EXHIBIT 99.1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of BDO International, Independent Auditors............................
Consolidated Statements of Operations........................................
Consolidated Balance Sheets..................................................
Consolidated Statements of Shareholders' Equity (Deficit)....................
Consolidated Statements of Cash Flows........................................
Accounting Policies..........................................................
Notes to the Consolidated Financial Statements...............................
Independent Auditors' Report
To the Directors of S.A.I (Ireland) Limited
We have audited the accompanying consolidated balance sheets of S.A.I (Ireland)
Limited and its subsidiaries as of December 31, 1998 and December 31, 1999 and
the related consolidated statements of operations, shareholders' equity
(deficit) and cash flows for each of the years in the two year period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with US generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of S.A.I. (Ireland)
Limited and its subsidiaries as at December 31, 1999 and December 31, 1998, and
the results of their operations and their cash flows for each of the years in
the two-year period ended December 31, 1999 in conformity with generally
accepted accounting principles in the United States of America.
(signed) BDO International
- -------------------------------
August 14, 2000
Limerick, Ireland
S.A.I (Ireland) Limited
Consolidated Statements of Operations for the year ended December 31
1999 1998
Notes IR(Pounds) IR(Pounds)
Revenue
Licence fees, maintenance and consultancy 2,636,781 2,988,945
Grants received 46,726 39,509
---------- ---------
Total revenues 2,683,507 3,028,454
Operating expenses
Staff costs (1,262,028) (901,349)
Sales and marketing (897,319) (576,876)
General administration (518,837) (487,212)
Research and development (342,940) (234,692)
Loss on disposal of fixed assets (871) -
---------- ---------
Operating (loss)/income (338,488) (828,325)
Other income
Interest expense (5,289) (8,557)
Interest income 1,356 7,932
---------- ---------
(Loss)/income on ordinary activities before taxation (342,421) 827,700
Taxation 1 117,152 (80,105)
---------- ---------
Retained (loss)/income for the year (225,269) 747,595
---------- ---------
Basic and diluted net (loss)/income per
share of common stock (23.22) 77.07
---------- ---------
Weighted average shares of
common stock 9,700 9,700
---------- ---------
See accompanying notes to the consolidated financial statements.
S.A.I. (Ireland) Limited
Consolidated Balance Sheets as at December 31
1999 1998
Notes IR(Pounds) IR(Pounds)
Assets
- ------
Current assets
Cash 200,425 492,185
Receivables 256,057 624,361
Prepaid expenses 72,983 -
Deferred tax asset 1 39,708 -
--------- ---------
Total current assets 566,512 1,116,546
--------- ---------
Fixed assets
Tangible assets 3 197,493 238,618
--------- ---------
Total assets 766,666 1,355,164
--------- ---------
Liabilities
- -----------
Current liabilities
Bank overdraft 286,975 163,104
Finance leases 20,958 34,188
Payables 73,555 86,207
Accrued expenses 914,372 731,384
Directors' loan 4 273,037 -
--------- ---------
1,568,897 1,022,005
Long-term liabilities
Finance leases 4,765 29,639
Deferred tax liability 2,661 7,122
--------- ---------
Total liabilities 1,573,662 1,051,644
--------- ---------
Minority interest - Preference shares 7 5,870 3,000
--------- ---------
Shareholders' Equity (Deficit)
Common stock - IR(Pounds)1 par value 5 9,700 9,700
100,000 ordinary shares authorised
9,700 (1998: 9,700) issued and outstanding
at December 31
Accumulated (deficit)/surplus (225,269) 290,820
Distributions in excess of share capital (599,958) -
--------- ---------
Total shareholders' (deficit)/equity (815,527) 300,520
--------- ---------
Total Liabilities and Shareholders' Equity 766,666 1,355,164
--------- ---------
See accompanying notes to the consolidated financial statements.
S.A.I. (Ireland) Limited
Consolidated Statements of Shareholders' Equity (Deficit) as at December 31,
1999
Accumulated Distributions
Common Stock Income in excess of
Shares Amount /(Deficit) share capital Total
No. IR(Pounds) IR(Pounds) IR(Pounds) IR(Pounds)
Balance 12/31/1997 9,700 9,700 308,986 - 318,686
Net income 12/31/1998 - - 747,595 - 747,595
Dividends - declared - - (765,761) - (765,761)
--------- --------- --------- --------- ---------
Balance 12/31/1998 9,700 9,700 290,820 - 300,520
Dividends - declared - - (290,820) (599,958) (890,778)
Net loss 12/31/1999 - - (225,269) - (225,269)
--------- --------- --------- --------- ---------
Balance 12/31/1999 9,700 9,700 (225,269) (599,958) (815,527)
--------- --------- --------- --------- ---------
See accompanying notes to the consolidated financial statements.
S.A.I. (Ireland) Limited
Consolidated Statements of Cash Flows for the year ended December 31
1999 1998
IR(Pounds) IR(Pounds)
Cash flows from operating activities:
Net (loss)/income (225,269) 747,595
Adjustments to reconcile net (loss)/income to net cash
used by operations:
Depreciation and amortisation 80,276 51,600
Deferred tax (benefit)/provision (44,169) 7,122
Loss on disposal of fixed assets 871 -
Change in assets and liabilities
Decrease/(Increase) in accounts receivable 368,304 (140,832)
Increase in accounts payable and accrued expenses 97,353 554,502
-------- ---------
Net cash provided by operating activities 277,366 1,219,987
-------- ---------
Cash flows from investing activities
Proceeds from sale of fixed assets 19,500 -
Capital expenditures (59,522) (222,735)
-------- ---------
Net cash used in investing activities (40,022) (222,735)
-------- ---------
Cash flows from financing activities
Directors' loans received 771,068 29,009
Directors' loans repaid (498,031) (29,009)
Capital lease repayments (38,104) 35,730
Increase in bank overdraft 123,871 157,241
Payment of dividends (890,778) (790,761)
Proceeds from issue of preference shares in subsidiary 2,870 -
Purchase of minority interest in subsidiary - (76,800)
-------- ---------
Net cash used in financing activities (529,104) (674,590)
-------- ---------
(Decrease)/increase in cash and cash equivalents (291,760) 322,622
Cash at beginning of year 492,185 169,563
-------- ---------
Cash at end of year 200,425 492,185
-------- ---------
Cash disclosures from operating activities:
Interest paid 3,933 625
Taxes paid 72,983 50,481
S.A.I. (Ireland) Limited
Accounting Policies for the year ended December 31
(a) Basis of preparation
The financial statements are prepared in accordance with US generally
accepted accounting principles. These financial statements have been
prepared to facilitate the SEC filing requirements of the company's new
parent, Clarus Corporation.
(b) Organisation
S.A.I. (Ireland) Limited was incorporated within the Republic of
Ireland on August 12, 1992. The Company was initially set up as a
patent company to benefit from grant incentives and the tax-free
royalty income resulting from royalties generated from the ownership
of intellectual properties relating to the development of computer
software. The company acquired the entire issued share capital of
Software Architects International Limited at par on August 12, 1992.
Software Architects International Limited is a wholly owned
subsidiary of the Parent and was incorporated within the Republic of
Ireland on June 5, 1992.
SAI America Limited is a wholly owned subsidiary of Software
Architects International Limited and was incorporated within the
Republic of Ireland on November 30, 1999. This company carried out
the sales and marketing activity of the Group in the US.
S.A.I. U.K. Limited is a wholly owned subsidiary of Software
Architects International Limited and was incorporated in the United
Kingdom on July 11, 1995. The company has yet to trade.
S.A.I. America LLC is a wholly owned subsidiary of SAI America Limited
and was incorporated in Delaware, United States of America on November
11, 1999. This company carries out sales and marketing activities in
the US.
Redeo Technologies Inc., a Delaware corporation, was incorporated in
the United States of America on March 21, 2000.
The customers of the company and its subsidiaries are located
worldwide.
(c) Tangible fixed assets and depreciation
Depreciation is provided at rates calculated to write off the cost less
residual value of each asset over its expected useful life, as follows:
Fixtures & fittings - 20% Straight Line
Computer equipment - 20% Straight Line
Motor vehicles - 20% Straight line
Leased fixed assets - shorter of 20% Straight line or over the
lease term
(d) Revenue
Revenue arising from the sale of services represents invoiced sales during
the year, net of valued added taxation. Licence fees are recognised upon
delivery of the software when there are no significant vendor obligations,
the customer has accepted and collectibility is reasonably assured; revenue
from consultancy services is recognised as services are performed; and
revenue from annual maintenance and support contract is recognised over the
contract period.
Deferred income arises when either a portion of a contract period, for which
cash has been received in advance, falls after the year end or where work
has not been completed.
(e) Grants
Grants are credited to deferred revenue. Grants towards capital expenditure
are released to the profit and loss account over the expected useful life of
the assets. Grants towards revenue expenditure are released to the profit
and loss account as the related expenditure is incurred.
(f) Leasing
Assets held under leasing arrangements that transfer substantially all the
risks of ownership to the company are capitalised. The capital element of
the related rental obligations is included in creditors. The interest
element of the rental obligations is charged to the profit and loss account
in proportion to the amount outstanding under the lease.
All other leases are operating leases and the annual rentals are charged to
the profit and loss account.
(g) Foreign currencies
The consolidated financial statements are expressed in Irish Pounds
(IR(Pounds)) which is the functional currency. Monetary assets and
liabilities denominated in foreign currencies are translated at the rates
ruling at the balance sheet date and revenues, costs and non monetary assets
at the exchange rates ruling at the transaction date.
(h) Pensions
The company operates a defined contribution pension scheme with costs
charged to the profit and loss account as incurred.
(i) Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date if the financial
statements, and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those results.
(j) Income taxes
Deferred taxes are provided for temporary differences on the basis of assets
and liabilities for financial reporting and tax purposes. To the extent
that it is not considered to be more likely than not that all of the
Company's deferred tax assets will be realised, a valuation allowance is
recorded to reduce the deferred tax asset to its estimated net realisable
value.
(k) Earnings per share
Earnings per share for each year was calculated by dividing the
(loss)/income by the weighted average shares outstanding for each respective
year.
(l) Impairment policy
The company has adopted SFAS No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be disposed of" which requires
that long-lived assets to be held and used be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Long-lived assets are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected future
undiscounted cash flows is less than the carrying amount of the asset, a
loss is recognised for the difference between fair value and carrying value
of the asset.
(m) Consolidation
The consolidated financial statements include the accounts of the parent and
its wholly owned subsidiaries. Inter company balances and transactions are
eliminated on consolidation.
(n) Software development costs
Software development costs, which are required to be capitalised pursuant to
Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for
the Cost of Computer Software to be Sold, Leased or Otherwise Marketed",
have not been material to the company to date.
(o) Credit risk
Financial instruments which potentially subject the company to
concentrations of credit risk are primarily accounts receivable. The
company performs continuing credit evaluations of its customers and does not
require collateral. For the most part, the company has not experienced
significant losses related to receivables from individual customers or
groups of customers in any particular industry or geographic area.
(p) Research and development
Research and development costs are expensed to the profit and loss account
as incurred.
S.A.I. (Ireland) Limited
Notes to the Consolidated Financial Statements for the year ended December 31
1. Taxation
The provision for income taxes differs from the amount computed by applying
the statutory income tax rate to income before taxes. The sources and tax
effects of the differences are as follows:
1999 1998
IR(Pounds) IR(Pounds)
Income tax computed at the Irish statutory income tax
rate of 10% for manufacturing operations 34,242 (82,770)
Permanent differences - patent 78,473 87,575
- other 4,437 (84,910)
------- -------
Total benefit/(provision) for income taxes 117,152 (80,105)
------- -------
The income tax is comprised of the following:
Current 72,983 (72,983)
Deferred 44,169 (7,122)
------- -------
Total benefit/(provision) for income taxes 117,152 (80,105)
------- -------
The tax effects of temporary differences that give rise to
the company's deferred tax assets/(liabilities) are as follows:
1999 1998
IR(Pounds) IR(Pounds)
Deferred tax assets/(liabilities)
Fixed assets (2,661) (7,122)
Deferral income 39,708 -
------- -------
Total deferred taxes 37,047 (7,122)
------- -------
At December 31, 1999 the company had net operating losses to carryforward
for Irish income tax purposes of IR(Pounds)397,081. The company has
concluded that, based on expected future results, it is more likely than not
that the deferred tax assets will be realised.
2. Dividends 1999 1998
IR(Pounds) IR(Pounds)
On ordinary shares of IR(Pounds)1 each
Paid: IR(Pounds)91.83 per share 890,778 765,761
(1998: IR(Pounds) 78.94 per share) ------- -------
3. Tangible fixed assets
Fixtures & Computer Motor Leased fixed
Fittings equipment vehicles assets Total
IR(Pounds) IR(Pounds) IR(Pounds) IR(Pounds) IR(Pounds)
Cost
At January 1, 1999 103,572 126,971 62,764 82,821 376,128
Additions 7,954 51,568 - - 59,522
Disposals - - (25,464) - (25,464)
------- ------- ------- ------- -------
At December 31, 1999 111,526 178,539 37,300 82,821 410,186
------- ------- ------- ------- -------
Depreciation
At January 1, 1999 28,666 39,957 10,775 58,112 137,510
On disposals - - (5,093) - (5,093)
Charge for the year 21,913 32,469 12,553 13,341 80,276
------- ------- ------- ------- -------
At December 31, 1999 50,579 72,426 18,235 71,453 212,693
------- ------- ------- ------- -------
Net book values
At December 31, 1999 60,947 106,113 19,065 11,368 197,493
------- ------- ------- ------- -------
At December 31, 1998 74,906 87,014 51,989 24,709 238,618
------- ------- ------- ------- -------
The basis by which depreciation is calculated is stated in Accounting
Policy note (c).
4. Directors' loans 1999 1998
IR(Pounds) IR(Pounds)
Opening Balance - -
Advances by directors (771,068) (29,009)
Repayments to directors 498,031 29,009
-------- -------
Closing Balance (273,037) -
-------- -------
No specific repayment date has been set for the above loans and interest
is not charged on the outstanding balance.
5. Common stock 1999 1998
IR(Pounds) IR(Pounds)
Authorised equity
100,000 Ordinary shares of IR(Pounds)1 each 100,000 100,000
------- ---------
Allotted, called up and fully paid equity
9,700 Ordinary shares of IR(Pounds)1 each 9,700 9,700
------- ---------
The company was incorporated on 12 August 1992 and 100 ordinary shares of
IR(Pounds)1 each were issued for IR(Pounds)100 as subscriber shares. The
company issued 7,214 ordinary shares of IR(Pounds)1 each for IR(Pounds)7,214
on 26 July 1993 and a further 2,386 ordinary shares of IR(Pounds)1 each were
issued for IR(Pounds)2,386 on 9 December 1993.
6. Related parties
The premises occupied by the Company is owned by SAI Properties, a
partnership in which the directors are partners. The Company pays rent to
this partnership amounting to IR(Pounds)30,000 per annum and the agreement
entered into is renewable on a month to month basis.
In November 1999 the two directors set up a company in the name of SAI
Recruitment Limited, in which they each own a 50% share. This company did
not trade up to December 31, 1999.
7. Minority interest
A subsidiary company, Software Architects International Limited, issued 8%
redeemable preference shares of IR(Pounds)1 each at par to Shannon Free
Airport Development Company in support of grants received. The shares were
issued as follows:
Date No. of Shares
February 25, 1993 9,600
March 25, 1993 9,600
October 20, 1993 4,800
November 3, 1993 4,800
November 11, 1994 48,000
All such shares were redeemed by the company on April 1, 1998.
7. Minority interest (continued)
Software Architects International Limited, also issued the following 2%
redeemable preference shares of IR(Pounds)1 each at par to certain
employees:
Date No. and Type of Shares
August 26, 1994 500 "C" redeemable preferences shares
June 15, 1995 500 "C" redeemable preferences shares
June 15, 1995 500 "D" redeemable preferences shares
September 9, 1996 500 "E" redeemable preferences shares
August 7, 1997 500 "E" redeemable preferences shares
December 20, 1997 500 "D" redeemable preferences shares
March 9, 1999 1,500 "C" redeemable preferences shares
July 31, 1999 1,250 "C" redeemable preferences shares
July 31, 1999 120 "D" redeemable preferences shares
These shares remained in issue at December 31, 1999 and are disclosed under
Minority Interest. These shares were redeemed by the company at par value
post year end.
8. Contingent liability
There is a potential liability in relation to litigation being pursued by a
customer against the company for claimed non-delivery of services in the
amount of Australian dollars $39,639.
Management does not believe that the outcome will have a material impact on
the financial condition, results of operations, or cash flows.