<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) SEPTEMBER 13, 2000
PACKETEER, INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 77-0420107
---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
10495 NORTH DE ANZA BOULEVARD, CUPERTINO, CA 95014
-------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 873-4400
--------------
N/A
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On September 13, 2000, Packeteer, Inc., a Delaware corporation
("Packeteer"), through its wholly-owned subsidiary, Workfire Acquisition Corp.,
a Delaware corporation ("Acquisition Sub"), acquired Workfire Technologies
International, Inc., a Nevada corporation ("Workfire") from its sole
shareholders, Workfire.com, a Nevada corporation ("Workfire Holdings") and one
individual (the "Merger") pursuant to an Agreement and Plan of Merger and
Reorganization, filed as Exhibit 2.1 to this report, by and among Packeteer,
Acquisition Sub, Workfire and Workfire Holdings dated as of July 13, 2000 (the
"Acquisition Agreement").
Packeteer acquired all of the issued and outstanding capital
stock and options of Workfire in the Merger. The assets of Workfire acquired in
the Merger include all of the assets (both tangible and intangible) necessary
and desirable for the continuation of the business of Workfire, including,
without limitation, all of the contract rights of Workfire (including those
granted under existing service and distribution agreements, dealer agreements
and purchase orders), all ownership and leasehold interests in real property and
all buildings, facilities, and other improvements located thereon, all leasehold
interests in any equipment used in the business of Workfire, all right, title
and interest to intellectual property, all accounts and notes receivable and
prepaid expenses of Workfire, all original books or duplicates thereof of
account, general ledgers, sales invoices, purchase orders, accounts payable and
payroll records, tax returns and supporting schedules, drawings, files, papers,
and all other records, all rights under express or implied warranties from
suppliers of Workfire, all of Workfire's causes of action, judgments, and claims
or demands of whatever kind or description, goodwill, insurance policies and all
issued and outstanding capital stock of Workfire Development Corporation, a
corporation organized under the laws of British Columbia, Canada. Workfire's
principal executive offices were located in Kelowna, British Columbia and its
tangible assets were primarily located in Kelowna, British Columbia.
Pursuant to the Acquisition Agreement, Packeteer issued
1,836,517 shares (the "Merger Shares") of Packeteer Common Stock to Workfire
Holdings and the other stockholder of Workfire in exchange for all of the
outstanding shares of Workfire capital stock, subject to the terms of an Escrow
Agreement (the "Escrow Agreement") by and among Packeteer, Kevin O'Neill, an
individual (the "Stockholders' Agent"), and U.S. Bank Trust National Association
(the "Escrow Agent"). Additionally, each option to purchase Workfire Common
Stock outstanding immediately prior to the Effective Time was converted into the
right to receive a proportional share of options to purchase an aggregate of
155,588 shares of Packeteer Common Stock. In addition, Packeteer paid certain
liabilities of Workfire Holdings Inc. having an aggregate value of $379,800.
After the effective time of the merger (the "Effective Time"),
Workfire Holdings will liquidate (the "Liquidation") and distribute its shares
of Packeteer Common Stock to its stockholders. Pursuant to the Acquisition
Agreement and upon the Liquidation, each share of Workfire Holdings Common Stock
outstanding immediately prior to the Liquidation (other than dissenting shares
or fractional shares) will be converted into the right to receive a proportional
share of the Merger Shares.
<PAGE> 3
Pursuant to the Escrow Agreement, approximately 12% of the total
shares of Packeteer Common Stock (the "Escrow Shares") issued in the Merger (not
including shares issuable upon exercise of options) were placed in escrow for
one year from the Effective Time. Upon breach of any representation, warranty,
covenant or agreement of the stockholders of Workfire or Workfire Holdings made
in connection with the Merger or any legal proceeding related to such breach,
Packeteer will receive from the escrow, the amount of Escrow Shares equal to the
value of the damages incurred by Packeteer in connection with such breach less a
deductible of $50,000. The Escrow Shares will be valued at the average closing
price per share of Packeteer Common Stock for the 30 day period ending three
days prior to the Effective Time. Absent fraud, recourse by Packeteer of some or
all of the Escrow Shares is the sole remedy of Packeteer for any such breach or
legal proceeding.
Each holder of a single share of Workfire Holdings Common Stock
as of the effective time of the Liquidation will have the right to receive an
aggregate number of the Merger Shares equal to approximately 88% of the Merger
Shares multiplied by a fraction, the numerator of which is one and the
denominator of which is (i) the total number of shares of Workfire Holdings
Common Stock issued and outstanding immediately prior to the Liquidation less
any dissenting shares and treasury shares (ii) plus the total number of shares
of Workfire Holdings Common Stock issuable upon exercise of outstanding warrants
of Workfire Holdings.
There was no material relationship between Packeteer or
Acquisition Sub or any of their respective affiliates, directors or officers or,
to the knowledge of Packeteer, any associate of any director or officer of
Packeteer, on the one hand, and Workfire, on the other hand, prior to the
Merger. The source of the funds used to pay the cash in lieu of fractional
shares will be the working capital of Packeteer.
The description of the agreement set forth herein does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the Acquisition Agreement and the Escrow Agreement, filed as
Exhibits 2.1 and 2.2, respectively, of this report and incorporated herein by
reference.
(b) Prior to the Merger, Workfire developed software products with
genetic caching technology, which accelerate Internet data delivery. Packeteer
intends to continue this development to enhance its ability to provide Internet
application infrastructure systems.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
Audited Consolidated Financial Statements:
(i) Report of KPMG LLP, dated September 6, 2000.
(ii) Workfire Technologies International, Inc. Consolidated Balance
Sheets as of December 31, 1999 and 1998.
<PAGE> 4
(iii) Workfire Technologies International, Inc. Consolidated Statements
of Loss for the year ended December 31, 1999 and the period from
July 7, 1998 (inception) to December 31, 1998 and the period from
July 7, 1998 (inception) to December 31, 1999.
(iv) Workfire Technologies International, Inc. Consolidated Statement
of Stockholders' Equity and Comprehensive Income for the year
ended December 31, 1999 and the period from July 7, 1998
(inception) to December 31, 1998.
(v) Workfire Technologies International, Inc. Statements of Cash
Flows for the year ended December 31, 1999 and the period from
July 7, 1998 (inception) to December 31, 1998 and the period from
July 7, 1998 (inception) December 31, 1999.
(vi) Workfire Technologies International, Inc. Notes to Financial
Statements for the year ended December 31, 1999 and the period
from July 7, 1998 (inception) to December 31, 1998.
Condensed Consolidated Financial Statements (unaudited):
(vii) Workfire Technologies International, Inc. Consolidated Balance
Sheet as of June 30, 2000 (unaudited).
(viii) Workfire Technologies International, Inc. Consolidated Statements
of Loss for the six month periods ended June 30, 2000 and 1999
(unaudited) and the period from July 7, 1998 (inception) to June
30, 2000 (unaudited).
(ix) Workfire Technologies International, Inc. Consolidated Statements
of Cash Flows for the six month periods ended June 30, 2000 and
1999 (unaudited) and the period from July 7, 1998 (inception) to
June 30, 2000 (unaudited).
(x) Workfire Technologies International, Inc. Notes to Financial
Statements for the six month periods ended June 30, 2000 and 1999
(unaudited).
(b) Pro Forma Financial Information
Pro Forma Combined Condensed Consolidated Financial Statements
(unaudited):
(i) Pro Forma Combined Condensed Consolidated Balance Sheet as of
June 30, 2000 (unaudited).
<PAGE> 5
(ii) Pro Forma Combined Condensed Consolidated Statement of Operations
for the year ended December 31, 1999 (unaudited).
(iii) Pro Forma Combined Condensed Consolidated Statement of Operations
for the six month period ended June 30, 2000 (unaudited).
(iv) Notes to Pro Forma Combined Condensed Consolidated Financial
Statements (unaudited).
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization,
dated as of July 13, 2000, by and among Packeteer,
Acquisition Sub, Workfire and Workfire Holdings.
2.2 Escrow Agreement, dated as of September 13, 2000,
by and among Packeteer, the Shareholders' Agent
and the Escrow Agent.
23.1 Consent of KPMG LLP.
99.1 Press Release, dated July 13, 2000, issued by
Packeteer, announcing the execution of the
Acquisition Agreement.
99.2 Press Release, dated September 14, 2000, issued by
Packeteer, announcing the completion of the
Merger.
</TABLE>
<PAGE> 6
AUDITORS' REPORT TO THE STOCKHOLDERS
We have audited the consolidated balance sheets of Workfire Technologies
International, Inc. and subsidiary (a development stage enterprise) as at
December 31, 1999 and 1998 and the related consolidated statements of loss,
stockholders' (deficiency) equity and cash flows for the year ended December 31,
1999, the period from incorporation on July 7, 1998 to December 31, 1998 and the
period from July 7, 1998 (inception) to December 31, 1999. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 our audits provide a reasonable
basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1999
and 1998 and the results of its operations and its cash flows for the year ended
December 31, 1999, the period from incorporation on July 7, 1998 to December 31,
1998 and the period from July 7, 1998 (inception) to December 31, 1999 in
accordance with accounting principles generally accepted in the United States of
America.
/S/ KPMG LLP
Kelowna, Canada
September 6, 2000
<PAGE> 7
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
$ United States
(In thousands, except per share data)
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Assets
Current assets
Cash $ 92 $ 36
Accounts receivable 5 4
Prepaid expenses -- 5
------- -------
97 45
Due from related party (note 2) 13 --
Due from parent company (note 3) -- 6
Lease deposit (note 8) 35 --
Fixed assets (note 4) 136 43
------- -------
$ 281 $ 94
======= =======
Liabilities and Stockholders' (Deficiency) Equity
Current liabilities
Accounts payable and accrued liabilities $ 52 $ 14
Current portion of long-term debt 6 --
------- -------
58 14
Due to parent company 860 --
Due to related parties (note 2) -- 6
Long-term debt (note 5) 74 --
Stockholders' (Deficiency) Equity
Capital stock (note 6) 1 1
Additional paid in capital 400 400
Deficit accumulated during the development stage (1,112) (327)
------- -------
(711) 74
------- -------
$ 281 $ 94
======= =======
</TABLE>
Commitment (note 8)
Subsequent events (note 9)
See accompanying notes to consolidated financial statements.
<PAGE> 8
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Consolidated Statements of Loss
$ United States
(In thousands, except per share data)
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
<TABLE>
<CAPTION>
From inception
(July 7, 1998) to
December 31, 1999 1999 1998
----------------- ------- -------
<S> <C> <C> <C>
Revenue
Interest $ 2 $ 1 $ 1
Expenses
Research and development
Consultants 69 68 1
Internet access charges 10 8 2
Purchased research and
development 100 -- 100
Salaries and benefits 430 333 97
------- ------- -------
609 409 200
General and administrative
Amortization 28 24 4
Consulting 17 17 --
Foreign exchange 15 9 6
Interest on long term debt 5 5 --
Marketing and promotion 47 32 15
Office and administration 56 44 12
Professional fees 35 31 4
Rent and utilities 53 41 12
Salaries and benefits 181 122 59
Travel 55 39 16
Write-off of loan receivable 11 11 --
------- ------- -------
503 375 128
------- ------- -------
Loss before income taxes (1,110) (783) (327)
Income taxes 2 2 --
------- ------- -------
Net loss $(1,112) $ (785) $ (327)
======= ======= =======
Weighted average number of shares outstanding 9,504 9,632 9,241
Loss per share (note 1(h)) $ (0.12) $ (0.08) $ (0.04)
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' (Deficiency) Equity
$ United States
(In thousands, except per share data)
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Capital Stock Additional During the
-------------------- Paid in Development
Shares Amount Capital Stage Total
------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Issued July 7, 1998 for cash
at $0.0001 per share 8,032 $ 1 $ -- $ -- $ 1
Issued August 19, 1998 for
cash at Cdn $0.20 (US $0.13) 1,250 -- 167 -- 167
Issued August 20, 1998 for
cash at Cdn $1.00 (US $0.67) 350 -- 233 -- 233
Net loss -- -- -- (327) (327)
------- ------- ------- ------- -------
Balance, December 31, 1998 9,632 1 400 (327) 74
Net loss -- -- -- (785) (785)
------- ------- ------- ------- -------
Balance, December 31, 1999 9,632 $ 1 $ 400 $(1,112) $ (711)
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
$ United States
(In thousands, except per share data)
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
<TABLE>
<CAPTION>
From inception
(July 7, 1998) to
December 31, 1999 1999 1998
----------------- ------- -------
<S> <C> <C> <C>
Cash provided by (used in):
Operations
Net loss $(1,112) $ (785) $ (327)
Items not involving cash:
Amortization 28 24 4
Loss on write-off of fixed asset 1 1 --
Changes in non-cash working capital:
Accounts receivable (5) (1) (4)
Prepaid expenses -- 5 (5)
Accounts payable and accrued liabilities 52 38 14
------- ------- -------
(1,036) (718) (318)
Financing
Advances (to) from related parties (13) (19) 6
Advances (to) from parent company 860 866 (6)
Issue of common shares 401 -- 401
Proceeds from long-term debt net of
repayments 80 80 --
------- ------- -------
1,328 927 401
Investments
Lease deposit (35) (35) --
Expenditures on fixed assets (165) (118) (47)
------- ------- -------
(200) (153) (47)
Increase in cash 92 56 36
Cash, beginning of period -- 36 --
------- ------- -------
Cash, end of period $ 92 $ 92 $ 36
======= ======= =======
Supplementary Information
Interest paid $ 6 $ 6 $ --
Income taxes paid 2 2 --
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 11
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
$ United States
(In thousands, except per share data)
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
Workfire Technologies International Inc. (the "Company") is a development
stage company and was incorporated on July 7, 1998 under the General
Incorporation Laws of the State of Nevada. The Company's principal business
activity is the development of software to deliver extended internet
services to internet users (the "Workfire" technology).
1. Significant accounting policies:
a) Translation of financial statements
The functional currency of the Company and its subsidiary is the United
States dollar. The Company's subsidiary, Workfire Development
Corporation, operates in Canada and its operations are conducted, in
part, in Canadian currency. The method of translation applied is as
follows:
i) Monetary assets and liabilities are translated at the exchange rate
in effect at the balance sheet date, being US $1.00 per Cdn
$1.4433.
ii) Non-monetary assets and liabilities are translated at the exchange
rate in effect at the transaction date.
iii) Revenues and expenses are translated at the exchange rate in effect
at the transaction date.
iv) The net adjustment arising from the translation is included in the
consolidated statement of loss.
b) Basis of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Workfire Development
Corporation ("WDC"). All significant inter company balances and
transactions have been eliminated.
c) 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 disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
d) Financial instruments
The fair values of cash, accounts receivable and accounts payable and
accrued liabilities approximate their carrying values due to the
relatively short periods to maturity of these instruments. The fair
value of the long term debt approximates its carrying value due to the
fixed interest rate of the long term debt closely approximating floating
rates at the financial statement date. The maximum credit risk exposure
for all financial assets is the carrying amount of that asset.
<PAGE> 12
1. Significant accounting policies (continued):
e) Fixed assets
Fixed assets are stated at cost. Amortization is provided using the
following methods and annual rates:
<TABLE>
<CAPTION>
Asset Method Rate
----- ------ ----
<S> <C> <C>
Office equipment Declining balance 20%
Computer equipment Declining balance 30%
Computer software Declining balance 100%
Incorporation costs Straight line 100%
Leasehold improvements Straight line 10%
</TABLE>
Amortization is provided at one-half the annual rates in the year of
acquisition.
f) Income taxes
The Company accounts for income taxes by the asset and liability method.
Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
g) Technology
Software development costs have been accounted for in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed."
Under the standard, capitalization of software development costs begins
upon the establishment of technological feasibility, subject to net
realizable value considerations. Technological feasibility has not been
established at December 31, 1999 and therefore all costs of acquiring,
developing and enhancing the Workfire technology are charged to earnings
as incurred.
h) Loss per share
Loss per share has been calculated using the weighted average number of
common shares outstanding during the period.
2. Due from/to related parties:
Amounts due from/to related parties are unsecured, non-interest bearing and
without stated terms of repayment.
3. Due from/to parent company:
Amounts due from/to parent company are unsecured, non-interest bearing and
without stated terms of repayment.
<PAGE> 13
4. Fixed assets:
<TABLE>
<CAPTION>
1999 1998
Accumulated Net book Net book
Cost amortization value value
---- ------------ -------- --------
<S> <C> <C> <C> <C>
Office equipment $ 12 $ 2 $ 10 $ 6
Computer equipment 63 17 46 34
Computer software 5 4 1 2
Incorporation costs -- -- -- 1
Leasehold improvements 83 4 79 --
---- ---- ---- ----
$163 $ 27 $136 $ 43
==== ==== ==== ====
</TABLE>
5. Long-term debt:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Loan payable to Stober Construction Ltd. repayable
$1 monthly, including interest at 7.5% per annum $80 $ --
Less principal due within one year 6 --
--- ----
$74 $ --
Principal repayments due within the next five years:
2000 $ 6
2001 7
2002 7
2003 8
2004 9
</TABLE>
6. Capital stock:
Authorized:
100,000 common voting shares with a par value of $0.0001 per share
1,000 non-voting, preferred shares with a par value of $0.0001 per
share
7. Income taxes:
At December 31, 1999, the Company had a net operating loss carryforward for
United States income tax purposes of approximately $1,100 and a non-capital
loss carryforward for Canadian income tax purposes of approximately $5. The
net operating loss and non-capital loss carryforward expire in increments
beginning in 2018 and 2006 respectively. No amount has been reflected on the
balance sheet for deferred income taxes as any deferred income tax asset has
been fully offset by a valuation allowance.
<PAGE> 14
8. Commitment:
During the year, the company signed a new five year triple net lease
agreement for office premises expiring January 31, 2004. The base rent
payments over the remaining term of the lease are as follows:
<TABLE>
<S> <C>
2000 $27
2001 27
2002 27
2003 27
2004 2
</TABLE>
The lease contains a renewal option for a further five year term at an
amount to be mutually agreed upon by both parties.
Pursuant to the lease agreement, the Company paid CDN $50 (US $35) to be
applied to the last eight months of the lease term. The deposit earns
interest at 7.5% per annum.
9. Subsequent events:
a) On July 13, 2000, the Company signed an Agreement and Plan of Merger and
Reorganization with Packeteer, Inc. ("Packeteer"). Pursuant to the
agreement, in exchange for all of the outstanding shares of the Company,
Packeteer will issue on a pro rata basis 2,000 common shares of
Packeteer common stock and options to purchase Packeteer common stock to
the Company's stockholders and optionholders, respectively. The Company
anticipates completing due diligence and definitive agreements on
September 15, 2000.
b) On February 1, 2000, the Company signed a new triple net lease agreement
for additional office space with base rent payments in each of the next
five years as follows:
<TABLE>
<S> <C>
2000 $15
2001 16
2002 16
2003 16
2004 16
</TABLE>
c) Subsequent to December 31, 1999, the Company adopted a stock option plan
for its employees, officers, consultants and directors under which a
maximum number of shares could be issued equal to the greater of 9% of
the issued and outstanding common shares of the Company or 1,500 shares.
Options issued under the Plan are subject to a minimum vesting period of
three months, unless specifically waived by the Board, and any other
such vesting periods as determined by the Board. Options are granted
with exercise prices equal to or greater than the fair market value of
the Company's common stock at the date of grant.
<PAGE> 15
9. Subsequent events (continued):
The Company applies APB Opinion No. 25 in accounting for stock options
granted to employees whereby compensation cost is recorded only to the
extent that the market price exceeds the exercise price at the date of
grant and, accordingly, no compensation cost will be recognized for its
stock options in the financial statements. Options granted to
non-employees will be accounted for at their fair value at the date of
grant.
Pursuant to the stock option plan, the Company issued 1,319 common share
options with an exercise price of $0.335 per share and an expiry date of
March 20, 2005 with the exception of 250 of the options which expire on
June 7, 2005. The options have the following vesting dates:
<TABLE>
<CAPTION>
Number of shares (thousands) Vesting Dates
---------------------------- -------------
<S> <C> <C>
626 March 20, 2000
96 annually June 1, 2000, 2001 and 2002
249 June 7, 2000
3 annually December 16, 2000, 2001 and 2002
9 annually January 4, 2001, 2002 and 2003
40 annually March 1, 2001, 2002 and 2003
</TABLE>
The amount payable to the Company's parent, the sole shareholder, at
December 31, 1999, plus further advances to June 30, 2000 creating a
total indebtedness of $1,600, was converted into 5,581 common shares of
the Company on June 30, 2000.
<PAGE> 16
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
$ United States
(In thousands, except per share data)
<TABLE>
<CAPTION>
June 30,2000
(unaudited)
------------
<S> <C>
Assets
Current assets
Cash $ 82
Accounts receivable 11
-------
93
Lease deposit (note 6) 35
Fixed assets (note 2) 260
-------
$ 388
=======
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities
Accounts payable and accrued liabilities $ 66
Current portion of long-term debt 10
-------
76
Long-term debt (note 3) 108
Stockholders' Equity (Deficiency)
Capital stock (note 4) 2
Additional paid in capital 2,002
Deficit accumulated during the development stage (1,800)
-------
204
-------
$ 388
=======
</TABLE>
Commitments (note 6)
See accompanying notes to consolidated financial statements.
<PAGE> 17
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Consolidated Statement of Loss
(Unaudited)
(In thousands, except per share data)
$ United States
<TABLE>
<CAPTION>
Six month period
From inception ended June 30,
(July 7, 1998) to ---------------------
June 30, 2000 2000 1999
----------------- ------- -------
<S> <C> <C> <C>
Revenue
Interest 2 $ -- $ --
Expenses
Research and development
Consultants 119 50 14
Internet access charges 18 8 2
Purchased research and
development 100 -- --
Salaries and benefits 788 308 159
------- ------- -------
975 366 175
General and administrative
Amortization 62 34 6
Consulting 44 27 --
Foreign exchange (2) (17) 1
Interest on long-term debt 9 4 3
Marketing and promotion 104 57 --
Office and administration 83 27 34
Professional fees 71 36 13
Rent and utilities 84 31 24
Salaries and benefits 296 115 75
Travel 65 10 8
Write-off of loan receivable 11 -- --
------- ------- -------
827 324 164
------- ------- -------
Loss before income taxes 1,800 (690) (339)
Income taxes (recovery) -- (2) --
------- ------- -------
Net loss 1,800 $ (688) $ (339)
======= ======= =======
Weighted average number of shares outstanding 9,536 9,632 9,632
Loss per share (note 1(j)) $ (0.19) $ (0.07) $ (0.04)
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 18
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' Equity (Deficiency)
(Unaudited)
(In thousands, except per share data)
$ United States
Six month period ended June 30, 2000
<TABLE>
<CAPTION>
Deficit
Accumulated
Capital Stock Additional During the
----------------- Paid In Development
Shares Amount Capital Stage Total
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Issued July 7, 1998 for cash
at $0.0001 per share 8,032 $ 1 $ -- $ -- $ 1
Issued August 19, 1998 for
cash at Cdn $0.20 (US $0.13) 1,250 -- 167 -- 167
Issued August 20, 1998 for
cash at Cdn $1.00 (US $0.67) 350 -- 233 -- 233
Net loss -- -- -- (327) (327)
------ ----- ------ -------- -------
Balance, December 31, 1998 9,632 1 400 (327) 74
Net loss -- -- -- (785) (785)
------ ----- ------ -------- -------
Balance, December 31, 1999 9,632 1 400 (1,112) (711)
Issued upon conversion
of amount due to parent
company 5,581 1 1,599 -- 1,600
Compensation cost of options
issued to non-employees
(note 5(b)) -- -- 3 -- 3
Net loss -- -- -- (688) (688)
------ ----- ------ -------- -------
Balance, June 30, 2000 15,213 $ 2 $2,002 $(1,800) $ 284
======= ===== ====== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 19
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
(Unaudited)
(In thousands, except per share data)
$ United States
<TABLE>
<CAPTION>
From inception
(July 7, 1998) to Six month period
June 30, 2000 ended June 30,
-------------------- ---------------------
2000 1999
------- -------
<S> <C> <C> <C>
Cash provided by (used in):
Operations
Net loss $ (1,800) $ (688) $ (339)
Items not involving cash:
Amortization 62 34 6
Loss on write-off of fixed asset 1 -- --
Compensation cost of options issued
to non-employees 3 3 --
Changes in non-cash working capital:
Accounts receivable (11) (6) --
Prepaid expenses -- -- 5
Accounts payable and accrued liabilities 66 14 12
------ ------- -------
(1,679) (643) (316)
Financing
Advances from (to) related parties -- 13 (36)
Advances from parent company 1,600 740 433
Issue of common shares 401 -- --
Proceeds from long-term debt net of
repayments 118 38 79
------ ------- -------
2,119 791 476
Investments
Lease deposit (35) -- (35)
Expenditures on fixed assets (323) (158) (95)
------ ------- -------
(358) (158) (130)
------ ------- -------
Increase (decrease) in cash 82 (10) 30
Cash, beginning of period -- 92 36
------ ------- -------
Cash, end of period $ 82 $ 82 $ 66
====== ======= =======
Supplementary Information
Interest paid 10 4 --
Income taxes paid (recovered) -- (2) --
Non-cash financing and investing activities
conversion of due to parent company
into common shares 1,600 1,600 --
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 20
WORKFIRE TECHNOLOGIES INTERNATIONAL, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Unaudited)
(In thousands, except per share data)
$ United States
Six month period ended June 30, 2000
Workfire Technologies International Inc. (the "Company") is a development
stage company and was incorporated on July 7, 1998 under the General
Incorporation Laws of the State of Nevada. The Company's principal business
activity is the development of software to deliver extended internet
services to internet users (the "Workfire" technology).
1. SIGNIFICANT ACCOUNTING POLICIES:
a) Unaudited interim financial information
The accompanying financial statements as at June 30, 2000 and for the
six month period ended June 30, 2000 and for the period from inception
(July 7, 1998) to June 30, 2000 are unaudited. However, in the opinion
of management, all adjustments (consisting of normal recurring items)
necessary for the fair presentation of these unaudited financial
statements in conformity with generally accepted accounting principles
have been made.
b) Translation of financial statements
The functional currency of the Company and its subsidiary is the United
States dollar. The Company's subsidiary, Workfire Development
Corporation, operates in Canada and its operations are conducted, in
part, in Canadian currency. The method of translation into United
States dollars applied is as follows:
v) Monetary assets and liabilities are translated at the exchange
rate in effect at the balance sheet date, being US $1.00 per Cdn
$1.4529 at June 30, 2000.
vi) Non-monetary assets and liabilities are translated at the
exchange rate in effect at the transaction date.
vii) Revenues and expenses are translated at the exchange rate in
effect at the transaction date.
viii) The net adjustment arising from the translation is included in
the consolidated statement of loss.
c) Basis of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Workfire Development
Corporation ("WDC"). All significant inter-company balances and
transactions have been eliminated.
d) 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 disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE> 21
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
e) Financial instruments
The fair values of cash, accounts receivable and accounts payable and
accrued liabilities approximate their carrying values due to the
relatively short periods to maturity of these instruments. The fair
value of the long term debt approximates its carrying value due to the
fixed interest rate of the long term debt closely approximating floating
rates at the financial statement date. The maximum credit risk exposure
for all financial assets is the carrying amount of that asset.
f) Fixed assets
Fixed assets are stated at cost. Amortization is provided using the
following methods and annual rates:
<TABLE>
<CAPTION>
Asset Method Rate
----- ------ ----
<S> <C> <C>
Office equipment Declining balance 20%
Computer equipment Declining balance 30%
Computer software Declining balance 100%
Leasehold improvements Straight line 10%
</TABLE>
Amortization is provided at one-half the annual rates in the year of
acquisition.
g) Income taxes
The Company accounts for income taxes by the asset and liability method.
Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
h) Stock option plan
During the period ended June 30, 2000, the Company adopted a stock
option plan for its employees, officers, consultants and directors under
which a maximum number of shares could be issued equal to the greater of
9% of the issued and outstanding common shares of the Company or 1,500
shares. Options issued under the Plan are subject to a minimum vesting
period of three months, unless specifically waived by the Board, and any
other such vesting periods as determined by the Board. Options are
granted with exercise prices equal to or greater than the fair market
value of the Company's common stock at the date of grant. The Company
applies APB Opinion No. 25 in accounting for stock options granted to
employees whereby compensation cost is recorded only to the extent that
the market price exceeds the exercise price at the date of grant and,
accordingly, no compensation cost will be recognized for its stock
options in the financial statements. Options granted to non-employees
are accounted for at their fair value at the date of grant.
<PAGE> 22
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
i) Technology
Software development costs have been accounted for in accordance with
Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed.
Under the standard, capitalization of software development costs begins
upon the establishment of technological feasibility, subject to net
realizable value considerations. Technological feasibility has not been
established at June 30, 2000 and therefore all costs of acquiring,
developing and enhancing the Workfire technology are charged to earnings
as incurred.
j) Loss per share
Loss per share has been calculated using the weighted average number of
common shares outstanding during the period. The effect of the stock
options (note 4(b)) has not been included in the computation because to
do so would be anti-dilutive.
2. FIXED ASSETS:
<TABLE>
<CAPTION>
2000
Accumulated Net book
Cost amortization value
---- ------------ --------
<S> <C> <C> <C>
Office equipment $ 35 $ 7 $ 28
Computer equipment 152 27 125
Computer software 7 6 1
Leasehold improvements 129 23 106
---- --- ----
$323 $63 $260
==== === ====
</TABLE>
3. LONG-TERM DEBT:
<TABLE>
<CAPTION>
2000
----
<S> <C>
Loan payable to Stober Construction Ltd. repayable
$1 monthly, including interest at 7.5% per annum $118
Less principal due within one year 10
----
$108
====
</TABLE>
Principal repayments due within the next five calendar years:
<TABLE>
<S> <C>
2000 $3
2001 $7
2002 $7
2003 $8
2004 $9
</TABLE>
<PAGE> 23
4. CAPITAL STOCK:
a) Authorized:
100,000 common voting shares with a par value of $0.0001 per share
1,000 non-voting, preferred shares with a par value of $0.0001 per
share
b) Stock option plan:
During the period, the Company issued 1,319 common share stock options.
These stock options have an exercise price of $0.335 per share and an
expiry date of March 20, 2005 with the exception of 250 of the options
which expire on June 7, 2005. At June 30, 2000, 971 of the options had
vested. The remaining options have the following vesting dates:
<TABLE>
<CAPTION>
Number of shares (thousands) Vesting Dates
---------------------------- -------------
<S> <C> <C>
3 annually December 16, 2000, 2001 and 2002
9 annually January 4, 2001, 2002 and 2003
40 annually March 1, 2001, 2002 and 2003
96 annually June 1, 2001 and 2002
</TABLE>
Of the above options, 1,308 were granted to employees. Had the Company
determined compensation cost based on the fair value of the options
issued to employees at the grant date under SFAS No. 123, the Company's
loss for the period would have been increased to the pro forma amount
indicated below:
Loss:
<TABLE>
<S> <C>
As reported $ 688
Pro forma 1,017
</TABLE>
The above pro forma amount has been determined using the Black Scholes
Method using the expected life to be the life of the options, volatility
factor of 95%, risk free rate of 5.5% and no assumed dividend rate.
Of the options, 11 were granted to non-employees. The fair value of $3
of these options has been determined using the Black Scholes Method
using the expected life to be the life of the options, volatility factor
of 95%, risk free rate of 5.5% and no assumed dividend rate, and has
been included in the determination of the loss for the period.
5. INCOME TAXES:
At December 31, 1999, the Company had a net operating loss carryforward for
United States income tax purposes of approximately $1,100 a non-capital loss
carryforward for Canadian income tax purposes of approximately $5. The net
operating loss and non-capital loss carryforward expire in increments
beginning in 2018 and 2006 respectively. No amount has been reflected on the
balance sheet for deferred income taxes as any deferred income tax asset has
been fully offset by a valuation allowance.
<PAGE> 24
6. COMMITMENTS:
During the period, the Company signed a new five year triple net lease
agreement for additional office premises. The base rent payments over the
remaining terms of both the original and the new office premises leases are
as follows:
<TABLE>
<S> <C> <C>
Calendar 2000 $21
2001 43
2002 43
2003 43
2004 18
</TABLE>
The leases contain renewal options for further five year terms at amounts to
be mutually agreed upon by both parties.
Pursuant to the original lease agreement, the Company paid CDN $50 (US $35)
to be applied to the last eight months of the lease term. The deposit earns
interest at 7.5% per annum.
7. CHANGE OF OWNERSHIP:
On July 13, 2000, the Company signed an Agreement and Plan of Merger and
Reorganization with Packeteer, Inc. ("Packeteer"). Pursuant to the
agreement, in exchange for all of the outstanding shares of the Company,
Packeteer will issue on a pro rata basis 2,000 common shares of Packeteer
common stock and options to purchase Packeteer common stock to the Company's
stockholders and optionholders, respectively. The Company anticipates
completing due diligence and definitive agreements on September 15, 2000.
<PAGE> 25
(b) PRO FORMA FINANCIAL INFORMATION.
1. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information
gives effect to the acquisition of Workfire Technologies International, Inc.
(Workfire) by Packeteer, Inc. (Packeteer). The acquisition will be accounted for
under the purchase method of accounting in accordance with APB Opinion No. 16.
Under the purchase method of accounting, the purchase price is allocated to the
assets acquired and liabilities assumed based on their estimated fair values.
Estimates of the fair values of the assets and liabilities of Workfire have been
combined with the historical values of the assets and liabilities of Packeteer
in the unaudited pro forma condensed consolidated financial information.
The unaudited pro forma condensed consolidated balance sheet as of June 30, 2000
gives effect to the acquisition as if it occurred on June 30, 2000. The
Packeteer and Workfire balance sheet information was derived from their
unaudited June 30, 2000 balance sheets. The unaudited pro forma condensed
consolidated statements of operations give pro forma effect to the acquisition
as if the transaction was consummated as of January 1, 1999. The information for
the Packeteer and Workfire June 30, 2000 statements of operations was derived
from their unaudited statements of operations for the six months ended June 30,
2000. The information for the Packeteer and Workfire December 31, 1999
statements of operations was derived from their audited statements of operations
for the year ended December 31, 1999.
The unaudited pro forma condensed consolidated financial information has been
prepared by Company management for illustrative purposes only and is not
necessarily indicative of the condensed consolidated financial position or
results of operations in future periods or the results that actually would have
been realized had Packeteer and Workfire been a combined company during the
specified periods. The unaudited pro forma condensed consolidated financial
information, including the notes thereto, is qualified in its entirety by
reference to, and should be read in conjunction with, the historical
consolidated financial statements of Packeteer included in its Form 10-K and
Form 10-Q filed March 23, 2000 and August 4, 2000, respectively, with the
Securities and Exchange Commission and the historical consolidated financial
statements of Workfire included in Item 7(a) in this Form 8-K.
<PAGE> 26
PACKETEER INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 2000
(In thousands)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------- --------------------------
PACKETEER WORKFIRE ADJUSTMENTS COMBINED
--------- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $29,941 $ 82 $ (380) (a) $ 29,643
Short-term investments 24,899 -- -- 24,899
Accounts receivable 4,238 11 -- 4,249
Inventories 1,598 -- -- 1,598
Prepaids and other current assets 803 35 -- 838
------- ------- ------- --------
Total current assets 61,479 128 (380) 61,227
Property and equipment, net 936 260 - 1,196
Long-term investments and other assets 9,318 -- 9,318
Goodwill and intangible assets, net -- -- 71,726 (b) 71,726
------- ------- ------- --------
Total assets $71,733 $ 388 $71,346 $143,467
======= ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $3,038 $ -- $ -- $ 3,038
Current portion of capital leases obligations 487 -- -- 487
Current portion of notes payable 46 10 -- 56
Accounts payable 822 66 -- 888
Accrued compensation 1,706 -- -- 1,706
Other accrued liabilities 3,782 -- 1,800 (a) 5,582
Deferred revenue 1,361 -- -- 1,361
------- ------- ------- --------
Total current liabilities 11,242 76 1,800 13,118
Long-term liabilities 905 108 -- 1,013
Common stock 27 2 (2)(c)
2 (a) 29
Additional paid-in capital 90,332 2,002 (2,002)(c)
70,926 (a) 161,258
Accumulated other comprehensive income (loss) (83) -- - (83)
Deferred stock-based compensation (1,509) -- (1,178)(b) (2,687)
Notes receivable from stockholders (338) -- - (338)
Accumulated deficit (28,843) (1,800) 1,800 (c) (28,843)
------- ------- ------- --------
Total stockholders' equity 59,586 204 69,546 129,336
------- ------- ------- --------
Total liabilities and stockholders' equity $71,733 $ 388 $71,346 $143,467
======= ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined
condensed financial statements.
<PAGE> 27
PACKETEER INC.
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------- ---------------------
PACKETEER WORKFIRE ADJUSTMENTS COMBINED
--------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Product revenue $ 16,824 $ -- $ -- $ 16,824
Licensing revenue 1,617 -- -- 1,617
--------- -------- ---------- --------
Total revenues 18,441 -- -- 18,441
Cost of revenue 5,286 -- -- 5,286
--------- -------- ---------- --------
Gross profit 13,155 -- -- 13,155
--------- --------- ---------- --------
Operating expenses:
Research and development 5,164 409 -- 5,573
Sales and marketing 13,737 377 -- 14,114
General and administrative 2,936 -- -- 2,936
Stock-based compensation 3,088 -- 390(e) 3,478
Amortization of goodwill
and other intangible assets -- -- 23,908(d) 23,908
--------- -------- ---------- --------
Total operating expenses 24,925 786 24,298 50,009
--------- -------- ---------- --------
Net loss from operations (11,770) (786) (24,298) (36,854)
Other income, net 894 1 -- 895
--------- -------- ---------- --------
Net loss (10,876) (785) (24,298) (35,959)
Basic and diluted net loss
per share $ (0.71) (2.09)
========= ========
Shares used in computing
basic and diluted net loss
per share 15,343 1,836(f) 17,179
========= =======
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
<PAGE> 28
PACKETEER INC.
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(In thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------- ----------------------
PACKETEER WORKFIRE ADJUSTMENTS COMBINED
--------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Product revenue $ 15,489 $ -- $ -- $ 15,489
Licensing revenue 778 -- -- 778
--------- -------- ----------- --------
Total revenues 16,267 -- -- 16,267
Cost of revenue 5,111 -- -- 5,111
--------- -------- ----------- --------
Gross profit 11,156 -- -- 11,156
--------- --------- ----------- --------
Operating expenses:
Research and development 3,740 366 -- 4,106
Sales and marketing 8,065 -- -- 8,065
General and administrative 2,264 324 -- 2,588
Stock-based compensation 723 -- 195(e) 918
Amortization of goodwill
and other intangible assets -- -- 11,954(d) 11,954
--------- -------- ----------- --------
Total operating expenses 14,792 690 12,149 27,631
--------- -------- ----------- --------
Net loss from operations (3,636) (690) (12,149) (16,475)
Other income, net 1,614 2 -- 1,616
--------- -------- ----------- --------
Net loss (2,022) (688) (12,149) (14,859)
Basic and diluted net loss
per share $ (0.08) (0.53)
======== ========
Shares used in computing
basic and diluted net loss
per share 26,308 1,836(f) 28,144
======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
<PAGE> 29
1. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(in thousands except share and per share data)
BASIS OF PRESENTATION
Packeteer acquired Workfire on September 13, 2000 for a total purchase price of
$73,108 in a transaction accounted for as a purchase. Packeteer exchanged
1,836,517 shares of Packeteer common stock with a fair value of $65,793 for all
of the outstanding stock of Workfire. The common stock was valued using
Packeteer's average stock price on the date the merger agreement was announced
and the prices of the stock two days before and after the announcement. The
average value was $35.83 per share. Packeteer also assumed all of the
outstanding stock options of Workfire with a fair value of approximately $5,135.
The options were valued using the Black Scholes option pricing model with the
following assumptions: no dividends; 110% volatility; 4.5 years expected life;
6.1% for the risk-free interest rate and common stock value of $35.83 as
described above. In addition, Packeteer paid certain liabilities of
Workfire.com, who was the shareholder of Workfire, having an aggregate value of
$380. There were also $1,800 of direct transaction costs related to this
transaction.
The acquisition was accounted for under the purchase method of accounting in
accordance with APB Opinion No. 16. Under the purchase method of accounting, the
purchase price is allocated to the assets acquired and liabilities assumed based
on their estimated fair values. Management's best estimates of the fair values
of the assets and liabilities of Workfire have been combined with the historical
values of the assets and liabilities of Packeteer in the unaudited pro forma
condensed consolidated financial information.
PRO FORMA ADJUSTMENTS
(a) To reflect issuance of 1,836,517 shares of Packeteer common stock,
assumption of stock options and payment of cash consideration for an
aggregate purchase price of $73,108, including approximately $1,800 of
transaction costs.
(b) To reflect the purchase price allocation. The purchase price allocation is
based on management's estimates of the fair values of the tangible assets
and intangible assets. The book value of tangible assets and liabilities
acquired are assumed to approximate fair value. The goodwill and other
intangible assets will be amortized on a straight-line basis over three
years. Intrinsic value of unvested employee options assumed in the
acquisition was calculated as of the consummation date and allocated to
deferred stock compensation which will be amortized over the remaining
vesting period of approximately 3 years.
The total purchase price paid for the acquisitions is summarized as follows:
<TABLE>
<S> <C>
Common stock .................................................. $65,793
Fair value of options assumed ................................. 5,135
Cash consideration............................................. 380
Estimated transaction costs ................................... 1,800
-------
Total purchase price .................................... $73,108
=======
</TABLE>
<PAGE> 30
The preliminary allocation of the purchase price is presented below:
<TABLE>
<S> <C>
Cash and cash equivalents ..................................... $ 82
Other current assets .......................................... 46
Property and equipment ........................................ 260
Liabilities assumed ........................................... (184)
-------
Book value of net tangible assets of Workfire ........... $ 204
Deferred compensation ......................................... 1,178
Developed and core technology ................................. 5,620
Assembled workforce ........................................... 220
Goodwill ...................................................... 65,886
-------
Net assets acquired ..................................... $73,108
=======
</TABLE>
The actual allocation of the purchase price will depend on Workfire's net assets
on the closing date and Packeteer's evaluation of the fair value of the net
assets as of the date indicated. Consequently, the actual allocation of the
purchase price could differ from that presented above.
(c) To reflect the elimination of the stockholders' equity of Workfire.
(d) To record amortization of goodwill and other intangible assets acquired.
(e) To record amortization of deferred stock based compensation related to
options assumed.
(f) To reflect common stock issued to shareholders of Workfire. Shares to be
issued for options are excluded as they are antidilutive.
PRO FORMA NET LOSS PER SHARE
The unaudited pro forma combined net loss per share is based upon the weighted
average number of vested outstanding shares of common stock of Packeteer during
the periods presented, plus the number of shares issued to consummate the
acquisition of Workfire as if the acquisition occurred at the beginning of the
period presented.
CONFORMING AND RECLASSIFICATION ADJUSTMENTS
There were no material adjustments required to conform the accounting policies
of Packeteer and Workfire. Certain amounts have been reclassified to conform to
Packeteer's financial statement presentation.
ITEM 7. (c) Exhibits. The following documents are filed as exhibits to this
report
2.1 - Agreement and Plan of Merger and Reorganization, dated as of July
13, 2000, by and among Packeteer, Acquisition Sub, Workfire and Workfire
Holdings.
<PAGE> 31
2.2 - Escrow Agreement, dated as of September 13, 2000, by and among
Packeteer, the Shareholders' Agent and the Escrow Agent.
23.1 - Consent of KPMG LLP.
99.1 - Press Release, dated July 13, 2000, issued by Packeteer,
announcing the execution of the Acquisition Agreement.
99.2 - Press Release, dated September 14, 2000, issued by Packeteer,
announcing the completion of the Merger.
<PAGE> 32
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.
Packeteer, Inc.
------------------------------------
(Registrant)
Date: September 28, 2000 By: /s/ David C. Yntema
---------------------------------
DAVID C. YNTEMA
Chief Financial Officer and
Secretary
<PAGE> 33
Packeteer, Inc.
Exhibit Index
to Form 8-K
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization,
dated as of July 13, 2000, by and among Packeteer,
Acquisition Sub, Workfire
and Workfire Holdings.
2.2 Escrow Agreement, dated as of September 13, 2000,
by and among Packeteer, the Shareholders' Agent
and the Escrow Agent.
23.1 Consent of KPMG LLP.
99.1 Press Release, dated July 13, 2000, issued by
Packeteer, announcing the execution of the
Acquisition Agreement.
99.2 Press Release, dated September 14, 2000, issued by
Packeteer, announcing the completion of the
Merger.
</TABLE>
