-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FP8eFDVjioaxAXxyi3Q9zfVOwY1xtaTZK0OiDH/P7q9S1TOaUd+zkliM3YPK3El9 fA5DDEp3DmuxN8E91v4Okw== 0000912057-02-017229.txt : 20030124 0000912057-02-017229.hdr.sgml : 20030124 20020429214108 ACCESSION NUMBER: 0000912057-02-017229 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020214 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 20020430 DATE AS OF CHANGE: 20030124 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVENT SOFTWARE INC /DE/ CENTRAL INDEX KEY: 0001002225 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 942901952 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26994 FILM NUMBER: 02625634 BUSINESS ADDRESS: STREET 1: 301 BRANNAN ST CITY: SAN FRANCISCO STATE: CA ZIP: 94107 BUSINESS PHONE: 4155437696 8-K 1 a2077950z8-k.htm FORM 8-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A
Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

February 14, 2002
Date of Report (date of earliest event reported)

ADVENT SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)

State of Delaware		0-26994		94-2901952
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification Number)

301 Brannan Street
San Francisco,
California 94107
(Address of principal
executive offices)

(415) 543-7696
(Registrant's telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

ADVENT SOFTWARE, INC.
FORM 8-K/A

Item 2. Acquisition or Disposition of Assets

On March 1, 2002, Advent Software, Inc., a Delaware corporation (the "Registrant"), filed a Form 8-K to report its acquisition of Kinexus Corporation, a Delaware Corporation ("Kinexus") pursuant to an Agreement and Plan of Merger (the "Agreement") by and among Registrant, Kinexus and Kayak Acquisition Corp., ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of the Registrant In that report, the Registrant indicated that it would file the information required by this Item 7 of Form 8-K no later than the date required by this item. The Registrant is filing this Current Report on Form 8-K/A to provide this financial information.

Item 7. Financial Statements and Exhibits

(a): Financial statements of the business acquired.

The following financial statements of Kinexus Corporation are filed with this report as Exhibit 99.1:

(i): Audited balance sheet as of December 31, 2000.
(ii): Audited statements of operations, shareholders equity (deficit) and cash flows for the year ended December 31, 2000.

The following financial statements of Kinexus Corporation are filed with this report as Exhibit 99.2:

(i): Audited balance sheet as of December 31, 2001.
(ii): Audited statements of operations, shareholders equity (deficit) and cash flows for the year ended December 31, 2001.

(b): Pro forma financial information.

The following unaudited pro forma financial information is filed with this report as Exhibit 99.3:

(i): Unaudited pro forma condensed combined balance sheet of Advent Software, Inc. as of December 31, 2001.
(ii): Unaudited pro forma condensed combined statement of operations of Advent Software, Inc. for the year ended December 31, 2001.
(iii): Notes to unaudited pro forma condensed combined financial information

(c): Exhibits

The following exhibits are filed herewith

Exhibit 23.1		Consent of Ernst & Young LLP
Exhibit 99.1		Kinexus Corporation audited balance sheet as of December 31, 2000 and statements of operations, shareholders equity (deficit) and cash flows for the year ended December 31, 2000
Exhibit 99.2		Kinexus Corporation audited balance sheet as of December 31, 2001 and statements of operations, shareholders equity (deficit) and cash flows for the year ended December 31, 2001
Exhibit 99.3		Unaudited pro forma condensed combined balance sheet of Advent Software, Inc. as of December 31, 2001. Unaudited pro forma condensed combined statement of operations of Advent Software, Inc. for the year ended December 31, 2001. Notes to unaudited pro forma condensed combined financial information.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ADVENT SOFTWARE, INC.
	By:	/s/ IRV H. LICHTENWALD Irv H. Lichtenwald Executive Vice President and Chief Financial Officer
Date: April 30, 2002

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ADVENT SOFTWARE,INC. FORM 8–K/A

Item 2. Acquisition or Disposition of Assets

Item 7. Financial Statements and Exhibits

SIGNATURES
EX-23.1 3 a2077950zex-23_1.htm EXHIBIT 23.1
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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No.'s 333-43574, 333-57782, 333-79573, 333-79553, 333-56905, 333-39747 and 333-28725) and on Form S-3 (No.'s 333-79659, 333-58659, 333-48513, 333-66120 and 333-19601) of Advent Software, Inc. of our reports dated February 28, 2001 and February 14, 2002 relating to the financial statements of Kinexus Corporation for the December 31, 2000 and 2001, respectively, both of which appear in this Current Report on Form 8-K/A of Advent Software, Inc.

/s/ Ernst & Young LLP
New York, New York
April 29, 2002

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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS
EX-99.1 4 a2077950zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

FINANCIAL STATEMENTS

Kinexus Corporation

For the twelve months ended December 31, 2000
with Report of Independent Auditors

Kinexus Corporation

Financial Statements

For the twelve months ended December 31, 2000

Contents

Report of Independent Auditors		1
Statement of Financial Position		2
Statement of Operations		3
Statement of Changes in Shareholders' Deficit		4
Statement of Cash Flows		5
Notes to Financial Statements		7

[Ernst & Young LLP Letterhead]

Report of Independent Auditors

To the Shareholders of
Kinexus Corporation

We have audited the accompanying statement of financial position of Kinexus Corporation (the "Company") as of December 31, 2000, and the related statements of operations, changes in shareholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kinexus Corporation at December 31, 2000, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.


February 28, 2001 New York, New York 10019

Kinexus Corporation

Statement of Financial Position

December 31, 2000

Assets
Current assets:
	Cash and cash equivalents	$	21,580,641
	Accounts receivable (less allowance for doubtful accounts of $562,500) from related party		8,437,500
	Accounts receivable		1,100,000
	Prepaid expenses		482,622

Total current assets			31,600,763

Employee loan			439,587
Deposits			1,643,300
Property, equipment and software-cost			16,112,674
Less accumulated depreciation			(5,777,588	)

Total assets		$	44,018,736

Liabilities and shareholders' deficit
Current liabilities:
	Accounts payable	$	7,007,428
	Accounts payable to related parties		192,293
	Accrued interest		31,093
	Accrued wages and benefits		1,058,334
	Accrued other		2,487,270
	Unearned revenue		8,933,333
	Accrued professional fees		2,757,667
	Note payable to related party		390,000

Total current liabilities			22,857,418

Series A convertible redeemable preferred, par value $0.00001; 1,000,000,000 preferred shares authorized, 150,000,000 designated as Series A convertible redeemable preferred; 104,321,626 shares issued and outstanding			63,991,660
Series B convertible redeemable preferred, par value $0.00001; 1,000,000,000 preferred shares authorized, 67,741,473 designated as Series B convertible redeemable preferred; 67,741,473 shares issued and outstanding			49,361,310

Total redeemable preferred			113,352,970

Shareholders' deficit:
	Common stock, par value $0.00001; 500,000,000 shares authorized; 27,328,994 shares issued and outstanding		273
	Additional paid in capital		13,619,661
	Warrants		2,616,543
	Accumulated deficit		(108,428,129	)

Total shareholders' deficit			(92,191,652	)

Total liabilities and shareholders' deficit		$	44,018,736

See notes to financial statements.

Kinexus Corporation

Statement of Operations

For the twelve months ended December 31, 2000

Revenues
Fees for services		$	1,260,999
Interest income			431,896

Total revenues			1,692,895
Expenses
Compensation and benefits			25,077,217
Consulting fees			11,500,761
Professional fees			9,871,261
Depreciation and amortization			2,445,766
Interest			1,827,488
Travel and entertainment			1,582,005
Occupancy			1,362,712
Communications			969,983
Manager fee			362,903
Office and other			2,051,481

Total expenses			57,051,577

Loss before extraordinary item			(55,358,682	)
Extraordinary item—interest forgiven on payment of debt			224,088

Net loss			(55,134,594	)
Dividends on preferred shares			(722,932	)

Loss applicable to common shares		$	(55,857,526	)

Earnings (loss) per common share (basic and diluted):
	Loss before extraordinary item	$	(3.14	)
	Extraordinary item		0.01

Net loss		$	(3.13	)

Weighted average shares outstanding			17,854,915

See notes to financial statements.

Kinexus Corporation

Statement of Changes in Shareholders' Deficit

For the twelve months ended December 31, 2000

				Kinexus Corporation Shareholders (Deficit)/Equity
	The Witan Group, LLC Members' Equity			Kinexus Corporation Shareholders (Deficit)/Equity
	The Witan Group, LLC Members' Equity			Common Stock		Additional Paid-in-capital			Warrants			Accumulated Deficit			Totals
Balance at January 1, 2000	$	44,379,404		$	—	$	—		$	—		$	(52,570,603	)	$	(8,191,199	)
Capital contribution		19,000,000			—		—			—			—			19,000,000
Syndication costs related to capital contribution		(479,598	)		—		—			—			—			(479,598	)
Equity issued for services rendered		875,000			—		33,940			—			—			908,940
Warrants issued for services rendered		2,000,000			—		—			90,750			—			2,090,750
Deferred compensation		15,978,437			88		469,306			—			—			16,447,831
Conversion to C-corporation		(17,356,583	)		185		15,356,398			2,000,000			—			—
Conversion to Series A convertible redeemable preferred		(64,396,660	)		—		—			—			—			(64,396,660	)
Redemption of warrants issued for services rendered		—			—		—			(1,916,800	)		—			(1,916,800	)
Warrants issued to creditors		—			—		—			1,187,093			—			1,187,093
Warrants issued in connection with equity financing		—			—		—			1,255,500			—			1,255,500
Assignment of a liability to a shareholder		—			—		600,000			—			—			600,000
Syndication costs related to capital contribution		—					(2,839,983	)		—			—			(2,839,983	)
Dividend accrued on Series B Preferred		—					—			—			(722,932	)		(722,932	)
Net loss		—			—		—			—			(55,134,594	)		(55,134,594	)

Balance at December 31, 2000	$	—		$	273	$	13,619,661		$	2,616,543		$	(108,428,129	)	$	(92,191,652	)

See notes to financial statements.

Kinexus Corporation

Statement of Cash Flows

For the twelve months ended December 31, 2000

Cash flows from operating activities
Net loss				$	(55,134,594	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation and amortization				2,445,766
	Loss on disposal or impairment of facilities and equipment				617,071
	Equity instruments issued in connection with equity financing and for services rendered				3,525,483
	Non-cash compensation expense arising from stock awards				16,447,830
	Extraordinary item—interest forgiven on debt				(224,088	)
	Changes in assets and liabilities:
		(Increase)/decrease in:
			Accounts receivable from related party, net of allowance		(8,437,500	)
			Accounts receivable		(1,100,000	)
			Prepaid expenses		(388,497	)
			Employee loan		(439,587	)
			Deposits		(1,159,506	)
		Increase/(decrease) in:
			Accounts payable		1,472,897
			Accounts payable to related parties		138,906
			Accrued interest		605,112
			Accrued wages & benefits		(331,266	)
			Accrued other		2,303,474
			Unearned revenue		8,933,333
			Accrued professional fees		2,072,771

Net cash used in operating activities					(28,652,395	)

Cash flows from investing activities
Purchase of property, equipment and software					(10,878,581	)

Net cash used in investing activities					(10,878,581	)

See notes to financial statements.

Kinexus Corporation

Statement of Cash Flows (continued)

For the twelve months ended December 31, 2000

Cash flows from financing activities
Repurchase of common shares	$	(405,000	)
Payments on capital lease obligations		(89,837	)
Payments on notes payable		(4,027,517	)
Proceeds from issuance of notes payable		6,680,000
Capital contributions		59,000,000
Syndication costs		(3,271,473	)

Net cash provided by financing activities		57,886,173

Increase in cash		18,355,197
Cash and cash equivalents—beginning of year		3,225,444

Cash and cash equivalents—end of year	$	21,580,641

Supplemental cash flow disclosures
Interest paid	$	81,740

Noncash investing and financing items

During 2000, holders of convertible debt in the principal amount of $8,034,867 and $603,511 in accrued interest elected to exercise their conversion right and converted these amounts into series B preferred stock of the Company. A note payable with a principal balance of $600,000 was converted to equity upon assumption of the liability by the chairman of the Company.

Kinexus Corporation

Notes to Financial Statements

December 31, 2000

1. Description of Business

Kinexus Corporation ("Kinexus" or the "Company") markets a service to financial institutions that is used to aggregate financial data for affluent and high net worth customers and is sold on a subscription basis through private banks and boutique asset managers. The aggregated data is delivered over the Internet. Kinexus earns revenues based on the number of subscribers referred by each financial institution.

Kinexus was previously known as "The Witan Group, Inc." and changed its name effective November 28, 2000. At the beginning of the year, The Witan Group, Inc. was organized as a limited liability company and was called "The Witan Group, LLC." As more fully discussed in Note 10, the Company converted to a C-Corporation on June 30, 2000.

2. Summary of Significant Accounting Policies

General

The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has sustained losses and negative cash flows from operations since inception. The Company's ability to meet its obligations in the ordinary course of business is dependent on the successful execution of potential customer agreements (or in the absence of such agreements, significantly reducing costs and expenditures) and its ability to deliver services in accordance with existing customer agreements, as well as its ability to implement cost reduction programs. While there can be no assurance, management believes that it will successfully execute its business plan for the year 2001. The Company received $17,000,000 and $59,000,000 in private equity financings in 1999 and 2000, respectively.

The Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently encountered in the new and rapidly evolving markets for Internet products and services.

Use of Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from those estimates.

Revenue Recognition

Fees for services are recognized at the time services are rendered.

Revenues are currently generated from aggregation services and services provided to family office clients of the Company.

A component of the fees generated is setup fees. These are recognized over the life of the customer relationship, which is currently estimated to be three years.

Revenues from aggregation services are recognized ratably over the term of the related agreements. Revenues from services not yet rendered are deferred and taken into income as earned,

and the deferred element is included in liabilities. The Company had deferred revenues of $8,933,333 as of December 31, 2000.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts receivable based on the expected collectibility of all accounts receivables. The Company had an allowance for doubtful accounts receivable from related parties of $562,500 as of December 31, 2000.

Software Costs

Kinexus accounts for the cost of software development in accordance with Statement of Position 98-1 ("SOP 98-l"), "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use." All development costs incurred prior to the application development stage for a software product are expensed as incurred. Development costs incurred during the application development stage through the date of general release of the software are capitalized and amortized over the estimated life of the software product. The estimated life of this software is nine months.

The Company has incurred and expensed $5,847,639 of research and development costs for such software for the year ended December 31, 2000. The application development stage of version 1 of the Company's software product occurred in the fourth quarter of 1999. Version 2 of the product reached the application development stage during the first quarter of 2000. The capitalized software cost will be amortized over 9 months. The software was placed in service November 1, 2000. $3,260,489 of software costs was capitalized under this standard during the year ended December 31, 2000. The related accumulated amortization and amortization expense at and for the year ended December 31, 2000 was $680,087.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation and amortization are provided on a straight-line basis over estimated useful lives of depreciable assets. Useful lives for property and equipment are as follows:

Communications equipment		3-5 years
Computer equipment		3 years
Furniture and fixtures		5 years
Leasehold improvements		5 years
Purchased software		3 years
Internally developed software		9 months

Improvements are capitalized, expenditures for maintenance and repairs are charged to expense as incurred.

Syndication Costs

Syndication costs, including legal, travel and entertainment, consulting, and other related expenditures are offset against capital raised from existing shareholders or new shareholders. Similar costs related to active prospects are charged to Deferred Syndication Costs until such time as capital is contributed or the prospect is no longer active. All costs related to syndication for prospects that are no longer considered active are expensed as operating costs in the period that such determination is made.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and other investments that are readily convertible into cash and have original maturities of three months or less.

Earnings (Loss) Per Share

Basic earnings (loss) per share excludes any dilutive effects of options, warrants and convertible securities and is calculated using the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of shares and equivalent shares outstanding during the period. All of Kinexus' common stock equivalents are excluded from diluted loss per share since their effect is antidilutive.

Stock-Based Compensation

The Company accounts for its employee stock option plans in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Compensation expense related to employee stock options is recorded only if, on the date of grant, the fair value of the underlying stock exceeds the exercise price of the stock option. The Company adopted the disclosure-only requirements of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which allows entities to continue to apply the provisions of APB Opinion No. 25 for transactions with employees and non-employee board of director members and provide pro forma net income (loss) and pro forma earnings (loss) per share disclosures for employee stock as if the fair-value-based method of accounting in SFAS No. 123 had been applied to these transactions.

3. Income Taxes

Through June 30, 2000, the Company operated within a limited liability company that was treated as a partnership for income tax purposes. Under Federal, state and local income tax laws generally applicable to partnerships, the tax effects of the Company's activities during that period accrued directly to its members. Accordingly, no provision for, or benefit from, income taxes has been made for this period.

Effective July 1, 2000, the Company was reorganized as a corporation. There is no provision for, or benefit from, income taxes during the period beginning July 1, 2000 and ending December 31, 2000 because the Company incurred losses for this period and all deferred tax assets arising on account of these losses have been fully offset with a valuation allowance.

The difference between the effective tax rate and the U.S. Federal statutory rate of 35% is primarily attributable to the establishment of such valuation allowance against all deferred tax assets.

The Company is reasonably expecting to generate a net operating loss for the period during which it was a corporation. Such net operating loss will expire in 2020.

4. Property, Equipment and Software

Property, equipment and software consist of:

Computer and communications equipment	$	5,595,671
Furniture and fixtures		655,171
Leasehold improvements		1,923,874
Software		7,937,958

		16,112,674
Less accumulated depreciation and amortization		(5,777,588	)

Net property, equipment and software	$	10,335,086

Property and equipment depreciation expense including equipment under capital lease was $1,246,841 for the year ended December 31, 2000. Software amortization expense was $1,198,925 for the year ended December 31, 2000.

5. Notes Payable

Notes payable of the Company consist of the following:

The following note is due on March 15, 2001. First Union Investors, Inc. is an investor in and a customer of the Company. The interest rate is 10%.

Accrued Lender		Date Issued		Principal			Interest
First Union Investors, Inc.		March 15, 2000		$	390,000		$	31,093

The Company had a subordinated note payable to Perot Systems of $600,000. On September 20, 2000, an officer of Kinexus assumed the Company's liability to Perot Systems. This assumption of debt was accounted for as a contribution of capital.

6. Commitments and Contingencies

Leases

The Company leases certain office and storage space under non-cancelable lease agreements, which are reflected in the financial statements as operating leases. The following is a schedule of future minimum rental payments required under operating leases that have initial or remaining terms in excess of one year at December 31, 2000.

The Company's last capital lease expired on August 31, 2000. All obligations related to the capital leases have been fulfilled.

2001	$	1,622,784
2002		1,615,377
2003		1,611,330
2003		1,612,130
2004		1,648,987
Thereafter		8,628,166

Total lease payments	$	16,738,774

Total rent expense for operating leases was $1,174,676 for the year ended December 31, 2000.

Other Commitments

The Company is required under the terms of certain agreements with two shareholders to repurchase the shareholders' interests. The agreements to repurchase units vary between agreements and are required upon the attainment of certain funding levels or the passage of time. The commitment of the Company under these agreements is to repurchase 942,679 shares for $928,600 and 194,773 shares for $500,000.

Legal Proceedings

There are presently no material claims filed against the Company, nor are there any material unasserted claims that the Company is aware of.

7. Related Party Transactions

Witan Management Company, as manager, received a management fee of $50,000 per month until June 1, 2000 when the management fee was reduced to $25,000. This management fee agreement was terminated on October 20, 2000. The Company expensed $362,903 related to this agreement in the year ended December 31, 2000. At the end of the year there was no outstanding balance owed to the Witan Management Company.

MIC Real Estate, L.L.C., which is related by common ownership, receives a monthly license fee of $29,714 per month for real estate licensed by Kinexus. This arrangement began July 15, 2000. The Company expensed $164,865 in the year ended December 31, 2000.

Kinexus contracted with LoBue Associates, Inc. ("LoBue") to provide development and other services to Kinexus. Kinexus and LoBue are related through common ownership. During the period, Kinexus paid to LoBue $398,457 and had outstanding obligations of $42,734 to LoBue at December 31, 2000.

Kinexus obtained some of its air transportation through MIC Aircraft, L.L.C., a company affiliated through common ownership. Total expenses incurred under this arrangement amounted to $1,177,076 during the calendar year 2000, of which $64,395 is included in accounts payable to related parties at December 31, 2000. Effective at the close of the third round of financing, October 24, 2000 (See Note 10), MIC Aircraft, L.L.C. charged Kinexus the coach fare equivalent for each passenger.

Kinexus funds benefits, payroll and other expenses for certain Morriss Holdings L.L.C. ("Morriss Holdings") controlled entities, which reimburse Kinexus for these payments. Morriss Holdings provides the same service for Kinexus. Morriss Holdings is related to the Company by common ownership. At December 31, 2000 Kinexus' total payable related to these items was $192,293.

The CEO is indebted to the Company including interest, for $439,587 as of December 31, 2000. Interest will accrue at a rate of 5.5% per year. The loan matures on December 31, 2003, but may accelerate and become fully due upon the occurrence of certain events per the loan agreement.

See Note 5 for related party information concerning notes payable.

8. Segment Information

The Company's chief operating decision-maker ("CODM") is considered to be the Company's CEO. The CODM evaluates performance, makes operating decisions and allocates resources based on financial data consistent with the presentation in the accompanying financial statements. Therefore, the Company operates in a single segment for purposes of disclosure under Statement of Financial Accounting Standards No. 131.

9. Recent Accounting Pronouncements

In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." This statement requires that companies recognize all derivatives as either assets or liabilities on the balance sheet and measure these instruments at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133." This statement deferred the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities" which made minor amendments to SFAS 133. The Company does not expect SFAS 133 to have a material effect on its financial position or results of operations.

10. Shareholders' Deficit

Private Equity Financing—Second Round

On March 15, 2000, the Company raised $19,000,000 of equity investment in a second private equity financing (the "Second Round"). A previous agreement with an existing member required the Company to repurchase 167,212 of Class A member interests for $480,000 upon completion of the Second Round. To satisfy this obligation, one of the Second Round investors purchased these units in an outside transaction.

Disposition of Class B and C LLC Member Interests

As described in the 1999 financial statements, on December 3, 1999 the Company had issued 10,250,000 class B units to its manager and 5,637,500 class C units to a group of employees. These units had no initial capital value but were entitled to share in the profits of the Company earned after December 3, 1999. In the Second Round, the number of units was increased to 11,402,171 class B units and 6,350,680 class C units.

These units were accounted for as stock appreciation rights. Accordingly, Kinexus recognized compensation expense for the year ended December 31, 2000 of $15,978,437, based on the growth in the value of the Company between December 31, 1999 and June 30, 2000. Upon the Company's conversion to a C-Corporation the units were converted to common stock and no further compensation expense was recorded with respect to these units.

Conversion to a C-Corporation

In connection with the Second Round, Kinexus agreed to convert to a C-Corporation prior to the next financing round or September 30, 2000, whichever occurred first. On June 30, 2000 Kinexus converted to a C-Corporation.

Series A Preferred Stock

Upon conversion of the Company from an LLC to a C-Corporation, existing Witan Group, LLC class A units were exchanged for an equal number of Series A Convertible Preferred shares ("Series A Preferred"). At December 31, 2000 the Company had 104,321,626 shares of Series A Preferred outstanding. All the holders of the Series A Preferred are entitled to receive dividends at the annual rate of 8% of the share price. Dividends are not cumulative and will not accrue unless declared by the Board of Directors of the Company. Dividends will be paid prior to and in preference to dividends on the common stock or any other preferred stock that is junior to the Series A Preferred.

The Series A Preferred shares are convertible at the option of the holders into an equal number of shares of common stock ("Voluntary Conversion"). In addition, the Series A Preferred shall

automatically convert into an equal number of shares of common stock upon an initial public offering ("Automatic Conversion"). The conversion ratio of 1:1 for both voluntary and automatic conversions is subject to upward adjustment if the Company subsequently issues additional common shares, convertible securities or options for consideration less than $1.1138 per share. Furthermore, the $1.1138 trigger will be reduced proportionately whenever such an event results in an increase in the conversion ratio.

The holders of Series A Preferred vote together with the holders of common stock on an as-if-converted basis. The holders of Series A Preferred also have voting rights related to certain amendments to the Company's articles of incorporation.

In the event of liquidation of the Company, holders of Series A Preferred not previously converted to common stock shall rank equal with the Series B Convertible Preferred Stock ("Series B Preferred") and shall be entitled to receive $1.1138 per share, subject to adjustment as described in the Series A Preferred Certificate of Designation, plus an amount equal to all declared but unpaid dividends, in preference to the holders of common stock. If, upon occurrence of such an event, the assets distributed among holders of Series A Preferred and Series B Preferred are insufficient to cover the combined liquidation preferences then the assets available for distribution will be distributed pro-rata between the Series A Preferred and Series B Preferred.

Private Equity Financing—Third Round

On October 24, 2000 the Company executed a private equity financing (the "Third Round") that raised $48,638,378 consisting of:

1.: Issuance of 55,710,306 units of Series B Convertible Preferred Stock in exchange for $40,000,000 cash investment.
2.: Conversion of notes payable in the amount of $8,638,378 including accrued interest to 12,031,167 shares of Series B Convertible Preferred Stock.

At December 31, 2000 the Company had 67,741,473 shares of Series B Preferred outstanding. Holders of the Series B Preferred are entitled to receive cumulative dividends in kind at the annual rate of 8% of the price per share, compounded on a semi-annual basis. Dividends will accrue regardless of whether declared and will be paid prior to and in preference to any dividend on any other class of stock of the Company, including the Series A Preferred.

The Series B Preferred is convertible into common stock using a 1:1 conversion ratio. This conversion ratio is subject to upward adjustment if the Company does not complete an Initial Public Offering ("IPO") as follows:

1.: If the Company does not complete an IPO by December 31, 2001 the conversion ratio increases to 1:1.22463; and
2.: If the Company completes an IPO that is not a Qualified Public Offering by December 31, 2001, the conversion ratio increases to 1:1.10106. A Qualified Public Offering is a firm commitment underwriting, executed by a major bracketed underwriter with gross proceeds to the Company of at least $40,000,000 and a price per share of at least $2.154.

In addition, the conversion ratio is subject to upward adjustment if the Company issues additional common shares, convertible securities or options for consideration less than $0.718 per share.

The Series B Preferred shall automatically convert into common stock upon the written consent of holders of two-thirds of the outstanding shares of Series B Preferred or the consummation of a Qualified Public Offering.

The Series B Preferred, plus any accrued but unpaid dividends, shall be redeemable at the option of the holders after the fifth anniversary of the closing of the Third Round or after the occurrence of an event of non-compliance defined as the breach of any material representation or warrant, failure to comply with any covenant or agreement contained in the Third Round closing documents or the bankruptcy or insolvency of the Company.

The holders of Series B Preferred vote together with the holders of the Series A preferred and the holders of the common stock on an as-if-converted basis. The holders of Series B Preferred also have voting rights related to certain amendments to the Company's Articles of Incorporation.

In the event of liquidation of the Company, holders of Series B Preferred not previously converted to common stock shall rank equal with Series A Preferred and shall be entitled to receive the amount of their purchase price per share, plus any accrued dividends, in preference to the holders of common stock. If, upon occurrence of such an event, the assets distributed among holders of Series B Preferred and Series A Preferred are insufficient to cover the combined liquidation preferences, the assets of the Company available for distribution will be distributed pro-rata between the Series B Preferred and Series A Preferred.

Redemption of Shares

On November 6, 2000 pursuant to a repurchase agreement with an investor, the Company repurchased 141,085 shares of Series A Preferred for $405,000. (See similar commitments in Note 6.)

11. Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows expected to be generated by the assets. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The fair value of the assets is determined by quoted market prices if available, or the best information available in the circumstances. For the year ended December 31, 2000 $617,071 was recognized as a special charge, included on the Statement of Operations in the Office and other caption. The fair value of the assets recognized as impaired was due to lost, damaged or obsolete equipment.

12. Employee Compensation Plans

The Company has adopted a variety of compensation plans for certain of its employees as well as for certain non-employee advisors. These plans are designed to facilitate a pay-for-performance policy, provide compensation commensurate with other leading technology companies and provide for internal ownership in order to align the interests of employees with long-term interests of the Company's shareholders. These plans are summarized below.

Stock Options

The Company awarded 6,360,000 employee stock warrants on December 31, 2000, with an exercise price of $0.40. These options vest ratably after one, two, three and four years of continued employment, commencing with date of hire, and expire ten years from the date granted.

The Company follows the intrinsic value method in accounting for its stock options. Had compensation cost been recognized based on the fair value at the date of grant for options granted in

2000, the pro forma amounts of the Company's net loss and net loss per share for the year ended December 31, 2000 would have been as follows:

Net loss applicable to common stock as reported	$	(55,857,526	)
Net loss applicable to common stock pro forma	$	(55,892,985	)
Basic and diluted loss per share as reported		(3.13	)
Basic and diluted loss per share pro forma		(3.13	)

The estimated fair value of the Company's options granted during 2000 was $0.066 on the date of grant using the Black-Scholes option pricing model and the assumptions referred below.

Expected stock price volatility		100	%
Risk free interest rate		6.45	%
Expected annual dividend per share	$	0.00
Term		10 years

Employee Awards

Non-employee Awards

The Company awarded 1,375,000 of stock warrants to certain consultants on December 31, 2000, with an exercise price of $0.40. The Company incurred $90,750 of expense related to these stock options.

The fair value of each warrant was estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used for 2000:

Expected stock price volatility		100	%
Risk free interest rate		6.45	%
Expected annual dividend per share	$	0.00
Term		10 years

The Company granted 848,500 shares of common stock at an issue price of $0.04 to outside advisors for services provided during the year ended December 31, 2000. The Company incurred $33,940 of expense related to this stock award.

13. Computation of Net Loss Per Share

Basic and diluted net loss per share is computed using the weighted average number of shares actually outstanding during the period. There are potentially dilutive securities outstanding, as follows:

Warrants/Options Issued in Connection With	Number	Exercise Price		Expiration Date
Notes payable(A)	2,167,334	$	0.595201	March 15, 2005
Notes payable(B)	100,000	$	0.01	September 7, 2005
Customer service agreement(C)	2,326,633 1,000,000 2,000,000	$ $	0.595201 0.718 Delay strike warrants	October 23, 2005
Employee options	6,360,000	$	0.40	December 31, 2010
Non-employee	1,375,000	$	0.40	December 31, 2010
Equity financing	2,250,000	$	0.718	October 23, 2005
Vendor services	400,000	$	0.718	August 18, 2005

(A): Warrants issued in connection with notes payable equal to 1% of current shares outstanding before effects of the conversion, to creditors with an exercise price of $1,290,000 expiring March 15, 2005. At December 31, 2000 the Company calculated that this would represent 2,167,334 warrants issued with an exercise price of $0.595201.
(B): Warrants issued in connection with an interest free bridge loan from a related party.
(C): These warrants become exercisable when the customer delivers a certain quantity of subscribers. A total of 2,326,633 warrants will be issued upon the implementation of 32,500 subscribers over a two year period beginning October 1, 2000. As of December 31, 2000 zero subscribers have been implemented under the terms of this agreement. 1,000,000 warrants will be issued upon the implementation of 50,000 subscribers. As of December 31, 2000 30,000 subscribers have been implemented under the terms of this agreement. Two additional tranches of 1,000,000 warrants will be issued upon the implementation of 100,000 and 150,000 subscribers. The exercise price of these tranches will be the fair market value at the issue date.

The following table sets forth the computation of basic and diluted earnings (loss) from continuing operations per common share:

Numerator:
	Net loss	$	(55,358,682	)
	Extraordinary gain		224,088
	Preferred stock dividends		(722,932	)

	Net loss		(55,857,526	)
Denominator:
	Weighted average common shares—basic and diluted		17,854,915
Earnings (loss) per common share (basic and diluted):
	Loss before extraordinary item		(3.14	)
	Extraordinary item		0.01

			(3.13	)

14. Vulnerability Due to Revenue Concentration

The Company executed a service level agreement with a major money center bank. This customer accounts for substantially all of the revenue for the Company. The loss of this customer would have a material adverse effect on the Company's financial condition and results of operations.

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Exhibit 99.1

Contents
Report of Independent Auditors
Kinexus Corporation Statement of Financial Position December 31, 2000
Kinexus Corporation Statement of Operations For the twelve months ended December 31, 2000
Kinexus Corporation Statement of Changes in Shareholders' Deficit For the twelve months ended December 31, 2000
Kinexus Corporation Statement of Cash Flows For the twelve months ended December 31, 2000
Kinexus Corporation Statement of Cash Flows (continued) For the twelve months ended December 31, 2000
Kinexus Corporation Notes to Financial Statements December 31, 2000
EX-99.2 5 a2077950zex-99_2.htm EXHIBIT 99.2
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Exhibit 99.2

FINANCIAL STATEMENTS

Kinexus Corporation

Twelve Months Ended December 31, 2001
with Report of Independent Auditors

Kinexus Corporation

Financial Statements

For the Twelve Months Ended December 31, 2001

Contents

Report of Independent Auditors		1
Statement of Financial Condition		2
Statement of Operations		3
Statement of Changes in Shareholders' (Deficit) Equity		4
Statement of Cash Flows		5
Notes to Financial Statements		6

[Ernst & Young Letterhead]

Report of Independent Auditors

To the Shareholders of Kinexus Corporation:

We have audited the accompanying statement of financial position of Kinexus Corporation (the "Company") as of December 31, 2001 and the related statements of operations, changes in shareholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kinexus Corporation at December 31, 2001, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.


February 14, 2002 New York, New York 10019

Kinexus Corporation

Statement of Financial Condition

December 31, 2001

Assets
Current assets:
	Cash and cash equivalents	$	31,312
	Accounts receivable (less allowance for doubtful accounts of $217,658)		420,091
	Accounts receivable from related parties		47,681
	Prepaid expenses		267,638

Total current assets			766,722
Deposits			1,440,407
Property, equipment and software—cost			21,750,264
Less accumulated depreciation			(15,436,834	)
Intangible assets, net			1,465,672

Total assets		$	9,986,231

Liabilities and shareholders' deficit
Current liabilities:
	Accounts payable	$	5,300,323
	Accrued interest		107,377
	Accrued wages and benefits		2,643,872
	Accrued other		7,842,447
	Unearned revenue		5,088,557
	Accrued professional fees		4,029,131
	Note payable to related party		6,509,334
	Capital lease obligations		6,676

Total current liabilities			31,527,717

Series A convertible redeemable preferred, par value $0.00001; 1,000,000,000 preferred shares authorized, 150,000,000 designated as Series A convertible redeemable preferred; 104,321,626 shares issued and outstanding, with a liquidation preference of $1.1138 per share plus dividends declared but unpaid			63,991,660
Series B convertible redeemable preferred, par value $0.00001; 1,000,000,000 preferred shares authorized, 67,741,473 designated as Series B convertible redeemable preferred; 67,741,473 shares issued and outstanding, with a liquidation preference of $0.718 per share plus dividends accrued but unpaid			53,400,686

Total redeemable preferred			117,392,346

Shareholders' deficit:
	Common stock, par value $0.00001; 500,000,000 shares authorized; 44,140,869 shares issued and outstanding		441
	Additional paid-in capital		15,133,911
	Warrants		2,742,432
	Accumulated deficit		(156,810,616	)

Total shareholders' deficit			(138,933,832	)

Total liabilities and shareholders' deficit		$	9,986,231

See notes to financial statements.

Kinexus Corporation

Statement of Operations

For the Twelve Months Ended December 31, 2001

Revenues:
	Fees for services	$	8,864,894
	Interest income		485,823

Total revenues			9,350,717
Expenses:
	Compensation and benefits		17,671,986
	Depreciation and amortization		12,213,223
	Consulting fees		7,332,612
	Restructuring charge		5,559,157
	Professional fees		5,473,638
	Occupancy		1,944,693
	Communications		1,158,763
	Travel and entertainment		1,069,890
	Interest		309,468
	Office and other		960,398

Total expenses			53,693,828

Net loss			(44,343,111	)

Dividends on preferred shares			(4,039,376	)

Income (loss) applicable to common shares		$	(48,382,487	)

Earnings (loss) per common share (basic and diluted):
	Net loss	$	(1.29	)

Weighted average shares outstanding			37,495,487

See notes to financial statements.

Kinexus Corporation

Statement of Changes in Shareholders' (Deficit) Equity

For the Twelve Months Ended December 31, 2001

	Common Stock		Additional Paid-in Capital		Warrants		Accumulated Deficit			Total
Balance at January 1, 2001	$	273	$	13,619,661	$	2,616,543	$	(108,428,129	)	$	(92,191,652	)
Warrants issued for services rendered		—		—		125,889		—			125,889
Deferred compensation		—		165,668		—		—			165,668
Options exercised		—		4,750		—		—			4,750
Accrue Preferred Dividend on Series B Preferred								(4,039,376	)		(4,039,376	)
Issuance of common shares for acquisition		168		1,343,832		—		—			1,344,000
Net Loss		—		—		—		(44,343,111	)		(44,343,111	)

Balance at December 31, 2001	$	441	$	15,133,911	$	2,742,432	$	(156,810,616	)	$	(138,933,832	)

See notes to financial statements.

Kinexus Corporation

Statement of Cash Flows

For the Twelve Months Ended December 31, 2001

Cash flows from operating activities
Net loss				$	(44,343,111	)
Adjustments to reconcile net loss to net loss to net cash used in operating activities:
	Depreciation and amortization				12,213,223
	Restructuring charges				5,559,157
	Loss on disposal or impairment of facilities and equipment				(57,026	)
	Equity instruments issued in connection with services rendered				125,889
	Non-cash compensation expense arising from stock awards				165,668
	Changes in assets and liabilities:
		(Increase) decrease in:
			Accounts receivable from related party, net of allowance		8,437,500
			Accounts receivable, net of allowance		804,792
			Prepaid expenses		237,942
			Deposits		213,988
			Employee loan		(5,135	)
		Increase (decrease) in:
			Accounts payable		(2,109,430	)
			Accounts payable/receivable to related parties		(238,149	)
			Accrued interest		76,284
			Accrued wages & benefits		1,496,593
			Accrued other		2,920,620
			Unearned revenue		(4,504,172	)
			Accrued professional fees		1,271,465

Net cash used in operating activities					(17,733,902	)

Cash flows from investing activities
Purchase of property, equipment and software					(9,364,908	)
Acquisition, net of cash acquired					(493,587	)

Net cash used in investing activities					(9,858,495	)

Cash flows from financing activities
Payments on capital lease obligations					(1,416	)
Payments on notes payable					(469,600	)
Proceeds from issuance of notes payable					6,509,334
Proceeds from the exercise of stock options					4,750

Net cash used in financing activities:					6,043,068

Increase (decrease) in cash					(21,549,329	)
Cash and cash equivalents—beginning of period					21,580,641

Cash and cash equivalents—end of period				$	31,312

Supplemental cash flow disclosures
Interest paid				$	44,114

See notes to financial statements.

Kinexus Corporation

Notes to Financial Statements

December 31, 2001

1. Description of Business

Kinexus Corporation ("Kinexus" or the "Company") markets a service to financial institutions that is used to aggregate financial data for affluent and high net worth customers and is sold on a subscription basis through private banks and boutique asset managers. The aggregated data is delivered over the Internet, on paper reports, or through direct electronic feeds to the financial institutions. Kinexus earns revenues based on the number of subscribers referred by each financial institution.

2. Summary of Significant Accounting Policies

General

As more fully described in Note 16, the Company signed a merger agreement with Advent Software, Inc. ("Advent") on December 31, 2001. The merger closed on February 14, 2002.

Use of Estimates

Revenue Recognition

Fees for services are recognized at the time services are rendered.

Revenues are currently generated from aggregation services, consulting services, and services provided to family office clients of the Company.

A component of the fees generated is setup fees. These are recognized over the life of the customer relationship, which is currently estimated to be three years.

Revenues from aggregation services are recognized ratably over the term of the related agreements. Revenues from services not yet rendered are deferred and reported as revenue when earned, and the deferred element is included in liabilities. The Company had deferred revenues of $5,088,557 as of December 31, 2001.

Allowance for Doubtful Accounts

Software Costs

The Company has incurred and expensed $2,551,551 of research and development costs for such software for the year ended December 31, 2001. The application development stage of version 1 of the Company's software product occurred in the fourth quarter of 1999. Version 2 of the product reached the application development stage during the first quarter of 2000. The software was placed in service November 1, 2000. Version 3 of the Company's software reached application development stage in February 2001. The software was placed in service during September 2001. The capitalized software cost will be amortized over nine months. $8,626,355 of software costs was capitalized under SOP 98-1 as of December 31, 2001 and accumulated amortization of $8,396,824 was booked as of December 31, 2001. The related amortization expense was $7,716,737 for the year ended December 31, 2001.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation and amortization are provided on a straight-line basis over estimated useful lives of depreciable assets. No salvage values are assumed. Estimated useful lives for property and equipment are as follows:

Communications equipment		3-5 years
Computer equipment		3 years
Furniture and fixtures		5 years
Leasehold improvements		5 years
Purchased software		3 years
Internally developed software		9 months

Improvements are capitalized and expenditures for maintenance and repairs are charged to expense as incurred.

Syndication Costs

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and other investments that are readily convertible into cash and have original maturities of three months or less.

Earnings (Loss) Per Share

Basic earnings (loss) per share excludes any dilutive effects of options, warrants and convertible securities and is calculated using the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of shares and equivalent shares outstanding during the period. All of Kinexus's common stock equivalents are excluded from diluted loss per share since their effect is antidilutive.

Stock-Based Compensation

option. The Company adopted the disclosure-only requirements of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which allows entities to continue to apply the provisions of APB Opinion No. 25 for transactions with employees and non-employee board of director members and provide pro forma net income (loss) and pro forma earnings (loss) per share disclosures for employee stock as if the fair-value-based method of accounting in SFAS No. 123 had been applied to these transactions.

Intangible Assets

The excess of the cost over fair value of net assets of purchased businesses is recorded as intangible assets and is amortized on a straight-line basis over 24 months. The Company's intangible asset consists entirely of goodwill created upon its acquisition of GreenTrak, Inc. (see Note 13). The Company periodically reviews the carrying value of intangible assets to ensure they are appropriately valued. Intangible assets were $1,465,672 net, as of December 31, 2001. Accumulated amortization was $879,403 as of December 31, 2001. Kinexus will be implementing Statements of Financial Accounting Standards "Business Combinations" No. 142, "Goodwill and Other Intangible Assets" beginning January 1, 2002.

3. Income Taxes

Effective July 1, 2000, the Company was reorganized as a corporation. There is no provision for, or benefit from, income taxes during the period beginning January 1, 2001 and ending December 31, 2001 because the Company incurred losses for this period and all deferred tax assets arising on account of these losses have been fully offset with a valuation allowance.

The difference between the effective tax rate and the U.S. Federal statutory rate of 35% is primarily attributable to the establishment of such valuation allowance against all deferred tax assets.

The Company expects to generate a net operating loss for the period during which it was a corporation. Such net operating loss will expire in 2020.

4. Property, Equipment and Software

Property, equipment and software consist of:

Computer and communications equipment	$	7,635,166
Furniture and fixtures		407,742
Leasehold improvements		1,331,686
Software		12,375,670

		21,750,264
Less accumulated depreciation and amortization		(15,436,834	)

Net property, equipment and software	$	6,313,430

Property and equipment depreciation expense was $2,523,756 for 2001. Software amortization expense was $8,810,064 for 2001. Goodwill amortization expense of $879,403 for 2001 is included in the Depreciation and amortization caption of the statement of operations (See notes 2 and 15).

5. Notes Payable

Notes payable of Kinexus consist of the following:

From October through December 2001, Gryphon Financing, L.L.C., a related party by common ownership, provided funds in the form of interest bearing advances. The following notes were issued to

evidence the indebtedness of Kinexus. These notes are due one year from issue date. The interest rate is 10%.

Date Issued	Principal
October 17, 2001	$	2,050,000
October 23, 2001		2,060,000
November 8, 2001		500,000
November 15, 2001		404,688
November 16, 2001		500,000
November 23, 2001		200,000
November 29, 2001		150,000
December 11, 2001		250,000

	$	6,114,688

Total interest accrued on these notes as of December 31, 2001 is $107,377.

Total debt issue costs balance as of December 31, 2001 was $20,354. These costs are being amortized over the life of notes.

On December 31, 2001 Advent Software, Inc. provided funds in the form of a non-interest bearing advance in the amount of $415,000. On February 14, 2002 Advent and Kinexus entered into a merger agreement (see Note 16).

6. Commitments and Contingencies

Leases

The Company leases certain office and storage space under non-cancelable lease agreements, which are reflected in the financial statements as capital and operating leases. The following is a schedule of future minimum rental payments required under operating leases that have initial or remaining terms in excess of one year, together with the net present value of the net minimum lease payments under capital lease at December 31, 2001.

		Capital Lease			Operating Leases
Year ending December 31:
	2002	$	2,798		$	1,549,947
	2003		2,798			1,568,419
	2004		2,332			1,575,885
	2005		—			1,623,389
	2006		—			1,576,449
Thereafter			—			5,694,134

Total lease payments			7,928		$	13,589,223

Less amount representing interest			(1,252	)

Present value of net lease payments, including current portion of $2,099		$	6,676

Total rent expense for operating leases was $1,838,735 for the year ended December 31, 2001.

The Company has made deposits for office space it leases under non-cancelable lease agreements, with utilities and for equipment it leases under capital and operating leases. Listed below are the leased properties, vendors and deposit amounts.

Location/Vendor	Deposit
123 William Street, 24th & 25th, fl., N.Y., N.Y.	$	793,254
18500 Edison Avenue, Chesterfield, Mo.		356,562
110 William Street, 21st N.Y., N.Y.		224,354
Other		66,237

Total	$	1,440,407

Other Commitments

The Company is required under the terms of certain agreements with two shareholders to repurchase the shareholders' interests. The commitments to repurchase units vary between agreements. The commitment of the Company under these agreements is to repurchase 942,679 shares for $928,600 and 194,773 shares for $500,000.

Legal Proceedings

There are presently no material claims filed against the Company, nor are there any material unasserted claims that the Company is aware of.

7. Related Party Transactions

MIC Real Estate, L.L.C., which is related by common ownership, received a monthly license fee of $29,714 per month for real estate licensed by Kinexus. This arrangement began July 15, 2000. The license fee was reduced to $11,955 beginning October 1, 2001 and is scheduled to end on December 31, 2001. The Company expensed $303,290 in the year ended December 31, 2001.

Kinexus contracted with LoBue Associates, Inc. ("LoBue") to provide development and other services to Kinexus. Kinexus and LoBue are related through common ownership. During 2001, Kinexus paid to LoBue $276,428 and had estimated outstanding obligations of $43,500 to LoBue at December 31, 2001.

Kinexus obtained some of its air transportation through MIC Aircraft, L.L.C., a company affiliated through common ownership. Total expenses incurred under this arrangement amounted to $108,578 during the calendar year 2001. At December 31, 2001, Kinexus's total payable to MIC Aircraft had been settled. Effective at the close of the third round of financing, October 24, 2000 (See Note 10), MIC Aircraft, L.L.C. charged Kinexus the coach fare equivalent for each trip taken by a Kinexus employee.

During 2001, Kinexus funded benefits and other expenses for certain Morriss Holdings L.L.C. ("Morriss Holdings") controlled entities, which reimburse Kinexus for these payments. Morriss Holdings provided the same service for Kinexus. Effective November 1, 2001, Kinexus stopped funding benefits on behalf of Morriss Holdings. Morriss Holdings is related to the Company by common ownership. At December 31, 2001, Kinexus's total receivable related to these items was $20,880. Kinexus has made advances to several officers of the Company for business travel and other expenses. At December 31, 2001, Kinexus's total receivable related to this item was $23,985.

The CEO is indebted to the Company, including interest, for $463,753 as of December 31, 2001. Interest accrues at a rate of 5.5% per year. The loan matures on December 31, 2003, but may accelerate and become fully due upon the occurrence of certain events per the loan agreement. Total interest earned on this loan was $24,365 during 2001. This loan was fully reserved on December 31,

2001. The loan is non-recourse and secured by common stock. Under the terms of merger agreement with Advent the common stock will have zero value (see Note 16).

As more fully described in Footnote 5, Gryphon Financing, LLC has provided funds to Kinexus in the form of interest bearing advances in the amount of $6,114,688.

8. Segment Information

9. Recent Accounting Pronouncements

Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities", which establishes the accounting and reporting standards for derivative instruments and hedging activities. This statement requires that companies recognize all derivatives as either assets or liabilities on the balance sheet and measure these instruments at fair value. The cumulative effect of adopting SFAS No. 133 to the Company's results was immaterial. As of December 31, 2001 the Company has no derivative instruments and has not engaged in hedging activities.

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations", and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the SFAS 142. Other intangible assets will continue to be amortized over their useful lives.

The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter 2002. Application of the non-amortization provisions of the Statement is expected to result in an increase in net income of $1,172,538 per year. During 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002 and has not yet determined what the effect of these tests will be on earnings and financial position of the Company.

10. Shareholders' Deficit

Series A Preferred Stock

At December 31, 2001 the Company had 104,321,626 shares of Series A Preferred outstanding. All the holders of the Series A Preferred are entitled to receive dividends at the annual rate of 8% of the share price. Dividends are not cumulative and will not accrue unless declared by the Board of Directors of the Company. Dividends will be paid prior to and in preference to dividends on the common stock or any other preferred stock that is junior to the Series A Preferred.

The Series A Preferred shares are convertible at the option of the holders into an equal number of shares of common stock ("Voluntary Conversion"). In addition, the Series A Preferred shall automatically convert into an equal number of shares of common stock upon an initial public offering ("Automatic Conversion"). The initial conversion ratio of 1:1 for both voluntary and automatic conversions is subject to upward adjustment on a weighted average basis if the Company subsequently issues additional common shares, convertible securities or options for consideration per share less than

$1.1138. Furthermore, the $1.1138 conversion price will be reduced proportionately whenever such an event results in an increase in the conversion ratio.

The Series A Preferred shall be redeemable at the option of the holders in the event that on or before October 24, 2005 neither an Initial Public Offering ("IPO") nor a sale or merger of the Company to a third party has occurred. The Series A Preferred will be redeemed for cash at a price equal to fair market value as determined by an independent financial appraiser. The Company will have six months from the date the redemption right is exercised to complete the redemption.

The holders of Series A Preferred vote together with the holders of common stock on an as-if-converted basis. The holders of Series A Preferred also have separate voting rights related to certain material corporate events.

In the event of liquidation of the Company, holders of Series A Preferred not previously converted to common stock shall rank equal with the Series B Convertible Preferred Stock ("Series B Preferred) and shall be entitled to receive $1.1138 per share, subject to adjustment as described in the Series A Preferred Certificate of Designation, plus an amount equal to all declared but unpaid dividends, in preference to the holders of common stock. If, upon occurrence of such an event, the assets distributed among holders of Series A Preferred and Series B Preferred are insufficient to cover the combined liquidation preferences then the assets available for distribution will be distributed pro-rata between the Series A Preferred and Series B Preferred on an equal basis.

Series B Preferred Stock

At December 31, 2001 the Company had 67,741,473 shares of Series B Preferred outstanding. Holders of the Series B Preferred are entitled to receive cumulative dividends in cash or in kind at the annual rate of 8% of the price per share, compounded on a semi-annual basis. Dividends will accrue regardless of whether declared and will be paid prior to and in preference to any dividend on any other class of stock of the Company, including the Series A Preferred.

The Series B Preferred is initially convertible into common stock using a 1:1 conversion ratio. This conversion ratio is subject to upward adjustment if the Company does not complete an IPO as follows:

1.: If the Company does not complete an IPO by December 31, 2001 the conversion ratio increases to 1: 1.22463; and
2.: If the Company completes an IPO that is not a Qualified Public Offering by December 31, 2001, the conversion ratio increases to 1:1.10106. A Qualified Public Offering is an underwritten offering executed by a nationally recognized underwriter with gross proceeds to the Company of at least $40,000,000 and a price per share of at least $2.154.

In addition, the conversion ratio is subject to upward adjustment on a full ratchet basis if the Company issues additional common shares, convertible securities or options for consideration less than $0.718 per share.

The Series B Preferred, plus any accrued but unpaid dividends, shall be redeemable at the option of the holders after October 24, 2005 or after the occurrence of an event of noncompliance by the Company, which is defined as the material breach of any representation or warrant, failure to comply with any covenant or agreement contained in the Third Round closing documents or the bankruptcy or insolvency of the Company. The Series B Preferred will be redeemed for cash at a price equal to the greater of (i) the fair value of such shares and (ii) the amount the holder would have received for such shares upon liquidation.

The holders of Series B Preferred vote together with the holders of the Series A preferred and the holders of the common stock on an as-if-converted basis. The holders of Series B Preferred also have separate voting rights related to certain material corporate events.

In the event of liquidation of the Company, holders of Series B Preferred not previously converted to common stock shall rank equal with Series A Preferred and shall be entitled to receive, in preference to the holders of common stock, the greater of (i) the purchase price per share plus any accrued dividends and (ii) the amounts such holder would have received if he converted such shares to common stock. If, upon occurrence of such an event, the assets distributed among holders of Series B Preferred and Series A Preferred are insufficient to cover the combined liquidation preferences, the assets of the Company available for distribution will be distributed pro-rata between the Series B Preferred and Series A Preferred on an equal basis.

The merger agreement Kinexus signed with Advent (See note 16) will produce significantly different results from the above detailed information.

11. Employee Compensation Plans

Stock Options

The Company awarded 6,360,000 employee stock options on December 31, 2000, with an exercise price of $0.40. These options vest ratably after one, two, three and four years of continued employment, commencing with date of hire, and expire ten years from the date granted. The Company awarded 743,750 employee stock options during 2001, with an exercise price of $0.40 and an additional 4,564,750 employee stock options were awarded on April 16, 2001, with an exercise price of $0.75. These options vest ratably after one, two, three and four years of continued employment, commencing with date of hire, and expire ten years from the date granted. At December 31, 2001, there were 114,706 employee stock options available for future grants.

The following summarizes stock options granted from December 31, 2000 through December 31, 2001:

	Shares		Exercise Price
Outstanding, December 31, 2000	6,360,000		$	.40
Granted	743,750		$	.40
Granted	4,564,750		$	.75
Exercised	(11,875	)	$	.40
Canceled	(391,875	)	$	.40

Outstanding, December 31, 2001	11,264,750

The Company follows the intrinsic value method in accounting for its stock options. Had compensation cost been recognized based on the fair value at the date of grant for options granted in

2000 and 2001 and vesting during 2001, the pro forma amounts of the Company's net loss and net loss per share during 2001 would have been as follows:

Net loss applicable to common stock as reported	$	(48,382,487	)
Net loss applicable to common stock pro forma		(48,571,142	)
Basic and diluted loss per share as reported		(1.29	)
Basic and diluted loss per share pro forma		(1.30	)

The estimated fair value of the Company's options granted during 2000 and 2001 with a strike price of $0.40 was $0.066 on the date of grant using the Black-Scholes option pricing model and the assumptions referred below.

Expected stock price volatility		100	%
Risk free interest rate		6.45	%
Expected annual dividend per share	$	0.00
Term		10 years
Value of common stock	$	0.08

The estimated fair value of the Company's options granted during 2001 with a strike price of $0.75 was $0.062 on the date of grant using the Black-Scholes option pricing model and the assumptions referred below.

Expected stock price volatility		100	%
Risk free interest rate		6.45	%
Expected annual dividend per share	$	0.00
Term		10 years
Value of common stock	$	0.08

Employee Awards

The Company granted 8,801,121 shares of voting common stock to the CEO on December 29, 2000. These shares vest as follows: One-half on grant date, and the remainder over 17 months with accelerated vesting based on certain specified performance criteria. The fair value of these shares was estimated to be $0.08 per share. Compensation expense related to this award is recognized over the period that the award vests. The Company recognized expense related to this award of $165,668 during 2001. Pursuant to the merger agreement (see Note 16), the vesting of these shares will accelerate.

12. Computation of Net Loss Per Share

Basic and diluted net loss per share is computed using the weighted average number of shares actually outstanding during the period. There are potentially dilutive securities outstanding, as follows:

Warrants/Options Issued in Connection With		Number	Exercise Price		Equity Class	Expiration Date
Notes payable(A)		1,083,667	$	0.595201	Series A	3/15/05
Notes payable(B)		1,231,502	$	0.523751	Series A	3/15/05
Notes payable(C)		100,000	$	0.01	Series B	9/7/05
Customer service agreements:
	(D)	2,644,034	$	0.523751	Series A	10/23/05
	(E)	1,000,000	$	0.718	Common
	(F)	2,000,000		Delayed strike warrants	Common
Employee options		6,700,000	$	0.40	Common	12/31/10
Employee options		4,564,750	$	0.75	Common	4/16/11
Non-employee		1,375,000	$	0.40	Common	12/31/10
Equity financing		2,250,000	$	0.718	Series A	10/23/05
Vendor services		400,000	$	0.718	Common	8/18/05
Preferred Stock
Series A		104,321,626
Series B(G)		74,374,213

(A): Warrants issued in connection with notes payable to creditors with an exercise price of $645,000 expiring March 15, 2005. At December 31, 2001 this represents 1,083,667 warrants issued with an exercise price of $0.595201.
(B): Warrants issued in connection with notes payable equal to .5% of current shares outstanding before effects of the conversion, to creditors with an exercise price of $645,000 expiring March 15, 2005. At December 31, 2001 the Company calculated that this would represent 1,231,502 warrants issued with an exercise price of $0.523751.
(C): Warrants issued in connection with an interest free bridge loan from a related party. On September 12, 2000 the Company borrowed $3,000,000 under the terms of this bridge loan. This loan was repaid on October 25, 2000.
(D): These warrants become exercisable when the customer delivers a certain quantity of subscribers. A total of 2,644,034 warrants will be issued upon the implementation of 32,500 subscribers over a two-year period beginning October 1, 2000. As of December 31, 2001 60 subscribers have been implemented under the terms of this agreement.
(E): 1,000,000 warrants will be issued upon the implementation of 50,000 subscribers. As of December 31, 2001 30,000 subscribers have been implemented under the terms of this agreement.
(F): Two additional tranches of 1,000,000 warrants will be issued upon the implementation of 100,000 and 150,000 subscribers. The exercise price of these tranches will be the fair market value at the issue date.
(G): Series B convertible preferred shares includes dividends as if converted into Series B. As of December 31, 2001 accrued dividends equal $4,762,307 and if converted would equal 6,632,740 Series B shares.

The following table sets forth the computation of basic and diluted earnings (loss) from continuing operations per common share:

Numerator:
	Net loss		$	(44,343,111	)
	Preferred stock dividends			(4,039,376	)

	Net loss		$	(48,382,487	)

Denominator:
	Weighted average common shares:
		Basic and diluted		37,495,487
	Earnings(loss) per common share:
		(Basic and diluted)	$	(1.29	)

13. Acquisitions

On April 1, 2001, the Company acquired all of the outstanding common stock of GreenTrak, Inc. ("GreenTrak"). Under the terms of the agreement, each outstanding share of GreenTrak was exchanged for 1.1649166 Kinexus common stock. 16,800,000 shares of Kinexus stock were issued to the GreenTrak shareholders. The acquisition was accounted for using the purchase method. Accordingly, the purchase price was allocated to the acquired assets and assumed liabilities based on fair market value. An intangible asset has been recognized for the amount of the excess of the purchase price over the fair market value of the net assets acquired and is being amortized on a straight-line basis over 24 months. Total goodwill recognized from the acquisition of GreenTrak was $2,345,076. The entire excess of the purchase price over net assets is being assigned to goodwill. No other separately identifiable intangible assets exist. A summary of the assets acquired and liabilities assumed in the acquisition follows:

Estimated fair values:

Assets acquired	$	946,542
Liabilities assumed		(1,467,188	)

Net assets acquired		(520,646	)
Kinexus cash acquisition costs		480,430
Purchase price		1,344,000

Goodwill	$	2,345,076

The results of operations of GreenTrak have been included in the Company's financial statements from the date of acquisition. On a pro forma basis, if GreenTrak had been acquired at the beginning of 2001 revenue, net income and earnings per share would not differ materially from the amounts reported in the accompanying statement of operations for year ended December 31, 2001.

14. Vulnerability Due to Revenue Concentration

The Company executed a service level agreement with a major money center bank. This customer accounted for most of the revenue for the Company in 2001. This agreement terminated in the last quarter of 2001. The Company is in the process of negotiating a new agreement.

15. Restructuring Charge

In connection with several strategic restructuring initiatives in the fourth quarter of 2001, Kinexus incurred a charge of $5,559,157 for the disposition of premises and equipment ($4,684,737) and employee and shareholder loans ($874,420).

16. Subsequent Events (Unaudited)

Merger

Effective February 14, 2002 the sale of Kinexus to Advent closed. Total consideration is approximately $39.003 million in cash and $8.5 million in warrants on Advent common stock. The holders of Series A preferred shares will received $14.627 million, the holders of Series B preferred will receive $24,376 million plus $8.5 million in warrants on Advent common stock and the holders of common shares will receive no consideration at the time of sale. In addition to the initial purchase consideration, shareholders of Kinexus are eligible to receive potential additional earn-out consideration of up to $115 million in cash and stock under a formula based on the amount of revenue and expenses.

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Exhibit 99.2

Contents
Report of Independent Auditors
Kinexus Corporation Statement of Financial Condition December 31, 2001
Kinexus Corporation Statement of Operations For the Twelve Months Ended December 31, 2001
Kinexus Corporation Statement of Changes in Shareholders' (Deficit) Equity For the Twelve Months Ended December 31, 2001
Kinexus Corporation Statement of Cash Flows For the Twelve Months Ended December 31, 2001
Kinexus Corporation Notes to Financial Statements December 31, 2001
EX-99.3 6 a2077950zex-99_3.htm EXHIBIT 99.3
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EXHIBIT 99.3

UNAUDITED PRO FORMA FINANCIAL INFORMATION

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information has been prepared to give effect to the acquisition by Advent Software, Inc. (Advent) of Kinexus Corporation ("Kinexus") on February 14, 2002. The unaudited pro forma condensed combined financial information is based on the following:

1. Our audited historical consolidated financial statements as of December 31, 2001 and for the year then ended;

2. Kinexus's audited historical financial statements as of December 31, 2001 and for the year then ended;

3. Unaudited pro forma adjustments as described in the accompanying notes.

The unaudited pro forma condensed combined balance sheet at December 31, 2001 gives effect to the acquisition of Kinexus as if it occurred as of December 31, 2001. The unaudited pro forma condensed combined statement of operations for the year December 31, 2001 gives effect to the acquisition of Kinexus as if it occurred as of January 1, 2001.

The related adjustments are described in the accompanying notes. The unaudited pro forma condensed combined financial information is based upon available information and certain assumptions set forth in the notes to the unaudited pro forma condensed combined financial information, which have been made solely for purposes of developing such unaudited pro forma financial information. The unaudited pro forma condensed combined financial information does not purport to represent what our results of operations or financial condition would have been had the acquisition of Kinexus occurred as of the pro forma dates specified above, or to project our results of operations or financial condition for any future period or date.

The unaudited pro forma condensed combined financial information should be read in conjunction with our historical consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2001, Kinexus's historical financial statements and notes, the latter of which are included herein.

ADVENT SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2001
(in thousands)

				Advent			Kinexus			Pro Forma Adjustment				Pro Forma Consolidated Advent
ASSETS
Current assets:
	Cash, cash equivalents, and short-term investments			$	288,550		$	31		$	(34,003 (3,777	) )	(a) (b)	$	250,801
	Accounts receivable, net				49,930			468							50,398
	Prepaid expenses and other				9,451			268			(1,100	)	(c)		8,619
	Deferred income taxes				10,935			—			5,559		(d)		16,494

		Total current assets			358,866			767			(33,321	)			326,312
Fixed assets, net					26,090			6,313							32,403
Deferred income taxes					3,147			—			34,248		(d)		37,395
Goodwill, net					12,650			1,466			32,336 (1,466	)	(g) (h)		44,986
Identifiable intangibles, net					21,675			—			16,500		(f)		38,175
Other assets					31,247			1,440			3,777 (415	)	(b) (e)		36,049

			Total assets	$	453,675		$	9,986		$	51,659			$	515,320

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	2,408		$	5,300						$	7,708
	Accrued liabilities				13,520			14,630		$	11,101 3,035 817		(j) (k) (n)		43,103
	Deferred revenues				25,907			5,089			(1,100	)	(c)		29,896
	Income taxes payable				5,767			—							5,767
	Notes payable to related party				—			6,509			(415	)	(e)		6,094

		Total current liabilities			47,602			31,528			13,438				92,568
Long-term liabilities					1,684			—			8,179		(i)		9,863

		Total liabilities			49,286			31,528			21,617				102,431
Redemable preferred stock					—			117,392			(117,392	)	(l)		—
Stockholders' equity:
	Common stock				342			1			(1	)	(l)		342
	Additional paid-in capital				317,548			17,876			(17,876 8,500	)	(l) (m)		317,548 8,500
	Retained earnings / (accumulated deficit)				86,621			(156,811	)		156,811		(l)		86,621
	Cumulative other comprehensive income (loss)				(122	)		—							(122	)

		Total stockholders' equity			404,389			(138,934	)		147,434				412,889

			Total liabilities and stockholders' equity	$	453,675		$	9,986		$	51,659			$	515,320

ADVENT SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(in thousands, except per share data)

			Advent		Kinexus			Pro Forma Adjustments				Pro Forma Consolidated Advent
Revenues:
License and development fees			$	83,587	$	—						$	83,587
Maintenance and other recurring				67,699		8,865		$	(176	)	(o)		76,388
Professional services and other				18,929		—							18,929

	Net revenues			170,215		8,865			(176	)			178,904

Cost of revenues:
License and development fees				6,497		—							6,497
Maintenance and other recurring				16,955		16,101			(176	)	(o)		32,880
Professional services and other				6,190		—							6,190

	Total cost of revenues			29,642		16,101			(176	)			45,567

	Gross margin			140,573		(7,236	)		—				133,337

Operating expenses:
Sales and marketing				52,229		5,063							57,292
Product development				27,426		14,426							41,852
General and administrative				14,824		11,356							26,180
Restructuring						5,559							5,559
Amortization of intangibles				4,694		879			(879 5,583	)	(p) (q)		10,277

	Total operating expenses			99,173		37,283			4,704				141,160

		Income (loss) from operations		41,400		(44,519	)		(4,704	)			(7,823	)
Interest and other income, net				6,273		176			(1,427	)	(r)		5,022

		Income (loss) before income taxes		47,673		(44,343	)		(6,131	)			(2,801	)
Provision for (benefit from) income taxes				16,208		—			(17,356	)	(s)		(1,148	)

		Net income (loss)	$	31,465	$	(44,343	)	$	11,225			$	(1,653	)

Net income (loss) per share data:
Basic:
Net income (loss) per share			$	0.98								$	(0.05	)

Shares used in per share calculations				32,148									32,148

Diluted:
Net income (loss) per share			$	0.89								$	(0.05	)

Shares used in per share calculations				35,383									32,148

ADVENT SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

NOTE 1—BASIS OF PRESENTATION

On February 14, 2002, Advent acquired the Kinexus Corporation ("Kinexus"), which provides internal account aggregation, and manual data management services which will be used in our Advent TrustedNetwork service. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the tangible and intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. We acquired Kinexus at amounts exceeding the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $29.5 million in order to further increase our deployment of Advent TrustedNetwork.

The total purchase price of approximately $45.5 million consisted of cash upon closing of $34.0 million, a warrant to purchase 165,176 shares of our common stock valued at $8.5 million and acquisition costs of $3 million. The warrant has an exercise price of $0.01 per share, is immediately exercisable, and expires on January 1, 2003. The fair value of the warrant was calculated using the Black-Scholes method using the following assumptions: fair value of common stock of $51.34 per share, interest rate of 3%, volatility of 65.9% and a dividend rate of zero. There is $3.8 million of additional contingent consideration that is held in escrow for 14 months, which if released will be recorded as additional goodwill. There is also a potential additional earn-out distribution to shareholders of up to $115 million over the next two years in cash and stock under a formula based on revenue and expenses, which if earned will be recorded as additional goodwill. The preliminary allocation of the purchase price to tangible and intangible assets and liabilities at February 14, 2002 is summarized below:

Description	Estimated Remaining Useful Life	Balance at February 14, 2002
		(in thousands)
Goodwill		$	29,388
Existing Technologies	3 years		3,900
Existing Technologies—Internal	2 years		500
Core Technologies	3 years		2,100
Trade Name / Trademarks	3 years		600
Contracts and Customer Relationships	3 years		9,400
Tangible Assets			3,591
Net Deferred Tax Assets			39,807
Liabilities Assumed			(43,748	)

Total Purchase Price		$	45,538

Liabilities assumed of $43.7 million include cash advances from Advent of $4.9 million and estimated change-in-control separation obligations of $11.1 million. The purchase price is subject to further refinement and change over the next year due primarily to assessing the liabilities assumed. The amount allocated to intangibles was determined based on management's estimates using established valuation techniques.

NOTE 2—UNAUDITED PRO FORMA ADJUSTMENTS

(a): Reflects the cash we paid to Kinexus shareholders as of the acquisition date.
(b): Reflects the amount deposited in escrow of contingent consideration to be paid to Kinexus at the end of 14 months if conditions are met.

(c): Reflects the elimination of prepaid services that we purchased from Kinexus/GreenTrak and that were reflected as Kinexus deferred revenue.
(d): Reflects the net deferred tax assets realizable by us in future years.
(e): Reflects the elimination of a cash advance we made to Kinexus as of December 31, 2001. At February 14, 2002, the cash advances amounted to $4.9 million.
(f): Reflects the estimated identifiable intangible assets resulting from the acquisition of Kinexus based on the purchase price allocation described in Note 1.
(g): Reflects the estimated goodwill resulting from the acquisition of Kinexus based on the purchase price allocation described in Note 1. The goodwill calculated in Note 1 is not the same as the unaudited pro forma adjustment goodwill as it is based on the net assets and liabilities on the acquisition date of February 14, 2002 versus the pro forma date of acquisition of December 31, 2001.
(h): Reflects the elimination of Kinexus's historical goodwill related to its acquisition of GreenTrak, Inc.
(i): Reflects the long-term portion of estimated accrued lease exit costs for Kinexus' lease commitment assumed as part of the acquisition, which have no future benefit to us.
(j): Reflects the estimated change-in-control separation obligations that were a result of the Kinexus acquisition.
(k): Reflects the acquisition cost we incurred as part of the acquisition.
(l): Reflects the elimination of Kinexus' equity and redeemable preferred stock.
(m): Reflects the issuance of a warrant to purchase our common stock issued as part of acquisition of Kinexus as described in Note 1.
(n): Reflects the short-term portion of estimated accrued lease exit costs for Kinexus' lease commitment assumed as part of the acquisition, which have no future benefit to us.
(o): Reflects the elimination of inter-company revenue and expense.
(p): Reflects the elimination of Kinexus' amortization of historical goodwill.
(q): Reflects the amortization of identifiable intangible assets resulting from the Kinexus acquisition over their estimated useful lives of two to three years, as if the acquisition had occurred on January 1, 2001.
(r): Reflects the elimination of interest income related to the cash used in the acquisition of Kinexus. The assumed interest rate was 2.7%, which is based upon the current estimated rate of return on our short-term investments.
(s): Reflects the estimated adjustment required to reflect the pro forma tax benefit on the unaudited pro forma pre tax loss using a federal and state combined statutory tax rate of 41%.

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EXHIBIT 99.3

UNAUDITED PRO FORMA FINANCIAL INFORMATION
ADVENT SOFTWARE, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF DECEMBER 31, 2001 (in thousands)
ADVENT SOFTWARE, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (in thousands, except per share data)
ADVENT SOFTWARE, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
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