Exhibit 20.1
BIVERONI BATSCHELET PARTNERS AG
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998
IN SWISS FRANCS
INDEX
Page
---------------
Report of Independent Auditors F-2
Balance Sheets F-3 - F-4
Statements of Operations F-5
Statements of Changes in Shareholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8 - F-17
- - - - - - - - - - -
ERNST & YOUNG
KOST FORER & GABBAY
REPORT OF INDEPENDENT AUDITORS
To the shareholders of
BIVERONI BATSCHELET PARTNERS AG
We have audited the accompanying balance sheet of Biveroni Batschelet
Partners AG as of December 31, 1998, and the related statements of operations,
changes in shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance as to 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 the 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 Biveroni Batschelet
Partners AG as of December 31, 1998, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles in the United States.
Tel-Aviv, Israel KOST FORER & GABBAY
June 30, 1999 A Member of Ernst & Young International
F-2
BIVERONI BATSCHELET PARTNERS AG
BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------------
(CHF in thousands)
December 31, March 31,
1998 1999
------------------ ----------------
Audited Unaudited
------------------ ----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 988 2,390
Marketable securities (Note 2d) 344 1,391
Inventories 25 15
Loan to shareholders (Note 3) 500 500
Trade receivables (net of allowance - $ 65 in December 31, 1998) 782 699
Unbilled receivables 221 238
Deferred income taxes (Note 8d) 370 53
Other accounts receivable (Note 4) 119 280
------------------ ----------------
Total current assets 3,349 5,566
------------------ ----------------
FIXED ASSETS, NET (Note 5) 950 1,048
------------------ ----------------
4,299 6,614
================== ================
The accompanying notes are an integral part of the financial statements.
F-3
BIVERONI BATSCHELET PARTNERS AG
BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------------
(CHF in thousands)
December 31, March 31,
1998 1999
------------------ ----------------
Audited Unaudited
------------------ ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables 334 180
Deferred revenues 1,679 3,760
Other payables and accrued expenses (Note 6) 1,980 1,409
Dividend declared - 80
------------------ ----------------
Total current liabilities 3,993 5,429
------------------ ----------------
LONG-TERM LIABILITIES:
Deferred tax liabilities (Note 8d) 71 61
------------------ ----------------
SHARHOLDERS' EQUITY (Note 7):
Ordinary shares 800 800
Appropriated retained earnings 149 169
Non-appropriated retained earnings (accumulated deficit) (714) 155
------------------ ----------------
Total shareholders' equity 235 1,124
------------------ ----------------
4,299 6,614
================== ================
The accompanying notes are an integral part of the financial statements.
F-4
BIVERONI BATSCHELET PARTNERS AG
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
(CHF in thousands, except per share data)
Three months ended
Year ended March 31,
December 31, -------------------------------------
1998 1998 1999
----------------- ---------------- ----------------
Audited Unaudited
----------------- -------------------------------------
Revenues:
Software licensing fees 2,250 484 1,943
Maintenance and service fees 3,784 747 1,275
Hardware sales 641 137 52
----------------- ---------------- ----------------
Total revenues 6,675 1,368 3,270
----------------- ---------------- ----------------
Cost of revenues:
Software licensing costs 184 16 173
Maintenance and service costs 1,603 249 517
Hardware costs 531 106 45
----------------- ---------------- ----------------
Total cost of revenues 2,318 371 735
----------------- ---------------- ----------------
Gross profit 4,357 997 2,535
----------------- ---------------- ----------------
Operating expenses:
Software development 2,267 429 582
Selling and marketing 882 158 320
General and administrative 1,476 258 291
----------------- ---------------- ----------------
Total operating expenses 4,625 845 1,193
----------------- ---------------- ----------------
Operating income (loss) (268) 152 1,342
Financial expenses, net (Note 9c) (40) - (15)
Other income (expenses), net 7 - (2)
Income taxes (benefit) (Note 8b) (38) (21) 356
----------------- ---------------- ----------------
Net income (loss) for the period (263) 173 969
================= ================ ================
Basic earnings (loss) per share (0.33) 0.22 1.21
================= ================ ================
Diluted earnings (loss) per share (0.33) 0.22 1.21
================= ================ ================
The accompanying notes are an integral part of the financial statements.
F-5
BIVERONI BATSCHELET PARTNERS AG
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------
(CHF in thousands)
Non-appropriated
Appropriated retained earnings Total
Ordinary shares retained (accumulated shareholders'
Shares Amount earnings deficit) equity
-------------- ------------ ---------------- --------------------- ----------------
Audited
---------------------------------------------------------------------------------------
Balance as of January 1, 1998 800 800 141 (403) 538
Dividend paid - - (40) (40)
Appropriated retained earnings - - 8 (8) -
Loss for the year - - (263) (263)
-------------- ------------ ---------------- --------------------- ----------------
Balance as of
December 31, 1998 800 800 149 (714) 235
============== ============ ================ ===================== ================
Unaudited
---------------------------------------------------------------------------------------
Balance as of January, 1, 1999 800 800 149 (714) 235
Dividend declared - - - (80) (80)
Appropriated retained earnings - - 20 (20) -
Net income for the period - - - 969 969
-------------- ------------ ---------------- --------------------- ----------------
Balance as of March 31, 1999 800 800 169 155 1,124
============== ============ ================ ===================== ================
The accompanying notes are an integral part of the financial statements.
F-6
BIVERONI BATSCHELET PARTNERS AG
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------------------------
(CHF in thousands)
Three months ended
Year ended March 31,
December 31, -------------------------------------
1998 1998 1999
----------------- ---------------- ----------------
Audited Unaudited
----------------- -------------------------------------
Cash flows from operating activities:
Net income (loss) for the period (263) 173 969
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 399 76 122
Deferred taxes, net (112) (49) 307
Marketable securities (344) - (1,047)
Capital loss (gain) on sale of fixed assets 7 - -
Decrease (increase) in inventories (25) - 10
Increase in trade receivables and unbilled
receivables (682) (106) 66
Decrease (increase) in other accounts receivable (56) (111) (161)
Increase (decrease) in trade payables 29 (165) (154)
Increase (decrease) in other payables and
accrued expenses 839 108 (571)
Increase in deferred revenues 1,592 2,015 2,081
----------------- ---------------- ----------------
Net cash provided by operating activities 1,384 1,941 1,622
----------------- ---------------- ----------------
Cash flows from investing activities:
Loan to shareholders (353) - -
Purchase of fixed assets (569) (147) (220)
Proceeds from sale of fixed assets 10 10 -
----------------- ---------------- ----------------
Net cash used in investing activities (912) (137) (220)
----------------- ---------------- ----------------
Cash flows from financing activities:
Dividend paid (40) - -
----------------- ---------------- ----------------
Net cash used in financing activities (40) - -
----------------- ---------------- ----------------
Increase in cash and cash equivalents 432 1,804 1,402
Cash and cash equivalents at the beginning
of the period 556 556 988
----------------- ---------------- ----------------
Cash and cash equivalents at the end of the period 988 2,360 2,390
================= ================ ================
Supplemental disclosure of cash flows activities:
Cash paid during the period for:
Income taxes 27 19 5
================= ================ ================
The accompanying notes are an integral part of the financial statements.
F-7
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
NOTE 1:- GENERAL
Biveroni Batschelet Partners AG was incorporated in Switzerland in
1984, and commenced operations at approximately that time.
Biveroni Batschelet Partners AG ("the Company") designs, develops,
markets, supports and operates systems for automatic processing
and transmitting of data in the finance industry.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with
generally accepted accounting principles in the United States.
a. 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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
b. Financial statements in Swiss francs:
The Company's sales are made in Swiss francs. In addition,
all of the Company's costs are incurred in Swiss francs.
Since the Swiss franc is the primary currency in the
economic environment in which the Company operates, the
Swiss franc is its functional currency and, accordingly,
monetary accounts maintained in currencies other than the
Swiss franc are remeasured using the foreign exchange rate
at the balance sheet date. Operational accounts and
non-monetary balance sheet accounts are measured and
recorded at the rate in effect at the date of the
transaction.
c. Cash equivalents:
Cash equivalents are short-term, highly liquid investments
that are readily convertible to cash, and purchased with
maturities of three months or less.
d. Marketable securities:
The Company accounts for its investments using Statement of
Financial Accounting Standards No. 115 ("SFAS 115"),
"Accounting for Certain Investments in Debt and Equity
Securities". This standard requires that certain debt and
equity securities be adjusted to market value at the end of
each accounting period. Unrealized market value gains and
losses are charged to earnings, if the securities are
traded for short-term profit. Otherwise, such unrealized
gains and losses are charged or credited to a separate
component of shareholders' equity.
As of December 31, 1998, all securities covered by SFAS 115
were designated as trading securities. Accordingly, these
securities are carried at fair value, based upon the quoted
market price of those investments. Net realized and
unrealized gains and losses on these securities are
included in financial expenses.
F-8
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
e. Exchange rates:
Data concerning the CHF/U.S. dollar exchange rate are
presented below:
Exchange rate
of CHF
------------------
At the end of the year:
1997 1.4554
1998 1.37
Rate of change during the year (5.87%)
f. Trade receivables:
Trade receivables include amounts billed to clients and
various amounts due from transactions arising in the
ordinary course of business. Management periodically
evaluates the collectibility of these receivables and
adjusts the allowance for doubtful accounts to reflect the
amounts estimated to be uncollectible.
g. Fixed assets:
Fixed assets are stated at cost. Depreciation is calculated
by the straight-line method over the estimated useful lives
of the assets, at the following annual depreciation rates:
%
---------------------------
Office furniture and equipment 6 - 15
Computers and software 33
Leasehold improvements Over the term of the lease
h. Deferred taxes:
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) 109,
"Accounting for Income Taxes". This Statement prescribes
the use of the liability method whereby deferred tax asset
and liability account balances are determined based on
differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the
differences are expected to reverse.
F-9
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
i. Revenue recognition:
The Company generates revenues from licensing the rights to
use its software products directly to end-users. The
Company also generates revenues from sales of professional
services, including consulting, implementation, training
and maintenance.
Revenues from software license agreements are recognized,
in accordance with Statement Of Position (SOP) 97-2
"Software Revenue Recognition", upon delivery of the
software when collection is probable; all license payments
are due within one year, the license fee is otherwise fixed
or determinable, vendor-specific evidence exists to
allocate the total fee to the elements of the arrangement
and persuasive evidence of an arrangement exists.
Revenues from software licenses that require significant
customization, integration and installation are recognized
using contract accounting by the percentage of completion
method based on the relationship of actual costs incurred
to total estimated costs.
Revenues from maintenance and services are recognized over
the life of the maintenance agreement or at the time that
services are rendered.
Revenues from hardware sales are recognized upon shipment.
j. Software development:
Software development costs incurred in the process of
developing product improvements or new products, are
charged to expenses as incurred.
SFAS No. 86 "Accounting for the Costs of Computer Software
to be Sold, Leased or Otherwise Marketed" requires
capitalization of certain software development costs
subsequent to the establishment of technological
feasibility.
Based on the Company's product development process,
technological feasibility is established upon completion of
a working model. Costs incurred by the Company between
completion of the working model and the point at which the
product is ready for general release have been
insignificant. Therefore, all research and development
costs have been expensed.
k. Concentration of credit risks:
SFAS No.105, "Disclosure of Information About Financial
Instruments with Off-Balance-sheet Risk and Financial
Instruments with Concentrations of Credit Risk", requires
disclosure of any significant off-balance sheet and credit
risk concentrations. The Company has no significant
off-balance sheet concentration of credit risk, such as
foreign exchange contracts, option contracts or other
foreign hedging arrangements.
F-10
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
Financial instruments that potentially subject the Company
to concentrations of credit risk consist principally of
cash equivalents, marketable securities and accounts
receivable. The Company's cash and cash equivalents and
short-term bank deposits are invested in deposits with
major banks in Switzerland. Management believes that the
financial institutions holding the Company's investments
are financially sound, and accordingly, minimal credit risk
exists with respect to these investments. The Company's
accounts receivable are derived from sales to customers
located mainly in Switzerland. The Company generally does
not require collateral; however, in certain circumstances,
the Company may require letters of credit, other collateral
or additional guarantees. The Company performs ongoing
credit evaluations of its customers and to date has not
experienced any material losses.
The Company's marketable securities include investments in
debentures of several corporations. Management believes
that those corporations are financially sound, the
portfolio is well diversified, and accordingly, minimal
credit risk exists with respect to said marketable
securities.
l. Earnings (loss) per share:
The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings per
Share", (Statement 128) which requires the presentation of
basic and diluted earnings per share. Basic earnings per
share excludes dilution and is computed by dividing income
available to holders of Ordinary shares by the weighted
average number of Ordinary shares outstanding for the
period. The Company does not have any dilutive potential
Ordinary shares.
m. Fair value of financial instruments:
The following methods and assumptions were used by the
Company in estimating its fair value disclosures for
financial instruments:
Cash and cash equivalents and short-term bank deposits -
The carrying amounts of these items approximate their fair
value due to the short-term maturity of such instruments.
Marketable securities - The fair value of marketable
securities is based on quoted prices.
F-11
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
n. Comprehensive income:
As of January 1, 1998, the Company adopted FASB Statement
130, "Reporting Comprehensive Income". Statement 130
establishes new rules for the reporting and display of
comprehensive income and its components. The adoption of
this Statement had no impact on the Company's net income or
shareholders' equity for the year ended December 31, 1998
or the three month periods ended March 31, 1998 and 1999.
o. Interim financial statements:
In the opinion of management, the unaudited financial
statements as of March 31, 1999, and for the three month
periods ended March 31, 1998, and March 31, 1999 have been
prepared in accordance with generally accepted accounting
principles for interim financial information and on the
same basis as the audited financial statements and include
all significant adjustments, consisting only of normal
recurring adjustments that are necessary for the fair
presentation of the results of the interim periods. The
data disclosed in these notes to the combined financial
statements for these periods are also unaudited. Operating
results from the interim periods are not necessarily
indicative of the results that may be expected for the
entire year.
NOTE 3:- LOAN TO SHAREHOLDERS
The loan was extended to two shareholders who own 45.75% and 8% of
the Company's shares, respectively. The loan is in Swiss francs
and bears interest of 2% being paid at the end of each month.
NOTE 4:- OTHER RECEIVABLES
December 31,
1998
------------------
Employees 88
Customer advances 6
Government authorities 2
Other 23
------------------
119
==================
F-12
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
NOTE 5:- FIXED ASSETS
December 31,
1998
------------------
Cost:
Office furniture 243
Computers and software 1,620
Equipment 32
------------------
1,895
------------------
Accumulated depreciation:
Office furniture 108
Computers and software 820
Equipment 17
------------------
945
------------------
Depreciated cost 950
==================
Depreciation expenses for the year
ended December 31, 1998 are $399.
NOTE 6:- OTHER PAYABLES AND ACCRUED EXPENSES
Employees and payroll accruals 1,317
Accrued vacation and employee benefits 384
Accrued expenses 89
Government authorities 69
Income tax payable 72
Others 49
------------------
1,980
==================
F-13
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
NOTE 7:- SHARE CAPITAL
a. Composition of share capital:
December 31, 1998
-------------------------------------
Issued and
Authorized outstanding
---------------- ----------------
Number of shares
-------------------------------------
Shares of CHF 1,000 par value:
Ordinary shares 800 800
================ ================
The Ordinary shares confer upon the holders the right to
receive notice to participate and vote in general meetings
of the Company and the right to receive dividends, if
declared.
b. Appropriated retained earnings:
According to the Swiss Code of Obligation, 5% of the net
income shall be allocated to the general reserve, up to 20%
of the outstanding share capital.
In addition, 10% of the amounts that are distributed as a
share of profits, after payment of a dividend of 5%, shall
be allocated to the general reserve.
To the extent it does not exceed half of the share capital,
the general reserve shall only be used to cover losses, or
for measures bound to maintain the Company in bad business
times to counteract unemployment, or to soften its
consequences.
As of December 31, 1998, the total general reserve is in
the amount of CHF 35. In 1999, the Company increased the
general reserve by CHF 9.50.
Aside from the abovementioned reserve, as of December 31,
1998, the Company allocated another CHF 114 as an
additional reserve. The Company is restricted from
withdrawing any portion of this reserve as a dividend. It
was management's decision to allocate additional funds to
beyond what it is obligated to allocate pursuant to the
abovementioned Code.
F-14
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
c. Dividends:
In the event that cash dividends are declared in the
future, such dividends will be paid in CHF, out of
the retained earnings.
During the year ended December 31, 1998, the Company
paid a dividend to its shareholders in the total
amount of CHF 40 out of the 1997 net income.
In February 1999, the Company declared a further
dividend of CHF 80 out of the 1998 net income, to be
distributed to its shareholders. The Company paid
these dividends in April 1999.
NOTE 8:- TAXES ON INCOME
a. Tax assessments:
The Company received final tax assessments up to and
including the 1996 tax year.
b. Composition of income taxes:
Year ended
December 31,
1998
------------------
Income taxes (benefit):
Current taxes 74
Deferred taxes (112)
------------------
Total (38)
==================
F-15
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
c. Reconciliation of the theoretical tax expenses:
A reconciliation between the theoretical income tax,
assuming all income is taxed at the statutory rate
applicable to income of the Company and the actual income
tax as reported in the statement of operations, is as
follows:
Year ended
December 31,
1998
------------------
Pre tax loss (301)
Statutory tax 25%
==================
Theoretical tax benefit (75)
Tax in respect to prior years 15
Items for which deferred taxes were not recognized (13)
Expenses not recognized for tax purposes 35
------------------
Income taxes 38
==================
d. The following is a summary of amounts related to deferred
income taxes in accordance with statement No. 109 of the
FASB:
December 31,
1998
------------------
Deferred tax assets - current:
Reserves and allowance (50)
Deferred revenues 420
------------------
370
==================
Deferred tax liabilities - non-current:
Depreciation (71)
==================
NOTE 9: - SELECTED STATEMENTS OF OPERATIONS DATA
a. Summary information about geographical destinations:
The Company attributes revenues from external customers on
the basis of where the products are sold. All revenues are
from sales to customers in Europe.
F-16
BIVERONI BATSCHELET PARTNERS AG
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(CHF in thousands)
b. Major customers data by percentage of total revenues:
Year ended
December 31,
1998
------------------
Customer A 10%
==================
c. Financial expenses:
Financial expenses:
Losses from marketable securities, net 44
Interest and other 4
------------------
48
------------------
Financial income:
Interest and other 8
------------------
Financial expenses 40
==================
NOTE 10:- SUBSEQUENT EVENTS
On June 15, 1999, Fundtech Ltd. acquired the Company in
consideration of CHF 20,000, out of which 75% is payable in cash
and 25% is payable in Fundtech Ordinary shares.
- - - - - - - - - - - - -
F-17