-----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, LWWhPnI3hICiOmd8m0WBReAMCWS8WjzQMi2DqqDN3qp0fHuuvLuyVaE6v+uUIfUj tKp1bgJem+TgN8ixoxeT0Q== 0001012870-99-004806.txt : 19991230 0001012870-99-004806.hdr.sgml : 19991230 ACCESSION NUMBER: 0001012870-99-004806 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991104 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIBCO SOFTWARE INC CENTRAL INDEX KEY: 0001085280 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 770449727 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-26579 FILM NUMBER: 99782770 BUSINESS ADDRESS: STREET 1: 3165 PORTER DRIVE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 6508465000 MAIL ADDRESS: STREET 1: 3165 PORTER DRIVE CITY: PALO ALTO STATE: CA ZIP: 94304 8-K/A 1 AMENDMENT #1 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 4, 1999 ------------------------------ TIBCO SOFTWARE INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 000-26579 77-0449727 - -------------------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification Number) incorporation) 3165 Porter Drive, Palo Alto, CA 94304 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (650) 846-5000 ---------------------------- ________________________________________________________________________________ (Former name or former address, if changed since last report) This Form 8-K/A is filed as an amendment to the current report on Form 8-K filed by TIBCO Software Inc. ("TIBCO") on November 19, 1999 in connection with the Company's acquisition of substantially all of the assets of InConcert, Inc., a subsidiary of Xerox Corporation. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. ------------------------------------ On November 4, 1999 (the "Closing Date"), pursuant to three separate agreements, each an Asset Purchase Agreement dated as of September 30, 1999 (together, the "Agreements") by and among TIBCO, InConcert, Inc., a Delaware corporation ("InConcert"), and Xerox Corporation, a New York corporation ("Xerox"), TIBCO acquired substantially all of the assets of InConcert, a subsidiary of Xerox, for $34 million in cash. TIBCO is a leading provider of real-time infrastructure software for the internet and enterprise that enables businesses to dynamically link internal operations, business partners and customer channels. InConcert is a developer of business integration solutions for telecommunications companies. TIBCO intends to utilize the assets acquired through the purchase, including any physical assets so acquired, in its ongoing business. The consideration paid by TIBCO for the assets of InConcert acquired under the Agreements was determined pursuant to arms length negotiations and took into account various factors concerning the valuation of the business of InConcert. A portion of TIBCO's working capital was used for the purchase of the assets of InConcert. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. --------------------------------- (a) Financial Statements of InConcert, Inc. --------------------------------------- The following Audited Financial Statements of InConcert, Inc. are filed herewith on the pages listed below: Report of Independent Accountants............................................... F-1 Balance Sheets.................................................................. F-2 Statement of Operations........................................................ F-3 Statement of Stockholders' Equity (Deficit)..................................... F-4 Statement of Cash Flows......................................................... F-5 Notes to Financial Statements................................................... F-6
(b) Pro Forma Financial Information ------------------------------- The following required Unaudited Pro Forma Combined Financial Information of TIBCO and InConcert Inc. is filed herewith on the pages listed below: OVERVIEW Unaudited Pro Forma Combined Balance Sheet..................................... F-14 Unaudited Pro Forma Combined Statements of Operations.......................... F-17
(c) Exhibits -------- 2.1 Asset Purchase Agreement, dated as of September 30, 1999, among TIBCO Software Inc., InConcert, Inc., and Xerox Corporation providing for the transfer of the U.S. Assets (as defined therein) of InConcert (the schedules to such agreement are not filed herewith and are listed on the last page of Exhibit 2.1).* 2.2 Asset Purchase Agreement, dated as of September 30, 1999, among TIBCO Software Inc., InConcert, Inc., and Xerox Corporation providing for the transfer of the U.K. Assets (as defined therein) of InConcert (the schedules to such agreement are not filed herewith and are listed on the last page of Exhibit 2.2).* 2.3 Asset Purchase Agreement, dated as of September 30, 1999, among TIBCO Software Inc., InConcert, Inc., and Xerox Corporation providing for the transfer of the German Assets (as defined therein) of InConcert (the schedules to such agreement are not filed herewith and are listed on the last page of Exhibit 2.3).* - -------------- * Previously filed -2- 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. Dated: December 29, 1999 TIBCO SOFTWARE INC. /s/ Paul G. Hansen ------------------ Paul G. Hansen Executive Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) -3- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of InConcert, Inc. In our opinion, the accompanying balance sheet and the related statements of operations, stockholders' equity (deficit) and cash flows present fairly, in all material respects, the financial position of InConcert, Inc. at December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts December 10, 1999 F-1 INCONCERT, INC. BALANCE SHEET
December 31, September 30, ------------------------- 1999 1998 1997 ------------- ------------ ----------- ASSETS (unaudited) Current assets: Accounts receivable, net of allow- ances of $937,955, $12,418 and $182,242, respectively............ $ 2,702,450 $ 2,678,409 $ 954,206 Related party accounts receivable.. 73,708 146,257 412,570 Prepaid expenses and other current assets............................ 134,209 121,094 134,804 ------------ ------------ ----------- Total current assets.............. 2,910,367 2,945,760 1,501,580 Property and equipment, net......... 456,354 573,272 568,918 ------------ ------------ ----------- $ 3,366,721 $ 3,519,032 $ 2,070,498 ============ ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Accounts payable................... $ 308,381 $ 338,323 $ 136,542 Accrued liabilities................ 902,728 1,369,768 1,786,359 Deferred revenue................... 857,376 899,322 736,237 Due to parent...................... 6,036,962 7,542,201 3,339,415 ------------ ------------ ----------- Total current liabilities......... 8,105,447 10,149,614 5,998,553 Long-term deferred revenue.......... 82,206 -- -- ------------ ------------ ----------- Total liabilities................. 8,187,653 10,149,614 5,998,553 ------------ ------------ ----------- Commitments (Note 6) Stockholders' equity (deficit): Convertible Preferred Stock, 24,000,000 shares authorized, $0.001 par value: Series A, 16,000,000 shares designated, issued and outstanding (liquidation preference of $23,500,000)...................... 16,000 16,000 16,000 Series B, 2,273,362, 2,273,362 and 0 shares designated, issued and outstanding (liquidation preference of $3,339,000) at September 30, 1999 and December 31, 1998 and 1997, respectively... 2,273 2,273 -- Series C, 5,940,578, 0 and 0 shares designated, issued and outstanding (liquidation preference of $7,542,000) at September 30, 1999 and December 31, 1998 and 1997, respectively...................... 5,941 -- -- Common Stock, par value $0.001; 30,000,000 shares authorized; 225,448, 176,778, and 5,999 shares issued and 27,432, 17,169 and 1,000 outstanding at September 30, 1999 and December 31, 1998 and 1997, respectively................ 225 177 6 Treasury Stock, at cost; 198,016, 159,609 and 4,999 shares at September 30, 1999, and December 31, 1998 and 1997, respectively... (75,576) (60,268) (600) Additional paid-in capital......... 15,538,766 7,998,687 4,657,833 Accumulated other comprehensive income............................ 11,000 49,000 18,982 Accumulated deficit................ (20,319,561) (14,636,451) (8,620,276) ------------ ------------ ----------- Total stockholders' equity (deficit)........................ (4,820,932) (6,630,582) (3,928,055) ------------ ------------ ----------- $ 3,366,721 $ 3,519,032 $ 2,070,498 ============ ============ ===========
The accompanying notes are an integral part of these financial statements. F-2 INCONCERT, INC. STATEMENT OF OPERATIONS
Nine Months Ended Year Ended September 30, December 31, ------------------------ ------------------------ 1999 1998 1998 1997 ----------- ----------- ----------- ----------- (unaudited) License revenue: Non-related parties....... $ 3,948,157 $ 1,524,525 $ 4,827,175 $ 5,025,801 Related parties........... 669,203 732,548 1,047,654 729,210 ----------- ----------- ----------- ----------- Total license revenue.... 4,617,360 2,257,073 5,874,829 5,755,011 ----------- ----------- ----------- ----------- Maintenance and service revenue: Non-related parties....... 3,213,039 1,892,773 2,721,255 2,186,597 Related parties........... 40,367 115,964 152,449 89,416 ----------- ----------- ----------- ----------- Total maintenance and service revenue......... 3,253,406 2,008,737 2,873,704 2,276,013 ----------- ----------- ----------- ----------- Total revenue............ 7,870,766 4,265,810 8,748,533 8,031,024 ----------- ----------- ----------- ----------- Cost of revenue: License................... 245,227 295,483 528,228 441,426 Maintenance and service... 2,303,452 1,192,025 1,772,539 1,896,301 ----------- ----------- ----------- ----------- Total cost of revenue.... 2,548,679 1,487,508 2,300,767 2,337,727 ----------- ----------- ----------- ----------- Gross profit............... 5,322,087 2,778,302 6,447,766 5,693,297 ----------- ----------- ----------- ----------- Operating expenses: Research and development.. 2,262,000 2,136,771 2,892,020 3,223,737 Sales and marketing....... 5,969,759 4,730,723 7,012,745 6,649,527 General and administrative........... 2,773,165 2,037,133 2,555,404 4,440,309 ----------- ----------- ----------- ----------- Total operating expenses................ 11,004,924 8,904,627 12,460,169 14,313,573 ----------- ----------- ----------- ----------- Loss from operations....... (5,682,837) (6,126,325) (6,012,403) (8,620,276) Other income (expense)..... (273) 88 (3,772) -- ----------- ----------- ----------- ----------- Net loss................... $(5,683,110) $(6,126,237) $(6,016,175) $(8,620,276) =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-3 INCONCERT, INC. STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Convertible Preferred Stock ---------------------------------------------------- Treasury Series A Series B Series C Common Stock Stock Stock Additional ------------------ ---------------- ---------------- -------------- ---------------- Subscription Paid-in Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Receivable Capital ---------- ------- --------- ------ --------- ------ ------- ------ ------- -------- ------------ ----------- Balance as of January 1, 1997............ 16,000,000 $16,000 -- $ -- -- $ -- 1,000 $ 1 -- $ -- $(4,673,788) $ 4,657,788 Translation adjustment...... -- -- -- -- -- -- -- -- -- -- -- -- Net loss........ -- -- -- -- -- -- -- -- -- -- -- -- Comprehensive loss............ Transfer of assets from parent.......... -- -- -- -- -- -- -- -- -- -- 4,673,788 -- Stock options exercised, net of shares repurchased..... -- -- -- -- -- -- 4,999 5 4,999 (600) -- 45 ---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- ----------- Balance at December 31, 1997............ 16,000,000 16,000 -- -- -- -- 5,999 6 4,999 (600) -- 4,657,833 ---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- ----------- Translation adjustment...... -- -- -- -- -- -- -- -- -- -- -- -- Net loss........ -- -- -- -- -- -- -- -- -- -- -- -- Comprehensive loss............ Issuance of Series B Preferred Stock........... -- -- 2,273,362 2,273 -- -- -- -- -- -- -- 3,337,142 Stock options exercised, net of shares repurchased..... -- -- -- -- -- -- 170,779 171 154,610 (59,668) -- 3,712 ---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- ----------- Balance at December 31, 1998............ 16,000,000 16,000 2,273,362 2,273 -- -- 176,778 177 159,609 (60,268) -- 7,998,687 ---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- ----------- Translation adjustment (unaudited)..... -- -- -- -- -- -- -- -- -- -- -- -- Net loss (unaudited)..... -- -- -- -- -- -- -- -- -- -- -- -- Comprehensive loss (unaudited)..... Issuance of Series C Preferred Stock (unaudited)..... -- -- -- -- 5,940,578 5,941 -- -- -- -- -- 7,536,260 Stock options exercised, net of shares repurchased (unaudited)..... -- -- -- -- -- -- 48,710 48 38,407 (15,308) -- 3,819 ---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- ----------- Balance at September 30, 1999 (unaudited)..... 16,000,000 $16,000 2,273,362 $2,273 5,940,578 $5,941 225,488 $225 198,016 $(75,576) $ -- $15,538,766 ========== ======= ========= ====== ========= ====== ======= ==== ======= ======== =========== =========== Other Accumu- Total Comprehensive lated Stockholders' income (Loss) Deficit Equity (Deficit) ------------- ------------- ---------------- Balance as of January 1, 1997............ $ -- $ -- $ 1 ---------------- Translation adjustment...... 18,982 -- 18,982 Net loss........ -- (8,620,276) (8,620,276) ---------------- Comprehensive loss............ (8,601,294) Transfer of assets from parent.......... -- -- 4,673,788 Stock options exercised, net of shares repurchased..... -- -- (550) ------------- ------------- ---------------- Balance at December 31, 1997............ 18,982 (8,620,276) (3,928,055) ------------- ------------- ---------------- Translation adjustment...... 30,018 -- 30,018 Net loss........ -- (6,016,175) (6,016,175) ---------------- Comprehensive loss............ (5,986,157) Issuance of Series B Preferred Stock........... -- -- 3,339,415 Stock options exercised, net of shares repurchased..... -- -- (55,785) ------------- ------------- ---------------- Balance at December 31, 1998............ 49,000 (14,636,451) (6,630,582) ------------- ------------- ---------------- Translation adjustment (unaudited)..... (38,000) -- (38,000) Net loss (unaudited)..... -- (5,683,110) (5,683,110) ---------------- Comprehensive loss (unaudited)..... (5,721,110) Issuance of Series C Preferred Stock (unaudited)..... -- -- 7,542,201 Stock options exercised, net of shares repurchased (unaudited)..... -- -- (11,441) ------------- ------------- ---------------- Balance at September 30, 1999 (unaudited)..... $ 11,000 $(20,319,561) $(4,820,932) ============= ============= ================
F-4 INCONCERT, INC. STATEMENT OF CASH FLOWS
Nine Months Ended September 30, Year Ended December 31, ------------------------ ------------------------ 1999 1998 1998 1997 ----------- ----------- ----------- ----------- (unaudited) Cash flows from operating activities: Net loss.................. $(5,683,110) $(6,126,237) $(6,016,175) $(8,620,276) Adjustment to reconcile net loss to net cash used for operating activities: Depreciation and amortization............ 249,629 281,571 359,498 498,588 Provision for bad debt... (925,537) (169,824) (169,824) (182,242) Changes in assets and liabilities: Accounts receivable..... 974,045 (814,004) (1,288,066) (1,184,534) Prepaid expenses and other assets........... (13,115) 126,289 13,710 (134,804) Accounts payable........ (29,942) 230,367 201,781 136,542 Accrued liabilities..... (467,040) (668,005) (416,591) 1,786,359 Deferred revenue........ 40,260 816,246 163,085 736,237 ----------- ----------- ----------- ----------- Net cash used for operating activities.. (5,854,810) (6,323,597) (7,152,582) (6,964,130) ----------- ----------- ----------- ----------- Cash flows from investing activities-- Purchases of property and equipment................ (132,711) (249,890) (363,852) (1,067,506) ----------- ----------- ----------- ----------- Cash flows from financing activities: Borrowings from parent.... 6,036,962 6,524,746 7,542,201 3,339,416 Proceeds from issuance of Preferred Stock.......... -- -- -- 4,673,788 Proceeds from issuance of Common Stock............. 3,867 252 3,883 50 Repurchase of Common Stock.................... (15,308) (220) (59,668) (600) ----------- ----------- ----------- ----------- Net cash provided by financing activities.. 6,025,521 6,524,778 7,486,416 8,012,654 ----------- ----------- ----------- ----------- Effect of exchange rate changes on cash........... (38,000) 48,709 30,018 18,982 ----------- ----------- ----------- ----------- Net change in cash and cash equivalents............... -- -- -- -- Cash and cash equivalents at beginning of period.... -- -- -- -- ----------- ----------- ----------- ----------- Cash and cash equivalents at end of period.......... $ -- $ -- $ -- $ -- =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-5 INCONCERT, INC. NOTES TO FINANCIAL STATEMENTS 1. THE COMPANY InConcert, Inc. (the "Company") is a provider of enterprise-class software systems. The Company designs, develops, markets, and supports its product, InConcert, an object oriented client/server application software product family designed to solve process centric mission critical business problems for large multinational organizations. 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Company was first established as a product line within Xerox Corporation's Xsoft division in 1990. On July 1, 1996, the Company incorporated under the laws of the State of Delaware as a wholly-owned subsidiary of Xerox. See Note 4. On September 30, 1999, the Company entered into an Asset Purchase Agreement to sell substantially all of the net assets of the Company to TIBCO Software Inc. for $34 million in cash. The Company expects to close the transaction during the fourth quarter of fiscal 1999. The transaction will be accounted for as a purchase acquisition; however, the financial statements presented in this report do not reflect purchase accounting. Unaudited Interim Results The accompanying interim financial statements as of September 30, 1999, and for the nine months ended September 30, 1999 and 1998, are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows as of September 30, 1999 and for the nine months ended September 30, 1999 and 1998. The financial information disclosed in these notes to financial statements related to these periods are unaudited. The results for the nine months ended September 30, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the report period. Actual results could differ from those estimates. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of accounts receivable. The Company's accounts receivable is derived from revenue earned from customers located primarily in the United States and Europe. The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based upon the F-6 INCONCERT, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued) expected collectibility of accounts receivable. The following table summarized revenue from customers in excess of 10% of the total revenue:
Nine Months Ended September 30, Year Ended Year Ended -------------- December 31, December 31, 1999 1998 1998 1997 ------ ------ ------------ ------------ (unaudited) WorldCom................................ 18% N/A N/A 17% Bell South.............................. 10% N/A 15% N/A Toshiba................................. N/A N/A 12% N/A
Capitalized Software Development Costs Research and development costs for internally developed software products and enhancements to existing software products are expensed when incurred until technological feasibility is established. Thereafter, software costs are capitalized until the product is available for general released to customer. To date, the period between achieving technological feasibility and the general availability of such software has been short, and software development costs qualifying for capitalization have been insignificant. Accordingly, no costs have been capitalized. Property and Equipment Property and equipment are stated at cost. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets as follows: Furniture and fixtures..... 10-15 years Equipment..... 3-5 years Leasehold improvements.. Shorter of the lease term or the estimated useful life
Revenue Recognition Software license revenue is recognized when all of the following criteria have been met: there is an executed license agreement, software has been shipped to the customer, no significant vendor obligations remain, the license fee is fixed and payable within twelve months and collection is deemed probable. Maintenance revenue is recognized ratably over the term of the maintenance contract, typically twelve months. Service revenues, generally training and consulting, are recognized as services are performed. Stock-Based Compensation The Company accounts for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to Employees," ("APB No. 25") and complies with the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Comprehensive Income Effective December 31, 1997, the Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting comprehensive income and its components in financial statements. Comprehensive income, as defined, includes all changes in equity (net assets) during a period from non-owner sources. Foreign currency translation is currently the only item in comprehensive income. F-7 INCONCERT, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued) Recent Accounting Pronouncements In June 1988, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is effective for fiscal years beginning after June 15, 2000 and establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. The Company does not expect that the adoption of SFAS No. 133 will have a material impact on its financial statements. 3. BALANCE SHEET COMPONENTS
December 31, September 30, ------------------------ 1999 1998 1997 ------------- ----------- ----------- (unaudited) Accounts receivable: Accounts receivable.................. $ 1,471,705 $ 2,152,527 $ 832,679 Unbilled receivables................. 2,168,700 538,300 303,769 ----------- ----------- ----------- 3,640,405 2,690,827 1,136,448 Less: Allowance for doubtful accounts and returns.......................... (937,955) (12,418) (182,242) ----------- ----------- ----------- $ 2,702,450 $ 2,678,409 $ 954,206 =========== =========== =========== Property and equipment, net: Equipment............................ $ 2,458,157 $ 2,325,988 $ 2,468,535 Furniture and fixtures............... 71,168 57,105 47,569 Leasehold improvements............... 48,046 48,046 29,739 Construction in progress............. 1,830 15,166 6,766 ----------- ----------- ----------- 2,579,201 2,446,305 2,552,609 Less: accumulated depreciation and amortization......................... (2,122,847) (1,873,033) (1,983,691) ----------- ----------- ----------- $ 456,354 $ 573,272 $ 568,918 =========== =========== =========== Accrued liabilities: Compensation and employee related.... 308,743 677,213 943,206 Other operating expenses............. 593,985 692,555 843,153 ----------- ----------- ----------- $ 902,728 $ 1,369,768 $ 1,786,359 =========== =========== ===========
4. RELATED PARTY TRANSACTIONS The Company has significant transactions with Xerox Corporation, including licensing arrangements, development contracts and shared functions and services. Related party revenue is related to the Company licensing its software product to Xerox Corporation for sub-licensing to Xerox's end-users. The cost of revenue to related parties has not been separately stated because it is impracticable to do so. The following is a summary of the transactions for the periods indicated: Service Agreement The Company and Xerox Corporation had a service agreement under which Xerox provided certain administrative services, human resource and employee benefits administration, expenditure F-8 INCONCERT, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 4. RELATED PARTY TRANSACTIONS--(Continued) processing, and treasury functions. Xerox Corporation charged the Company for these services on a basis that reflected the Company's share of such costs, including a fixed fee that was negotiated annually. Management believed this allocation method was reasonable based upon the Company's use of such services. The service fee included in general and administrative expenses on the Statement of Operations was $180,000, $117,000, $157,480 and $212,000 for the nine months ended September 30, 1999 and 1998 and for the year ended December 31, 1998 and 1997, respectively. Secured Lending Agreement The Company and Xerox Corporation entered into a secured lending agreement where Xerox Corporation extended short-term loans to the Company. This was administered through maintaining a "sweep" bank account. Xerox Corporation advanced money or deducted excess funds directly out of the Company's bank account. In effect, the Company maintained a "zero balance" bank account. No interest was charged or paid on the balance of the outstanding loans or net credit. The parties could have agreed to convert all or part of the outstanding loans to equity or another form of lending. Net amount loaned to the Company for the nine months ended September 30, 1999 and the years ended December 31, 1998 and 1997 were $6,036,962, $7,542,201 and $3,339,415, respectively. During the nine months ended September 30, 1999 and for the year ended December 31, 1998, the Company converted $7,542,201 and $3,339,415, respectively, into Series B and C preferred stock. 5. INCOME TAXES Xerox files a consolidated tax return which includes the results of the Company. Under the terms of the Tax Sharing Agreement, the Company will pay to Xerox amounts determined as if the Company paid taxes as a separate entity. During 1999, 1998 and 1997, the Company incurred an operating loss for both financial and tax reporting purposes. Under the Company's agreement with Xerox, the Company would be reimbursed for its previous tax net operating losses utilized by Xerox in its consolidated return, in future periods when the Company generated taxable income. The Company has not generated taxable income through the date of the acquisition, therefore no deferred tax asset has been recorded. There are no other significant deferred tax assets or liabilities. See Note 8. 6. COMMITMENTS The Company leases office space under a non-cancelable operating lease with an expiration date of June 2003. Rental expense was approximately $349,000, $318,000, $435,000 and $344,000 for the nine months ended September 30, 1999 and 1998 and for the years ended December 31, 1998 and 1997, respectively. Future minimum lease payments under the non-cancelable operating lease, as of December 31, 1998, are as follows: 1999.............................................................. $ 465,140 2000.............................................................. 465,140 2001.............................................................. 465,140 2002.............................................................. 465,140 2003.............................................................. 116,285 ---------- $1,976,845 ==========
F-9 INCONCERT, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 7. STOCKHOLDERS' EQUITY As of November 27, 1996, the Company's Articles of Incorporation authorized the Company to issue 24,000,000 shares of Preferred Stock at $0.001 par value and 30,000,000 shares of Common Stock at $0.001 par value. Preferred Stock Effective as of January 1, 1997, the Company's initial capital structure was established by issuing 16.0 million shares of Series A Convertible Preferred Stock ("Series A") and 1,000 shares of Common Stock to Xerox. In April 1998, the Company issued 2,273,362 shares of Series B Convertible Preferred Stock ("Series B") at $1.46875 per share for net proceeds of $3,339,000. In May 1999, the Company issued 5,940,578 share of Series C Convertible Preferred Stock ("Series C") at $1.2696 per share for net proceeds of $7,542,000. The holders of the outstanding Preferred Stock have various rights and preferences as follows: Voting Rights. The holders of Series A, Series B and Series C have the right to one vote for each share of Common Stock into which such shares of Preferred Stock could be converted. Dividend Rights. The holders of Series A, Series B and Series C are entitled to receive noncumulative dividends at the per share annual rate of $0.1175 payable when and if declared by the board of directors. The holders of Preferred Stock will also be entitled to participate in dividends on Common Stock, when and if declared by the board of directors, based on the number of shares of Common Stock held on an as-converted basis. No dividends on Preferred Stock or Common Stock have been declared by the board from inception through September 30, 1999. Liquidation Preference. In the event of any liquidation, dissolution, or winding-up of the Company, including a merger, acquisition or sale of assets where the beneficial owners of the Company's Common Stock and Preferred Stock own less than 50% of the resulting voting power of the surviving entity, the holders of Series A, Series B and Series C are entitled to receive an amount of $1.46875, $1.46875 and $1.2696 per share, respectively, plus any declared but unpaid dividends prior to and in preference to any distribution to the holders of Common Stock. If the assets and funds distributed to the holders of Preferred Stock are insufficient to permit the payment to the holders of the full preferential amount mentioned above, then the entire assets of the Company legally available for distribution shall be distributed ratably among the holders of Preferred Stock. Any assets remaining after the payment of all preferential amounts to the holders of Preferred Stock, will be shared ratably by the holders of the Preferred Stock and common stockholders. Conversion. Each share of Preferred Stock is convertible, at the option of the holder, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the applicable original issue price for such series of Preferred Stock. The initial Conversion Price per share for shares of Preferred Stock is the Original Issue Price. The Conversion Prices for the Preferred Stock is subject to adjustment. F-10 INCONCERT, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 7. STOCKHOLDERS' EQUITY--(Continued) Each share of Preferred Stock will automatically be converted into shares of Common Stock at the applicable Conversion Price at the time in effect for such series of Preferred Stock immediately upon the earlier of the following two events: (a) upon the consummation of the sale of the Company's Common Stock in a bona fide, firm commitment underwriting pursuant to a registration statement under the Securities Act of 1933, the public offering price of which is not less than $5.00 per share with aggregate gross proceeds to the Corporation in excess of $10.0 million, or (b) the date upon such conversion is approved by holders of a majority of the shares of Preferred Stock. Common Stock Voting Rights. The holders of each shares of Common Stock has the right to one vote, and is entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Company, and is entitled to vote upon such matters and in such manner as may be provided by law. Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board, out of any assets of the Company legally available therefore, such dividends as may be declared from time to time by the Board. Liquidation Rights. Upon liquidation, dissolution, or winding-up of the Company, the assets of the Company are distributed as described above for Preferred Stock liquidation rights. Stock Option Plan During 1996, the Company adopted the 1996 Stock Option Plan (the "Plan"). The purpose of the Plan is to enable the Company to obtain and retain the services of the types of employees, consultants, officers and directors who will contribute to the Company's long range success and to provide incentives which are linked directly to increases in share value which will inure to the benefit of all shareholders of the Company. The total number of shares which may be issued under the Plan is 4,568,340 shares. The Plan is administered by the Board of Directors or the Committee. The administrator is responsible for determining the term of each option, the option exercise price, the medium of payment, the number of shares for which each option is granted and the vesting rate at which each option is exercisable. To date, options awarded generally vest ratably over five years and expire upon the earlier of ten years from the date of grant or 90 days from employee termination. F-11 INCONCERT, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 7. STOCKHOLDERS' EQUITY--(Continued) The activity under the 1996 Plan, is summarized as follows:
Year Ended Year Ended December 31, 1998 December 31, 1997 ------------------- ------------------- Weighted Weighted Average Average Exercise Exercise Options Price Options Price --------- -------- --------- -------- Outstanding at beginning of year...... 2,125,306 $0.04 274,700 $0.01 Granted............................... 682,500 0.26 2,036,505 0.04 Exercised............................. (170,779) 0.02 (4,999) 0.01 Canceled.............................. (438,859) 0.04 (180,900) 0.08 --------- --------- Outstanding at end of year............ 2,198,168 0.11 2,125,306 0.04 ========= ========= Options vested at end of year......... 1,170,946 669,302 ========= ========= Weighted average fair value of options granted during the year.............. $ 0.17 $ 0.03 ========= =========
The following table summarizes information about stock options outstanding at December 31, 1998 (in thousands, except per share data):
Options Outstanding and Exercisable -------------------------------------------- Weighted Average Weighted Number of Remaining Average Options Contractual Exercise Options Range of exercise prices Outstanding Life Price Exercisable ------------------------ ----------- ----------- -------- ----------- $0.01......................... 1,136,169 8.3 years $0.01 757,446 0.12......................... 709,499 8.6 years 0.12 354,750 0.39......................... 352,500 9.5 years 0.39 58,750 --------- --------- ----- --------- $0.01-$0.39................... 2,198,168 8.8 years $0.11 1,170,946 ========= ========= ===== =========
F-12 INCONCERT, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 7. STOCKHOLDERS' EQUITY--(Continued) Pro Forma Information This information is required to illustrate the financial results of operations as if the Company accounted for its grants to employee stock options under the fair value method of SFAS No. 123. The fair value of the Company's options granted was estimated at the date of grant using a Black-Scholes option pricing model. The Company calculated the value of each option grant on the date of grant with the following assumptions:
Nine Months Ended September 30, Year Ended Year Ended -------------- December 31, December 31, 1999 1998 1998 1997 ------ ------ ------------ ------------ (unaudited) Risk free interest rates........... 5.4% 5.5% 5.5% 6.3% Expected lives (in years).......... 6.0 6.0 6.0 6.0 Dividend yield..................... 0.0% 0.0% 0.0% 0.0% Expected volatility................ 70.0% 70.0% 70.0% 70.0%
For purposes of pro forma disclosures, the estimated value of the option is amortized over the options' vesting period. The compensation cost associated with the Company's stock-based compensation plans, as if the fair value based method described in SFAS No. 123 had been adopted, would have resulted in a pro forma loss of $5,789,049, $6,149,930, $6,047,766 and $8,627,173 for the nine months ended September 30, 1999 and 1998 and for the years ended December 31, 1998 and 1997, respectively. F-13 TIBCO SOFTWARE INC. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OVERVIEW On November 4, 1999, TIBCO Software Inc. ("TIBCO" or the "Company") acquired substantially all of the assets of InConcert, Inc. ("InConcert"), a wholly-owned subsidiary of Xerox, in a transaction to be accounted for as a purchase business combination. TIBCO paid $34 million in cash and reimbursed Xerox approximately $1.3 million for severance costs related to said merger. The Company also anticipates incurring approximately $0.3 million in acquisition related expenses, which consist primarily of financial advisory, accounting and legal fees. The total acquisition price of $35.6 million was allocated to the assets acquired, including tangible and intangible assets and liabilities assumed based upon the fair value of such assets and liabilities on the date of the acquisition. The total estimated purchase cost of the acquisition has been allocated on a preliminary basis to assets and liabilities based on management estimates of their fair value and a preliminary independent appraisal of certain intangible assets with the excess costs over the net assets acquired allocated to goodwill. This allocation is subject to change pending a final analysis of the total purchase cost and fair value of the assets acquired and liabilities assumed. The aggregate purchase price has been allocated as follows (in thousands): Net assets received.................................................. 1,216 In-process technology................................................ 2,800 Existing technology.................................................. 14,000 Workforce in place................................................... 3,100 Customer base........................................................ 2,900 Trademark............................................................ 1,200 Operating leases..................................................... 947 Goodwill............................................................. 9,394 ------- $35,557 =======
The net tangible assets consist primarily of accounts receivable, property and equipment, accounts payable, accrued liabilities, and deferred revenue. InConcert's net tangible assets received as of September 30, 1999 were used for purposes of calculating the pro forma adjustments as they approximate their fair value as such date. Because the in-process technology had not reached the stage of technological feasibility at the acquisition date and had no alternative future use, the amount was immediately charged to operations. The amount allocated to existing technology, workforce in place, customer base, and trademark is being amortized over their estimated useful lives of five years. The purchase price in excess of identified tangible and intangible assets is allocated as goodwill, which is also being amortized over five years. The accompanying unaudited pro forma combined balance sheet gives effect to the combination of TIBCO and InConcert as if such transaction occurred on August 31, 1999. The unaudited pro forma combined balance sheet combines the unaudited consolidated balance sheet of TIBCO as of August 31, 1999 and the unaudited balance sheet of InConcert as of September 30, 1999. The accompanying unaudited pro forma combined statement of operations presents the results of operations of TIBCO for the year ended November 30, 1998 and the nine-month period ended August 31, 1999 combined with the statement of operations of InConcert for the year ended F-14 December 31, 1998 and the nine-month period ended September 30, 1999. The unaudited pro forma combined statement of operations gives effect to this acquisition as if it had occurred as of December 1, 1997. The unaudited pro forma condensed combined information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transaction had been consummated at the dates indicated, nor is it necessarily indicative of future operating results or the financial position of the combined companies. F-15 TIBCO SOFTWARE INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET (in thousands)
TIBCO InConcert ---------- ------------- As of As of Pro Forma August 31, September 30, ------------------------- 1999 1999 Adjustments Combined ---------- ------------- ----------- -------- ASSETS Current assets: Cash and cash equivalents............. $ 16,344 $ -- $ -- $ 16,344 Short term investments... 110,326 -- (34,000)(A) 76,326 Accounts receivable, net..................... 23,203 2,776 -- 25,979 Due from related parties................. 2,799 -- -- 2,799 Other current assets..... 2,966 134 -- 3,100 -------- -------- ------- -------- Total current assets.... 155,638 2,910 (34,000) 124,548 Property and equipment, net...................... 9,893 457 -- 10,350 Intangible assets......... -- -- 30,594 (B) 30,594 Other assets.............. 797 -- 947 (C) 1,744 -------- -------- ------- -------- $166,328 $ 3,367 $(2,459) $167,236 ======== ======== ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable......... $ 5,535 $ 308 $ -- $ 5,843 Accrued expenses and other liabilities....... 14,157 903 1,557 (D) 16,617 Deferred revenue......... 5,972 940 -- 6,912 -------- -------- ------- -------- Total current liabilities............ 25,664 2,151 1,557 29,372 Due to parent............ -- 6,037 (6,037)(E) -- -------- -------- ------- -------- Total liabilities....... 25,664 8,188 (4,480) 29,372 -------- -------- ------- -------- Stockholders' equity (deficit): Convertible Preferred Stock................... -- 24 (24)(E) -- Common Stock............. 60 1 (1)(E) 60 Treasury Stock........... -- (76) 76 (E) -- Additional paid-in capital................. 181,053 15,539 (15,539)(E) 181,053 Unearned stock compensation............ (9,881) -- -- (9,881) Accumulated other comprehensive gain (loss).................. (66) 11 (11)(E) (66) Accumulated deficit...... (30,502) (20,320) 17,520 (E)(F) (33,302) -------- -------- ------- -------- Total stockholders' equity (deficit)....... 140,664 (4,821) 2,021 137,864 -------- -------- ------- -------- $166,328 $ 3,367 $(2,459) $167,236 ======== ======== ======= ========
F-16 TIBCO SOFTWARE INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (in thousands, except per share data)
TIBCO InConcert ---------- ------------- Nine Months Ended Pro Forma ------------------------ ---------------------- August 31, September 30, 1999 1999 Adjustments Combined ---------- ------------- ----------- -------- Revenue....................... $ 63,107 $ 7,871 $ -- $ 70,978 Cost of revenue............... 25,978 2,549 -- 28,527 -------- ------- ------- -------- Gross profit.................. 37,129 5,322 -- 42,451 -------- ------- ------- -------- Operating expenses: Sales and marketing......... 21,022 5,970 -- 26,992 Research and development.... 18,943 2,262 -- 21,205 General and administrative.. 5,291 2,773 -- 8,064 Amortization of stock compensation............... 5,429 -- -- 5,429 Amortization of goodwill and acquired intangibles....... -- -- 4,590 (G) 4,590 -------- ------- ------- -------- Total Operating Expenses.. 50,685 11,005 4,590 66,280 -------- ------- ------- -------- Loss from operations.......... (13,556) (5,683) (4,590) (23,829) Interest income/(expense), net.......................... 668 -- (2,136)(H) (1,468) -------- ------- ------- -------- Net loss...................... $(12,888) $(5,683) $(6,726) $(25,297) ======== ======= ======= ======== Net loss per share: Basic and diluted........... $ (0.49) $ (0.95) ======== ======== Weighted average shares..... 26,511 26,511 ======== ========
F-17 TIBCO SOFTWARE INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (in thousands, except per share data)
TIBCO InConcert ------------ ------------ Year Ended Pro Forma ------------------------- ---------------------- November 30, December 31, 1998 1998 Adjustments Combined ------------ ------------ ----------- -------- Revenue...................... $ 52,757 $ 8,749 $ -- $ 61,506 Cost of revenue.............. 27,682 2,301 -- 29,983 -------- ------- ------- -------- Gross profit................. 25,075 6,448 -- 31,523 -------- ------- ------- -------- Operating expenses: Sales and marketing........ 15,242 7,013 -- 22,255 Research and development... 14,787 2,892 -- 17,679 General and administrative............ 4,025 2,555 -- 6,580 Amortization of stock compensation.............. 5,064 -- -- 5,064 Amortization of goodwill and acquired intangibles.. -- -- 6,120 (G) 6,120 -------- ------- ------- -------- Total operating expenses................ 39,118 12,460 6,120 57,698 -------- ------- ------- -------- Loss from operations......... (14,043) (6,012) (6,120) (26,175) Interest income/(expense), net......................... 1,092 (4) (2,848)(H) (1,760) -------- ------- ------- -------- Net loss..................... $(12,951) $(6,016) $(8,968) $(27,935) ======== ======= ======= ======== Net loss per share: Basic and diluted.......... $ (0.28) $ (0.59) ======== ======== Weighted average shares.... 47,002 47,002 ======== ========
F-18 The following adjustments were applied to TIBCO's historical financial statements and those of InConcert to arrive at the pro forma combined financial information: (A) To reflect cash payment of $34.0 million for the acquistion of InConcert. (B) To record the allocation of the purchase price of InConcert as described in the overview. (C) To record the write-up of InConcert operating leases to fair market value. (D) To reflect anticipated acquisition related expenses of approximately $1.6 million. (E) To eliminate InConcert's historical equity accounts and amount due to parent. (F) The in-process research and development charge related to the acquisition has been reflected in the balance sheet as if the transaction occurred on August 31, 1999 and has been excluded from the statements of operations. (G) To record amortization of goodwill and acquired intangibles related to the acquisition of InConcert as if the transaction occurred on December 1, 1997. Goodwill and acquired intangibles of approximately $30.6 million are being amortized on a straight-line basis over five years. (H) To record the impact on interest income (expense) as if the transaction and related $35.6 million cash payments occurred on December 1, 1997. F-19 INDEX TO EXHIBITS ----------------- Exhibit Number Description of Document ------ ----------------------- 2.1 Asset Purchase Agreement, dated as of September 30, 1999, among TIBCO Software Inc., InConcert, Inc., and Xerox Corporation providing for the transfer of the U.S. Assets (as defined therein) of InConcert (the schedules to such agreement are not filed herewith and are listed on the last page of Exhibit 2.1).* 2.2 Asset Purchase Agreement, dated as of September 30, 1999, among TIBCO Software Inc., InConcert, Inc., and Xerox Corporation providing for the transfer of the U.K. Assets (as defined therein) of InConcert (the schedules to such agreement are not filed herewith and are listed on the last page of Exhibit 2.2).* 2.3 Asset Purchase Agreement, dated as of September 30, 1999, among TIBCO Software Inc., InConcert, Inc., and Xerox Corporation providing for the transfer of the German Assets (as defined therein) of InConcert (the schedules to such agreement are not filed herewith and are listed on the last page of Exhibit 2.3).* - -------------- * Previously filed -4- -----END PRIVACY-ENHANCED MESSAGE-----