1
UNITED STATES
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: September 26, 1997
NEW ERA OF NETWORKS, INC.
(Exact name of registrant as specified in its charter)
State of Delaware
(State or other jurisdiction of incorporation)
000-22043 84-1234845
(Commission File Number) I.R.S. Employer Identification No.
7400 East Orchard Rd., Suite 230, Englewood, CO 80111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 694-3933
(Former name or former address, if changed since last report): N/A
-----------------------------------
2
ITEM 2. ACQUISITIONS OR DISPOSITION OF ASSETS
As previously disclosed in a Current Report on Form 8-K, filed on October
10, 1997, New Era of Networks Limited ("Neon UK"), a wholly-owned United Kingdom
subsidiary of New Era of Networks, Inc. (the "Company"), acquired all of the
outstanding capital stock of Menhir Limited ("Menhir"), a corporation organized
under the laws of the United Kingdom. The transaction was consummated by means
of a Share Purchase Agreement by and among Menhir, the shareholders of Menhir,
and Neon UK (the "Purchase Agreement") and was effective as of September 1,
1997. The total cash purchase price for Menhir was $2.8 million, plus fees and
expenses of approximately $200,000.
The financial statements of Menhir and the pro forma financial information
relating to the acquisition, required to be filed in connection with the
acquisition pursuant to Items 7(a) and (b) of Form 8-K, are included herewith.
The unaudited pro forma consolidated statements of operations for the nine
months ended September 30, 1997 and the year ended December 31, 1996 attached
hereto as an exhibit give effect to the Menhir acquisition as if it had been
consummated at the beginning of the earliest period presented. The unaudited
pro forma financial data attached hereto as an exhibit should be read in
conjunction with the notes thereto. The unaudited pro forma condensed
financial statements do not purport to represent what the Company's results of
operations or financial position actually would have been had such transactions
and events occurred on the dates specified, or to project the Company's results
of operations or financial position for any future period or date. The pro
forma adjustments are based upon available information and represent, in the
Company's opinion, all adjustments necessary to present fairly the following
unaudited pro forma financial data.
A pro forma balance sheet has not been included on this Form 8-K as the
assets and liabilities of Menhir were consolidated in the September 30, 1997
balance sheet of the Company reported on the Registrant's quarterly report on
Form 10-Q filed on November 13, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) The financial statements of the business acquired.
Menhir Limited:
Report and Accounts, for the year ended 30 June 1997
Report and Accounts, for the year ended 30 June 1996
Consent of Chartered Accountants
(b) Pro forma financial information.
New Era of Networks, Inc.:
Condensed Pro Forma Combined Statement of Operations,
Nine months ended September 30, 1997 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1996 (unaudited)
3
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.
NEW ERA OF NETWORKS, INC.
/s/ STEPHEN E. WEBB
---------------------------
Stephen E. Webb, Senior Vice President
and Chief Financial Officer
Date: December 8, 1997
4
MENHIR LIMITED
REPORT AND ACCOUNTS
FOR THE YEAR ENDED
30 JUNE 1997
5
MENHIR LIMITED
OFFICERS AND PROFESSIONAL ADVISERS
DIRECTORS P Franklin (Chairman)
J Fotheringham
R V Gridley
J R C Perkins
M C Probert
N R Sedgwick
SECRETARY Fiona Scott-Smith
REGISTERED OFFICE Aldermary House
15 Queen Street
London
EC4N 1TX
BANKERS National Westminster Bank plc
Holborn Corporate Business Centre
PO Box 204
No 1 Hatton Garden
London
EC1P 1DU
AUDITORS Smith & Williamson
Chartered Accountants
No 1 Riding House Street
London W1A 3AS
COMPANY'S REGISTERED NUMBER 2275868
1
6
MENHIR LIMITED
CONTENTS PAGES
Directors' report 3
Statement of directors' responsibilities in
respect of the accounts 4
Auditors' report 5
Profit and loss account 6
Balance sheet 7
Notes to the accounts 8-12
2
7
MENHIR LIMITED
DIRECTORS' REPORT
The directors present their report and the accounts for the year ended 30 June
1997.
ACTIVITIES
The principal activity of the company continues to be computer consultancy
services.
REVIEW OF AFFAIRS
In the opinion of the directors, the state of the company's affairs at the year
end was satisfactory and they look forward to the future with confidence.
RESULTS FOR THE YEAR
The loss for the year after taxation was L.87,164 (1996: profit L.75,931). The
directors do not recommend the payment of a dividend (1996: L.nil).
DIRECTORS AND THEIR INTERESTS
The interests of the directors at the year end in the share capital of the
company were as follows:
Number of
Ordinary shares of L.1
each
1997 1996
J Fotheringham 235 235
R V Gridley 450 450
J R C Perkins 450 450
M C Probert - -
N R Sedgwick 450 450
P Franklin - -
AUDITORS
A resolution to re-appoint Smith & Williamson as auditors will be proposed at
the next Annual General Meeting.
SMALL COMPANY EXEMPTION
This statement has been prepared in accordance with the special provisions of
Part VII of the Companies Act 1985 relating to small companies.
APPROVED BY THE BOARD OF DIRECTORS
AND SIGNED ON BEHALF OF THE BOARD.
Nick Sedgwick
Director
3
8
MENHIR LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ACCOUNTS
Company law requires the directors to prepare accounts for each financial year
which give a true and fair view of the state of affairs of the company and of
the profit or loss of the company for that period. In preparing those
accounts, the directors are required to:
o select suitable accounting policies and then apply them consistently;
o make judgements and estimates that are reasonable and prudent;
o prepare the accounts on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and to enable them to ensure that the accounts comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
4
9
AUDITORS' REPORT TO THE SHAREHOLDERS OF MENHIR LIMITED
We have audited the accounts on pages 6 to 12 which have been prepared under
the historical cost convention and the accounting policies set out on page 8.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 4, the company's directors are responsible for the
preparation of accounts. It is our responsibility to form an independent
opinion, based on our audit, on those accounts and to report our opinion to
you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, 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 accounts 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 accounts.
OPINION
In our opinion the accounts give a true and fair view of the state of the
company's affairs at 30 June 1997 and of its loss for the year then ended and
have been properly prepared in accordance with the Companies Act 1985.
/s/ SMITH & WILLIAMSON No 1 Riding House Street
Chartered Accountants London W1A 3AS
Registered Auditors
25 September 1997
5
10
MENHIR LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 1997
NOTES 1997 1996
L. L.
TURNOVER 2 1,983,184 1,574,406
Cost of sales (1,017,670) (699,815)
----------- ---------
GROSS PROFIT 965,514 874,591
Administrative expenses (1,028,979) (748,315)
----------- ---------
OPERATING (LOSS)/PROFIT 3 (63,465) 126,276
Interest receivable 4 - 1,152
Interest payable 5 (16,199) (4,997)
----------- ---------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION (79,664) 122,431
TAXATION 6 (7,500) (46,500)
----------- ---------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION (87,164) 75,931
=========== =========
All of the company's activities are classed as continuing and there are no
recognised gains or losses in either year other than those included in the
above profit and loss account.
6
11
MENHIR LIMITED
BALANCE SHEET AS AT 30 JUNE 1997
NOTES 1997 1996
L. L.
FIXED ASSETS
Tangible fixed assets 7 34,821 57,591
--------- ---------
CURRENT ASSETS
Debtors 8 848,271 513,195
--------- ---------
CREDITORS: amounts falling due within
one year 9 (852,780) (453,310)
--------- ---------
NET CURRENT (LIABILITIES)/ASSETS (4,509) 59,885
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 30,312 117,476
--------- ---------
NET ASSETS 30,312 117,476
========= =========
CAPITAL AND RESERVES
Called up share capital 10 2,021 2,021
Share premium 11 56,789 56,789
Profit and loss account 11 (28,498) 58,666
--------- ---------
SHAREHOLDERS' FUNDS 11 30,312 117,476
========= =========
These accounts have been prepared in accordance with the special provisions of
Part VII of the Companies Act 1985 relating to small companies and were
approved by the Board of Directors on 25 September 1997 and signed on their
behalf by
/s/ Nick Sedgwick, Director
7
12
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1997
1. ACCOUNTING POLICIES
The accounts have been prepared under the historical cost convention and
in accordance with applicable accounting standards.
DEPRECIATION
Depreciation is provided on all tangible fixed assets in use to write
off the cost or valuation, less estimated residual value, of each asset
over its expected useful life in equal annual instalments, as follows:
Computer equipment )
Fixtures and fittings ) 25% per annum
Office equipment )
DEFERRED TAXATION
Deferred taxation is provided at the anticipated tax rates on
differences arising from the inclusion of items of income and
expenditure in taxation computations, in periods different from those in
which they are included in the accounts, to the extent that it is
probable that a liability will crystallise in the future.
FOREIGN CURRENCIES
Transactions denominated in foreign currency are translated into
sterling at the rate of exchange ruling at the date of transaction.
Assets and liabilities denominated in foreign currencies are translated
into sterling at the exchange rates ruling at the balance sheet date.
All exchange differences are taken to the profit and loss account.
OPERATING LEASES
The rentals payable under operating leases are charged on a straight
line basis over the lease term.
DEFERRED INCOME
Support income is accounted for over the life of the contract to which
it relates. Licence fees are deferred in full and written back to the
profit and loss account over the expected period of implementation of
the customer's system.
8
13
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1997 (continued)
2. TURNOVER
Turnover represents the net amount invoiced to customers less trade
discounts together with an adjustment for the change in deferred income
excluding value added tax and sales of fixed assets.
The analysis of the percentage of turnover attributable to each
geographical area is as follows:
1997 1996
% %
United Kingdom 63 51
European Economic Community 19 37
Rest of the World 18 12
-------- --------
100 100
======== ========
3. OPERATING (LOSS)/PROFIT L. L.
This is stated after charging:
Directors' emoluments 274,362 246,455
Auditors' remuneration 9,000 8,500
======== ========
4. INTEREST RECEIVABLE L. L.
Bank interest - 1,152
======== ========
9
14
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1997 (continued)
5. INTEREST PAYABLE
1997 1996
L. L.
On bank overdrafts 12,049 2,277
On bank loans repayable within
five years, by instalments - 2,720
On late payment of tax 4,150 -
-------- --------
16,199 4,997
======== ========
6. TAXATION L. L.
Corporation tax payable @ 24%
(1996:25%) 7,500 46,500
======== ========
7. TANGIBLE FIXED ASSETS
Computer Fixtures and Office
equipment fittings equipment Total
L. L. L. L.
Cost
At 1 July 1996 24,992 19,174 68,453 112,619
Additions - - 7,179 7,179
--------- -------- -------- --------
At 30 June 1997 24,992 19,174 75,632 119,798
--------- -------- -------- --------
Depreciation
At 1 July 1996 11,114 7,880 36,034 55,028
Charge for the year 6,248 4,793 18,908 29,949
--------- -------- -------- --------
At 30 June 1997 17,362 12,673 54,942 84,977
--------- -------- -------- --------
Net book values
At 30 June 1997 7,630 6,501 20,690 34,821
========= ========= ========= =========
At 30 June 1996 13,878 11,294 32,419 57,591
========= ========= ========= =========
10
15
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1997 (continued)
8. DEBTORS
1997 1996
L. L.
Trade debtors 422,138 90,143
Other debtors 53,290 49,190
Prepayments and accrued income 372,843 373,862
--------- --------
848,271 513,195
========= =========
9. CREDITORS: Amounts falling due within one year
L. L.
Bank loans and overdrafts 204,069 76,446
Trade creditors 171,899 135,788
Corporation tax 54,000 46,500
Other creditors 338,040 134,466
Accruals and deferred income 84,772 60,110
--------- --------
852,780 453,310
========= =========
Included within bank loans and overdrafts is L.22,685 of loans repayable
by instalments within one year. Interest is charged on the loan at the
rate of 10% per annum. The comparative included a loan balance of
L.9,227 that was repaid during the year.
The bank loans and overdrafts are secured by an unscheduled mortgage
debenture dated 5 October 1996 with National Westminster Bank Plc.
10. SHARE CAPITAL
L. L.
Authorised
3,500 Ordinary shares of L.1 each 3,500 3,500
========= =========
Allotted, called up and fully paid
2,021 Ordinary shares of L.1 each 2,021 2,021
========= =========
11
16
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1997 (continued)
11. STATEMENT OF SHAREHOLDERS' FUNDS AND RESERVES
Share Profit
Premium and Loss Shareholders'
Account Account Funds
L. L. L.
At 30 June 1996 56,789 58,666 117,476
Loss for the year - (87,164) (87,164)
--------- --------- ---------
At 30 June 1997 56,789 (28,498) 30,312
========= ========= =========
12. OPERATING LEASE COMMITMENTS
At the year end the company had the following annual commitments on
operating leases expiring:
Land and
Other Buildings
L. L.
1997
Within 1 year 28,689 -
Within 2-5 years 10,549 74,085
========= =========
1996
Within 1 year 5,894 -
Within 2-5 years 10,010 -
After 5 years - 74,085
========= =========
12
17
MENHIR LIMITED
REPORT AND ACCOUNTS
FOR THE YEAR ENDED
30 JUNE 1996
18
MENHIR LIMITED
OFFICERS AND PROFESSIONAL ADVISERS
DIRECTORS P Franklin (Chairman)
J Fotheringham
R V Gridley
J R C Perkins
M C Probert
N R Sedgwick
SECRETARY Britannia Registrars Limited
REGISTERED OFFICE 26 Wilfred Street
Buckingham Gate
London
SW1E 6PL
BANKERS National Westminster Bank plc
Holborn Corporate Business Centre
PO Box 959
2 Hatton Garden
London EC1N 8AB
AUDITORS Smith & Williamson
Chartered Accountants
No 1 Riding House Street
London W1A 3AS
COMPANY'S REGISTERED NUMBER 2275868
1
19
MENHIR LIMITED
CONTENTS PAGES
Chairman's statement 3
Directors' report 4
Statement of directors' responsibilities in
respect of the accounts 5
Auditors' report 6
Profit and loss account 7
Balance sheet 8
Notes to the accounts 9-13
2
20
MENHIR LIMITED
CHAIRMAN'S STATEMENT
The year ended 30 June 1996 was most encouraging for Menhir Limited for a
number of reasons, not all of which have yet shown through in the company's
results. As anticipated, the year brought the expected return to profitability
following a 32% increase in turnover over the previous period. This increased
turnover must be seen against a background of ever tightening budgets in the
financial services area and particularly in banks which represent the major
part of the company's target market. For this reason the increased product
sales are all the more laudable.
Inevitably, to achieve these results has meant an increase in costs for staff,
premises, equipment and the like. The company has actively improved its
project controls to ensure that costs are commensurate with the demands of the
business and are justifiable in the context of both revenue and providing the
best possible service to our customers.
As to the company's flagship product, Rapport, there is a continual growth in
interest from major financial market participants who recognise not only the
need for this sort of technology within their organisations but also the cost
effectiveness of using Rapport to meet their requirements. Further, to ensure
the integrity of each and every delivery, the company has implemented enhanced
quality assurance procedures internally. There is currently a significant
pipeline of potential new customers, many of whom are likely to take the
product in the second half of 1996, which bodes well for the coming year where
we expect to see the profitability trend to continue.
In summary, the company is performing better and looking stronger than at any
time and the potential for increased growth is clearly visible. Management are
equally aware of the need to undertake this growth in an organised manner to
adhere to the high standards of quality already achieved.
Finally, on behalf of the Board, I would like to sincerely thank all the staff
for the hard work and dedication in making 1996 such a successful year.
P Franklin
Chairman
3
21
MENHIR LIMITED
DIRECTORS' REPORT
The directors present their report and the accounts for the year ended 30 June
1996.
ACTIVITIES
The principal activity of the company continues to be computer consultancy
services.
REVIEW OF AFFAIRS
In the opinion of the directors, the state of the company's affairs at the year
end was satisfactory and they look forward to the future with confidence.
RESULTS FOR THE YEAR
The profit for the year after taxation was L.75,931 (1995: loss L.16,058). The
directors do not recommend the payment of a dividend (1995: L.nil).
DIRECTORS AND THEIR INTERESTS
The interests of the directors at the year end in the share capital of the
company were as follows:
Ordinary shares of L.1
1996 1995
J Fotheringham 235 235
R V Gridley 450 450
J R C Perkins 450 450
M C Probert (appointed 1 July 1995) - -
N R Sedgwick 450 450
A R Paul resigned on 15 April 1996
AUDITORS
A resolution to re-appoint Smith & Williamson as auditors will be proposed at
the next Annual General Meeting.
In preparing the above report, the directors have taken advantage of special
exemptions applicable to small companies provided by Part II of Schedule 8 to
the Companies Act 1985.
APPROVED BY THE BOARD OF DIRECTORS
AND SIGNED ON BEHALF OF THE BOARD.
/s/ Nick Sedgwick
DIRECTOR
4
22
MENHIR LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ACCOUNTS
Company law requires the directors to prepare accounts for each financial year
which give a true and fair view of the state of affairs of the company and of
the profit or loss of the company for that period. In preparing those
accounts, the directors are required to:
o select suitable accounting policies and then apply them consistently;
o make judgements and estimates that are reasonable and prudent;
o prepare the accounts on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and to enable them to ensure that the accounts comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
5
23
AUDITORS' REPORT TO THE SHAREHOLDERS OF MENHIR LIMITED
We have audited the accounts on pages 7 to 13 which have been prepared under
the historical cost convention as modified by the revaluation of certain fixed
assets and the accounting policies set out on page 9.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 5, the company's directors are responsible for the
preparation of accounts. It is our responsibility to form an independent
opinion, based on our audit, on those accounts and to report our opinion to
you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, 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 accounts 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 accounts.
OPINION
In our opinion the accounts give a true and fair view of the state of the
company's affairs at 30 June 1996 and of its profit for the year then ended and
have been properly prepared in accordance with the Companies Act 1985
applicable to small companies.
/s/ SMITH & WILLIAMSON No 1 Riding House Street
Chartered Accountants London W1A 3AS
Registered Auditors
8 November 1996
6
24
MENHIR LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 1996
Notes 1996 1995
L. L.
TURNOVER 2 1,574,406 1,187,872
Cost of sales (699,815) (605,274)
--------- ---------
GROSS PROFIT 874,591 582,598
Administrative expenses (748,315) (583,722)
--------- ---------
OPERATING PROFIT/(LOSS) 3 126,276 (1,124)
Interest receivable and similar income 4 1,152 170
Interest payable and similar charges 5 (4,997) (13,182)
--------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
BEFORE TAXATION 122,431 (14,136)
TAXATION 6 (46,500) (1,922)
--------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
AFTER TAXATION 75,931 (16,058)
========= =========
All of the above activities are classed as continuing and there are no
recognised gains or losses other than the profit for the financial year.
7
25
MENHIR LIMITED
BALANCE SHEET AS AT 30 JUNE 1996
Notes 1996 1995
L. L.
FIXED ASSETS
Tangible fixed assets 7 57,591 40,913
--------- ---------
CURRENT ASSETS
Debtors 8 513,195 375,015
Cash at bank - 912
--------- ---------
513,195 375,927
CREDITORS: Amounts falling due within
one year 9 (453,310) (368,788)
--------- ---------
NET CURRENT ASSETS 59,885 7,139
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 117,476 48,052
CREDITORS: Amounts falling due after
more than one year 10 - (6,507)
--------- ---------
NET ASSETS 117,476 41,545
========= =========
CAPITAL AND RESERVES
Called up share capital 11 2,021 2,021
Share premium 12 56,789 56,789
Profit and loss account 12 58,666 (17,265)
--------- ---------
SHAREHOLDERS' FUNDS 12 117,476 41,545
========= =========
The directors have taken advantage of special exemptions conferred by Part 1 of
Schedule 8 to the Companies Act 1985 applicable to small companies in the
preparation of the accounts and have done so on the grounds that, in their
opinion the company qualifies as a small company for the year ended 30 June
1996.
These accounts were approved by the Board of Directors on 8 November 1996 and
signed on their behalf by
/s/ Nick Sedgwick, Director
8
26
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1996
1. ACCOUNTING POLICIES
The accounts have been prepared under the historical cost convention and
in accordance with applicable accounting standards.
DEPRECIATION
Depreciation is provided on all tangible fixed assets in use to write
off the cost or valuation, less estimated residual value, of each asset
over its expected useful life in equal annual instalments, as follows:
Computer equipment )
Fixtures and fittings ) 25% per annum
Office equipment )
DEFERRED TAXATION
Deferred taxation is provided at the anticipated tax rates on
differences arising from the inclusion of items of income and
expenditure in taxation computations, in periods different from those in
which they are included in the accounts, to the extent that it is
probable that a liability will crystallise in the future.
FOREIGN CURRENCIES
Transactions denominated in foreign currency are translated into
sterling at the rate of exchange ruling at the date of transaction.
Assets and liabilities denominated in foreign currencies are translated
into sterling at the exchange rates ruling at the balance sheet date.
All exchange differences are taken to the profit and loss account.
OPERATING LEASES
The rentals payable under operating leases are charged on a straight
line basis over the lease term.
DEFERRED INCOME
Support income is accounted for over the life of the contract to which
it relates. Licence fees are deferred in full and written back to the
profit and loss account over the expected period of implementation of
the customer's system.
9
27
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1996 (continued)
2. TURNOVER
Turnover represents the net amount invoiced to customers less trade
discounts together with an adjustment for the change in deferred income
excluding value added tax and sales of fixed assets.
The analysis of the percentage of turnover attributable to each
geographical area is as follows:
1996 1995
% %
United Kingdom 51 60
European Economic Community 37 5
Rest of the World 12 35
-------- --------
100 100
======== ========
3. OPERATING PROFIT L. L.
This is stated after charging:
Directors' emoluments 246,455 222,191
Auditors' remuneration 5,000 3,000
Hire of equipment 75,429 42,522
Depreciation 28,278 15,466
======== ========
4. INTEREST RECEIVABLE L. L.
Bank interest 1,152 170
======== ========
10
28
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1996 (continued)
5. INTEREST PAYABLE
1996 1995
L. L.
On bank overdrafts 2,277 8,472
On bank loans repayable within five years,
by installments 2,720 4,710
-------- --------
4,997 13,182
======== ========
6. TAXATION L. L.
Corporation tax payable @ 25% 46,500 505
Underprovision in respect of prior years - 1,417
-------- --------
46,500 1,922
======== ========
7. TANGIBLE FIXED ASSETS
Computer Fixtures and Office
equipment fittings equipment Total
L. L. L. L.
Cost
At 1 July 1995 18,975 4,294 44,394 67,663
Additions 6,017 14,880 24,059 44,956
-------- -------- -------- --------
At 30 June 1996 24,992 19,174 68,453 112,619
-------- -------- -------- --------
Depreciation
At 1 July 1995 4,744 3,086 18,920 26,750
Provision for year 6,370 4,794 17,114 28,278
-------- -------- -------- --------
At 30 June 1996 11,114 7,880 36,034 55,028
-------- -------- -------- --------
Net book values
At 30 June 1996 13,878 11,294 32,419 57,591
======== ======== ======== ========
At 30 June 1995 14,231 1,208 25,474 40,913
======== ======== ======== ========
11
29
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1996 (continued)
8. DEBTORS 1996 1995
L. L.
Trade debtors 90,143 266,527
Other debtors 49,190 28,660
Prepayments and accrued income 373,862 79,828
-------- --------
513,195 375,015
======== ========
9. CREDITORS: Amounts falling due within
one year L. L.
Bank loans and overdrafts - secured 76,446 75,292
Trade creditors 135,788 57,456
Corporation tax 46,500 5,643
Other creditors 134,466 192,318
Accruals and deferred income 60,110 38,079
-------- --------
453,310 368,788
======== ========
10. CREDITORS: Amounts falling due after more
than one year L. L.
Bank loan - secured - 6,507
======== ========
11. SHARE CAPITAL L. L.
Authorised
3,500 Ordinary shares of L.1 each 3,500 3,500
======== ========
Allotted, called up and fully paid
2,021 Ordinary shares of L.1 each 2,021 2,021
======== ========
12
30
MENHIR LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 1996 (continued)
12. STATEMENT OF SHAREHOLDERS' FUNDS AND RESERVES
Share Profit
Premium and Loss Shareholders'
Account Account Funds
L. L. L.
At 30 June 1995 56,789 (17,264) 41,545
Profit for the year - 75,931 75,931
------ ------- -------
At 30 June 1996 56,789 58,666 117,476
====== ======= =======
13. FIXED AND FLOATING CHARGE
At the year end Yorkshire Bank plc held a fixed and floating charge over
the assets of the company as security for the bank overdraft facility.
14. OPERATING LEASE COMMITMENTS
At the year end the company had the following annual commitments on
operating leases expiring
Land and
Other Buildings
L. L.
Within 1 year 5,894 -
Within 2-5 years 10,010 -
After 5 years - 74,085
======== =========
13
31
Consent of Chartered Accountants
As UK Chartered Accountants, we hereby consent to the incorporation of our
reports included in this Form 8-K, into the Company's previously filed
Registration Statement on Form S-8.
/S/ SMITH & WILLIAMSON
London, England
December 5, 1997
32
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Menhir Ltd. Consolidated
Neon Historical Historical Combined Pro Forma
Nine months ended Nine months ended Nine Months Ended Nine Months Ended
September 30, September 30, September 30, Pro Forma September 30,
1997 (5) 1997 (1) 1997 Adjustments 1997
------------ --------- ---------- ------------ ----------
Revenues:
Software licenses $ 9,691,279 $ 1,482,212 $ 11,173,491 $ (332,384) (3) $10,841,107
Services and maintenance
4,682,894 803,446 5,486,340 (138,513) (3) 5,347,827
------------ ----------- ------------ ------------ -----------
Total revenues
14,374,173 2,285,658 16,659,831 (470,897) 16,188,934
------------ ----------- ------------ ------------ -----------
Cost of revenues:
Cost of software licenses
757,935 - 757,935 - 757,935
Cost of services and maintenance 3,188,909 374,518 3,563,427 (49,547) (3) 3,513,880
------------ ----------- ------------ ------------ -----------
Total cost of revenues
3,946,844 374,518 4,321,362 (49,547) 4,271,815
------------ ----------- ------------ ------------ -----------
Gross Profit
10,427,329 1,911,140 12,338,469 (421,350) 11,917,119
Operating Expenses:
Sales and marketing
5,930,783 491,476 6,422,259 (35,578) (3) 6,386,681
Research and development
4,890,464 1,582,715 6,473,179 (112,623) (3) 6,360,556
General and administrative
1,481,377 304,927 1,786,304 (29,221) (3) 1,757,083
Charge for acquired in-process research
and development
2,600,000 - 2,600,000 (2,600,000) (3) -
Amortization of intangibles
18,016 - 18,016 143,984 (2,3) 162,000
------------ ----------- ------------ ------------ -----------
Total operating expenses
14,920,640 2,379,118 17,299,758 (2,633,438) 14,666,320
------------ ----------- ------------ ------------ -----------
Loss from operations
(4,493,311) (467,978) (4,961,289) 2,212,088 (2,749,201)
Other income (expense), net
444,624 (25,559) 419,065 (1,805) (3) 417,260
------------ ----------- ------------ ------------ -----------
Loss before provision for income taxes (4,048,687) (493,537) (4,542,224) 2,210,283 (2,331,941)
Provision for income taxes
- 12,278 12,278 (12,278) (4) -
------------ ----------- ------------ ------------ -----------
Net loss $ (4,048,687) $ (505,815) $ (4,554,502) $ 2,222,561 $(2,331,941)
============ =========== ============ ============ ===========
Pro forma net loss per common share
$ (0.56) $ (0.32)
============ ===========
Pro forma weighted average shares
of Common Stock outstanding 7,199,153 7,199,153
============ ===========
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of these statements.
33
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Consolidated
Neon Historical Menhir Ltd. Historical Combined Pro Forma
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, Pro Forma December 31,
1996 1996 (1) 1996 Adjustments 1996
--------------- ------------ ------------ ------------ -------------
Revenues:
Software licenses $ 3,382,464 $2,362,182 $ 5,744,646 $ - $ 5,744,646
Services and maintenance 3,762,223 461,662 4,223,885 - 4,223,885
------------ ---------- ------------ ------------ ------------
Total revenues 7,144,687 2,823,844 9,968,531 - 9,968,531
------------ ---------- ------------ ------------ ------------
Cost of revenues:
Cost of software licenses 1,021,849 - 1,021,849 - 1,021,849
Cost of services and maintenance 2,306,370 353,859 2,660,229 - 2,660,229
------------ ---------- ------------ ------------ ------------
Total cost of revenues 3,328,219 353,859 3,682,078 - 3,682,078
------------ ---------- ------------ ------------ ------------
Gross Profit 3,816,468 2,469,985 6,286,453 - 6,286,453
Operating Expenses:
Sales and marketing 4,424,554 382,857 4,807,411 - 4,807,411
Research and development 3,658,493 1,683,159 5,341,652 - 5,341,652
General and administrative 1,466,594 243,856 1,710,450 - 1,710,450
Charge for acquired in-process
research and development - - - 2,600,000 2,600,000
Amortization of intangibles - - - 216,000 (2216,000
------------ ---------- ------------ ------------ ------------
Total operating expenses 9,549,641 2,309,872 11,859,513 2,816,000 14,675,513
------------ ---------- ------------ ------------ ------------
Loss from operations (5,733,173) 160,113 (5,573,060) (2,816,000) (8,389,060)
Other income (expense), net 60,855 (9,818) 51,037 - 51,037
------------ ---------- ------------ ------------ ------------
Loss before provision for income taxes (5,672,318) 150,295 (5,522,023) (2,816,000) (8,338,023)
Provision for income taxes - 73,025 73,025 (20,025) (4)53,000
------------ ---------- ------------ ------------ ------------
Net income (loss) $ (5,672,318) $ 77,270 $ (5,595,048) $ (2,795,975) $ (8,391,023)
============ ========== ============ ============ ============
Pro forma net loss per common share $ (0.98) $ (1.45)
============ ============
Pro forma weighted average shares of
Common Stock outstanding 5,789,382 5,789,382
============ ============
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of these statements.
34
NEW ERA OF NETWORKS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
(1) Statements of operations (unaudited) for the nine months ended
September 30, 1997 and year ended December 31, 1996 of Menhir have
been translated into U.S. dollars using the average exchange rates for
the period of BPS .6108 to $1 USD and BPS .6368 to $1 USD,
respectively. Historical operating results of Menhir have been
conformed to the fiscal year end of the Company.
(2) Reflects incremental amortization related to the Menhir Acquisition
and is based upon an allocation of total consideration for the
acquisition ($2.8 million plus approximately $200,000 in acquisition
related expenses plus net liabilities assumed) and related amortization
as follows: (i) charge to in-process research and development of $2.6
million at the time of acquisition; (ii) software $460,000 over a
period of 3 years; and (iii) goodwill $400,000 over a period of 7
years.
(3) Reflects September 1997 activity for Menhir which has been included in
the consolidated historical statement of operations for Neon for the
nine months ended September 30, 1997.
(4) Adjustment to reflect Menhir's tax liability to conform to the period
presented.
(5) Includes September 1997 activity for Menhir which has been
included in the consolidated financial statement of operations for
Neon for the nine months ended September 30, 1997.