-----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, HuQQ6pNdl89QmF+Gi3eOW5Dvyvti/AW42yAKPltluKT4t7xcKvNCCioiprOGO882 xw7VtxPbtoHZUiXowT5EaA== 0000892569-00-000246.txt : 20000221 0000892569-00-000246.hdr.sgml : 20000221 ACCESSION NUMBER: 0000892569-00-000246 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991217 ITEM INFORMATION: FILED AS OF DATE: 20000218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUEST SOFTWARE INC CENTRAL INDEX KEY: 0001088033 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330231678 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-26937 FILM NUMBER: 549314 BUSINESS ADDRESS: STREET 1: 8001 IRVINE CENTER DRIVE CITY: IRVINE STATE: CA ZIP: 92618 MAIL ADDRESS: STREET 1: 8001 IRVINE CENTER DRIVE CITY: IRVINE STATE: CA ZIP: 92618 8-K/A 1 CURRENT REPORT DATED DECEMBER 17, 1999 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 8-K/A CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) DECEMBER 17, 1999 ----------------- QUEST SOFTWARE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) CALIFORNIA 333-80543 33-0231678 - ---------------------------- ------------ -------------------- (State or other jurisdiction (Commission (IRS Employer or incorporation) File Number) (Identification No.) 8001 IRVINE CENTER DRIVE, IRVINE, CALIFORNIA 92618 - -------------------------------------------- -------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (949) 754-8000 -------------- N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 AMENDMENT The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K, originally filed with the Securities Exchange Commission on December 29, 1999, as set forth in the pages attached hereto: Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS: The following financial statements and pro forma financial information are filed as a part of this report.
Page ---- (a) Financial Statements of Business Acquired. MBR Technologies, Inc. Report of Independent Accountants (Swenson Advisors, LLP) (Exhibit 99.1) 1 Statement of Operations for the period April 23, 1998 (inception) to March 31, 1999 (Exhibit 99.1) 3 Statements of Stockholders' Equity (Deficiency) for the period April 23, 1998 (inception) to March 31, 1999 (Exhibit 99.1) 4 Statements of Cash Flows for the period April 23, 1998 (inception) to March 31, 1999 (Exhibit 99.1) 5 Notes to Financial Statements (Exhibit 99.1) 6 (b) Pro Forma Financial Information. Quest Software, Inc. and MBR Technologies, Inc. (on a consolidated basis) 9 Notes to the Unaudited Pro Forma Condensed Financial Statements (Exhibit 99.2) 9 Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 1999 (Exhibit 99.2) 10 Unaudited Pro Forma Condensed Statement of Operations for the Year Ended December 31, 1998 (Exhibit 99.2) 11
2 3 (c) Exhibits. * Agreement and Plan of Merger dated as of November 2, 1999 by and among Quest Software, Inc., Quest Merger Corporation, MBR Technologies, Inc., John Rocha, Joseph F. Brusatto, Michael Q. Mai and Vicente Perez de Tudela, as amended by that certain First Amendment to Agreement and Plan of Merger dated as of December 6, 1999 (Exhibit 2.1) Consent of Swenson Advisors, LLP (Exhibit 23.1). * Incorporated by reference to the same Exhibit number of the Company's Current Report on Form 8-K dated December 17, 1999. 3 4 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 thereunto duly authorized. Quest Software, Inc. Date: February 17, 2000 By: /s/ JOHN J. LASKEY ---------------------------- John J. Laskey Chief Financial Officer 4 5 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1* Agreement and Plan of Merger dated as of November 2, 1999 by and among Quest Software, Inc., Quest Merger Corporation, MBR Technologies, Inc., John Rocha, Joseph F. Brusatto, Michael Q. Mai and Vicente Perez de Tudela, as amended by that certain First Amendment to Agreement and Plan of Merger dated as of December 6, 1999 23.1 Consent of Independent Accountants 99.1 Financial Statements of Business Acquired 99.2 Pro Forma Financial Information - ---------------- * Incorporated by reference to the same Exhibit number of the Company's Current Report on Form 8-K dated December 17, 1999. EX-23.1 2 CONSENT OF SWENSON ADVISORS, LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the application of our report dated September 29, 1999, included in this Form 8-K/A of MBR Technologies, Inc., relating to the financial statements for the year ended March 31, 1999. SWENSON ADVISORS, LLP Temecula, California February, 18, 2000 EX-99.1 3 FINANCIAL STATEMENTS OF BUSINESS ACQUIRED 1 EXHIBIT 99.1 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Directors of MBR Technologies, Inc. We have audited the accompanying balance sheet of MBR Technologies, Inc., a California Corporation, as of March 31, 1999, the related statements of operations, shareholders' equity and cash flows from inception (April 23, 1998) through March 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based upon our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MBR Technologies Inc. as of March 31, 1999, and the results of its operations and cash flows from inception (April 23, 1998) through March 31, 1999, in conformity with generally accepted accounting principles. /s/ SWENSON ADVISORS, LLP - ---------------------------- SWENSON ADVISORS, LLP Temecula, California September 29, 1999 1 2 MBR TECHNOLOGIES, INC. BALANCE SHEETS
MARCH 31, 1999 ---------- ASSETS Current assets: Cash and cash equivalents................................. $ 63,055 Accounts receivable....................................... 94,918 Deposits and prepaid assets............................... 21,831 ---------- Total current assets................................. 179,804 ---------- Property, equipment and software: Software.................................................. 262,722 Furniture and fixtures.................................... 55,722 Computers and equipment................................... 114,868 Leasehold improvements.................................... 9,772 ---------- 443,084 Less: accumulated depreciation.............................. (17,118) ---------- Net property and equipment................................ 425,966 ---------- Other assets: Other assets.............................................. 4,044 ---------- Total assets......................................... $ 609,814 ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities.................. $ 45,553 Other current liabilities................................. 13,001 Current portion of notes payable to related parties....... 299,136 Current portion of capital lease obligations.............. 30,342 Deferred revenue.......................................... 22,912 ---------- Total current liabilities............................ 410,944 ---------- Long term liabilities: Capital lease obligations, net of current portion......... 52,443 ---------- Total liabilities.................................... 463,387 ---------- Shareholders' equity: Common stock, no par value; authorized 10,000,000 shares; Issued and outstanding 1,020,000 shares................ 1,020,000 Accumulated deficit....................................... (873,573) ---------- Total shareholders' equity........................... 146,427 ---------- Total liabilities and shareholders' equity........... $ 609,814 ==========
See Accompanying Notes to Financial Statements. 2 3 MBR TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS
FROM INCEPTION (APRIL 23, 1998) THROUGH MARCH 31, 1999 ---------------- Revenue..................................................... $ 267,825 Operating expenses: Salary expenses and related employee benefits............. 248,859 Research and development.................................. 300,873 Amortization of software costs............................ 337,278 Selling, general and administrative....................... 137,087 Professional fees and outside services.................... 92,710 Amortization and depreciation............................. 17,568 ---------- Total operating expenses............................. 1,134,375 ---------- Operating loss.............................................. (866,550) Interest income............................................. 278 ---------- Loss before interest and taxes.............................. (866,272) Interest expense.......................................... 6,501 Income tax provision...................................... 800 ---------- Net loss.................................................... $ (873,573) ==========
See Accompanying Notes to Financial Statements. 3 4 MBR TECHNOLOGIES, INC. STATEMENT OF SHAREHOLDERS' EQUITY FROM INCEPTION (APRIL 23, 1998) THROUGH MARCH 31, 1999
COMMON RETAINED STOCK DEFICIT ---------- --------- BALANCE, April 23, 1998..................................... $ -- $ -- Net loss.................................................... -- (873,573) Sale of common stock........................................ 1,020,000 -- ---------- --------- BALANCE, March 31, 1999..................................... $1,020,000 $(873,573) ========== =========
See Accompanying Notes to Financial Statements. 4 5 MBR TECHNOLOGIES, INC. STATEMENTS OF CASH FLOWS
FROM INCEPTION (APRIL 23, 1998) THROUGH MARCH 31, 1999 ---------------- Cash flows from operating activities: Net loss.................................................. $(873,573) Adjustments used in operating activities: Depreciation and amortization.......................... 17,568 Amortization of software costs......................... 337,278 Related party equity exchanges......................... 237,040 Change in notes payable to related parties............. 4,136 Changes in assets and liabilities: Increase in accounts receivable...................... (94,918) Increase in deposits and prepaid expenses............ (21,831) Increase in organization costs....................... (4,494) Increase in accounts payable and accrued liabilities....................................... 45,553 Increase in other current liabilities................ 13,001 Increase in deferred revenue......................... 22,912 --------- Net cash used in operating activities............. (317,328) Cash flows from investing activities: Purchase of property and equipment........................ (82,472) --------- Net cash used in investing activities............. (82,472) Cash flows from financing activities: Proceeds from common stock................................ 173,501 Borrowings from related parties........................... 295,000 Payments on capital lease obligations..................... (5,646) --------- Net cash provided by financing activities......... 462,855 --------- Increase in cash............................................ 63,055 Cash, beginning of period................................... 0 --------- Cash, end of period......................................... $ 63,055 ========= Supplemental Disclosure of Cash flow Information: Cash paid for interest.................................... $ 2,364 =========
See Notes 4 and 6 for supplemental cash flow disclosures. See Accompanying Notes to Financial Statements. 5 6 MBR TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 -- ORGANIZATION MBR Technologies, Inc. (the "Company") was incorporated in California on April 23, 1998. The Company develops, publishes, markets, and distributes middleware solutions for enterprise software platforms. The Company's products are designed to reduce the cost of ownership and maintenance of the PeopleSoft and CSS/Horizon (ADP) environments. In addition to product sales the Company also provides annual maintenance for their software and related consulting services. The Company markets its software through several channels, including: direct sales, software showcase conferences, joint marketing relationships and value added resellers (VARs). NOTE 2 -- LIQUIDITY AND BUSINESS RISK The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has an accumulated deficit of $873,573 and negative working capital of $231,140 as of March 31, 1999. The Company's ability to continue business in its present form is subject to a variety of factors, which include, among other things, the Company's ability to raise working capital and to generate profitable operations. In the opinion of management, the Company will be able to improve its profitability and raise adequate capital to meet its current working capital requirements. The Company is subject to a number of risks associated with companies at a similar stage of development including; the need for funding its operations and growth, marketplace acceptance, competition, technological obsolescence, and the retention and reliance on key personnel. NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents -- The Company considers all unrestricted highly liquid investments purchased with maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value. Revenue Recognition -- Revenue from training and consulting fees is recognized when earned. Revenues from product sales and support fees are recognized in accordance with the provisions outlined in the AICPA SOP 97-2. Deferred revenue represents certain post contract customer support recognized on a monthly basis. Property and Equipment -- Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation is determined using the straight line method for all assets based on 6 7 MBR TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) estimated useful lives of the assets, which range from three to seven years for furniture and equipment, and fifteen years for leasehold improvements. Software Costs -- Software costs related to the acquisition of the Stat! software have been capitalized and amortized over the useful life of the software, estimated to be twenty months. For the year ended March 31, 1999, $337,278 of these costs have been amortized. Income Taxes -- For the year ended March 31, 1999, there was no federal tax liability for financial statement or tax bases. The minimum franchise tax of NOTE 4 -- RELATED PARTIES During the year ended March 31, 1999, the Secretary and Chief Financial Officer of the Company loaned $195,000 and $100,000, respectively, to the Company to be used for operating and investing activities. The loans are due and payable no later than September 30, 1999, and interest accrues at a rate of 5% per annum. The Company has obtained a waiver until December 31, 1999. For the year ended March 31, 1999, $4,136 of interest was accrued on these notes. During the year ended March 31, 1999, certain related parties received stock in exchange for goods and services. The Chief Executive Officer and Chief Operations Officer of the Company received 350,000 and 300,000 shares, respectively, in exchange for rights to software and related consulting for the product. The Chief Financial Officer received approximately 118,100 shares for consulting and certain equipment. NOTE 5 -- COMMON STOCK AND CAPITAL FUNDING The Company has one class of common stock. There are no preferences related to dividends, voting rights or dissolution. During the year ended March 31, 1999, $173,501 new cash was received for common stock sold to related and unrelated parties. (See Note 4) NOTE 6 -- COMMITMENTS AND CONTINGENCIES Operating Leases -- The Company leases office space under an operating lease agreement with monthly rent of $8,192; which increases to a maximum of $9,558 in 2003. Rent expense under this lease totaled $24,685 for the year ended March 31, 1999. The Company also entered into an operating equipment lease at March 31 that expires in December 2001. Future minimum lease payments under these operating leases are as follows: 2000...................................................... $104,294 2001...................................................... 108,390 2002...................................................... 112,487 2003...................................................... 116,583 -------- $441,754 ========
Capital Leases -- The Company has entered into certain capital leases. Interest accrues on each of these leases at a rate of 10% annually. Lease terms range from 36 to 48 months. 7 8 MBR TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) Future lease payments under capital leases are as follows: 2000...................................................... $ 41,160 2001...................................................... 41,160 2002...................................................... 38,476 2003...................................................... 8,293 -------- $129,089 ========
NOTE 7 -- 401(K)PLAN The Company provides a tax qualified section 401(k) plan for the benefit of eligible employees. In accordance with Plan guidelines, contributions by the employer are discretionary. During the year ended March 31, 1999, the Company contributed $8,546 to the Plan. No contributions were payable at the end of the fiscal year. The Company paid $1,700 in administrative costs for the Plan. Contributions made by the Company vest based on the employee's years of service. Vesting begins after two years of service in 20% annual increments until the employee is 100% vested after six years. NOTE 8 -- STOCK OPTION PLAN In June 1999, the Company adopted the Fiscal Year 2000 Equity Incentive Plan (2000 Plan.) Under the 1999 Plan, a maximum of 200,000 shares of Common Stock have been reserved for issuance of options. Options under the 1999 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than 85% of the fair market of the common stock. The options vest over three years at 33.3% a year commencing on the grant date. The term of the options are not to exceed 10 years. There were no options granted under this Plan as of March 31, 1999. Approximately 11,500 options were granted after March 31, 1999 through September 29, 1999. NOTE 9 -- YEAR 2000 ISSUE (UNAUDITED) Like other organizations and individuals around the world, the Company could be adversely affected if the computer systems it uses and those used by the Company's major customers and vendors do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." Management is assessing its computer systems and the systems compliance issues of its major service providers. Based on information available to management, the Company's major customers and vendors are taking steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that they use. At this time, however, there can be no assurance that these steps will be sufficient, and the failure of a timely completion of all necessary procedures could have a material adverse effect on the Company's operations. Management will continue to monitor the status of, and its exposure to, this issue. 8 EX-99.2 4 PRO FORMA FINANCIAL INFORMATION 1 EXHIBIT 99.2 QUEST SOFTWARE, INC. AND MBR TECHNOLOGIES, INC. PRO FORMA INFORMATION On December 17, 1999 the Company, through a wholly owned subsidiary, acquired all of the outstanding common stock and stock options of MBR Technologies, Inc. (MBR) in exchange for 93,471 shares of Quest Common Stock valued at $9,323,732, a cash payment of $1,313,583 and the assumption of net liabilities of $340,000. The acquisition was accounted for as a purchase. The following unaudited pro forma combined results of operations for the years ended December 31, 1999 and 1998 assumes that the acquisition had occurred on January 1, 1998. The pro forma combined results of operations is presented for information purposes only, is based on historical information, and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of the combined enterprise. NOTES TO PRO FORMA FINANCIAL STATEMENTS (1) To reflect the increase in goodwill amortization expense ($11,534M/60 x 12) on a straight-line basis over five years resulting from the acquisition. (2) To reflect the decrease in interest income due to the use of cash in the acquisition at a 5% annual yield. (3) To reflect the decrease in income tax expense resulting from the utilization of the operating loss of MBR for the year. (4) To adjust for the 93,471 shares of Quest common stock issued in the acquisition of MBR. 9 2 QUEST SOFTWARE, INC. AND MBR TECHNOLOGIES UNAUDITED PRO FORMA INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
QUEST MBR COMBINED SOFTWARE TECHNOLOGIES TOTAL PRO FORMA DECEMBER 31, DECEMBER 17, DECEMBER 31, PRO FORMA DECEMBER 31, 1999 1999 1999 ADJUSTMENTS 1999 ------------ ------------ ------------ ----------- ------------ Revenues: Licenses.............................. $54,269 $ 380 $54,649 $ -- $54,649 Services.............................. 16,599 190 16,789 -- 16,789 ------- ----- ------- ------- ------- Total revenues................... 70,868 570 71,438 -- 71,438 Cost of Revenues: Licenses.............................. 2,998 346 3,344 -- 3,344 Services.............................. 4,195 195 4,390 -- 4,390 ------- ----- ------- ------- ------- Total cost of revenues........... 7,193 541 7,734 -- 7,734 ------- ----- ------- ------- ------- Gross profit............................ 63,675 29 63,704 -- 63,704 Operating expenses: Sales and marketing................... 32,078 149 32,227 -- 32,227 Research and development.............. 15,980 209 16,189 -- 16,189 General and administrative............ 9,906 524 10,430 -- 10,430 Compensation costs and goodwill amortization....................... 1,243 -- 1,243 2,307(1) 3,550 ------- ----- ------- ------- ------- Total operating expenses......... 59,207 882 60,089 2,307 62,396 ------- ----- ------- ------- ------- Income (loss) from operations........... 4,468 (853) 3,615 (2,307) 1,308 Other income (expense), net............. 1,202 (31) 1,171 (71)(2) 1,100 ------- ----- ------- ------- ------- Income before income tax provision...... 5,670 (884) 4,786 (2,378) 2,408 Income tax provision.................... 2,273 1 2,274 (384)(3) 1,890 ------- ----- ------- ------- ------- Net income (loss)....................... 3,397 (885) 2,512 (1,994) 518 Preferred stock dividends............... 590 -- 590 -- 590 ------- ----- ------- ------- ------- Net income (loss) applicable to common shareholders.......................... $ 2,807 $(885) $ 1,922 $(1,994) $ (72) ======= ===== ======= ======= ======= Basic and diluted net income per share................................. $ 0.07 $ (0.00) ======= ======= Weighted average shares: Basic................................. 37,677 93(4) 37,270 Diluted............................... 41,805 93(4) 41,898
10 3 QUEST SOFTWARE, INC. AND MBR TECHNOLOGIES UNAUDITED PRO FORMA INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
QUEST MBR COMBINED SOFTWARE TECHNOLOGIES TOTAL PRO FORMA DECEMBER 31, MARCH 31, DECEMBER 31, PRO FORMA DECEMBER 31, 1998 1999 1998 ADJUSTMENTS 1998 ------------ ------------ ------------ ----------- ------------ Revenues: Licenses....................... $24,901 $ 122 $25,023 $ -- $25,023 Services....................... 9,889 146 10,035 -- 10,035 ------- ----- ------- ------- ------- Total revenues............ 34,790 268 35,058 -- 35,058 Cost of revenues: Licenses....................... 3,433 337 3,770 -- 3,770 Services....................... 2,507 66 2,573 -- 2,573 ------- ----- ------- ------- ------- Total cost of revenues.... 5,940 403 6,343 -- 6,343 ------- ----- ------- ------- ------- Gross profit (loss).............. 28,850 (135) 28,715 -- 28,715 Operating expenses: Sales and marketing............ 11,836 62 11,898 -- 11,898 Research and development....... 8,047 301 8,348 -- 8,348 General and administrative..... 5,278 368 5,646 2,307(1) 7,953 ------- ----- ------- ------- ------- Total operating expenses............... 25,161 731 25,892 2,307 28,199 ------- ----- ------- ------- ------- Income from (loss) operations.... 3,689 (866) 2,823 (2,307) 516 Other income (expense), net...... 336 (7) 329 (71)(2) 258 ------- ----- ------- ------- ------- Income before income tax provision...................... 4,025 (873) 3,152 (2,378) 774 Income tax provision............. 1,679 1 1,680 (394)(3) 1,286 ------- ----- ------- ------- ------- Net income (loss)................ $ 2,346 $(874) $ 1,472 $(1,984) $ (512) ======= ===== ======= ======= ======= Basic and diluted net income per share.......................... $ 0.05 $ (0.01) Weighted average shares: Basic.......................... 44,261 93(4) 44,354 Diluted........................ 44,459 93(4) 44,552
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