dollars)
CKS Pro Forma Pro Forma AXENT Limited Adjustments Consolidated (a) (b) (c) (d) --------- ---------- ----------- ------------ ASSETS Current assets: Cash and cash equivalents $ 80,035 $ 496 $ --- $ 80,531 Marketable securities 31,774 --- --- 31,774 Accounts receivable, net 28,300 5,473 --- 33,773 Other current assets 4,128 1,487 --- 5,615 --------- ---------- ----------- ------------ Total current assets 144,237 7,456 --- 151,693 Property and equipment, net 7,482 2,207 --- 9,689 Goodwill and other intangible assets 2,630 3,838 24,968 2a 31,436 Other assets 6,927 --- --- 6,927 --------- ---------- ----------- ------------ Total assets $ 161,276 $ 13,501 $ 24,968 $ 199,745 ========= ========== =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 15,764 $ 3,681 $ 6,000 2b 25,445 Deferred revenue 11,184 5,833 --- 17,017 --------- ---------- ---------- ------------ Total liabilities 26,948 9,514 6,000 42,462 --------- ---------- ---------- ------------ Stockholders' equity: Preferred --- 8,075 (8,075) 2c --- Common stock 523 3,056 (3,056) 2c 554 31 2d Additional paid-in capital 161,386 636 (636) 2c 186,310 24,924 2d Accumulated deficit (27,211) (7,904) 7,904 2c (29,211) (2,000) 2e Accumulated comprehensive income and other (370) 124 (124) 2c (370) --------- ---------- ---------- ------------ Total stockholders' equity 134,328 3,987 18,968 157,283 --------- ---------- ---------- ------------ Total liabilities and stockholders' equity $ 161,276 $ 13,501 $ 24,968 $ 199,745 ========= ========== ========== ============
The accompanying notes are an integral part of these financial statements. 29 (a) Reflects the unaudited consolidated financial position of the Company restated for the ITI acquisition as of December 31, 1998. On January 12, 1999 the Company consummated its merger with ITI in which it acquired 100% of the outstanding stock of ITI. The ITI business combination has been accounted for by the pooling-of-interests method of accounting and, accordingly, the assets, liabilities and stockholders' equity of ITI were combined with the Company's historical accounts at recorded values. This acquisition did not meet the criteria for a significant business combination and as such, pro forma disclosures were not included in the audited consolidated financial position of the Company as of December 31, 1998 as presented in the Company's annual report for 1998 on Form 10K. (b) Reflects the translated historical British pounds sterling denominated financial position of CKS as of December 31, 1998. The historical balance sheet of CKS has been converted to U.S. dollars at the December 31, 1998 exchange rate. (c) See Note 2 to Unaudited Pro Forma Consolidated Balance Sheet. (d) Reflects the consolidated financial position of the Company, on a pro forma basis, assuming the acquisition of CKS Limited had been consummated on December 31, 1998. See notes to Pro Forma Financial Information. 30 AXENT TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 Note 1 - Basis of Presentation Management believes that the assumptions used in preparing the Unaudited Pro Forma Consolidated Balance Sheet provide a reasonable basis for presenting the significant effects of the acquisition of CKS , that the pro forma adjustments give appropriate effect to those assumptions and that the pro forma adjustments are properly applied in the Unaudited Pro Forma Consolidated Balance Sheet. Note 2 - Pro Forma Adjustments Reflects the pro forma effects of the acquisition of CKS Limited including: (a) allocation of purchase price among net tangible and intangible assets as discussed below; (b) estimated acquisition related costs; (c) the elimination of the equity accounts of the acquired company; (d) the issuance of a total of 1,550,000 shares of AXENT stock for all the equity interests in CKS valued at $16.10 per share ($24.9 million) based on the approximated weighted average price (based on volume of shares traded) during the period from March 29, 1999 to April 5, 1999; and (e) the write-off of in-process research and development based on an independent third party valuation performed as of the acquisition date. The Company received an independent third party valuation to determine the allocation of the total purchase price of CKS. For purposes of the Unaudited Pro Forma Consolidated Financial Information, the Company has attributed the excess of the purchase price over the acquired net tangible assets of CKS at December 31, 1998 of approximately $25 million to goodwill and other intangibles with useful lives of between three and seven years. The adjustment was computed as follows (000's): 1,550,000 shares of AXENT common stock at $16.10 per share $ 24,995 Acquisition costs 6,000 ----------- Purchase consideration $ 30,955 Write-off of in-process research and development (2,000) CKS net assets at December 31, 1998 (3,987) ----------- Purchase price allocated to goodwill $ 24,968 ===========
The actual goodwill recorded as of the acquisition date was approximately $26 million. The difference between the actual goodwill amount and the amount included in the pro forma balance sheet herein is due to the change in the net assets of CKS between December 31, 1998 and the acquisition date. 31 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. Date: June 14, 1999 AXENT Technologies, Inc. /s/ Robert B. Edwards, Jr. --------------------------------------- By: Robert B. Edwards, Jr. Title: Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 32 EXHIBIT INDEX Exhibit No. Description of Exhibit - ----------- ---------------------- 10.37 (1) Share Exchange Agreement dated as of March 29, 1999 by and among AXENT Technologies, Inc. and the holders of all of the shares of capital stock, issued share capital and warrants of CKS Limited. 10.39 * Consent of Ernst and Young ________________________________________________________________________________ (1) Previously filed as an exhibit to AXENT's Form 8-K dated March 30, 1999 and filed on April 13, 1999. * File herewith. 33 EX-10.39 2 CONSENT OF ERNST & YOUNG EXHIBIT 10.39 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-71333, 333-79089 and 333-62689 and Form S-8 Nos. 333-73029, 333-47379, 333-47375, 333-47373, 333-08831, 333-08829 and 333-08827) of AXENT Technologies, Inc. of our report dated 14 June 1999 with respect to the consolidated financial statements of CKS Limited for the year ended 31 December 1998 included in the Current Report on Form 8-K of AXENT Technologies, Inc. dated 30 March 1999. Ernst & Young Bristol, England 14 June 1999 -----END PRIVACY-ENHANCED MESSAGE-----