-----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, BswQr2CGBiEonjRPNGgqgIvwInxgW2cRIOPO1nhL/yHfkc4vjUYjhhe4q0Ipx+bQ Eo40EASuxlYz0kXEvfS0GQ== /in/edgar/work/0000927016-00-003924/0000927016-00-003924.txt : 20001114 0000927016-00-003924.hdr.sgml : 20001114 ACCESSION NUMBER: 0000927016-00-003924 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000828 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOTTOMLINE TECHNOLOGIES INC /DE/ CENTRAL INDEX KEY: 0001073349 STANDARD INDUSTRIAL CLASSIFICATION: [7372 ] IRS NUMBER: 020433924 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-25259 FILM NUMBER: 761705 BUSINESS ADDRESS: STREET 1: 155 FLEET ST CITY: PORTSMOUTH STATE: NH ZIP: 03801 BUSINESS PHONE: 6034360700 MAIL ADDRESS: STREET 1: 155 FLEET ST CITY: PORTSMOUTH STATE: NH ZIP: 03801 8-K/A 1 0001.txt FORM 8K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 28, 2000 Bottomline Technologies (de), Inc. ------------------------------------------------------------------------ (Exact name of Registrant as Specified in Its Charter) Commission File Number: 000-25259 Delaware 02-0433294 ------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 155 Fleet Street, Portsmouth, New Hampshire 03801 ---------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (603) 436-0700 ITEM 2: Acquisition or Disposition of Assets On September 12, 2000, Bottomline Technologies (de), Inc. (the "Registrant") filed a Current Report on Form 8-K to report its acquisitions of Checkpoint (Holdings) Limited ("Checkpoint"), a private company incorporated in England and Wales, and Flashpoint, Inc. ("Flashpoint") a Massachusetts corporation. This amendment to the Registrant's Current Report on Form 8-K is being filed to include the Financial Statements and Pro Forma Financial Information required by Item 7 of Form 8-K. Item 7: FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED The following documents appear as Exhibit 99.01 to this report and are incorporated into this report by reference: . Reports of Independent Auditors . Checkpoint (Holdings) Limited Consolidated Balance Sheets as of April 30, 2000 and 1999 . Checkpoint (Holdings) Limited Consolidated Profit and Loss Accounts for the year ended April 30, 2000 and the period January 11, 1999 (inception) to April 30, 1999 and Checkpoint Security Services Limited Consolidated Profit and Loss Account for the period May 1, 1998 to March 10, 1999 and the year ended April 30, 1998. . Checkpoint (Holdings) Limited Consolidated Statements of Cash Flows for the year ended April 30, 2000 and the period January 11, 1999 (inception) to April 30, 1999 and Checkpoint Security Services Limited Consolidated Statement of Cash Flows for the period May 1, 1998 to March 10, 1999 and the year ended April 30, 1998. . Checkpoint (Holdings) Limited and Checkoint Security Services Limited Notes to the Accounts 1 The following documents appear as Exhibit 99.02 to this report and are incorporated into this report by reference: . Report of Independent Auditors . Flashpoint, Inc. Balance Sheets as of December 31, 1999 and June 30, 2000 (unaudited) . Flashpoint, Inc. Statements of Operations and Retained Earnings (Deficit) for the year ended December 31, 1999 and the six months ended June 30, 2000 (unaudited) . Flashpoint, Inc. Statements of Cash Flows for the year ended December 31, 1999 and the six months ended June 30, 2000 (unaudited) . Flashpoint, Inc. Notes to Financial Statements (b) UNAUDITED PRO FORMA FINANCIAL INFORMATION The following documents appear as Exhibit 99.03 to this report and are incorporated into this report by reference: . Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2000 (unaudited) . Pro Forma Condensed Consolidated Statement of Operations for the year ended June 30, 2000 (unaudited) . Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited) (c) ADJUSTED HISTORICAL FINANCIAL INFORMATION OF CHECKPOINT (HOLDINGS) LIMITED (UNAUDITED) The following documents appear as Exhibit 99.04 to this report and are incorporated into this report by reference: . Adjusted Checkpoint (Holdings) Limited Consolidated Balance Sheet as of April 30, 2000 (unaudited) . Adjusted Checkpoint (Holdings) Limited Consolidated Profit and Loss Accounts for the year ended April 30, 2000 (unaudited) (d) EXHIBITS ITEM NO. Description - -------- ----------- 2.1* Share Purchase Agreement between the Persons named in column (A) of Schedule 1 thereto and Bottomline Technologies (de), Inc. dated August 28, 2000. 2.2* Form of Loan Note issued to the Persons named in column (A) of Schedule 1 of the Share Purchase Agreement between the Persons named in column (A) of Schedule 1 thereto and Bottomline Technologies (de), Inc. dated August 28, 2000. 2.3* Stock Purchase Agreement by and among Bottomline Technologies (de), Inc., Flashpoint Inc. and Eric Levine dated August 28, 2000. 23.1 Consent of Ernst & Young LLP, Independent Auditors 23.2 Consent of Ernst & Young, Independent Auditors 23.3 Consent of Smith & Williamson, Independent Auditors 99.01 Historical financial statements of Checkpoint (Holdings) and Checkpoint Security Services Limited 2 99.02 Historical financial statements of Flashpoint, Inc. 99.03 Unaudited pro forma condensed consolidated financial statements 99.04 Adjusted historical financial statements of Checkpoint (Holdings) Limited (unaudited) * Previously filed SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Bottomline Technologies (de), Inc. Date: November 13, 2000 By: /s/ Robert A. Eberle Robert A. Eberle Executive Vice President, Chief Financial Officer and Treasurer 3 EX-23.1 2 0002.txt CONSENT OF ERNST & YOUNG LLP Exhibit 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-78471, 333-78467, 333-78469 and 333-78473) pertaining to the 1998 Employee Stock Purchase Plan, the Amended and Restated 1997 Stock Incentive Plan, the Amended and Restated 1989 Stock Option Plan and the 1998 Director Stock Option Plan of Bottomline Technologies (de), Inc. of our report dated October 3, 2000 with respect to the financial statements of Flashpoint, Inc. included in Bottomline Technologies (de), Inc.'s Current Report on Form 8-K/A, dated November 13, 2000, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP November 10, 2000 Boston, Massachusetts EX-23.2 3 0003.txt CONSENT OF ERNST & YOUNG Exhibit 23.2 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-78471, 333-78467, 333-78469 and 333-78473) pertaining to the 1998 Employee Stock Purchase Plan, the Amended and Restated 1997 Stock Incentive Plan, the Amended and Restated 1989 Stock Option Plan and the 1998 Director Stock Option Plan of Bottomline Technologies (de), Inc. of our report dated November 10, 2000 with respect to the consolidated financial statements of Checkpoint (Holdings) Limited as of April 30, 2000 and 1999 and for the one year ended April 30, 2000 and the period January 11, 1999 (inception) to April 30, 1999 and Checkpoint Security Services Limited for the period May 1, 1998 to March 10, 1999 included in Bottomline Technologies (de), Inc.'s Current Report on Form 8-K/A, dated November 13, 2000, filed with the Securities and Exchange Commission. /s/ Ernst & Young November 10, 2000 Reading, England EX-23.3 4 0004.txt CONSENT OF SMITH & WILLIAMSON Exhibit 23.3 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-78471, 333-78467, 333-78469 and 333-78473) pertaining to the 1998 Employee Stock Purchase Plan, the Amended and Restated 1997 Stock Incentive Plan, the Amended and restated 1989 Stock Option Plan and the 1998 Director Stock Option Plan of Bottomline Technologies (de), Inc. of our report dated November 10, 2000 with respect to the financial statements of Checkpoint Security Services Limited for the year ended April 30, 1998 included in Bottomline Technologies (de), Inc.'s Current Report on Form 8-K/A, dated November 13, 2000, filed with the Securities and Exchange Commission. /s/ Smith & Williamson November 10, 2000 Guildford, England EX-99.01 5 0005.txt HISTORICAL FINANCIAL STATEMENTS OF CHECKPOINT Exhibit 99.01 REPORT OF INDEPENDENT AUDITORS To: The Board of Directors Checkpoint (Holdings) Limited We have audited the consolidated balance sheets of Checkpoint (Holdings) Limited as at April 30, 2000 and 1999, and the related consolidated profit and loss accounts, reconciliation of movements in shareholders' funds and cash flow statements for the year ended April 30, 2000 and the period January 11, 1999 (inception) to April 30, 1999 and the consolidated profit and loss account, reconciliation of movements in shareholders' funds and cash flow statement of Checkpoint Security Services Limited for the period May 1, 1998 to March 10, 1999. 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 audits. We conducted our audits in accordance with United Kingdom auditing standards and 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 audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Checkpoint (Holdings) Limited at April 30, 2000 and 1999 and the consolidated results of its operations and its consolidated cash flows for the year ended April 30, 2000 and the period January 11, 1999 (inception) to April 30, 1999 and the consolidated results of operations and consolidated cash flows of Checkpoint Security Services Limited for the period May 1, 1998 to March 10, 1999, 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 24 of Notes to the Accounts). /s/ Ernst & Young Reading, England November 10, 2000 REPORT OF INDEPENDENT AUDITORS To: The Board of Directors Checkpoint (Holdings) Limited We refer to the accompanying profit and loss account, cash flow statement and reconciliation of movements in shareholders' funds for the year ended 30 April 1998. We were statutory auditors to the company for the year ended 30th April 1998 and issued an unqualified opinion on the financial statements for that year. Those financial statements were prepared in conformity with accounting policies generally accepted in the United Kingdom. We conducted our audit in accordance with Auditing Standards generally accepted in the United Kingdom. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. In our opinion the financial statements gave a true and fair view of the profits and cash flows of the company for the year ended 30 April 1998 in conformity with accounting policies generally accepted in the United Kingdom. The company changed its method of accounting for the recognition of certain revenue in the year ended 30 April 1999 which resulted in a restatement of the comparative figures in the 30 April 1999 accounts as required by United Kingdom accounting standards. This is further explained in note 2. GUILDFORD /s/ SMITH & WILLIAMSON ENGLAND 10 November 2000 CHARTERED ACCOUNTANTS REGISTERED AUDITOR 2 Checkpoint (Holdings) Limited and predecessor - --------------------------------------------------- CONSOLIDATED PROFIT AND LOSS ACCOUNTS for the periods from 1 May 1997 to 30 April 2000
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan. 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 Note (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 TURNOVER 3 20,670 2,838 15,821 15,183 Continuing operations 20,186 2,838 15,821 15,183 Discontinued operations 484 - - - Cost of sales 8,101 1,124 5,995 5,845 Continuing operations 7,928 1,124 5,995 5,845 Discontinued operations 173 - - - ------ ------ ------- ------ GROSS PROFIT 12,569 1,714 9,826 9,338 Administrative expenses 13,836 1,808 9,057 8,400 Redundancy costs - continuing activities 322 - - - ------ ------ ------- ------ 14,158 1,808 9,057 8,400 ------ ------ ------- ------ Continuing activities 13,853 1,808 9,057 8,400 Discontinued activities 305 - - - OPERATING (LOSS)/PROFIT 4 (1,589) (94) 769 938 Loss on sale of subsidiaries - discontinued activities 12 (338) - - - Interest receivable 23 7 - 1 Interest payable 5 (1,447) (195) (212) (154) ------ ------ ------- ------ (LOSS)/PROFIT FOR THE FINANCIAL PERIOD (3,351) (282) 557 785 Taxation on ordinary activities 8 - - 316 380 ------ ------ ------- ------ (LOSS)/PROFIT FOR THE FINANCIAL PERIOD (3,351) (282) 241 405 Dividends 9 - - 50 250 ------ ------ ------- ------ RETAINED (LOSS)/PROFIT FOR THE FINANCIAL PERIOD (3,351) (282) 191 155 ====== ====== ======= ======
There were no recognised gains or losses other than the results of the group reported above. A reconciliation to US GAAP is presented in note 24. The accompanying notes form an integral part of these financial statements. 3 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS as at 30 April 2000 and 30 April 1999
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 Note (Pounds)000 (Pounds)000 FIXED ASSETS Intangible fixed assets 10 9,446 11,466 Tangible fixed assets 11 1,737 2,140 Investments 12 33 6 ------ ------ 11,216 13,612 CURRENT ASSETS Stocks 13 1,235 1,420 Debtors 14 4,562 4,420 Cash at bank and in hand 1,351 773 ------ ------ 7,148 6,613 CREDITORS: amounts falling due 15 6,370 5,441 within one year ------ ------ NET CURRENT ASSETS 778 1,172 ------ ------ TOTAL ASSETS LESS CURRENT LIABILITIES 11,994 14,784 CREDITORS: amounts falling due after more than one year Loans 16 13,233 12,744 Obligations under hire purchase contracts and finance leases 17 34 301 ------ ------ 13,267 13,045 ------ ------ (1,273) 1,739 ====== ====== CAPITAL AND RESERVES Called up share capital 18 222 207 Share premium account 19 1,946 1,814 Profit and loss account 19 (3,441) (282) ------ ------ EQUITY SHAREHOLDERS' FUNDS (1,273) 1,739 ====== ======
A reconciliation to US GAAP is presented in note 24. The accompanying notes form an integral part of these financial statements. - ------------------------------------------------------------------------------- 4 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS for the periods from 1 May 1997 to 30 April 2000
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 11 January 1 May 1 May 1999 to 1999 to 1998 to 1997 to 30 April 30 April 10 March 30 April 2000 1999 1999 1998 Note (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES a 2,238 (129) 717 964 RETURNS ON INVESTMENT AND SERVICING OF FINANCE Interest received 23 7 - 1 Interest paid (614) (54) (165) (154) Interest element of finance lease rental payments (35) (8) (47) - Issue costs of new loans - (250) - - ------ ------ ------ ------ (626) (305) (212) (153) ------ ------ ------ ------ TAXATION Corporation tax (paid)/received (159) 17 (61) (201) ------ ------ ------ ------ CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire tangible fixed assets (404) (33) (980) (791) Payments to acquire intangible fixed assets (50) - - - Payments to acquire investment - - (6) - Receipts from sale of tangible fixed assets 6 7 104 70 Receipts from sale of investment 94 - - - ------ ------ ------ ------ (354) (26) (882) (721) ------ ------ ------ ------ ACQUISITIONS AND DISPOSALS Purchase of subsidiary undertaking - (11,535) - - Net cash acquired with subsidiary undertaking - (945) - - Net cash disposed of with subsidiary undertaking (293) - - - ------ ------ ------ ------ (293) (12,480) - - ------ ------ ------ ------ EQUITY DIVIDENDS PAID - - (203) (128) FINANCING Finance lease repayments (315) (62) 243 77 New long term loans - 5,325 - (66) New ordinary shares issued 114 2,071 1 44 Share issue costs - (50) - - New loan stock - 6,412 - - Repayment of long term loans (46) - (91) - ------ ------ ------ ------ (247) 13,696 153 55 ------ ------ ------ ------ INCREASE/(DECREASE) IN CASH b 559 773 (488) (184) ====== ====== ====== ======
Cash flows under US GAAP are summarised in note 24. The accompanying notes form an integral part of these financial statements. - -------------------------------------------------------------------------------- 5 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS for the periods from 1 May 1997 to 30 April 2000 a. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 11 January 1 May 1 May 1999 to 1999 to 1998 to 1997 to 30 April 30 April 10 March 30 April 2000 1999 1999 1998 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 Operating (loss)/profit (1,589) (94) 769 938 Exchange adjustments - - - (1) Amortisation 2,070 279 - - Depreciation 684 109 619 600 Profit on sale of fixed assets (7) (2) (55) (30) Decrease/(Increase) in stocks 121 (160) (85) (337) Increase in debtors (230) 38 (1,089) (1,025) Increase in creditors 997 (299) 558 819 Employee share scheme charge 192 - - - ---------- ---------- ---------- ---------- Net cash inflow from operating activities 2,238 (129) 717 964 ========== ========== ========== ==========
b. ANALYSIS OF NET DEBT Checkpoint Security Services Limited
At Cash At Cash At 1 May flow 30 April flow 10 March 1997 1998 1999 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 Cash at bank and in hand 143 (100) 43 138 181 Bank overdraft (414) (84) (498) (626) (1,124) ------ ------ ------ ------ ------ Cash (271) (184) (455) (488) (943) Debt due after one year (1,067) 101 (966) 21 (945) Debt due within one year (274) (112) (386) (28) (414) ------ ------ ------ ------ ------ (1,612) (195) (1,807) (495) (2,302) ====== ====== ====== ====== ======
- ------------------------------------------------------------------------------- 6 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS for the periods from 1 May 1997 to 30 April 2000 b. ANALYSIS OF NET DEBT (continued) Checkpoint (Holdings) Limited
Cash Acquisitions/ At Cash Other At flow Disposals 30 April flow non-cash 30 April 1999 movement 2000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Cash at bank and in hand 773 - 773 578 - 1,351 Bank overdraft - - - (19) - (19) ------ ------ ------ ------ ------ ------ Cash 773 - 773 559 - 1,331 Loans (11,487) (2,038) (13,525) 46 (932)* (14,411) Finance lease obligations 62 (638) (576) 315 - (261) ------ ------ ------ ------ ------ ------ (10,652) (2,676) (13,328) 920 (932) (13,340) ====== ====== ====== ====== ====== ======
* Relates to interest paid in the form of additional loan notes issued. c. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Increase/(decrease) in cash in the period 559 773 (488) (184) Cash inflow/(outflow) from increase in loans 361 (11,675) (7) (11) Issue costs of new loans - 250 - - ------ ------ ------ ------ Change in net debt arising from cash flows 920 (10,652) (495) (195) Loans and finance leases acquired with subsidiaries - (1,359) - - Loan stock issued on acquisition of subsidiary - (1,317) - - ------ ------ ------ ------ Change in net debt arising from cash flows 920 (13,328) (495) (195) Other non-cash movement (932) - - - ------ ------ ------ ------ Movement in net debt (12) (13,328) (495) (195) Net debt at beginning of period (13,328) - (1,807) (1,612) ------ ------ ------ ------ Net debt at end of period (13,340) (13,328) (2,302) (1,807) ====== ====== ====== ======
- ------------------------------------------------------------------------------- 7 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 1. ACCOUNTING POLICIES Accounting convention The accounts are prepared under the historical cost convention in accordance with applicable United Kingdom accounting standards. Basis of consolidation The accounts present the consolidated financial position for Checkpoint (Holdings) Limited as at its last two accounting reference dates and the results of operations and cash flows of Checkpoint (Holdings) Limited and its predecessor Checkpoint Security Services Limited for the three years to its last accounting reference date. The results and cash flows are presented for the following periods: 1 May 1997 to 30 April 1998; 1 May 1998 to 10 March 1999 (date of acquisition of Checkpoint Security Services Limited by Checkpoint (Holdings) Limited); 11 January 1999 to 30 April 1999 (date of incorporation of Checkpoint (Holdings) Limited to accounting reference date); and 1 May 1999 to 30 April 2000. Checkpoint Security Services Limited has been included in the group accounts using the acquisition method of accounting. Depreciation and amortisation Depreciation and amortisation are calculated on the straight line basis so as to write off the cost of intangible and tangible fixed assets over their estimated useful lives which are as follows: Short leasehold improvements - over the length of the lease Freehold buildings - 50 years Office equipment - 3 to 10 years Motor vehicles - 4 to 5 years Advance royalty - 3 years Goodwill - 5 years Deferred Taxation Deferred taxation is provided using the liability method on all timing differences, including those relating to pensions and other post-retirement benefits, to the extent that they are expected to reverse in the future without being replaced, calculated at the rate at which it is anticipated the timing differences will reverse. Advance corporation tax which is expected to be recoverable in the future is deducted from the deferred taxation balance. Deferred taxation assets are only recognised if recovery without replacement by equivalent debit balances is reasonably certain. Stocks Stocks are valued at the lower of cost and net realisable value. Cost includes all costs included in bringing each product to its present location and condition. Net realisable value is based on established selling price less any further costs expected to be incurred to completion and disposal. - -------------------------------------------------------------------------------- 8 Checkpoint (Holdings) Limited and predecessor - -------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 1. ACCOUNTING POLICIES (continued) Research and development Research and development expenditure is written off as incurred. Goodwill Goodwill is valued as the difference arising on acquisition between the purchase price paid and the fair value of separately identifiable tangible and intangible assets acquired. Positive goodwill arising on acquisitions since 1 January 1998 is carried on the balance sheet and is amortised over its useful life on a straight line basis. It is reviewed for impairment at the end of the first full financial year following the acquisition. Goodwill arising on acquisitions prior to 31 December 1997 was set off directly against reserves. Goodwill previously eliminated against reserves has not been reinstated on implementation of FRS 10. Leases and hire purchase commitments Assets held under finance leases and hire purchase contracts are capitalised at their fair value on the inception of the leases and depreciated over their estimated useful lives. The finance charges are allocated over the period of the lease in proportion to the capital amount outstanding. Rentals payable under operating leases are charged in the profit and loss on a straight line basis over the lease term. Service contracts Turnover relating to service contracts is recognised evenly over the period of the contract. Employee share award scheme Where share options or shares are granted to employees the company recognises as a charge in the profit and loss account the difference between the fair value of the shares at the date the award is made and the amount of the consideration the participants may be required to pay for the shares. This charge is spread evenly over the period in which the share options vest or immediately if shares are issued. 2. PRIOR YEAR ADJUSTMENT In periods prior to 30 April 1999 the company recognised turnover for service contracts at the start of the contract. As from 1 May 1998 the company now recognises the turnover evenly over the period of the contract in order to match the revenue with the incidence of costs. The effect of this change in policy was to reduce the operating profit before taxation by (Pounds)333,678 in the year to 30 April 1999 and to create an accrual for deferred revenue of (Pounds)1,598,631 at 30 April 1999. The prior period comparatives have been adjusted accordingly. The change in policy has no effect on the cashflow reported. - -------------------------------------------------------------------------------- 9 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 3. TURNOVER Turnover is attributable to the principal activities of the group which are the design, development, sale and support of secure payment and documentation management solutions and services. Geographical analysis of turnover is as follows:
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 UK 18,818 2,420 13,380 12,512 Overseas 1,852 418 2,441 2,671 ------ ----- ------ ----------- 20,670 2,838 15,821 15,183 ------ ----- ------ -----------
4. OPERATING PROFIT ON ORDINARY ACTIVITIES Profit on ordinary activities is stated after charging:
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Amortisation 2,070 279 - - Depreciation charge - owned assets 518 71 402 379 - assets under hire purchase contracts 167 37 217 221 Profit on disposal of fixed assets (7) (2) (55) (30) Auditor's remuneration - audit services (UK) 26 4 21 13 - audit services (Overseas) - - 3 3 - non-audit services 5 1 5 16 Research & development costs (inclusive of salary costs) 767 146 861 1,030 Operating lease costs - land and buildings 197 28 186 172 - other 298 43 246 151 ------ ----- ------ -----------
In addition to the amounts disclosed above, the auditors received (Pounds)347,640 for non-audit services in relation to the disposal of Checkpoint Security Services Limited on 11 March 1999. - -------------------------------------------------------------------------------- 10 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 5. INTEREST PAYABLE
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 On bank loans and overdrafts 450 70 163 82 On other loans 962 117 2 37 Hire purchase interest 35 8 47 35 ------- ------- ---------- ------- 1,447 195 212 154 ======= ======= ========== =======
6. STAFF COSTS
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Wages and salaries 7,267 888 5,520 5,084 Social security costs 735 84 524 541 Pension contributions 70 12 78 86 ------- ------- ---------- ------- 8,072 984 6,122 5,711 ======= ======= ========== ======= The average number of persons employed during the period was as follows: Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 No. No. No. No. Finance and administration 26 7 17 18 Sales and marketing 70 31 75 67 Customer support and engineering 102 39 94 60 Research, development and technology 42 14 35 34 ------- ------- ---------- ------- 240 91 221 179 ======= ======= ========== =======
- -------------------------------------------------------------------------------- 11 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 7. DIRECTORS' REMUNERATION
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Aggregate emoluments (including benefits in kind) 635 92 696 793 Aggregate contributions to individual money purchase pension scheme - - 78 86 ------------- ----------- ---- ----------- 635 92 774 879 ------------- ----------- ---- ----------- The highest paid director was remunerated as follows: Emoluments (including benefits in kind) 160 23 94 114 Contribution to money purchase pension scheme - - - - ------------- ----------- ---- ----------- 160 23 94 114 ------------- ----------- ---- -----------
8. TAXATION
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 UK corporation tax - - 185 228 (Over)/under provision in previous period - - (64) 152 ACT recoverable written off - - 51 - Overseas tax - - 144 - ------------- ----------- ---- ----------- - - 316 380 ------------- ----------- ---- -----------
At 30 April 2000 the Checkpoint (Holdings) Limited group had an unrecognised deferred tax asset of (Pounds)272,000 (30 April 1999: (Pounds)78,000). This related to taxation losses carried forward of (Pounds)132,000 (30 April 1999: (Pounds)50,000), depreciation charged in advance of capital allowances of (Pounds)64,000 (30 April 1999: (Pounds)28,000) and a capital loss of (Pounds)76,000 (30 April 1999: (Pounds)nil) relating to the disposals of the subsidiaries in the period. At 10 March 1999 the Checkpoint Security Services Limited group had an unrecognised deferred taxation asset of (Pounds)28,000 which related to depreciation charged in advance of capital allowances. - -------------------------------------------------------------------------------- 12 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 9. DIVIDENDS
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Paid: On `A' Ordinary shares - - 11 22 On Ordinary shares - - 39 74 Proposed: On `A' Ordinary shares - - - 35 On Ordinary shares - - - 119 ---- ----- -------- ----------- - - 50 250 ---- ----- -------- -----------
10. INTANGIBLE FIXED ASSETS
Checkpoint (Holdings) Limited 11 January 1999 to 30 April 2000 Advance royalty Goodwill Total (Pounds)000 (Pounds)000 (Pounds)000 COST: On incorporation 11 January 1999 - - - Additions - 11,745 11,745 ----- -------- ----------- At 30 April 1999 - 11,745 11,745 Additions 50 - 50 ----- -------- ----------- At 30 April 2000 50 11,745 11,795 ----- -------- ----------- AMORTISATION: On incorporation 11 January 1999 - - - Charge in the period - 279 279 ----- -------- ----------- At 30 April 1999 - 279 279 Charge in the year - 2,070 2,070 ----- -------- ----------- At 30 April 2000 - 2,349 2,349 ----- -------- ----------- NET BOOK VALUE: At 30 April 2000 50 9,396 9,446 ===== ======== =========== At 30 April 1999 - 11,466 11,466 ===== ======== ===========
- -------------------------------------------------------------------------------- 13 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 11. TANGIBLE FIXED ASSETS Checkpoint (Holdings) Limited 11 January 1999 to 30 April 2000
Short Freehold leasehold land & Office Motor improvements buildings equipment vehicles Total (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 COST: On incorporation 11 January 1999 - - - - - Acquisition of subsidiary undertaking 82 791 2,792 619 4,284 Additions - - 33 - 33 Disposals - - - (67) (67) ------- ------ ------ ------ ------ At 30 April 1999 82 791 2,825 552 4,250 Additions 10 6 388 - 404 Disposals - - (819) (371) (1,190) Disposal of subsidiary undertaking - - (74) - (74) ------- ------ ------ ------ ------ At 30 April 2000 92 797 2,320 181 3,390 ------- ------ ------ ------ ------ DEPRECIATION: On incorporation 11 January 1999 - - - - - Acquisition of subsidiary undertaking 18 54 1,604 388 2,064 Charge for the period - 2 86 20 108 On disposals - - - (62) (62) ------- ------ ------ ------ ------ At 30 April 1999 18 56 1,690 346 2,110 Charge for the period 17 12 578 78 685 On disposals - - (807) (296) (1,103) Disposal of subsidiary undertaking - - (39) - (39) ------- ------ ------ ------ ------ At 30 April 2000 35 68 1,422 128 1,653 ------- ------ ------ ------ ------ NET BOOK VALUE: At 30 April 2000 57 729 898 53 1,737 ======= ====== ====== ====== ====== At 30 April 1999 64 735 1135 206 2,140 ======= ====== ====== ====== ======
- -------------------------------------------------------------------------------- 14 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 11. TANGIBLE FIXED ASSETS (continued) Included in freehold land and buildings is land valued at (Pounds)200,000 which is not depreciated. Included in the above are assets held under hire purchase and finance leases contracts as follows:
Office equipment Motor vehicles (Pounds)000 (Pounds)000 Cost at 30 April 2000 612 134 ======= ======= Accumulated depreciation at 30 April 2000 367 73 ======= ======= Cost at 30 April 1999 779 245 ======= ======= Accumulated depreciation at 30 April 1999 304 98 ======= =======
12. INVESTMENTS
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 Own shares 33 - Subsidiary - Checkpoint International SA de CV - 6 ------- ------- 33 6 ======= =======
The `own shares' are held by Checkpoint (Holdings) Limited Employee Benefit Trust. On 11 March 1999, the group acquired the Checkpoint Security Services Limited group of companies for consideration of (Pounds)12,000,000 satisfied by cash of (Pounds)10,682,903, the issue of loan notes of (Pounds)800,000 and the issue of loan stock of (Pounds)517,097. Goodwill arising on the acquisition has been capitalised and is being amortised over five years. The investment in Checkpoint Security Services Limited has been included in the company's balance sheet at its fair value at the date of acquisition. - -------------------------------------------------------------------------------- 15 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 12. INVESTMENTS (continued) Analysis of the acquisition of Checkpoint Security Services Limited group of companies:
Net assets at date of acquisition: Book value and fair value to group (Pounds)000 Tangible fixed assets 2,226 Stock 1,260 Debtors 4,617 Cash (943) Creditors due within one year (4,552) Creditors due after one year (1,501) -------- 1,107 Goodwill arising on acquisition 11,745 -------- 12,852 ======== Discharged by: Cash 10,683 Loan notes 800 Loan stock 517 Costs associated with acquisition 852 ======== 12,852 ========
The Checkpoint Security Services Limited group of companies contributed (Pounds)1,938,533 to the group's net operating cash flows, paid (Pounds)43,378 in respect of net returns on investments and servicing of finance, and utilised (Pounds)386,474 for capital expenditure and financial investment. The Checkpoint Security Services Limited group of companies earned a profit after tax of (Pounds)432,701 in the year ended 30 April 1999 (1998: (Pounds)404,598), of which (Pounds)328,856 arose in the period 1 May 1998 to 11 March 1999. The summarised profit and loss account for the period from 1 May 1998 to the effective date of acquisition is as follows:
(Pounds)000 Turnover 15,821 ======= Profit before tax 569 Taxation (240) ------- 329 =======
There were no gains or losses in the period from 1 May 1998 to 11 March 1999 other than the profit of (Pounds)328,856 above. - -------------------------------------------------------------------------------- 16 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 12. INVESTMENTS (continued) On 22 February 2000, the group completed the sale of Compagnie Nationale des Machines de Bureau SA (`CNMB'), a subsidiary of Checkpoint Security Services Limited. The sale was made to J Shore, a director of Checkpoint Security Services Limited. The disposal is analysed as follows:
Net assets disposed of: (Pounds)000 Fixed assets 36 Stock 62 Debts 193 Cash 293 Other creditors (301) --------- 283 Loss on disposal (283) ========= Satisfied by: Cash - =========
The profit attributable to members of the parent company include profits of (Pounds)14,518 made by CNMB up to its date of disposal. The cashflow relating to the disposal of CNMB was an outflow of (Pounds)293,284. During the year CNMB contributed (Pounds)30,368 of the group's net operating cash flows and utilised (Pounds)22,602 for capital expenditure and financial investment. On 7 January 2000, the group completed the sale of Checkpoint International SA de CV ("CISA"), a subsidiary of Checkpoint Security Services Limited. CISA had net assets of (Pounds)55,300 at the date of disposal for which (Pounds)1 cash was received, resulting in a loss on disposal of (Pounds)55,299. 13. STOCKS
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 Raw materials 350 449 Stocks of finished goods and goods for resale 885 971 ----- ----- 1,235 1,420 ===== =====
The replacement value of stock is not significantly different from the amounts disclosed above. - -------------------------------------------------------------------------------- 17 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 14. DEBTORS
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 Trade debtors 3,916 3,920 Other debtors 76 61 Amount due from related undertakings - 44 Prepayments and accrued income 349 333 Corporation tax receivable 221 62 ----- ----- 4,562 4,420 ===== =====
15. CREDITORS: (amounts falling due within one year)
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 Bank overdraft 19 - Current instalments due on bank loans (see note 16) 1,178 781 Obligations under HP and finance leases (see note 17) 227 275 Trade creditors 976 1,116 Other taxes and social security costs 712 738 Other creditors 2 20 Accruals 1,396 912 Deferred revenue 1,860 1,599 Corporation tax - - ----- ----- 6,370 5,441 ===== =====
- -------------------------------------------------------------------------------- 18 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 16. LOANS
Checkpoint Checkpoint (Holdings) Services Limited Limited 30 April 30 April 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Amounts falling due: In one year or less or on demand 1,225 800 112 In more than one year but not more than two years 1,175 1,225 112 In more than two years but not more than five years 6,487 4,025 263 In more than five years 5,774 7,794 234 ------ ------ ------ 14,661 13,844 721 Less: issue costs (250) (319) - ------ ------ ------ Less: included in creditors: amounts falling 14,411 13,525 721 due within one year (note 14) (1,178) (781) (112) ------ ------ ------ 13,233 12,744 609 ====== ====== ====== Details of loans not wholly repayable within five years are as follows: Checkpoint Security Checkpoint (Holdings) Services Limited Limited 30 April 30 April 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Bank Mortgage - - 364 Bank Loan 1 - - 77 Fixed rate 11% to 14% Loan Stock 2004 to 2007 7,483 7,044 - Less: issue costs (132) (148) - Bank loan 2 6,000 6,000 - Less: issue costs (118) (152) - ------ ------ ------ 13,233 12,744 441 ====== ====== ======
The Bank Mortgage bears interest at 2% over Nat West Bank base rate for a term of 25 years from October 1992 repayable in equal instalments from November 1995. Bank Loan 1 bears interest at 2% over Nat West Bank base rate for a term of 10 years from September 1995 repayable in equal monthly instalments from September 1997. The loan stock is repayable in 6 equal half yearly instalments starting on 31 October 2004. Bank loan 2 is repayable in 6 equal half yearly instalments starting on 31 October 2004. - -------------------------------------------------------------------------------- 19 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 17. OBLIGATIONS UNDER HIRE PURCHASE CONTRACTS AND FINANCE LEASES
30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 In one year or less (note 15) 227 275 In two to five years 34 301 ---- ---- 261 576 ==== ====
18. SHARE CAPITAL Checkpoint Security Services Limited
10 March 30 April 1999 1998 (Pounds)000 (Pounds)000 AUTHORISED 213,200 Ordinary shares of 5p each 11 11 85,731 "A" Ordinary shares of 5p each 4 4 500,000 11% Redeemable Preference shares of (Pounds)1 each 500 500 ---- ---- 515 515 ==== ==== ALLOTTED, CALLED UP AND FULLY PAID 213,200 (1998: 213,135) Ordinary shares of 5p each 11 11 63,170 "A" Ordinary shares of 5p each 3 3 ---- ---- 14 14 ==== ====
During the period ended 10 March 1999, 65 Ordinary shares of 5p each were issued at (Pounds)15.75 each as part of an executive share scheme. During the year ended 30 April 1998, 2,795 Ordinary shares of 5p each were issued at (Pounds)15.75 each as part of an executive share scheme. The "A" Ordinary shareholders are entitled to a preferential dividend of 17.4133 pence per share each six months and then participate in any dividend declared to Ordinary shareholders in excess of that amount. - -------------------------------------------------------------------------------- 20 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 18. SHARE CAPITAL (continued) On a return of Capital the "A" Ordinary shareholders have a right to receive in preference to payments to Ordinary shareholders (Pounds)3.166 per share plus any accrued dividend and then participate in any amount above this paid to Ordinary shareholders. "A" Ordinary and Ordinary shareholders have equal voting rights. Checkpoint (Holdings) Limited
30 April 30 April 2000 1999 Number (pounds)000 Number (pounds)000 A Ordinary Shares of 10p each 1,608,000 161 1,608,000 161 B Ordinary Shares of 10p each 240,000 24 240,000 24 Ordinary Shares of 10p each 552,000 55 552,000 55 ------ ------ 240 240 ====== ====== ALLOTTED, CALLED UP AND FULLY PAID 30 April 30 April 2000 1999 Number (pounds)000 Number (pounds)000 A Ordinary Shares of 10p each 1,608,000 161 1,608,000 161 B Ordinary Shares of 10p each 240,000 24 240,000 24 Ordinary shares of 10p each 370,570 37 223,200 22 ------ ------ 222 207 ====== ======
All allotted shares detailed above were allotted for (Pounds)1. The company's Employee Benefit Trust held 32,732 Ordinary Shares of 10p each at 30 April 2000. The rights attaching to each class of share are as follows: . As regards dividends: All classes rank pari passu until 1 May 2004. . As regards capital: On a return of assets the capital available for distribution shall pay firstly the A ordinary shareholders the amount credited as paid up on the A Ordinary Shares and secondly pay the B ordinary shareholders and ordinary stockholders (as if they were one class) the amounts paid up on their respective shares. Thereafter, all classes rank pari passu. . As regards voting: All classes rank pari passu. - -------------------------------------------------------------------------------- 21 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 19. RECONCILIATION OF SHAREHOLDERS' FUNDS AND MOVEMENT ON RESERVES Checkpoint Security Services Limited 1 May 1997 to 10 March 1999
Called up Share Other Profit and share capital premium Reserve loss account Total (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 At 1 May 1997 14 294 400 8 716 Profit for the year - - - 405 405 Dividends - - - (250) (250) New shares issued - 44 - - 44 ----- ----- ----- ----- ------ At 30 April 1998 14 338 400 163 915 New shares issued - 1 - - 1 Profit for the period - - - 241 241 Dividends - - - (50) (50) ----- ----- ----- ----- ------ At 10 March 1999 14 339 400 354 1,107 ===== ===== ===== ===== ====== Checkpoint (Holdings) Limited 11 January 1999 to 30 April 2000 Called up Share Profit and share capital premium loss account Total (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Loss for the period - - (282) (282) New shares issued 207 1,864 - 2,071 Share issue expenses - (50) - (50) ------ ----- ------ ------ At 30 April 1999 207 1,814 (282) 1,739 Loss for the period - - (3,351) (3,351) Share award scheme - - 192 192 New shares issued 15 132 - 147 ------ ---- ------ ------ At 30 April 2000 222 1,946 (3,441) (1,273) ====== ===== ====== ======
- -------------------------------------------------------------------------------- 22 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 20. FINANCIAL COMMITMENTS The group has annual commitments under operating leases as follows.
Land and buildings Checkpoint Security Checkpoint (Holdings) Services Limited Limited 30 April 30 April 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Leases which expire within one year 38 - 9 Lease which expire in two to five years 11 58 54 Leases which expire after more than five years 112 104 104 ---- ---- ---- 161 162 167 ==== ==== ==== Other operating leases Leases which expire within one year 80 35 66 Lease which expire in two to five years 162 230 218 Leases which expire after more than five years - - - ---- ---- ---- 242 265 284 ==== ==== ====
21. RELATED PARTY TRANSACTIONS During the year ended 30 April 2000 Checkpoint Security Services Limited sold its shareholding in its subsidiary CNMB to J C Shore, a director of Checkpoint Security Services Limited (note 12). 22. ULTIMATE PARENT COMPANY Checkpoint (Holdings) Limited At 30 April 2000 and 30 April 1999, the company's immediate parent undertaking was Mercury Asset Management Limited. Copies of the company's accounts are available from 33 King William Street, London, EC4R 9DU. In the directors opinion the company's ultimate parent undertaking and controlling party was Merrill Lynch & Co. Inc., which is incorporated in the United States. Copies of its group accounts are available from The World Trade Center, New York, New York, 10080, United States. - -------------------------------------------------------------------------------- 23 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 23. POST BALANCE SHEET EVENTS The entire share capital of Checkpoint (Holdings) Limited has been purchased by Bottomline Technologies Inc., a company incorporated in the United States. As part of the terms of the acquisition, the group has divested itself of its electromechanical business. 24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The consolidated accounts are prepared in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP") which differ from United States generally accepted accounting principles ("US GAAP"). The differences that are significant to the group relate to the following items. Revenue recognition The group's product range includes a number of items that have a software element to them. Under UK GAAP, revenue for these products was recognised in accordance with the terms of the contracts. These terms were typically for payment on delivery. Installation of the product is considered perfunctory and therefore, for any contracts where revenue had been booked but installation not completed, the costs of installation were accrued for. Under US GAAP, the rules for recognition of revenue are more stringent. As a result of not being able to provide Vendor-Specific Objective Evidence for all elements of the sale of products with a software element to them revenue is deferred until all elements of the contract have been completed. The cost of sales associated with the revenue is also deferred to `Other debtors'. Dividends In the consolidated accounts, final dividends and the related advance corporation tax ("ACT") are provided for in the year in respect of which they are proposed by the Board of Directors for approval by the shareholders. Under U.S. GAAP, dividends and the related ACT are not provided for until the dividends are declared. The following is a summary of the significant adjustments to income and shareholders' funds which would be required if U.S. GAAP were to be applied instead of U.K. GAAP: - -------------------------------------------------------------------------------- 24 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
INCOME Checkpoint Security Checkpoint (Holdings) Services Limited Limited 1 May 1999 11 Jan 1999 1 May 1998 to 30 April to 30 April to 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 (Loss)/profit on ordinary activities as reported in the group profit and loss account (3,351) (282) 241 Adjustments: Revenue (205) (147) (741) Cost of goods sold 37 38 256 ------ ------ ------ Net income as adjusted to accord with US GAAP (3,519) (391) (244) ====== ====== ====== Shareholders' Funds Checkpoint Security Checkpoint (Holdings) Services Limited Limited 30 April 30 April 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Shareholders' funds as reported in the group balance sheets (1,273) 1,739 1,107 Adjustments: Current assets Other debtors 607 570 532 ACT recoverable - - (38) Creditors: amounts falling due within one year Deferred revenue (2,448) (2,243) (2,096) Dividends payable - - 153 ACT payable - - 38 ------ ------ ------ Shareholders' funds as adjusted to accord with US GAAP (3,114) 66 (304) ====== ====== ======
- -------------------------------------------------------------------------------- 25 Checkpoint (Holdings) Limited and predecessor - ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) GROUP STATEMENT OF CASH FLOWS The group cash flow statement prepared under U.K. GAAP presents substantially the same information that is required under U.S. GAAP but may differ, however, with regard to classification of some items within the statements and as regards the definition of cash under U.K. GAAP and cash and cash equivalents under U.S. GAAP. Under U.S. GAAP, cash and cash equivalents include short-term highly liquid investments but do not include bank overdrafts. Under U.K. GAAP cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, acquisitions, equity dividends and management of liquid resources and financing. U.S. GAAP, however, requires only three categories of cash flow to be reported: operating, investing and financing. Cash flows from and returns on investments, taxation and servicing of finance shown under U.K. GAAP would be included as operating activities under U.S. GAAP. The payment of dividends would be included as a financing activity under U.S. GAAP. Under U.K. GAAP all interest is treated as part of returns on investments and servicing of finance. Under U.S. GAAP capital expenditure and financial investment and acquisitions are reported within investing activities. The categories of cash flow activity under U.S. GAAP can be summarised as follows:
Checkpoint Security Checkpoint (Holdings) Services Limited Limited 1 May 1999 11 Jan 1999 1 May 1998 to 30 April to 30 April to 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Cash inflow/(outflow) from operating activities 1,453 (417) 444 Cash outflow from investing activities (647) (12,506) (882) Cash (outflow)/inflow from financing activities (228) 13,696 576 ----- ------- ---- Increase in cash and cash equivalents 578 773 138 Cash and cash equivalents At beginning of period 773 - 43 ----- ------- ---- At end of period 1,351 773 181 ===== ======= ====
26 EX-99.02 6 0006.txt HISTORICAL FINANCIAL STATEMENTS OF FLASHPOINT, INC. Exhibit 99.02 Report of Independent Auditors Board of Directors Flashpoint, Inc. We have audited the accompanying balance sheet of Flashpoint, Inc. as of December 31, 1999, and the related statements of operations and retained earnings (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 auditing standards generally accepted in the United States. 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 Flashpoint, Inc. at 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. /s/ Ernst & Young LLP October 3, 2000 Boston, Massachusetts FLASHPOINT, INC. Balance Sheets DECEMBER 31, JUNE 30 1999 2000 --------------------------------- Assets (Unaudited) Current assets: Cash and cash equivalents $ 54,800 $ - Accounts receivable 436,613 623,243 Unbilled receivables - 64,433 Refundable income taxes 2,055 2,055 Loan to stockholder 19,796 34,095 Prepaid expenses 678 1,793 --------------------------------- Total current assets 513,942 725,619 Property and equipment, net 220,800 282,578 Deposits 33,200 25,244 --------------------------------- Total assets $767,942 $1,033,441 ================================= Liabilities and stockholder's deficit Current liabilities: Cash overdraft $ - $ 37,370 Lines of credit 175,000 110,000 Notes payable 87,194 118,452 Capital lease obligations, current portion 15,974 23,223 Accounts payable 39,300 66,515 Accrued expenses 257,409 277,074 Deferred revenue 189,980 377,997 --------------------------------- Total current liabilities 764,857 1,010,631 Capital lease obligations, net of current portion 20,640 30,764 --------------------------------- Total liabilities 785,497 1,041,395 Stockholder's deficit: Common stock, $.01 par value, 300,000 shares authorized, 78,000 shares issued and outstanding 780 780 Additional paid-in capital 220 220 Retained earnings (deficit) (18,555) (8,954) --------------------------------- Total stockholder's deficit (17,555) (7,954) --------------------------------- Total liabilities and stockholder's deficit $767,942 $1,033,441 =================================
See accompanying notes. 2 Flashpoint, Inc. Statements of Operations and Retained Earnings (Deficit)
YEAR ENDED SIX MONTHS DECEMBER 31 ENDED 1999 JUNE 30 2000 -------------------------------- (Unaudited) Net revenues $3,531,649 $2,250,490 Cost of services 2,072,703 1,191,626 -------------------------------- Gross profit 1,458,946 1,058,864 Operating expenses: Marketing and selling 196,687 93,621 General and administrative 1,489,133 937,680 -------------------------------- Total operating expenses 1,685,820 1,031,301 -------------------------------- Operating income (loss) (226,874) 27,563 Interest expense, net (24,345) (17,962) -------------------------------- Income (loss) before income taxes (251,219) 9,601 Income tax benefit 44,378 - -------------------------------- Net income (loss) (206,841) 9,601 Retained earnings (deficit) at beginning of period 188,286 (18,555) -------------------------------- Retained earnings (deficit) at end of period $ (18,555) $ (8,954) ================================
See accompanying notes. 3 Flashpoint, Inc. Statements of Cash Flows
YEAR ENDED SIX MONTHS DECEMBER 31 ENDED 1999 JUNE 30 2000 ----------------------------------- (Unaudited) Operating activities: Net income (loss) $(206,841) $ 9,601 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 126,450 53,523 Deferred income taxes (44,378) - Changes in operating assets and liabilities: Cash overdraft - 37,370 Accounts receivable (171,920) (186,630) Unbilled receivables - (64,433) Prepaid expenses - (1,115) Loan to stockholder 14,162 (14,299) Accounts payable (4,491) 27,215 Accrued expenses 122,359 19,665 Deferred revenue 189,980 188,017 ----------------------------------- Net cash provided by operating activities 25,321 68,914 Investing activities: Purchases of equipment (138,602) (88,224) (Increase) decrease in deposits (22,800) 7,956 ----------------------------------- Net cash used in investing activities (161,402) (80,268) Financing activities: Proceeds (repayment) of lines of credit, net 125,000 (65,000) Proceeds from note payable 55,388 31,258 Repayment of capital lease obligations (5,347) (9,704) ----------------------------------- Net cash provided by (used in) financing activities 175,041 (43,446) ----------------------------------- Net increase (decrease) in cash and cash equivalents 38,960 (54,800) Cash and cash equivalents at beginning of period 15,840 54,800 ----------------------------------- Cash and cash equivalents at end of period $ 54,800 $ - =================================== Cash paid for: Interest $ 24,705 $ 18,038 =================================== Supplemental noncash investing and financing activities: Leased equipment financings $ 41,961 $ 27,077 ===================================
See accompanying notes. 4 Flashpoint, Inc. Notes to Financial Statements December 31, 1999 1. THE COMPANY AND BASIS OF PRESENTATION Flashpoint, Inc. (the Company) is engaged in the business of business consulting, developing and marketing computer programs, software and related information and materials, and the development of computer-driven, state-of-the- art products and services. The Company was incorporated in the Commonwealth of Massachusetts in 1988. Effective August 28, 2000, the Company was acquired by Bottomline Technologies (de), Inc. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. REVENUE RECOGNITION The Company currently records revenue under either a time and material basis or fixed price arrangement. Revenue for projects and products delivered on a time and material basis is recognized as time is incurred and materials are purchased. Revenue is recognized on a percentage-of-completion basis when the contract comprises fixed price arrangements with defined milestone deliveries. Billings not recognized as revenue in the period are recorded as deferred revenue. STOCK-BASED COMPENSATION The Company adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, for options granted to employees. As permitted by SFAS No. 123, the Company accounts for stock options granted to employees in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and has included the pro forma disclosures required by SFAS No. 123. 5 Flashpoint, Inc. Notes to Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS The Company invests its excess cash primarily in overnight repurchase agreements. Accordingly, these investments are subject to minimal credit and market risk. For financial reporting purposes, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company invests its excess cash primarily in overnight repurchase agreements and limits the amount of credit exposure to any one financial institution. The investment philosophy limits the Company's exposure to a concentration of credit risk and changes in market conditions. To reduce credit risk related to accounts receivable, credit evaluations of the financial condition of its customers are performed. Management does not believe significant credit risk exists at December 31, 1999. Historically, there have been no significant losses related to collection of accounts receivables. The Company conducts a significant amount of business with five customers that each comprise more than 10%, or in the aggregate 91%, of net revenues in 1999 and 74% of accounts receivable at December 31, 1999. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows: Office furniture and equipment 7 years Computer equipment 5 years Computer software 3 years Leasehold improvements and capitalized leases are amortized over their useful lives or the lease term, whichever is shorter. 6 Flashpoint, Inc. Notes to Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets used in operations, such as property and equipment, are included in impairment evaluations when events or circumstances exist that indicate the carrying amount of those assets may not be recoverable. If the impairment evaluation indicates the affected asset is not recoverable, the asset's carrying amount would be reduced to fair value. No event has occurred that would impair the value of long-lived assets recorded in the accompanying financial statements. INCOME TAXES The Company accounts for income taxes under the liability method as required by Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of differences between the tax and financial accounting of assets and liabilities at each year end. Deferred income taxes are based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. NEW ACCOUNTING PRONOUNCEMENTS In December 1999, the Securities Exchange Commission issued Staff Accounting Bulletin 101 (SAB 101), Revenue Recognition in Financial Statements. SAB 101 summarizes the application of generally accepted accounting principles to revenue recognition in financial statements. On March 24, 2000, the SEC issued an Amendment to SAB 101 (SAB 101A), delaying the effective date for certain companies. SAB 101 is effective for the quarter beginning October 1, 2000. The Company is presently analyzing what impact, if any, SAB 101 will have on the results of operations or financial position of the Company. In March 2000, the Financial Accounting Standards Board issued Financial Interpretation No. 44 (FIN 44), Accounting for Certain Transactions Involving Stock Compensation, which further clarifies the application of APB No. 25. FIN 44 is effective July 1, 2000, but certain conclusions in this interpretation cover specific events that occur after either December 15, 1998 or January 12, 2000. Events occurring after either December 15, 1998 or January 12, 2000 are recognized on a prospective basis from July 1, 2000. The Company does not believe that the adoption of FIN 44 will have a significant impact on its financial position or results of operations. 7 Flashpoint, Inc. Notes to Financial Statements (continued) 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
Office furniture and equipment $141,967 Computer equipment 354,307 Computer software 124,322 Leasehold improvements 95,448 -------- 716,044 Less accumulated depreciation and amortization 495,244 -------- Equipment and leasehold improvements, net $220,800 ========
The Company has $41,961 of equipment, at cost, under capital leases (accumulated amortization of $7,566) at December 31, 1999. 4. ACCRUED EXPENSES Accrued expenses consisted of the following at December 31, 1999: Employee Retirement Plan Contribution $ 85,000 Warranty 93,000 Payroll 79,409 -------- $257,409 ========
5. STOCK OPTION PLANS The 1997 Stock Option Plan and the 1990 Stock Option Plan (the Plans) provide for the issuance of incentive stock options to key employees of the Company and nonqualified options to directors, key employees and consultants of the Company. Incentive stock options may not be granted at less than fair market value of the Company's common stock at the date of the grant and for a term not to exceed ten years. The total number of shares available for issuance under the 1997 Stock Option Plan and the 1990 Stock Option Plan were 12,000 and 10,000 shares, respectively, at December 31, 1999. In August 2000, the Company amended the 1997 Stock Option Plan to allow for the issuance of 41,074 options. 8 Flashpoint, Inc. Notes to Financial Statements (continued) 5. STOCK OPTION PLANS (CONTINUED) Information regarding the Company's stock option plans is summarized below:
WEIGHTED-AVERAGE OPTIONS EXERCISE PRICE ------------------------------- Outstanding at December 31,1998 18,000 $ 1.29 Granted 4,000 10.00 ----------- Outstanding at December 31, 1999 22,000 $ 2.88 ============================= Exercisable at December 31, 1999 15,000 $ 1.25 =============================
There were no options available for grant at December 31, 1999. The weighted- average fair value of options granted during 1999 was $2.60 per option. The Company has 22,000 shares of common stock reserved for the exercise of stock options at December 31, 1999. The following table provides certain information with respect to stock options outstanding at December 31, 1999:
WEIGHTED-AVERAGE RANGE OF EXERCISE PRICES STOCK OPTIONS WEIGHTED-AVERAGE REMAINING CONTRACTUAL OUTSTANDING EXERCISE PRICE LIFE (YRS.) - ------------------------------------------------------------------------------------------- $1.00 7,500 $ 1.00 1.9 1.50 10,500 1.50 2.8 10.00 4,000 10.00 5.9 ----------- 22,000 $ 2.88 3.1 ==============================================================
9 Flashpoint, Inc. Notes to Financial Statements (continued) 5. STOCK OPTION PLANS (CONTINUED) The following table provides certain information with respect to stock options exercisable at December 31, 1999:
STOCK OPTIONS WEIGHTED-AVERAGE RANGE OF EXERCISE PRICES EXERCISABLE EXERCISE PRICE - --------------------------------------------------------------------------------------- $1.00 7,500 $1.00 1.50 7,500 1.50 ----------- ----------- 15,000 $1.25 ==============================================
Pro forma net loss information is required by SFAS 123 and has been determined as if the Company had accounted for its employee stock options under the fair value method outlined in SFAS 123. The fair value of options issued at the date of grant was estimated using the minimum-value model. For the year ended December 31, 1999, pro forma net loss did not differ materially from reported net loss. The effects on the pro forma net loss of expensing the estimated fair value of stock options is not necessarily representative of the effects on reporting the results of operations for future years as the period presented includes only two years of option grants under the Plans. The fair value for these options was estimated using the following weighted- average assumptions: risk-free interest rates of 5.54% to 7.53%; no dividend yield; and a weighted-average expected life of the options of five years. 6. FINANCING ARRANGEMENTS Notes payable consist of the following: Note payable due in monthly installments of $1,667, including interest, at bank's base rate plus 1.50% (10% at December 31, 1999) through July 2000. $21,204 Note payable in monthly installments of $1,667, including interest at bank's base rate plus 1.50% (10% at December 31, 1999) through April 2003. 65,990 ----------- 87,194 Less current portion 87,194 ----------- Long-term debt, net of current portion $ - ===========
10 Flashpoint, Inc. Notes to Financial Statements (continued) 6. FINANCING ARRANGEMENTS (CONTINUED) The notes payable are secured by significantly all assets of the Company. Since the above notes payable were repaid in August 2000, they have been classified as current liabilities. The Company has two lines of credit with a bank providing maximum credit availability of $190,000. Interest is at the bank's base rate plus 1.0% (9.5% at December 31, 1999). The lines are collateralized by equipment. At December 31, 1999, $175,000 was outstanding under the lines of credit with $140,000 payable on demand and $35,000 payable by February 15, 2000. At December 31, 1999, the Company has $15,000 available for borrowing under its lines of credit. 7. LEASE OBLIGATIONS Certain of the Company's office and computer equipment are leased under noncancelable operating leases. In addition, the lease agreements for office space provide that the Company pay additional rent for excess taxes and certain utilities on the leased premises. Following is a schedule of future minimum lease payments under capital and operating lease obligations at December 31, 1999:
CAPITAL OPERATING LEASES LEASES TOTAL ------------------------------------------- 2000 $20,693 $161,855 $182,548 2001 13,967 158,888 172,855 2002 10,706 156,800 167,506 2003 - 156,800 156,800 2004 - 13,067 13,067 ------------------------------------------ 45,366 $647,410 $692,776 ========================== Less amounts representing interest 8,752 ---------- Present value of net minimum lease payments $36,614 ==========
Rent expense related to operating leases approximated $145,000 in 1999. 11 Flashpoint, Inc. Notes to Financial Statements (continued) 8. INCOME TAXES A reconciliation of the federal statutory rate to the effective income tax rate for the year ended December 31, 1999 is as follows: Benefit at federal statutory rate (34.0)% State taxes, net of federal benefit (6.3) Nondeductible items 0.9 Unbenefitted operating loss 21.7 --------- (17.7)% ========= The components of the income tax benefit as of December 31, 1999 are as follows: Current $ - Deferred (44,378) --------- $(44,378) =========
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. For income tax purposes, the Company is a cash-basis taxpayer. Significant components of the Company's net deferred taxes as of December 31, 1999 is as follows:
Deferred tax assets: Net operating loss carryforward $133,436 Property and equipment 10,752 Accounts payable and accrued expenses 85,256 Charitable contributions 842 --------- Total deferred tax assets 230,286 Valuation allowance (54,462) --------- Net deferred tax assets 175,824 Deferred tax liabilities: Accounts receivable 175,824 --------- Total deferred tax liabilities 175,824 --------- Net deferred taxes $ - =========
12 Flashpoint, Inc. Notes to Financial Statements (continued) 8. INCOME TAXES (CONTINUED) SFAS 109 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a $54,462 valuation allowance at December 31, 1999 is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The change in the valuation allowance for the current year is $54,462. At December 31, 1999, the Company has available net operating loss carryforwards of $331,354, which expire in the year 2019. 9. RELATED-PARTY TRANSACTIONS At December 31, 1999, the sole stockholder of the Company owed $19,796 for amounts advanced by the Company. The debt is unsecured, noninterest-bearing and due on demand. 10. EMPLOYEE RETIREMENT PLAN The Company has a defined contribution retirement plan that qualifies under Section 401(k) of the Internal Revenue Code (IRC). Under the plan, employees meeting certain requirements can elect to have up to 15% of their designated salaries contributed to fully vested participant retirement accounts in lieu of salary payments up to the maximum limits allowed by the IRC. Employees completely vest in the employer matching contribution after four years of service. The Company, at its discretion, may make contributions to the plan on behalf of each eligible employee. The Company's contribution under this plan for 1999 was $85,000. 13 EX-99.03 7 0007.txt UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL PRO FORMA CONDENSED CONSOLIDATED Exhibit 99.03 FINANCIAL STATEMENTS (UNAUDITED) On August 28, 2000, Bottomline Technologies (de), Inc. (the Company) acquired Checkpoint (Holdings) Limited ("Checkpoint"), a private company incorporated in England and Wales. Checkpoint is a provider of electronic commerce and electronic payment software and hardware for the United Kingdom. The acquisition was completed pursuant to a Share Purchase Agreement dated August 28, 2000 between the Company and Checkpoint stockholders. The consideration for the acquisition was approximately $60.1 million consisting of $4.7 million in cash, $19.8 million in loan notes, 1,013,333 shares of the Company's common stock (the Common Stock), warrants to purchase a total of 100,000 shares of Common Stock at an exercise price of $50.00 per share and transaction costs. On August 28, 2000, the Company also acquired Flashpoint, Inc. ("Flashpoint"), a Massachusetts corporation and a developer of Web-based software. The acquisition was completed pursuant to a Stock Purchase Agreement dated August 28, 2000 by and among the Company, Flashpoint and the sole stockholder of Flashpoint. The consideration for the acquisition was approximately $16.8 million consisting of $4.5 million in cash, 242,199 shares of Common Stock, the assumption of all outstanding stock options of Flashpoint and transaction costs. The acquisitions were accounted for using the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16, "Business Combinations" ("APB 16"). Under APB 16, purchase price allocations are made to the assets acquired and the liabilities assumed based on their respective fair values. The value of the Common Stock was recorded at the average of the last reported sales price on The Nasdaq National Market during the last three consecutive trading days ending on and including August 28, 2000. The fair value of the warrants and stock options was recorded based on the Black-Scholes valuation method. The estimated fair value of the purchase price and net liabilities assumed in the Checkpoint and Flashpoint acquisitions, as if occurring on April 30, 2000 and June 30, 2000 respectively, was as follows:
Unaudited ---------------------------------------------------------------- Checkpoint Flashpoint Total ---------------------------------------------------------------- Cash $ 4,728,000 $ 4,500,000 $ 9,228,000 Loan notes 19,777,000 - 19,777,000 Common Stock 31,474,000 7,523,000 38,997,000 Common Stock warrants 1,568,000 - 1,568,000 Replacement stock options - 4,286,000 4,286,000 Transaction costs 2,561,000 437,000 2,998,000 ---------------------------------------------------------------- Total Estimated Purchase Price $60,108,000 $16,746,000 $76,854,000 Estimated Fair Value of Net Liabilities Assumed 20,072,000 8,000 20,080,000 ---------------------------------------------------------------- Estimated Fair Value of Purchase Price and Net Liabilities Assumed $80,180,000 $16,754,000 $96,934,000 ================================================================
The estimated fair value of the purchase price and net liabilities assumed (total liabilities less total tangible assets) of $96.9 million has been reflected in the unaudited pro forma condensed consolidated financial statements based on a preliminary purchase price, based on August 28, 2000 financial information, allocation. Finalization of the actual allocation of the purchase price, based on August 28, 2000 financial information, to assets acquired and liabilities assumed is subject to appraisals, valuations, evaluations and other analyses of the fair value of assets acquired and liabilities assumed. The estimated fair value of the purchase price and net liabilities assumed has been allocated on a preliminary basis as follows:
Estimated Fair Values (unaudited) ---------------------------------------------------------------------------------- Checkpoint Flashpoint Total ------------------------ ----------------------- -------------------------- Customer list $15,867,000 - $15,867,000 Assembled workforce 4,442,000 $ 1,509,000 5,951,000 Developed software 3,761,000 - 3,761,000 Trade name 1,543,000 - 1,543,000 Contract backlog - 435,000 435,000 Goodwill 54,567,000 14,810,000 69,377,000 ------------------------------------------------- -------------------------- Total $80,180,000 $16,754,000 $96,934,000 ================================================= ==========================
The intangible assets will be amortized over their estimated useful lives, as follows: customer list, assembled workforce, developed software, trade name and goodwill - three years; contract backlog - ten months. Based upon these estimates, the pro forma impact of amortization expense for the succeeding three years is $32.6 million, $32.2 million and $32.2 million, respectively. These estimates of amortization expense are highly dependent upon the allocation of the fair value of the purchase price and net liabilities assumed to the various intangible asset categories. Management anticipates that the purchase price allocation will be finalized no later than June 30, 2001. The accompanying unaudited pro forma condensed consolidated statement of operations for the Company's fiscal year ended June 30, 2000 has been prepared to give effect to the acquisitions of Checkpoint and Flashpoint by the Company. The unaudited pro forma information does not include nonrecurring charges which may result from the transactions and the integration of Checkpoint and Flashpoint into the Company. The unaudited pro forma information has been prepared assuming that the acquisition occurred at the beginning of the Company's most recently completed fiscal year, which began July 1, 1999, for the pro forma condensed consolidated statement of operations and at June 30, 2000 for the pro forma condensed consolidated balance sheet. The pro forma information is based on the historical financial statements of the Company and Flashpoint for the twelve months ended June 30, 2000, and the adjusted historical financial statements of Checkpoint for the twelve months ended April 30, 2000, giving effect to the transactions under the purchase method of accounting and the assumptions and adjustments described in the accompanying notes to the condensed consolidated pro forma financial statements. The adjusted historical financial statements of Checkpoint, which are unaudited, reflect adjustments necessary to conform the historical financial information of Checkpoint to that which would have been presented under U.S. Generally Accepted Accounting Principles ("US GAAP"). The adjusted historical financial statements of Checkpoint also give effect to the disposal of certain subsidiaries and business lines during the twelve month period ended April 30, 2000 and during the period subsequent to April 30, 2000 but prior to the acquisition of Checkpoint by the Company. The adjusted historical financial statements of Checkpoint, as of and for the twelve month period ending April 30, 2000, are included as part of this Form 8-K/A. The pro forma information is unaudited and does not purport to be indicative of the financial position or results of operations that would have been attained had the combinations been in effect on the dates indicated, nor of future results of operations of the combined Company. The unaudited pro forma financial statements should be read in conjunction with the separate audited financial statements and notes thereto of Bottomline Technologies (de), Inc., included in its Annual Report on Form 10-K for the year ended June 30, 2000, the audited financial statements and notes thereto of Checkpoint for the three years ended April 30, 2000, the audited financial statements and notes thereto of Flashpoint for the year ended December 31, 1999, and the unaudited Flashpoint financial statements for the six months ended June 30, 2000, included as part of this Form 8-K/A. 2 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 2000 (Unaudited) (Dollars in thousands)
Adjusted Historical Historical Historical Pro Forma Pro Forma Bottomline Checkpoint (1) Flashpoint Adjustments Consolidated ----------- -------------- ----------- ------------- ------------- ASSETS - ----------------------------------------- CURRENT ASSETS Cash and equivalents $27,292 $ 2,102 $(19,500) (3) $ 9,894 Short-term investments 11,222 11,222 Accounts receivable, net 14,571 5,487 $ 688 20,746 Inventories, net 168 1,300 1,468 Prepaid and other current assets 1,592 1,896 38 (201) (4) 3,325 ------- ------- ------ ------------ -------- Total current assets 54,845 10,785 726 (19,701) 46,655 Depreciable assets, net 5,172 2,673 282 8,127 Intangible assets, net 8,416 14,627 81,697 (5) 104,740 Other assets 2,847 129 25 3,001 ------- ------- ------ ------------ -------- Total assets $71,280 $28,214 $1,033 $ 61,996 $162,523 ======= ======= ====== ============ ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) - ------------------------------------ CURRENT LIABILITIES Borrowings due within one year $ 1,834 $ 252 $ (1,834) (6) $ 252 Accounts payable $ 2,004 1,322 103 3,429 Accrued expenses 4,930 2,792 277 2,998 (7) 10,997 Other current liabilities 901 353 20,356 (8) 21,610 Deferred revenue and deposits 6,034 6,706 378 (811) (4) 12,307 ------- ------- ------ ------------ -------- Total current liabilities 13,869 13,007 1,010 20,709 48,595 Long-term liabilities 283 20,652 31 (19,474) (6) 1,492 ------- ------- ------ ------------ -------- Total liabilities 14,152 33,659 1,041 1,235 50,087 STOCKHOLDERS' EQUITY (DEFICIT) Common stock 11 345 1 (344) (9) 13 Additional paid-in-capital 64,914 3,330 53,319 (10) 121,563 Deferred stock compensation (1,343) (11) (1,343) Accumulated other comprehensive loss (8) (8) Retained earnings (deficit) (7,789) (9,120) (9) 9,129 (12) (7,789) ------- ------- ------ ------------ -------- Total stockholders' equity (deficit) 57,128 (5,445) (8) 60,761 112,436 ------- ------- ------ ------------ -------- Total liabilities and stockholders' equity (deficit) $71,280 $28,214 $1,033 $ 61,996 $162,523 ======= ======= ====== ============ ========
See Notes to Pro Forma Condensed Consolidated Financial Statements 3 PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000 (Unaudited) (Dollars in thousands, except per share data)
Adjusted Historical Historical Historical Pro Forma Pro Forma Bottomline Checkpoint (2) Flashpoint Adjustments Consolidated ----------- -------------- ----------- ------------- ------------- Net revenue $ 49,134 $28,279 $4,138 $81,551 Costs and expenses Cost of revenues 17,546 14,796 2,284 34,626 Selling, general and administrative 34,292 11,159 2,037 47,488 Amortization of intangibles - acquisition 2,311 3,331 29,270 (13) 34,912 Research and development 8,580 2,537 11,117 Acquired in-process research and development 3,900 3,900 Stock compensation expense 442 (14) 442 -------- ------- ------ ----------- --------- Total costs and expenses 66,629 31,823 4,321 29,712 132,485 -------- ------- ------ ----------- --------- Operating loss (17,495) (3,544) (183) (29,712) (50,934) Other income (expense), net 1,830 (2,304) (35) (3,223) (15) (3,732) -------- ------- ------ ----------- --------- Loss from operations (15,665) (5,848) (218) (32,935) (54,666) Benefit for income taxes (1,400) (32) (2) (1,434) -------- ------- ------ ----------- --------- Net loss $(14,265) $(5,816) $ (216) ($32,935) ($53,232) ======== ======= ====== =========== ========= Loss per share: Basic $(1.33) $(4.32) Diluted $(1.33) $(4.32) Shares used to compute per share amounts Basic 10,744 1,592 (16) 12,336 Diluted 10,744 1,592 (16) 12,336
See Notes to Pro Forma Condensed Consolidated Financial Statements 4 NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (dollars in thousands except share data) (1) Adjusted historical balance sheet amounts for Checkpoint are presented in accordance with U.S. generally accepted accounting principles and have been converted from British Sterling to U.S. Dollars using the exchange rate in effect at April 30, 2000. Such amounts reflect the impact of the disposal of the electromechanical business line by Checkpoint, which occurred subsequent to April 30, 2000 but prior to the Company's acquisition of Checkpoint. The adjustments made to the historical Checkpoint balance sheet to arrive at the adjusted historical amounts are shown at Exhibit 99.04. (2) Adjusted historical amounts reported in the statement of operations for Checkpoint are presented in accordance with U.S. generally accepted accounting principles and have been converted from British Sterling to U.S. Dollars using the average exchange rate for the year ended April 30, 2000. Such amounts exclude the operating results of two subsidiaries that were disposed of during the year ended April 30, 2000, and the results of the electromechanical business line that was disposed of subsequent to April 30, 2000 but prior to the Company's acquisition of Checkpoint. The adjustments made to the historical checkpoint statement of operations to arrive at the adjusted historical amounts are shown at Exhibit 99.04. (3) To reflect payment ($9,228) of consideration in connection with acquisitions of Checkpoint and Flashpoint and to reflect the payment, at closing, of certain liabilities assumed ($10,272). (4) To record a reduction in deferred revenue ($811) and associated deferred cost of revenue ($201) based upon the assessment of fair value of certain acquired deferred revenue of Checkpoint, in accordance with APB 16. The net difference between the deferred revenue adjustment and the deferred cost of revenue adjustment has been recorded as a pro forma adjustment to intangible assets ($610). (5) To record goodwill and other intangible assets arising from the acquisition of Checkpoint and Flashpoint ($96,934), to eliminate the pre-existing goodwill of Checkpoint ($14,627) and to record the net reduction in the acquired Checkpoint deferred revenue, based on an assessment of its fair value, in accordance with APB 16 ($610). (6) To record the payment (in stock and cash), at closing, of certain liabilities assumed in connection with the Checkpoint acquisition ($20,729) and to record the conversion of certain assumed liabilities of Checkpoint to a loan note arrangement ($579). (7) To record accrual for direct acquisition costs incurred by the Company resulting from the acquisitions. The actual amounts ultimately incurred could differ from the estimated amounts. (8) To record the loan notes issued in connection with the Checkpoint acquisition ($19,777) and to record the conversion of certain assumed liabilities of Checkpoint to a loan note arrangement ($579). (9) To record the par value of the issuance of 1,592,199 shares of the Company's $.001 par value common stock ($2), 1,255,532 shares of which were issued as consideration in connection with the acquisitions of Checkpoint and Flashpoint and 336,667 shares of which were issued as payment, at closing, of certain liabilities assumed in the Checkpoint acquisition and to eliminate the common stock par value of Checkpoint ($345) and Flashpoint ($1). (10) To record the issuance of 1,592,199 shares of common stock ($49,452), 1,255,532 shares of which were issued as consideration in connection with the acquisitions of Checkpoint and Flashpoint and 336,667 shares of which were issued as payment, at closing, of certain liabilities assumed in the Checkpoint acquisition, to record the issuance of common stock warrants in connection with Checkpoint acquisition ($1,568), to record the fair value of replacement common stock options issued in connection with Flashpoint acquisition ($4,286), to record the intrinsic value of unvested common stock options issued in connection with the Flashpoint acquisition ($1,343), and to eliminate the pre-existing capital in excess of par amount of Checkpoint ($3,330). (11) To record deferred stock compensation equal to the intrinsic value of the unvested common stock options issued in connection with the Flashpoint acquisition. (12) To eliminate Checkpoint ($9,120) and Flashpoint ($9) retained deficit balances. (13) To record amortization expense for the intangible assets, represented by the estimated fair value of the purchase price and the net liabilities assumed ($32,601) and to eliminate the pre-existing goodwill amortization expense recorded by Checkpoint ($3,331). 5 NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (dollars in thousands except share data) (14) To record amortization of deferred compensation expense associated with the unvested stock options in the Company's common stock issued in connection with the Flashpoint acquisition. (15) To record interest expense ($2,443) on the loan notes, assuming an average outstanding balance of $20,356, calculated at an average annual interest rate of 12%, and to record a reduction in interest income ($780) calculated at an average annual rate of 4% as a result of the disbursement of $9,228 of purchase price consideration and the disbursement of $10,272 for the payment, at closing, of certain liabilities assumed. (16) Pro forma adjustments to common shares used in the computation of basic and diluted net loss per share consist of the issuance of 1,592,199 shares of common stock, 1,255,532 shares of which were issued as consideration in connection with the acquisitions of Checkpoint and Flashpoint and 336,667 shares of which were issued as payment, at closing, of certain liabilities assumed in the Checkpoint acquisition. For purposes of the pro forma net loss per share calculation, these share amounts have been treated as if they were outstanding since July 1, 1999. 6 EX-99.04 8 0008.txt ADJUSTED HISTORICAL FINANCIAL STATEMENTS OF CHECKPOINT Exhibit 99.04 CHECKPOINT (HOLDINGS) LIMITED ADJUSTED CONDENSED CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 2000 (Unaudited) (Dollars in thousands)
US GAAP Basis Adjusted Historical US GAAP Historical Non-recurring Historical Checkpoint (A) Adjustments (C) Checkpoint Activities (D) Checkpoint --------------- --------------- ----------- --------------------- ----------- ASSETS - ------ CURRENT ASSETS Cash and equivalents $ 2,102 $ 2,102 $ 2,102 Accounts receivable, net 6,096 6,096 $ (609) 5,487 Inventories, net 1,923 1,923 (623) 1,300 Prepaid and other current assets 1,006 $ 945 1,951 (55) 1,896 ------- ------- ------- ------- ------- Total current assets 11,127 945 12,072 (1,287) 10,785 Depreciable assets, net 2,704 2,704 (31) 2,673 Intangible assets, net 14,627 14,627 14,627 Other assets 129 129 129 ------- ------- ------- ------- ------- Total assets $28,587 $ 945 $29,532 $(1,318) $28,214 ======= ======= ======= ======= ======= LIABILITIES AND STOCKHOLDERS' DEFICIT - ------------------------------------- CURRENT LIABILITIES Borrowings due within one year $ 1,834 $ 1,834 $ 1,834 Accounts payable 1,550 1,550 $ (228) 1,322 Accrued expenses 3,284 3,284 (492) 2,792 Other current liabilities 353 353 353 Deferred revenue and deposits 2,895 $ 3,811 6,706 6,706 ------- ------- ------- ------- ------- Total current liabilities 9,916 3,811 13,727 (720) 13,007 Long-term liabilities 20,652 20,652 20,652 ------- ------- ------- ------- ------- Total liabilities 30,568 3,811 34,379 (720) 33,659 STOCKHOLDERS' DEFICIT Common stock 345 345 345 Additional paid-in-capital 3,330 3,330 3,330 Retained deficit (5,656) (2,866) (8,522) (598) (9,120) ------- ------- ------- ------- ------- Total stockholders' deficit (1,981) (2,866) (4,847) (598) (5,445) ------- ------- ------- ------- ------- Total liabilities and stockholders' deficit $28,587 $ 945 $29,532 $(1,318) $28,214 ======= ======= ======= ======= =======
CHECKPOINT (HOLDINGS) LIMITED ADJUSTED CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED APRIL 30,2000 (Unaudited) (Dollars in thousands)
US GAAP Basis Adjusted Historical US GAAP Historical Non-recurring Historical Checkpoint (B) Adjustments (C) Checkpoint Activities (D) Checkpoint -------------- --------------- ----------- -------------- ----------- Net revenue $33,256 $ (329) $32,927 $(4,648) $28,279 Costs and expenses Cost of revenues 13,034 3,796 16,830 (2,034) 14,796 Selling, general and administrative 18,214 (5,159) 13,055 (1,896) 11,159 Amortization of intangibles - acquisition 3,331 3,331 3,331 Research and development 1,234 1,303 2,537 2,537 ------- ------- ------- ------- ------- Total costs and expenses 35,813 (60) 35,753 (3,930) 31,823 ------- ------- ------- ------- ------- Operating loss (2,557) (269) (2,826) (718) (3,544) Other expense (2,291) (2,291) (13) (2,304) Loss on sale of subsidiary (543) (543) 543 ------- ------- ------- ------- ------- Loss from operations (5,391) (269) (5,660) (188) (5,848) Benefit for income taxes (32) (32) ------- ------- ------- ------- ------- Net loss $(5,391) $ (269) $(5,660) $ (156) $(5,816) ======= ======= ======= ======= =======
2 ADJUSTED HISTORICAL CHECKPOINT (HOLDINGS) LIMITED NOTES TO FINANCIAL STATEMENTS (unaudited) The adjusted historical financial statements of Checkpoint (Holdings) Limited, which are unaudited, reflect adjustments made to the historical audited financial statements of Checkpoint as of and for the twelve month period ended April 30, 2000, which are included as part of this Form 8-K/A. (A) Historical audited amounts reported in the balance sheet for Checkpoint are presented in accordance with U.K. Generally Accepted Accounting Principles ("UK GAAP") and have been converted from British Sterling to U.S. dollars using the exchange rate in effect at April 30, 2000. (B) Historical audited amounts reported in the statement of operations for Checkpoint are presented in accordance with UK GAAP and have been converted from British Sterling to U.S. dollars using the average exchange rate for the twelve month period ended April 30, 2000. (C) US GAAP adjustments reflect adjustments to the historic financial information of Checkpoint, as prepared in accordance with UK GAAP, such that the financial information is in conformity with accounting principles generally accepted in the United States. The US GAAP adjustments reflect the deferral of certain revenue ($3,811) and related cost of revenue ($945) as of April 30, 2000, and the net reduction of certain revenue ($329) and related cost of revenue ($60) for the twelve month period ended April 30, 2000. Additionally, the US GAAP adjustments reflect a reclassification of expenses from selling, general and administrative expenses ($5,159) to cost of revenues ($3,856) and research and development ($1,303) to conform with the reporting classifications used in the United States. (D) During the fiscal year ended April 30, 2000, Checkpoint completed the sale of Compagnie Nationale des Machines de Bureau SA ("CNMB") and Checkpoint International SA de CV ("CISA"), each of which was a Checkpoint subsidiary. Additionally, subsequent to April 30, 2000 but prior to the acquisition of Checkpoint by the Company, Checkpoint disposed of its electromechanical business line. Accordingly, in deriving the adjusted historical Checkpoint financial information, these non-recurring operating activities and the respective balance sheet amounts associated with these activities have been eliminated from the historical Checkpoint financial statements. 3 -----END PRIVACY-ENHANCED MESSAGE-----