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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported: JULY 15, 1999
EDIFY CORPORATION
(Exact name of registrant as specified in this charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-28480 77-0250992
(Commission File Number) (I.R.S. Employer Identification Number)
2840 SAN TOMAS EXPRESSWAY, SANTA CLARA, CALIFORNIA 95051
(Address of principal executive offices) (Zip Code)
(408) 982-2000
(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 15, 1999, Edify Corporation ("Edify"), pursuant to an Asset
Acquisition Agreement dated as of May 25, 1999, between Edify and Workscape,
Inc. ("Workscape"), as amended by a Closing Agreement, completed the sale to
Workscape of the assets related to Edify's employee self service activities for
$16,029,555 million in cash and the assumption of certain related liabilities of
Edify. The assets sold included Edify's Employee Self Service product and
related tangible and intangible assets, inventory, technology, books and records
contracts and goodwill. The purchase price for the assets was determined by
extensive negotiations between Edify and Workscape.
A copy of the Asset Acquisition Agreement is filed as Exhibit 2.01 to
this Report and the Closing Agreement is filed as Exhibit 2.02 to this Report.
These documents are incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Combined Condensed Financial Information (Unaudited):
The following unaudited pro forma condensed consolidated balance
sheet at March 31, 1999 and the unaudited pro form condensed
consolidated statements of operations data for the three months
ended March 31, 1999 and the fiscal year ended December 31,
1998, give pro forma effect to the estimated financial impact of
the sale of assets related to the employee self service
activities (the "HR Business") to Workscape. The pro forma
condensed consolidated balance sheet at March 31, 1999 gives pro
forma effect to the sale of the assets as if the transaction was
consummated on March 31, 1999. The pro forma condensed
consolidated statements of operations data for the three months
ended March 31, 1999 and the fiscal year ended December 31,
1998, gives pro forma effect to the sale of the assets as if the
transaction was consummated as of the beginning of the
respective periods presented.
The unaudited pro forma condensed consolidated financial
statements are based on the historical consolidated financial
statements of the Company giving effect to the assumptions and
adjustments set forth in the following notes. The overall
assumption is to show the effect of the transfer on the
revenues, expenses, assets and liabilities as if the transaction
had occurred on the assumed dates.
The unaudited pro forma condensed financial data have been
prepared by company management for informational purposes only
and are not necessarily indicative of how the Company's
financial position and results of operations would have appeared
had the transaction as set forth in the Asset Acquisition
Agreement, dated May 25, 1999 (the "Agreement"), by and between
the Registrant and Workscape been consummated on the assumed
dates, nor are they necessarily indicative of the Company's
financial position and results of operations for any future
period.
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EDIFY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of March 31, 1999
(amounts in thousands)
COMPANY PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS BALANCES
----------- ----------- -----------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 33,394 $ 16,030(a) $ 49,424
Accounts receivable, net 18,739 18,739
Prepaid expenses and other current assets 2,036 2,036
----------- ----------- -----------
Total current assets 54,169 16,030 70,199
Property and equipment, net 7,579 (200)(b) 7,379
Other assets 1,285 1,285
----------- ----------- -----------
Total assets $ 63,033 $ 15,830 $ 78,863
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,461 $ $ 3,461
Current installments of capital lease obligations 180 180
Accrued expenses 7,218 1,694(c) 8,912
Unearned revenue 5,574 (1,240)(d) 4,334
----------- ----------- -----------
Total current liabilities 16,433 454 16,887
Deferred rent 60 60
Capital lease obligations, excluding current installments 5 5
Commitments and contingencies
Stockholders' equity
Common stock 18 18
Additional paid-in capital 70,245 70,245
Deferred compensation and other (37) (37)
Note receivable from stockholder (8) (8)
Accumulated earnings (deficit) (23,683) 15,376(e) (8,307)
----------- ----------- -----------
Total stockholder's equity 46,535 15,376 61,911
----------- ----------- -----------
Total liabilities and stockholder's equity $ 63,033 $ 15,830 $ 78,863
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See accompanying notes to the unaudited pro forma
condensed consolidated balance sheet.
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
as of March 31, 1999
(amounts in thousands)
(a) The Company received consideration of approximately $16 million on July
15, 1999 for the sale of the HR Business.
(b) As stipulated in the Agreement, Workscape purchased all of the Company's
fixed assets related to the HR Business.
(c) To accrue for HR Business sales commissions required to be paid pursuant
to the agreement in excess of commissions accrued in accordance with the
Company's commission plan ($48), severance costs for HR Business
employees not transferring to Workscape ($10), legal and accounting
expenses related to the sale transaction ($250), and the commitment to
provide two years backline maintenance support to Workscape commencing
on the closing date of the transaction ($1,386). This pro forma
adjustment assumes that the transaction was consummated on March 31,
1999, and therefore the amount of commission accrual adjustment will
change based on the difference between required commission payments as
of March 31, 1999 and July 15, 1999.
(d) As stipulated in the agreement Workscape will assume responsibility for
future maintenance contracts relating to the HR Business. The actual
amount of the deferred revenue adjustment will change based on the
difference between deferred revenue as of March 31, 1999 and July 15,
1999.
(e) This adjustment reflects the profit on the sale of the HR Business. The
actual amount of the gain will be finalized following the Closing date
and will be accounted for in the Company's fiscal third quarter.
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EDIFY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1999
(amounts in thousands, except per share amounts)
COMPANY PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS BALANCES
------------ ------------ ------------
Net revenues:
License $ 7,796 $ (762)(a) $ 7,034
Services and other 8,169 (3,509)(a) 4,660
------------ ------------ ------------
Total net revenue 15,965 (4,271) 11,694
Cost of license revenue 984 (8)(b) 976
Cost of services and other revenues 8,117 (1,410)(b) 6,707
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Gross profit 6,864 (2,853) 4,011
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Operating expenses:
Product development 3,184 (188)(b) 2,996
Sales and marketing 8,566 (534)(b) 8,032
General and administrative 1,736 - 1,736
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Total operating expenses 13,486 (722) 12,764
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Loss from operations (6,622) (2,131) (8,753)
Other income, net 350 14,092(c) 14,442
------------ ------------ ------------
Income (loss) before income taxes (6,272) 11,961 5,689
Provision for income taxes 96 - 96
------------ ------------ ------------
Net income (loss) $ (6,368) $ 11,961 $ 5,593
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Basic net income (loss) per share $ (0.36) $ 0.32
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Diluted net income (loss) per share $ (0.36) $ 0.31
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Shares used in computing basic net income (loss) per share 17,577 17,577
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Shares used in computing diluted net income (loss) per share 17,577 18,293
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See accompanying notes to the unaudited pro forma condensed consolidated
statement of operations for the three months ended March 31, 1999.
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1999
(amounts in thousands)
(a) This adjustment relates to product revenue and service revenue relating
to the HR Business.
(b) These adjustments represent the HR Business cost of revenues and
associated direct operating expenses.
(c) This adjustment records interest income related to the proceeds of the
transaction ($208) and the related gain on sale of the HR Business
($13,884) assuming the transaction was consummated on January 1, 1999.
The actual amount of the gain will be finalized following the Closing
date and will be accounted for in the Company's fiscal third quarter. No
income tax expense will be recognized as a result of the gain on sale of
the HR Business as the Company has net operating carryforwards
sufficient to fully absorb the resulting taxable income. The Company
previously had a full valuation allowance on its deferred tax assets
including the net operating loss carryforwards.
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EDIFY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(amounts in thousands, except per share amounts)
COMPANY PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS BALANCES
------------ ------------ ------------
Net revenues:
License $ 37,375 $ (8,690)(a) $ 28,685
Services and other 33,511 (13,340)(a) 20,171
------------ ------------ ------------
Total net revenue 70,886 (22,030) 48,856
Cost of license revenue 1,328 (87)(b) 1,241
Cost of services and other revenues 23,671 (5,360)(b) 18,311
------------ ------------ ------------
Gross profit 45,887 (16,583) 29,304
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Operating expenses:
Product development 11,986 (343)(b) 11,643
Sales and marketing 31,511 (3,145)(b) 28,366
General and administrative 5,745 - 5,745
Intellectual property settlement 5,000 - 5,000
------------ ------------ ------------
Total operating expenses 54,242 (3,488) 50,754
------------ ------------ ------------
Loss from operations (8,355) (13,095) (21,450)
Other income, net 1,805 14,939(c) 16,744
------------ ------------ ------------
Loss before income taxes (6,550) 1,844 (4,706)
Provision for income taxes 125 - 125
------------ ------------ ------------
Net loss $ (6,675) $ 1,844 $ (4,831)
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Basic and diluted net loss per share $ (0.39) $ (0.28)
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Shares used in computing basic and
diluted net loss per share 17,090 17,090
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See accompanying notes to the unaudited pro forma condensed consolidated
statement of operations for the year ended December 31, 1998.
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(amounts in thousands)
(a) This adjustment relates to product revenue and service revenue relating
to the HR Business.
(b) These adjustments represent the HR Business cost of revenues and
associated direct operating expenses.
(c) This adjustment records interest income related to the proceeds of the
sale transaction ($802) and the related gain on sale of the HR Business
($14,137) assuming the transaction was consummated on January 1, 1998.
The actual amount of the gain will be finalized following the Closing
date and will be accounted for in the Company's fiscal third quarter. No
income tax expense will be recognized as a result of the gain on the
sale of the HR Business as the Company has net operating loss
carryforwards sufficient to fully absorb the resulting taxable income.
The Company previously had a full valuation allowance on its deferred
tax assets, including the net operating carryforwards.
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(c) Exhibits.
The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
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2.01 Asset Acquisition Agreement dated as of May 25, 1999, among
Edify Corporation and Workscape, Inc. *
2.02 Closing Agreement dated as of July 15, 1999, among Edify
Corporation and Workscape, Inc. *
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* Registrant will furnish supplementally a copy of any omitted schedule or
exhibit to the Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 28, 1999 Edify Corporation
By: /s/ Stephanie A. Vinella
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Stephanie A. Vinella, Vice President
of Finance and Administration and
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
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2.01 Asset Acquisition Agreement dated as of May 25, 1999, among
Edify Corporation and Workscape, Inc. *
2.02 Closing Agreement dated as of July 15, 1999, among Edify
Corporation and Workscape, Inc. *
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* Registrant will furnish supplementally a copy of any omitted schedule or
exhibit to the Commission upon request.
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