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 (Date of earliest event reported) October 12, 2000
LivePerson, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-30141 13-3861628
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
462 Seventh Avenue, 10th Floor, New York, New York 10018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 277-8950
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(Former name or former address, if changed since last report)
This current report on Form 8-K/A amends the current report on Form 8-K filed on
October 19, 2000.
ITEM 2. Acquisition or Disposition of Assets.
On October 12, 2000, LivePerson, Inc., a Delaware corporation
("LivePerson"), acquired HumanClick Ltd., a private company organized under the
laws of the State of Israel ("HumanClick"), pursuant to a Stock Purchase
Agreement among LivePerson, HumanClick and the shareholders of HumanClick named
in Schedule I thereto (the "Stock Purchase Agreement"). LivePerson purchased all
of the outstanding capital stock from the shareholders of HumanClick for
consideration consisting of 4,238,405 newly issued shares of LivePerson common
stock. The amount of consideration was determined based upon arm's-length
negotiations between LivePerson and HumanClick. The acquisition will be
accounted for as a purchase business combination and HumanClick became a
wholly-owned subsidiary of LivePerson.
The shares issued to HumanClick shareholders were issued pursuant to an
exemption from registration under the Securities Act of 1933, as amended. In
connection with the transaction, LivePerson assumed HumanClick's outstanding
stock options, which remain outstanding as options to purchase shares of
LivePerson's common stock.
The acquisition by LivePerson of shares of HumanClick's outstanding
capital stock pursuant to the Stock Purchase Agreement is deemed an indirect
acquisition of the assets of HumanClick represented thereby, including
HumanClick's plant, equipment and other physical property. HumanClick utilizes
such assets as a provider of real-time, online customer service applications to
small and mid-sized businesses. LivePerson intends to continue to utilize such
assets in the conduct of its business as a leading application service provider
of technology that enables real-time sales and customer service interaction over
the Internet.
Immediately prior to the consummation of the Stock Purchase Agreement, all
of the issued and outstanding shares of capital stock of HumanClick were owned
by the shareholders of HumanClick. LivePerson is not aware of any pre-existing
material relationship between such shareholders and LivePerson, or between such
shareholders and LivePerson's affiliates, directors or officers, or any
associate of any such affiliate, director or officer.
A copy of the Stock Purchase Agreement, and a copy of the press release
issued by LivePerson announcing the acquisition, are attached hereto as Exhibits
2 and 99.1, respectively, and incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The following appear as Exhibit 99.2 to this Current Report on Form
8-K/A and are incorporated into this document by reference:
(i) Balance sheet of HumanClick Ltd. as of December 31, 1999 and the
related statements of loss, changes in shareholders' equity and cash
flows for the period from June 24, 1999 (date of incorporation) to
December 31, 1999.
The following appear as Exhibit 99.3 to this Current Report on Form
8-K/A and are incorporated into this document by reference:
(ii) Unaudited condensed interim balance sheet of HumanClick Ltd. at
June 30, 2000 and the related unaudited condensed interim statements
of loss, changes in shareholders' equity and cash flows for the six
months ended June 30, 2000.
(b) Pro Forma Condensed Combined Financial Information.
On October 12, 2000, LivePerson acquired all of the outstanding
shares of capital stock of HumanClick pursuant to the Stock Purchase
Agreement for approximately $9.7 million.
The consideration paid by LivePerson was determined based on
arm's-length negotiations between LivePerson and HumanClick. The
number of shares of LivePerson common stock issued to HumanClick's
shareholders was determined based on an exchange rate of
approximately 2.223 shares of LivePerson common stock for each
HumanClick issued and outstanding ordinary share and consisted of
the following:
- 4,238,405 shares of LivePerson common stock valued at
approximately $8.9 million based upon the five-day average
trading price before and after October 12, 2000, the date on
which the transaction was consummated and announced, at $2.094
per share. Of these shares, 1,564,298 are subject to a
repurchase option by LivePerson if two of the former
shareholders of HumanClick are no longer employed by
HumanClick under certain circumstances prior to October 12,
2003. The price pursuant to which LivePerson may repurchase
such shares is equal to the lesser of the 30-day average price
per share of LivePerson common stock prior to the termination
of employment, and $7 per share. One-third of the stock
subject to the repurchase option shall be released from
LivePerson's purchase option on each of October 12, 2001, 2002
and 2003;
- The assumption by LivePerson of options to purchase
HumanClick's ordinary shares, to be exchanged for options to
purchase approximately 262,000 shares of LivePerson's common
stock. The options were valued at approximately $537,000 based
on a Black-Scholes option pricing model (classified within
stockholders' equity); and
- Acquisition costs of approximately $250,000 related to the
merger.
The acquisition has been accounted for using the purchase method of
accounting. LivePerson has allocated a portion of the purchase price
to the fair market value of the acquired assets and assumed
liabilities of HumanClick as of the date of the closing. For pro
forma purposes, LivePerson used October 12, 2000, the closing and
announcement date of the acquisition, as its basis for determining
its allocation of the purchase price. The excess of the purchase
price over the fair market value of the acquired assets and assumed
liabilities of HumanClick has been allocated to goodwill and other
intangible assets. Goodwill and other intangible assets are being
amortized over a period of three years, the expected estimated
period of benefit.
The following appear as Exhibit 99.4 to this Current Report on Form
8-K/A and are incorporated into this document by reference:
(i) Unaudited pro forma condensed combined Statements of
Operations for the year ended December 31, 1999.
(ii) Unaudited pro forma condensed combined Statements of
Operations for the six months ended June 30, 2000.
(iii) Unaudited pro forma condensed combined Balance Sheet as of
June 30, 2000.
(c) Exhibits. The following documents are filed as exhibits to this
report:
2* Stock Purchase Agreement, dated as of October 12, 2000, among
LivePerson, Inc., HumanClick Ltd. and the shareholders of
HumanClick Ltd. named in Schedule I thereto.
23.1 Consent of Independent Accountants.
99.1* Press release dated October 13, 2000.
99.2 Balance sheet of HumanClick Ltd. as of December 31, 1999 and
the related statements of loss, changes in shareholders'
equity and cash flows for the period from June 24, 1999 (date
of incorporation) to December 31, 1999.
99.3 Unaudited condensed interim balance sheet of HumanClick Ltd.
at June 30, 2000 and the related unaudited condensed interim
statements of loss, changes in shareholders' equity and cash
flows for the six months ended June 30, 2000.
99.4 Unaudited pro forma condensed combined Statements of
Operations for the year ended December 31, 1999 and the six
months ended June 30, 2000 and unaudited pro forma condensed
combined Balance Sheet as of June 30, 2000.
- ----------
* Previously filed
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LIVEPERSON, INC.
-------------------------------------
(Registrant)
November 13, 2000 /s/ TIMOTHY E. BIXBY
- --------------------------------------- -------------------------------------
Date Timothy E. Bixby
Executive Vice President, Chief
Financial Officer and Secretary
EXHIBIT INDEX
Exhibit
- -------
2* Stock Purchase Agreement, dated as of October 12, 2000, among LivePerson,
Inc., HumanClick Ltd. and the shareholders of HumanClick Ltd. named in
Schedule I thereto.
23.1 Consent of Independent Accountants.
99.1* Press release dated October 13, 2000.
99.2 Balance sheet of HumanClick Ltd. as of December 31, 1999 and the related
statements of loss, changes in shareholders' equity and cash flows for the
period from June 24, 1999 (date of incorporation) to December 31, 1999.
99.3 Unaudited condensed interim balance sheet of HumanClick Ltd. at June 30,
2000 and the related unaudited condensed interim statements of loss,
changes in shareholders' equity and cash flows for the six months ended
June 30, 2000.
99.4 Unaudited pro forma condensed combined Statements of Operations for the
year ended December 31, 1999 and the six months ended June 30, 2000 and
unaudited pro forma condensed combined Balance Sheet as of June 30, 2000.
- ----------
* Previously filed
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference on Form S-8 of LivePerson,Inc. of
our report dated July 13, 2000, relating to the balance sheets of HumanClick
Ltd. as of December 31, 1999, and the related statements of operations,
stockholders' equity and cash flows for the period ended December 31, 1999,
included in the Form 8-K of LivePerson, Inc. dated November 13, 2000.
Tel-Aviv, Israel
November 13, 2000
/s/ Kesselman & Kesselman
Kesselman & Kesselman
Certified Public Accountants (Isr.)
REPORT OF INDEPENDENT AUDITORS
To the shareholders of
HUMANCLICK LTD.
We have audited the financial statements of HumanClick Ltd. (an Israeli
corporation in the development stage; hereafter - the Company): balance sheet as
of December 31, 1999 and the related statement of loss, changes in shareholders'
equity and cash flows for the period from June 24, 1999 (date of incorporation)
to December 31, 1999. These financial statements are the responsibility of the
Company's board of directors and 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,
including those prescribed by the Israeli Auditors (Mode of Performance)
Regulations, 1973. 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 the board of directors and management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a fair
basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1999
and the results of its operations, changes in shareholders' equity and its cash
flows for the period from June 24, 1999 (date of incorporation) to December 31,
1999, in conformity with accounting principles generally accepted in Israel.
Accounting principles generally accepted in Israel vary in certain significant
respects from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of the net
income for the period ended December 31, 1999 and the determination of the
shareholders' equity and financial position at December 31, 1999 to the extent
summarized in note 12 to the financial statements.
Without qualifying our opinion, we draw attention to the Company's being in the
development stage, as described in note 1.
/s/ KESSELMAN & KESSELMAN
Tel-Aviv, Israel
July 13, 2000
Except for notes 1, 8, 12 and 13 for which the date is
November 13, 2000
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
BALANCE SHEET
AS OF DECEMBER 31, 1999
Note U.S. dollars
---- -------------
Assets
CURRENT ASSETS:
Cash and cash equivalents 2e 750,401
Accounts receivable 3 29,643
--------
Total current assets 780,044
--------
FIXED ASSETS: 4
Cost 18,058
Less - accumulated depreciation 1,067
--------
16,991
--------
Total assets 797,035
========
Liabilities and shareholders' equity
CURRENT LIABILITIES -
accounts payable and accruals:
Trade 9,898
Other 5 49,808
--------
Total current liabilities 59,706
LIABILITY FOR EMPLOYEE RIGHTS UPON
RETIREMENT 6 23,597
COMMITMENTS 7
--------
Total liabilities 83,303
--------
SHAREHOLDERS' EQUITY:
Share capital - ordinary shares of NIS 0.01 par value* (authorized -
3,800,000 shares; issued and paid - 1,561,800 shares) 8 3,717
Additional paid-in capital 863,285
Deficit accumulated during the development stage (153,270)
--------
Total shareholders' equity 713,732
--------
797,035
========
* Share numbers are retroactively adjusted to reflect 100% stock split effected
on February 27, 2000.
The accompanying notes are an integral part of the financial Statements.
2
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
STATEMENT OF LOSS
FOR THE PERIOD FROM JUNE 24, 1999* TO DECEMBER 31, 1999
Note U.S. dollars
---- -------------
COSTS AND EXPENSES:
Development costs 9a 97,996
General and administrative expenses 9b 76,227
--------
LOSS FROM OPERATIONS 174,223
FINANCIAL INCOME - net 20,953
--------
LOSS FOR THE PERIOD 153,270
========
* Date of incorporation (see note 1a).
The accompanying notes are an integral part of the financial statements.
3
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 24, 1999* TO DECEMBER 31, 1999
Deficit
accumulated
Additional during the
Share paid-in development
capital capital stage Total
-------- ---------- ----------- --------
U.S. dollars
-----------------------------------------------
CHANGES DURING THE PERIOD:
Issue of share capital (net of share
issuance expenses of $ 8,758) 3,717 863,285 -- 867,002
Loss for the period (153,270) (153,270)
-------- -------- -------- --------
BALANCE AT DECEMBER 31, 1999 3,717 863,285 (153,270) 713,732
======== ======== ======== ========
* Date of incorporation (see note 1a).
The accompanying notes are an integral part of the financial statements.
4
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 24, 1999*
TO DECEMBER 31, 1999
U.S. dollars
------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period (153,270)
--------
Adjustments required to reflect the cash flows
from operating activities:
Expenses not involving cash flows:
Depreciation 1,067
Liability for employee rights upon retirement 23,597
Changes in operating asset and liability items:
Increase in accounts receivable (29,643)
Increase in accounts payable and accruals 59,365
--------
54,386
--------
Net cash used in operating activities (98,884)
CASH FLOWS FROM INVESTING ACTIVITIES -
purchase of fixed assets (17,717)
CASH FLOWS FROM FINANCING ACTIVITIES -
issue of share capital, net of issuance costs 867,002
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS -
BALANCE OF CASH AND CASH EQUIVALENTS
AT END OF PERIOD 750,401
========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION -
cash paid during the period for interest 482
========
* Date of incorporation (see note 1a).
The accompanying notes are an integral part of the financial statements.
5
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - GENERAL:
a. HumanClick Ltd. ("the Company" or "HumanClick") - an Israeli
corporation in the development stage - was incorporated on June 24,
1999 and commenced operations in August 1999. The Company is a
software company developing a program which will enable the users to
talk for free to the visitors on their web sites and monitor the
traffic on their web sites in real time.
b. On October 12, 2000, all the Company's shares were acquired by
LivePerson, Inc. in exchange for LivePerson, Inc. shares.
c. On July 13, 2000, the Company published its audited financial
statements as of December 31, 1999 and for the period from June 24,
1999 to December 31, 1999. These financial statements include
reconciliation to U.S. GAAP, see note 12.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies, applied on a consistent basis, are as
follows:
a. General:
1) Functional currency
Most of the revenues of the Company are expected to be
received outside Israel, in U.S. dollars ("dollars") and most
of the fixed assets were purchased in U.S dollars. Thus, the
functional currency of the Company is the dollar.
Transactions and balances originally denominated in dollars
are presented at their original amounts. Currency transaction
gains and losses arising from non-dollar balances and
transactions are included in the determination of net income
or loss.
2) Accounting principles
Accounting principles generally accepted in Israel vary in
certain significant respects from accounting principles
generally accepted in the United States. The application of
the latter would have affected the determination of the net
income for the period ended December 31, 1999 and the
determination of the shareholders' equity and financial
position at December 31, 1999, as described in note 12.
3) Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
to disclose 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.
6
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
b. Development costs
Represent software development costs (see note 1a), which are
carried to operations as incurred.
c. Fixed assets:
1) These assets are stated at cost.
2) The assets are depreciated by the straight-line method, on
basis of their estimated useful life.
Annual rates of depreciation are as follows:
%
--
Computers and peripheral equipment 33
Furniture and office equipment 6-15
d. Deferred taxes
Deferred taxes are computed in respect of differences between the
amounts presented in these statements and those taken into account
for tax purposes, see also note 10c.
e. Cash equivalents
The Company considers all highly liquid investments, which include
short-term bank deposits (up to three months from date of deposit)
that are not restricted as to withdrawal or use, to be cash
equivalents.
NOTE 3 - ACCOUNTS RECEIVABLE - OTHER:
U.S. dollars
------------
VAT refundable 6,058
Prepaid expenses 20,859
Other 2,726
-------
29,643
=======
7
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4 - FIXED ASSETS
Composition of assets, grouped by major classifications, is as follows:
Accumulated Depreciated
Cost depreciation balance
---- ------------ -----------
U.S. dollars
-----------------------------------
Computers and peripheral
Equipment 15,208 998 14,210
Furniture and office
equipment 2,850 69 2,781
------- ------- -------
18,058 1,067 16,991
======= ======= =======
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUALS - OTHER:
U.S. dollars
------------
Employees and employee institutions 35,260
Accrued expenses 9,548
Sundry 5,000
-------
49,808
=======
NOTE 6 - EMPLOYEE RIGHTS UPON RETIREMENT:
a. Israeli law generally requires payment of severance pay upon
dismissal of an employee or upon termination of employment in
certain other circumstances. The Company's severance pay liability
to its employees, based upon the number of years of service and the
latest monthly salary, is partly covered by certain insurance
policies. Under labor agreements, these insurance policies are,
subject to certain limitations, the property of the employees.
b. The severance pay expense in the period from June 24, 1999 (date of
incorporation) to December 31, 1999 was $ 23,597.
8
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 7 - COMMITMENTS:
a. The Company has entered into operating lease agreements for the cars
it uses. The leases will expire in the year 2002. The lease payments
for the next three years, at rates in effect at December 31, 1999,
are as follows:
$
-
2000 24,938
2001 24,938
2002 22,260
-------
72,136
=======
Lease expenses totaled $ 1,781 in the period ended December 31,
1999.
b. On May 31, 1999, a Release Agreement was signed between the Company
and Elemental Software Ltd. ("Elemental"), under which the Company
has undertaken not to offer for sale any CRM (customer relationship
management) product for a period of two years from May 31, 1999. The
Company further agreed that, within such two year period, it will
offer its program only in the form of a free service.
NOTE 8 - SHARE CAPITAL AND STOCK OPTIONS, see also note 12:
a. Share capital
On February 27, 2000, the Company's shareholders resolved to perform
a stock split of its ordinary shares, so that each share of NIS 1
par value would be split into 100 shares of NIS 0.01 par value. The
number of shares in these financial statements, have been restated
to give retroactive effect to this split.
b. Stock options:
1) The Company granted 35,124 options to employees at exercise
prices of $ 0.77 - $ 2.24. Each option can be exercised to
purchase one ordinary share of NIS 0.01 par value. Most of the
options will vest ratably over a period of three years from
the date of beginning of employment of each employee, or the
grant date, as determined by the board committee, provided
that the employee is still in HumanClick's employ.
The options were granted at fair value at the grant date.
After December 31, 1999, the Company granted 37,754 options to
employees at exercise prices of $ 0.77 - $ 3.12.
9
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 8 - SHARE CAPITAL AND STOCK OPTIONS, see also note 12 (continued):
2) On August 1, 1999, HumanClick issued 9,100 options to
consultants for the purchase of ordinary shares at an exercise
price per share of NIS 0.01. These options expire in August
2006 and vest ratably over a six month service period. On
December 1, 1999, the Company issued 15,600 options to a
consultant to purchase ordinary shares at an exercise price of
$ 2.24. These options expire in December 2006 and vest ratably
over a two year service period.
After December 31, 1999, the Company granted additional 20,092
options to a consultant at an exercise prices of $ 2.24. The
options can be exercised to purchase one ordinary share of NIS
0.01 par value of the Company and vest ratably over a period
of three years.
NOTE 9 - SUPPLEMENTARY STATEMENT OF LOSS INFORMATION:
a. Development costs:
U.S. dollars
------------
Salaries and employee benefits 81,186
Rent and maintenance 5,534
Communication 2,161
Depreciation 825
Other 8,290
-------
97,996
=======
b. General and administrative expenses:
Salaries and employee benefits 51,837
Advertising 7,956
Professional fees 14,545
Depreciation 242
Office supplies and printing 600
Other 1,047
-------
76,227
=======
NOTE 10 - TAXES ON INCOME:
a. Measurement of results for tax purposes under the Income Tax
(Inflationary Adjustments) Law, 1985
Under this law, results for tax purposes are measured in real terms,
in accordance with the changes in the Israeli consumer price index
(CPI). The Company is taxed under this law.
The Company is taxed at the rate of 36%.
10
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 10 - TAXES ON INCOME (continued):
b. Carryforward tax losses
The Company has carryforward tax losses in the amount of
approximately $ 78,000 which can be utilized without any time
limits. Under the inflationary adjustments law, the carryforward
losses are linked to the Israeli CPI.
c. Deferred taxes
The deferred tax asset, computed at the tax rate of 36%, amounted to
approximately $60,000 at December 31, 1999. A full valuation
allowance has been provided against the deferred tax asset because
of the Company's lack of earnings and the uncertainty relating to
the utilization of these losses in the foreseeable future.
d. Tax assessments
The Company has not been assessed for tax purposes since
incorporation.
NOTE 11 - TRANSACTIONS WITH INTERESTED PARTIES
The salaries and employee benefits to interested parties employed by
the Company aggregated $ 82,049.
NOTE 12 - EFFECT OF MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN ISRAEL AND IN THE UNITED STATES:
The Company prepares its financial statements in conformity with
Israeli GAAP.
Accounting principles generally accepted in Israel vary in certain
significant respects from accounting principles generally accepted
in the United States. The application of the latter affected the
determination of the net income for the period ended December 31,
1999 and the determination of the shareholders' equity, as follows:
a. Stock options granted to employees and consultants (see note 8):
1) Stock options granted to employees
Under Israeli GAAP, HumanClick did not account for its
employee stock option plan using the treatment prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") as permitted by FAS 123.
Under APB 25, compensation cost for employee stock option
plans is measured using the intrinsic value based method of
accounting.
The options were granted at exercise prices which represent
the fair value of the ordinary shares at the date of issuance.
Since the options granted to HumanClick employees have no
intrinsic value at their grant dates, no compensation cost
should be recorded under U.S. GAAP.
11
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 12 - EFFECT OF MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN ISRAEL AND IN THE UNITED STATES (continued):
Had compensation cost for the plan been determined based on
the fair value at the grant dates, consistent with the method
of FAS 123, the Company's net income (loss) would have
decreased by $ 897.
The following weighted average assumptions were used for
estimating the fair value of the options under the
Black-Scholes option-pricing model: weighted average dividend
yield of 0% for all grants; expected volatility of 50% for all
grants; risk-free interest rate (in dollar terms) of 6% for
the 26,700 options granted in November 1999 and the 3,124
options granted in December 1999 and of 5.5% for the 5,300
options granted in September 1999.
2) Stock options granted to consultants
Under Israeli GAAP HumanClick did not account for the options
granted to consultants in exchange for services received using
the fair value based method of accounting, as prescribed by
FAS 123, based on the fair value of the equity instruments
issued, which is more reliability measurable than the value of
the services received, since such data were unavailable.
Service costs - $ 6,392 - were not charged to income in
respect of equity instruments granted to consultants,
according to FAS 123.
The following weighted average assumptions were used for
estimating the fair value of the options under the
Black-Scholes options-pricing model: weighted average dividend
yield of 0% for all grants; expected volatility of 50% for all
grants; risk-free interest rate (in dollar terms) of 5.5% for
the 9,100 options granted in August 1999 for the 15,600
options granted in December 1999.
3) The effect of applying APB 25 and FAS123 on the financial
statements for the period ended December 31, 1999, is as
follows:
U.S. dollars
------------
Loss for the period as reported
in the statement of loss 153,270
Effect of applying APB 25 -,-
Effect of applying FAS 123 7,289
-------
Loss under U.S. GAAP 160,559
=======
12
HUMANCLICK LTD.
(An Israeli Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 12 - EFFECT OF MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN ISRAEL AND IN THE UNITED STATES (continued):
b. Impairment of long-lived assets
In March 1995, the FASB issued SFAS No. 121 "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed of" ("SFAS 121"), to be effective for financial statements
for fiscal years beginning after December 15, 1995. SFAS 121
requires that long-lived assets, identifiable intangibles and
goodwill related to those assets to be held and used by an entity
will be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may
not be recoverable. Under SFAS 121, if the sum of the expected
future cash flows (undiscounted and without interest charges) of the
long-lived assets is less than the carrying amount of such assets,
an impairment loss would be recognized. Adopting this statement in
1999 is not expected to have a material impact on the Company's
results of operations or financial position.
c. Liability for employee rights upon retirement
Under Israeli GAAP, amounts funded by purchase of insurance
policies, as above, are deducted from the related severance pay
liability. Under U.S. GAAP, the amounts funded should be presented
as a long-term investment among the Company's assets. No amounts
were funded through December 31, 1999.
NOTE 13 - SUBSEQUENT EVENTS:
a. On August 30, 2000 and September 19, 2000, the Company signed
agreements for strategic cooperation with two U.S. companies that
provide a variety of internet services to small companies. Under
those agreements, the U.S. companies will offer the Company's
product to their customers and share the profits from resulting
sales with the Company.
b. As to options granted to employees and consultants, see note 8.
c. As to an agreement to sell the Company shares, see note 1c.
d. As to stock split, see note 8.
13
HUMANCLICK LTD.
(An Israeli corporation in the development stage)
CONDENSED INTERIM BALANCE SHEET
(Unaudited)
June 30, December 31,
2000 1999
---------- -----------
(Unaudited) (Audited)
---------- -----------
U.S. dollars
-------------------------
Assets
CURRENT ASSETS:
Cash and cash equivalents 728,283 750,401
Accounts receivable 63,204 29,643
---------- ----------
Total current assets 791,487 780,044
---------- ----------
FIXED ASSETS:
Cost 63,357 18,058
Less - accumulated depreciation 3,855 1,067
---------- ----------
59,502 16,991
---------- ----------
850,989 797,035
========== ==========
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Short-term credit from banks 2,989
Accounts payable and accruals:
Trade 65,316 9,898
Other 76,059 49,808
---------- ----------
Total current liabilities 144,364 59,706
LIABILITY FOR EMPLOYEE RIGHTS UPON
RETIREMENT, net of amount funded 69,043 23,597
---------- ----------
Total liabilities 213,407 83,303
---------- ----------
SHAREHOLDERS' EQUITY:
Share capital - ordinary shares of NIS 0.01 par value: authorized
3,800,000 shares; issued and paid: June 30, 2000 - 1,756,000;
December 31, 1999 - 1,561,800, see note 3 4,203 3,717
Additional paid in capital 1,458,801 863,285
Deficit accumulated during the development stage (825,422) (153,270)
---------- ----------
637,582 713,732
---------- ----------
850,989 797,035
========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
1
HUMANCLICK LTD.
(An Israeli corporation in the development stage)
CONDENSED INTERIM STATEMENTS OF LOSS
Period from Period from
Six months June 24, June 24,
ended 1999* to 1999* to
June 30, December 31, June 30,
2000 1999 2000
(Unaudited) (Audited) (Unaudited)
----------- ----------- -----------
U.S. dollars
--------------------------------------
COSTS AND EXPENSES:
Development costs 355,520 97,996 453,516
Selling and marketing 306,934 306,934
General and administrative 57,812 76,227 134,039
-------- -------- ---------
LOSS FROM OPERATIONS 720,266 174,223 894,489
FINANCIAL INCOME - net 48,114 20,953 69,067
-------- -------- ---------
LOSS FOR THE PERIOD 672,152 153,270 825,422
======== ======== =========
* Date of incorporation. see note 1.
The accompanying notes are an integral part of these condensed financial
statements.
2
HUMANCLICK LTD.
(An Israeli corporation in the development stage)
CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Deficit
accumulated
during the
Share Premium development
capital on shares stage Total
------- --------- ------------ -----
U.S. dollars
---------------------------------------------------
CHANGES DURING THE PERIOD FROM
JUNE 24, 1999* TO DECEMBER 31, 1999
(audited):
Issuance of share capital (net of share issuance
expenses of $ 8,758) 3,717 863,285 867,002
Loss (153,270) (153,270)
---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1999 (audited) 3,717 863,285 (153,270) 713,732
CHANGES DURING THE SIX MONTHS
ENDED JUNE 30, 2000 (unaudited):
Issuance of share capital (net of
share issuance expenses of $ 15,677) 486 595,516 596,002
Loss (672,152) (672,152)
---------- ---------- ---------- ----------
BALANCE AT JUNE 30, 2000 (unaudited) 4,203 1,458,801 (825,422) 637,582
========== ========== ========== ==========
* Date of incorporation, see note 1.
The accompanying notes are an integral part of these condensed financial
statements.
3
HUMANCLICK LTD.
(An Israeli corporation in the development stage)
CONDENSED INTERIM STATEMENTS OF CASH FLOWS
Period from Period from
Six months June 24, June 24,
ended 1999* to 1999* to
June 30, December 31, June 30,
2000 1999 2000
---------- ---------- ----------
(Unaudited) (Audited) (Unaudited)
---------- ---------- ----------
U.S. dollars
--------------------------------------0
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period (672,152) (153,270) (825,422)
---------- ---------- ----------
Adjustments required to reflect the cash flows
from operating activities:
Cash flows from operating activities:
Depreciation 2,788 1,067 3,855
Liability for employee rights upon retirement 45,446 23,597 69,043
Changes in operating asset and liability items:
Increase in accounts receivable (33,561) (29,643) (63,204)
Increase in accounts payable and accruals 81,328 59,365 141,034
---------- ---------- ----------
96,001 54,386 150,728
---------- ---------- ----------
Net cash used in operating activities (576,151) (98,884) (674,694)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES -
purchase of fixed assets (45,299) (17,717) (63,357)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of share capital 596,002 867,002 1,463,004
Short-term credit from banks 2,989 2,989
Payment to suppliers in respect of acquisition of fixed assets 341 341
---------- ---------- ----------
Net cash provided by financing activities 599,332 867,002 1,466,334
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (22,118) 750,401 728,283
BALANCE OF CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 750,401
---------- ---------- ----------
BALANCE OF CASH AND CASH EQUIVALENTS
AT END OF PERIOD 728,283 750,401 728,283
========== ========== ==========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW
INFORMATION - cash paid during the year for interest 1,853 482 2,335
========== ========== ==========
* Date of incorporation, see note 1.
The accompanying notes are an integral part of these condensed financial
statements.
4
HUMANCLICK LTD.
(An Israeli corporation in the development stage)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
AT JUNE 30, 2000
(Unaudited)
1. General
HumanClick Ltd. (the company) - an Israeli corporation in the development
stage - was incorporated and commenced operations on June 24, 1999. The
company is a software company developing a program which will enable the
users to talk for free to the visitors on their web site and monitor, in
real time, the traffic on their web site.
On October 12, 2000, all the company's shares were acquired by LivePerson,
Inc. in exchange for LivePerson, Inc. shares.
2. The interim statements at June 30, 2000 and for the six month period then
ended (hereafter - the interim statements) were drawn up in condensed
form, in accordance with generally accepted accounting principles
applicable to interim statements in Israel. The accounting principles
applied in the preparation of the interim statements are consistent with
those applied in the annual financial statements. Nevertheless, the
interim statements do not include all the information and explanations
required for annual financial statements. In management's opinion, these
statements include all adjustments necessary for a fair presentation of
the results of the interim periods shown. All adjustments are of a normal
recurring nature, unless otherwise disclosed. Expenses, assets and
liabilities can vary during each quarter of the year. Therefore, the
results and trends in these interim financial statements may not be the
same as those for the full year.
The interim financial statements presented herein have been prepared in
conformity with Israeli GAAP. Accounting principles generally accepted in
Israel vary in certain significant respects from accounting principles
generally accepted in the United States. The application of the latter
affected the determination of the net income for the period ended June 30,
2000 and the determination of the shareholders' equity and financial
position at June 30, 2000, see note 4.
3. On February 27, 2000 the company's board of directors resolved to split
38,000 ordinary shares (100% of the company's shares, issued and unissued)
of NIS 1 par value into 3,800,000 ordinary shares of NIS 0.01 par value.
4. Effect of material differences between generally accepted accounting
principles in Israel and in the United States
The company prepares its financial statements in conformity with Israeli
GAAP. Accounting principles generally accepted in Israel vary in certain
significant respects from accounting principles generally accepted in the
United States. The application of the latter affected the determination of
the net income for the period ended June 30, 2000 and the determination of
the shareholders' equity and financial position at June 30, 2000 as
follows:
a. Stock options granted to company employees
Under Israeli GAAP, the company did not account for its employee
stock option plan using the treatment prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") as permitted by FAS 123. Under APB 25,
compensation cost for employee stock option plans is measured using
the intrinsic value based method of accounting.
5
HUMANCLICK LTD.
(An Israeli corporation in the development stage)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
AT JUNE 30, 2000
(Unaudited)
The options were granted at exercise prices which represent the fair
value of the ordinary shares at the date of issuance except for
3,152 options. No compensation cost was recorded in relation to the
options granted to the company's employees since they have no
intrinsic value at their grant dates. As to 3,512 options the
company recorded $ 861 as compensation cost. The influence of the
application of FAS 123 on the company's results is a decrease of $
4,992.
b. Stock options granted to consultants
As to options granted to consultants, the effect of application of
FAS 123 is a compensation expense of $ 19,918 for the six month
period ended June 30, 2000.
c. Liability for employee rights upon retirement
Under Israeli GAAP, amounts funded by purchase of insurance
policies, as above, are deducted from the related severance pay
liability. Under U.S. GAAP, the amounts funded should be presented
as a long-term investment, among the Company's assets.
The balance of the severance pay liability and the amount funded by
purchase of insurance policies and deposits with severance pay funds
at June 30, 2000 are as follows:
U.S. dollars
-----------
Amount of severance pay liability 69,043
Amount funded 4,895
-----------
Excess of liability over amount funded 64,588
===========
d. The effect of applying APB 25 and FAS 123 on the financial
statements for the period ended June 30, 2000 is as follows:
U.S. dollars
-----------
Loss for the period as reported in the statements
of loss 672,152
Effect of applying APB 25 861
Effect of applying FAS 123 24,910
-----------
Loss under U.S. GAAP 697,923
===========
6
HUMANCLICK LTD.
(An Israeli corporation in the development stage)
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
AT JUNE 30, 2000
(Unaudited)
5. Subsequent events:
a. On August 30, 2000 and September 19, 2000, the company signed
agreements for strategic cooperation with two U.S. companies that
provide a variety of internet services to small companies. Under
those agreements, the U.S. companies will offer the company's
product to their customers and share the profits from resulting
sales with the company.
b. After June 30, 2000, the company granted 27,218 options to employees
at an exercise price of $ 3.12.
c. As to an agreement to sell the company shares, see note 1.
7
EXHIBIT 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed combined Statements of
Operations (the "Pro Forma Statements of Operations") for the year ended
December 31, 1999 and six months ended June 30, 2000 gives effect to the
HumanClick acquisition as if it had occurred on June 24, 1999 (HumanClick's date
of incorporation). The Pro Forma Statements of Operations are based on
historical results of operations of LivePerson for the year ended December 31,
1999 and six months ended June 30, 2000 and for HumanClick for the period from
June 24, 1999 (HumanClick's date of incorporation) through December 31, 1999 and
six months ended June 30, 2000.
The Unaudited Pro Forma Condensed Combined Balance Sheet (the "Pro Forma
Balance Sheet") gives effect to the acquisition of HumanClick as if the
acquisition had occurred on June 30, 2000. The Pro Forma Statements of
Operations and Pro Forma Balance Sheet and accompanying notes (the "Pro Forma
Financial Information") should be read in conjunction with, and are qualified
by, the historical financial statements of LivePerson contained in the
LivePerson Quarterly Report on Form 10-Q and Registration Statement on Form S-1
(commission file no. 333-95689) as filed, or to be filed, with the Securities
and Exchange Commission on November 14, 2000, and April 6, 2000, respectively,
and the historical financial statements of HumanClick appearing elsewhere in
this document.
The Pro Forma Financial Information is intended for informational purposes
only and does not purport to represent (i) the future results of operations of
LivePerson or (ii) the actual results of operations or financial position of
LivePerson had the acquisition occurred on the dates assumed. In addition, the
pro forma results are not intended to be a projection of future results.
1
LIVEPERSON, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 2000
(In thousands, except for share and per share information)
Human- Pro Forma
LivePerson Click (1) Adjustments Pro Forma
---------- --------- ----------- ---------
Assets
Current assets:
Cash and cash equivalents $ 4,736 $ 728 $ -- $ 5,464
Marketable securities 35,272 -- -- 35,272
Accounts receivable, net 729 63 -- 792
Prepaid expenses and other current
assets 1,064 -- -- 1,064
-------- -------- -------- --------
Total current assets 41,801 791 -- 42,592
Property and equipment, net 13,027 60 -- 13,087
Security deposits 258 -- -- 258
Deferred costs 687 -- -- 687
Goodwill and other intangible assets -- -- 8,751 (a) 8,751
-------- -------- -------- --------
Total assets $ 55,773 $ 851 $ 8,751 $ 65,375
======== ======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,481 $ 65 $ -- $ 4,546
Accrued expenses 1,347 79 -- 1,426
Deferred revenue 625 -- -- 625
-------- -------- -------- --------
Total current liabilities 6,453 144 -- 6,597
Deferred rent 254 -- -- 254
Other liabilities -- 69 -- 69
-------- -------- -------- --------
Total liabilities 6,707 213 -- 6,920
9,661 (a)
(272)(a)
Stockholders' equity 49,066 638 (638)(a) 58,455
-------- -------- -------- --------
Total liabilities and
stockholders' equity $ 55,773 $ 851 $ 8,751 $ 65,375
======== ======== ======== ========
(1) The HumanClick financial statements are presented in accordance with
Israeli generally accepted accounting principles ("GAAP"). The differences
between Israeli GAAP and US GAAP were not significant.
See accompanying notes to unaudited pro forma condensed combined financial
information.
2
LIVEPERSON, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
Six Months Ended June 30, 2000
(In thousands, except for share and per share information)
Human- Pro Forma
LivePerson Click (1) Adjustments Pro Forma
------------ ------------ ------------ ------------
Revenues $ 2,100 $ -- $ -- $ 2,100
------------ ------------ ------------ ------------
Operating expenses
Cost of revenues 3,229 -- -- 3,229
Product development 3,918 355 -- 4,273
Sales and marketing 7,217 307 -- 7,524
General and administrative 3,290 58 -- 3,348
Non-cash compensation expenses 10,957 -- 45 (a) 11,002
Amortization of goodwill and intangible
assets -- -- 1,459 (a) 1,459
------------ ------------ ------------ ------------
28,611 720 1,504 30,835
------------ ------------ ------------ ------------
Loss from operations (26,511) (720) (1,504) (28,735)
Total other income (expense), net 873 48 -- 921
------------ ------------ ------------ ------------
Net loss (25,638) $ (672) $ (1,504) (27,814)
============ ============
Non-cash preferred stock dividend (18,000) (18,000)
------------ ------------
Net loss attributable to common
stockholders $ (43,638) $ (45,814)
============ ============
Basic and diluted net loss per common
share $ (2.48) $ (2.10)(b)
============ ============
Weighted-average shares outstanding
used in basic and diluted net loss
per common share calculation 17,597,169 4,238,405 (b) 21,835,574
============ ============ ============
(1) The HumanClick financial statements are presented in accordance with
Israeli generally accepted accounting principles ("GAAP"). The differences
between Israeli GAAP and US GAAP were not significant.
See accompanying notes to unaudited pro forma condensed combined financial
information.
3
LIVEPERSON, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
Year ended December 31, 1999
(In thousands, except for share and per share information)
Human- Pro Forma
LivePerson Click (1) Adjustments Pro Forma
------------ ------------ ------------ ------------
Revenues $ 615 $ -- $ -- $ 615
------------ ------------ ------------ ------------
Operating expenses
Cost of revenues 856 -- -- 856
Product development 1,637 98 -- 1,735
Sales and marketing 3,987 -- -- 3,987
General and administrative 1,706 76 -- 1,782
Non-cash compensation expenses 2,679 -- 44 (a) 2,723
Amortization of goodwill and intangible
assets -- -- 1,415 (a) 1,415
------------ ------------ ------------ ------------
10,865 174 1,459 12,498
------------ ------------ ------------ ------------
Loss from operations (10,250) (174) (1,459) (11,883)
Total other income (expense), net 473 21 -- 494
------------ ------------ ------------ ------------
Net loss $ (9,777) $ (153) $ (1,459) $ (11,389)
============ ============ ============ ============
Basic and diluted net loss per common share $ (0.63) $ (0.65)
============ ============
Weighted-average shares outstanding used in
basic and diluted net loss per common
share calculation 15,465,304 2,055,336 (b) 17,520,640
============ ============ ============
(1) The HumanClick financial statements are presented in accordance with
Israeli generally accepted accounting principles ("GAAP"). The differences
between Israeli GAAP and US GAAP were not significant.
See accompanying notes to unaudited pro forma condensed combined financial
information.
4
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
(1) PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
(a) The consideration payable by LivePerson in connection with the
acquisition of all of the outstanding shares of capital stock of
HumanClick consists of the following:
- 4,238,405 shares of LivePerson common stock valued at approximately
$8.9 million based upon the five-day average trading price before
and after October 12, 2000, the date on which the transaction was
consummated and announced, at $2.094 per share. Of these shares,
1,564,298 are subject to a repurchase option by LivePerson if two of
the former shareholders of HumanClick are no longer employed by
HumanClick under certain circumstances prior to October 12, 2003.
The price pursuant to which LivePerson may repurchase such shares
is equal to the lesser of the 30-day average price per share of
LivePerson common stock prior to the termination of employment, and
$7 per share. One-third of the stock subject to the repurchase
option shall be released from LivePerson's purchase option on each
of October 12, 2001, 2002 and 2003;
- The assumption by LivePerson of options to purchase HumanClick's
ordinary shares, to be exchanged for options to purchase
approximately 262,000 shares of LivePerson's common stock. The
options were valued at approximately $537,000 based on a
Black-Scholes option pricing model of which $272,000 represents
unearned stock-based compensation relating to the intrinsic value of
unvested options assumed at the closing date; plus
- Acquisition costs of approximately $250,000 related to the merger.
The following represents the allocation of the purchase price over the
historical net book values of the acquired assets and assumed liabilities
of HumanClick at June 30, 2000, and is for illustrative pro forma purposes
only. Actual fair values will be based on financial information as of the
acquisition date. Assuming the transaction had occurred on June 30, 2000,
the allocation would have been as follows:
(in thousands)
Assets acquired:
Cash ............................... $ 728
Accounts receivable ................ 63
Property and equipment ............. 60
Goodwill and intangibles ........... 8,751
-------
9,602
-------
Liabilities assumed ...................... (213)
Unearned stock based compensation ........ 272
-------
Purchase price ........................... $ 9,661
=======
5
- The pro forma adjustments reflect approximately six months of
amortization expense for the year ended December 31, 1999 and six
months of amortization expense for the six months ended June 30,
2000, assuming the transaction had occurred on June 24, 1999
(HumanClick's date of incorporation). Goodwill and other intangible
assets are being amortized over a period of three years, the
expected estimated period of benefit;
- The pro forma adjustments reflect approximately six months of
non-cash compensation expense for the year ended December 31, 1999
and six months of non-cash compensation expense for the six months
ended June 30, 2000, assuming the transaction had occurred on June
24, 1999 (HumanClick's date of incorporation). The intrinsic value
of the unvested options assumed at the closing date will be
amortized over their applicable vesting periods. Options generally
vest over three years; and
- The pro forma adjustment reconciles the historical balance sheet of
HumanClick at June 30, 2000 to the allocated purchase price of
HumanClick of $9.7 million assuming the transaction had occurred on
June 30, 2000.
(b) The pro forma basic and diluted net loss per common share is
computed by dividing the net loss attributable to common
stockholders by the weighted average number of common shares
outstanding. The calculation of the weighted average number of
shares outstanding assumes that 4,238,405 shares of LivePerson
common stock issued in connection with the acquisition were
outstanding since the period of HumanClick's incorporation (June 24,
1999). The common stock issued in connection with the acquisition
was adjusted for the weighted average period such shares were
considered to be outstanding (for the periods from June 24, 1999
through December 31, 1999 and from January 1, 2000 through June 30,
2000).
Diluted net loss per share equals basic net loss per share, as
common stock equivalents are anti-dilutive for all pro forma periods
presented.
6
