<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1 to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 11, 2000
---------------------------
SOFTWARE.COM, INC.
----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 000-26379 77-0392373
----------------------------------------------------------------------------
<S> <C> <C>
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
525 ANACAPA STREET, SANTA BARBARA, CALIFORNIA 93101
--------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 882-2470
--------------
</TABLE>
N/A
--------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
This Current Report on Form 8-K/A amends Item 7 of the Current Report on
Form 8-K filed with the Securities and Exchange Commission on April 26, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
(a) Financial Statements of AtMobile.com
------------------------------------
(b) Pro Forma Financial Information.
-------------------------------
(c) Exhibits
--------
23.1 Consent of Ernst & Young LLP, independent auditors.
<PAGE>
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: June 23, 2000 SOFTWARE.COM, INC.
/s/ Amy E. Staas
----------------------
Amy E. Staas
Vice President, Finance
Acting Chief Financial Officer
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
AtMobile.com, Inc.
We have audited the accompanying consolidated balance sheets of AtMobile.com,
Inc. and subsidiaries (the Company) as of December 31, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AtMobile.com, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the results of its
operations and cash flows for the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
March 24, 2000,
except Note 11, as to which the date is
April 11, 2000.
Seattle, Washington
<PAGE>
AtMobile.com, Inc.
Consolidated Financial Statements
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999 2000
-------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 814,939 $ 5,459,783 $ 16,003,648
Accounts receivable 290,904 744,588 463,218
Unbilled receivables - 41,218 152,799
Prepaid expenses 49,195 51,190 83,440
-------------------------------------------------
Total current assets 1,155,038 6,296,779 16,703,105
Property and equipment, net 1,437,891 1,365,996 1,762,551
Deferred charges and other assets, net 95,794 190,194 195,526
-------------------------------------------------
Total assets $ 2,688,723 $ 7,852,969 $ 18,661,182
=================================================
Liabilities and shareholders' equity (deficit)
Current liabilities:
Note payable to bank $ 150,000 $ - $ -
Accounts payable - trade 265,507 700,817 588,325
Accounts payable - employees 26,483 14,075 -
Accrued expenses 441,503 464,235 1,068,906
Current portion of capital lease obligations 401,165 432,689 420,000
Current portion of long-term debt 697,060 750,000 750,000
Deferred revenue 58,508 - -
-------------------------------------------------
Total current liabilities 2,040,226 2,361,816 2,827,231
Capital lease obligations, less current portion 641,504 256,033 163,464
Long-term debt, less current portion 3,015,196 5,500,000 812,500
Shareholders' equity (deficit):
Preferred stock:
Convertible preferred stock, $.001 par value:
Authorized shares - 55,300,000
Issued and outstanding shares - 47,304,384,
35,219,739, and 12,612,312 at March 31,
2000, December 31, 1999, and 1998,
respectively 5,170,001 12,969,148 30,499,220
Common stock, $.001 par value:
Authorized shares - 75,000,000
Issued and outstanding shares - 7,098,693,
6,983,443, and 7,518,333 at March 31,
2000, December 31, 1999, and 1998,
respectively 21,650 150,879 2,220,492
Accumulated deficit (8,199,854) (13,384,907) (17,861,725)
-------------------------------------------------
Total shareholders' equity (deficit) (3,008,203) (264,880) 14,857,987
-------------------------------------------------
Total liabilities and shareholders' equity $ 2,688,723 $ 7,852,969 $ 18,661,182
=================================================
</TABLE>
See accompanying notes.
<PAGE>
AtMobile.com, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31 Three Months Ended March 31
-----------------------------------------------------------------------------------
1997 1998 1999 1999 2000
-----------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues, net $ 163,061 $ 1,519,816 $ 2,303,505 $ 270,894 $ 574,593
Operating expenses:
Cost of revenues 40,171 1,014,001 1,080,207 442,919 662,317
Product development 400,606 3,377,219 1,830,518 592,007 697,974
General and administrative 412,503 1,855,046 2,079,339 470,928 2,849,736
Sales and marketing 188,349 2,529,845 2,190,696 306,501 885,043
------------------------------------------------------------------------------
1,041,629 8,776,111 7,180,760 1,812,355 5,095,070
------------------------------------------------------------------------------
Loss from operations (878,568) (7,256,295) (4,877,255) (1,541,461) (4,520,477)
Other income (expense):
Interest income 37,121 69,644 13,402 287 120,233
Interest expense (3,746) (169,774) (358,621) - (92,007)
Other income (expense) - - 37,421 (100,459) 15,433
------------------------------------------------------------------------------
33,375 (100,130) (307,798) (100,172) 43,659
------------------------------------------------------------------------------
Net loss $ (845,193) $(7,356,425) $(5,185,053) $(1,641,633) $(4,476,818)
===============================================================================
</TABLE>
See accompanying notes.
<PAGE>
AtMobile.com, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Convertible Preferred
Stock Common Stock
---------------------------------------------------------
Shares Amount Shares Amount
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 - $ - 3,750,000 $ 10,000
Issuance of common stock - - 4,050,000 10,800
Issuance of preferred stock, net of issuance costs of $20,000 12,612,312 5,145,001 - -
Net loss for 1997 - - - -
-------------------------------------------------------
Balance, December 31, 1997 12,612,312 5,145,001 7,800,000 20,800
Proceeds from stock options exercised and stock awards - - 8,333 750
Issuance of common stock - - 10,000 900
Repurchase of common stock - - (300,000) (800)
Issuance of preferred stock warrants in connection with lease agreement
- 25,000 - -
Net loss for 1998 - - - -
-------------------------------------------------------
Balance, December 31, 1998 12,612,312 5,170,001 7,518,333 21,650
Issuance of Series B preferred stock, net of issuance costs of $16,000 9,952,253 4,059,647 - -
Issuance of Series C preferred stock, net of issuance costs of $25,000 12,655,174 3,645,000 - -
Proceeds from stock options exercised - - 70,580 6,248
Repurchase of common stock - - (605,470) (1,615)
Nonemployee equity-based compensation expense - - - 3,591
Issuance of common stock warrants in exchange for services - - - 121,005
Issuance of preferred stock warrants in connection with bank term note
agreement - 94,500 - -
Net loss for 1999 - - - -
-------------------------------------------------------
Balance, December 31, 1999 35,219,739 12,969,148 6,983,443 150,879
Issuance of Series D preferred stock, net of issuance costs of
$1,321,976* 12,084,645 17,530,072 - -
Common stock issued in exchange for services* - - 40,000 226,000
Proceeds from stock options exercised* - - 75,250 5,718
Nonemployee equity-based compensation* - - - 1,837,895
Net loss* - - - -
-------------------------------------------------------
Balance, March 31, 2000 (unaudited) 47,304,384 $30,499,220 7,098,693 $2,220,492
=======================================================
</TABLE>
<TABLE>
<CAPTION>
Subscription Accumulated
Receivable Deficit Total
---------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1997 $(10,000) $ 1,764 $ 1,764
Issuance of common stock 10,000 - 20,800
Issuance of preferred stock, net of issuance costs of $20,000 - - 5,145,001
Net loss for 1997 - (845,193) (845,193)
------------------------------------------
Balance, December 31, 1997 - (843,429) 4,322,372
Proceeds from stock options exercised and stock awards - - 750
Issuance of common stock - - 900
Repurchase of common stock - - (800)
Issuance of preferred stock warrants in connection with lease agreement
- - 25,000
Net loss for 1998 - (7,356,425) (7,356,425)
------------------------------------------
Balance, December 31, 1998 - (8,199,854) (3,008,203)
Issuance of Series B preferred stock, net of issuance costs of $16,000 - - 4,059,647
Issuance of Series C preferred stock, net of issuance costs of $25,000 - - 3,645,000
Proceeds from stock options exercised - - 6,248
Repurchase of common stock - - (1,615)
Nonemployee equity-based compensation expense - - 3,591
Issuance of common stock warrants in exchange for services - - 121,005
Issuance of preferred stock warrants in connection with bank term note
agreement - - 94,500
Net loss for 1999 - (5,185,053) (5,185,053)
------------------------------------------
Balance, December 31, 1999 - (13,384,907) (264,880)
Issuance of Series D preferred stock, net of issuance costs of
$1,321,976* - - 17,530,072
Common stock issued in exchange for services* - - 226,000
Proceeds from stock options exercised* - - 5,718
Nonemployee equity-based compensation* - - 1,837,895
Net loss* - (4,476,818) (4,476,818)
------------------------------------------
Balance, March 31, 2000 (unaudited) $ - $(17,861,725) $14,857,987
===========================================
</TABLE>
* (unaudited)
<PAGE>
AtMobile.com, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31 Three Months Ended
March 31
------------------------------------------------------------------------------
1997 1998 1999 1999 2000
------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss $ (845,193) $(7,356,425) $(5,185,053) $(1,641,633) $(4,476,818)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 23,321 450,507 611,031 150,404 208,789
Noncash stock-based expense - 6,250 153,926 - 2,073,852
Accrued interest on convertible notes - - - - 25,727
Loss on disposal of assets - - 9,769 - -
Changes in operating assets and liabilities:
Accounts receivable (134,273) (156,631) (453,684) 38,554 281,370
Unbilled receivables - - (41,218) - (111,581)
Prepaid expenses (27,465) (67,830) 5,928 132,473 (32,250)
Accounts payable and accrued expenses 246,130 475,928 513,548 (187,325) 478,104
Deferred maintenance revenue - 58,508 (50,775) (58,508) -
--------------------------------------------------------------------------
Net cash used in operating activities (737,480) (6,589,693) (4,436,528) (1,566,035) (1,552,807)
Investing activities
Purchases of property and equipment (430,364) (204,793) (546,649) (20,947) (604,105)
Acquisition of other assets, patents (6,995) (23,013) (39,410) (124,108) (16,528)
--------------------------------------------------------------------------
Net cash used in investing activities (437,359) (227,806) (586,059) (145,055) (620,633)
Financing activities
Proceeds from line of credit - 150,000 - - -
Proceeds from long-term debt 763,759 3,358,497 7,613,305 1,565,277 500,000
Repayments of long-term debt - (226,620) (1,229,507) (59,556) (292,758)
Proceeds from issuance of preferred stock, net 4,735,001 - 3,279,000 - 12,504,345
Proceeds from issuance of common stock, net 20,800 850 4,633 1,517 5,718
--------------------------------------------------------------------------
Net cash provided by financing activities 5,519,560 3,282,727 9,667,431 1,507,238 12,717,305
--------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 4,344,721 (3,534,772) 4,644,844 (203,852) 10,543,865
Cash and cash equivalents at beginning of period 4,990 4,349,711 814,939 814,939 5,459,783
--------------------------------------------------------------------------
Cash and cash equivalents at end of period $4,349,711 $ 814,939 $ 5,459,783 $ 611,087 $16,003,648
==========================================================================
Supplemental disclosures
Cash paid:
Interest $ 2,000 $ 149,501 $ 335,321 $ - $ 66,280
Noncash transactions:
Conversion of notes payable and accrued interest
into preferred stock 410,000 - 4,425,647 - 5,025,727
Property and equipment acquired pursuant to capital
leases - 1,269,289 - - -
Warrants issued in connection with borrowing
agreements - 25,000 94,500 - -
Common stock issued in exchange for services - - - - 226,000
Warrant issued for placement fee in connection
with Series D preferred stock financing - - - - 45,634
</TABLE>
See accompanying notes.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements
1. Background
AtMobile.com, Inc. was incorporated on August 16, 1996 as Global Mobility
Systems, Inc. During June 1999, Global Mobility Systems, Inc. changed its name
to AtMobile.com, Inc. to reflect its shift to developing mass market Internet
service applications that integrate both current and future generations of
digital wireless phones with the Internet. The Company is an application
service provider for wireless carriers and Internet content providers in search
of a technology gateway that links and integrates Web-based content, commerce,
and applications with current and future generations of wireless phones.
The Company's operations have been primarily devoted to research and
development, including the development of advanced network service software, as
well as raising capital, obtaining financing, and administrative functions.
Further development of the Company's business will require additional equity
financing and the establishment of an adequate sales channel for the Company's
products.
During June 1999, the Company created a Canadian subsidiary named Global
Mobility Systems Canada, Inc. (subsequently renamed to AtMobile Canada, Inc.)
for the purpose of conducting research and development activities for Canadian
customers. The consolidated financial statements include the accounts of
AtMobile.com, Inc., Global Mobility Networks, Inc., and AtMobile Canada, Inc.
(together referred to as the Company). All significant intercompany balances
and transactions have been eliminated in consolidation.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents and Supplemental Cash Flow Information
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
expenses are recorded using the straight-line method for financial statement
purposes and accelerated methods for federal income tax purposes over estimated
useful lives ranging from three to seven years.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Intangible Assets
Intangible assets consisting of patent and trademark costs are amortized using
the straight-line method over periods ranging from 5 to 15 years.
Foreign Currency Translation
The functional currency of the Company's foreign subsidiaries is the local
currency in the country in which the subsidiary is located. Assets and
liabilities denominated in foreign currencies are translated to U. S. dollars at
the exchange rate in effect on the balance sheet date. Revenues and expenses
are translated at the average rates of exchange prevailing during the year. The
translation adjustment resulting from this process is shown within accumulated
other comprehensive income (loss) as a component of shareholders' equity
(deficit). Gains and losses on foreign currency transactions are included in
the consolidated statements of operations as incurred. To date, gains and
losses on foreign currency transactions have not been significant.
Use of Estimates in the Preparation of Financial Statements
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Unaudited Interim Financial Information
The financial information as of March 31, 2000 and for the three months ended
March 31, 2000 and 1999, is unaudited, but includes all adjustments, consisting
only of normal recurring adjustments, that the Company considers necessary for a
fair presentation of the financial position at those dates and of the operations
and cash flows for the periods then ended. Operating results for the three
months ended March 31, 2000 are not necessarily indicative of results that may
be expected for the entire year.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Federal Income Taxes
The Company accounts for federal income taxes in accordance with the liability
method. Deferred federal income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
statement purposes and the amounts used for federal income tax purposes. In the
event that it becomes more likely than not that some portion of a deferred tax
asset will not be realized, a valuation allowance is recorded.
Concentration of Credit Risk
The Company maintains all of its cash balances in one financial institution.
The balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1999, the Company had bank balances in excess of the
federally insured limits.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations, in
accounting for employee stock options rather than the alternative fair value
accounting allowed by SFAS No. 123, Accounting for Stock-Based Compensation.
The Company accounts for stock issued to nonemployees in accordance with the
provisions of SFAS No. 123 and the Emerging Issues Task Force consensus in Issue
No. 96-18, Accounting for Equity Instruments that are Issued to other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services.
Revenue and Cost Recognition
The Company recognizes revenue, contract costs, and profit on management and
consulting contracts in accordance with Statement of Position No. 81-1 (SOP No.
81-1), Accounting for Performance of Construction-Type and Certain Production-
Type Contracts. Revenue, contact costs, and profit on contracts on fixed-fee
contracts are recognized on the percentage-of-completion method (determined
based on the cost-to-cost method). Revenue, contract costs, and profits on
time-and-material contracts are recorded based upon direct labor hours at fixed
hourly rates and cost of materials as incurred. When the current estimates of
total contract revenue and contract cost indicate a loss, a provision for the
entire loss on the contract is recorded. Revisions to contract estimates are
recorded as the estimating factors are refined. The effect of these revisions is
included in income in the period the revisions are made.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Product Development
Product development costs, which consist primarily of software development
costs, are expensed as incurred. Financial accounting standards provide for the
capitalization of certain software development costs after technological
feasibility of the software is established. Under the Company's current
practice of developing new products and enhancements, the technological
feasibility of the underlying software is not established until substantially
all product development is complete, including the development of a working
model. No such costs have been capitalized because the impact of capitalizing
such costs would not be material.
Reclassifications
Certain prior year amounts were reclassified to conform with the current year
financial statement presentation.
3. Property and Equipment
<TABLE>
<CAPTION>
March 31,
1998 1999 2000
--------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Computer equipment $1,131,195 $ 1,614,553 $ 2,164,093
Office furniture and equipment 229,832 218,546 224,826
Software 543,419 604,711 652,996
------------------------------------------
1,904,446 2,437,810 3,041,915
Less accumulated depreciation and
amortization (466,555) (1,071,814) (1,279,364)
------------------------------------------
$1,437,891 $ 1,365,996 $ 1,762,551
==========================================
</TABLE>
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
3. Property and Equipment (continued)
Computer equipment and software included $1,269,289 of equipment and software
acquired under capital leases as of December 31, 1998 and 1999. Accumulated
amortization related to this equipment and software totaled $301,575 and
$720,874 as of December 31, 1998 and 1999, respectively. These leases are
secured by the underlying assets.
4. Note Payable to Bank
The Company had a $2 million revolving line of credit with a bank. Borrowings
outstanding under this line of credit were $150,000 at December 31, 1998. The
line of credit was secured by substantially all accounts receivable. The line
of credit was refinanced on April 30, 1999 with a term loan from the bank.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31 March 31,
1998 1999 2000
-----------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Term loan from bank, interest at
prime plus 2% (10.5% at December
31, 1999), 36 monthly principal
payments of $62,500 beginning on
May 5, 1999 $2,000,000 $1,750,000 $1,562,500
Convertible promissory note payable
to Sutter Hill Ventures, a
preferred stock shareholder,
bearing interest at 5.06% per annum,
converted on June 15, 1999
735,000 - -
Convertible promissory note payable
to Olympic Venture Partners IV
L.P., a preferred stock shareholder,
bearing interest at 5.06% per annum,
converted on June 15, 1999 711,000 - -
Convertible promissory note payable
to OVP IV Entrepreneurs Fund, a
preferred stock shareholder,
bearing interest at 5.06 per annum,
converted on June 15, 1999 54,000 - -
Convertible promissory note payable
to MCP Global Corporation Limited,
bearing interest at 5.88%,
converted on February 18, 2000 - 4,500,000 -
Term loan from bank, interest at
prime plus 1.50%, refinanced on
April 30, 1999 212,256 - -
------------------------------------------
3,712,256 6,250,000 1,562,500
Less current portion (697,060) (750,000) (750,000)
------------------------------------------
$3,015,196 $5,500,000 $ 812,500
==========================================
</TABLE>
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt (continued)
In January 2000, the Company issued additional convertible promissory notes for
bridge financing aggregating $500,000. These notes bear interest at 5.88%. On
February 18, 2000, these promissory notes and the MCP Global promissory note of
$4,500,000 with accrued interest of $25,727, were converted into 3,221,620
shares of Series D preferred stock (see Note 7).
Aggregate maturities on the term loan as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ending December 31:
------------------------
<S> <C>
2000 $ 750,000
2001 750,000
2002 250,000
----------
$1,750,000
==========
</TABLE>
6. Commitments
The Company leases computer equipment, computer software, and office equipment
under capital lease agreements expiring in 2001. The Company also leases its
office space under noncancelable operating leases that expire in 2000 through
2002. Future minimum lease payments under these leases as of December 31, 1999
are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
2000 $ 465,618 $181,884
2001 259,255 12,849
2002 1,228 -
--------- --------
726,101 $194,733
========
Less amount representing interest (37,379)
---------
Net present value of minimum lease payments 688,722
Less current portion (432,689)
---------
$ 256,033
=========
</TABLE>
Rent expense for all operating leases was approximately $33,000, $228,500 and
$246,108 for 1997, 1998, and 1999, respectively. Sublease rental income was $0
in 1997 and 1998, and $37,421 in 1999.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (Deficit)
Preferred Stock
In September 1997, the Company sold 12,612,312 shares of Series A preferred
stock, resulting in net proceeds of $5,145,001. Each share of Series A
preferred stock is convertible into one share of common stock subject to certain
adjustments, at the holder's option, and automatically converts upon the
occurrence of an initial public offering. In the event of liquidation, the
preferred shareholders have preferential rights to liquidation payments of
$0.40952 per share. Each share of Series A preferred stock has a priority over
common shares as to dividends, if declared, and shareholders have the same
voting rights (on an as-converted basis) as the common stock shareholders.
During June 1999, the Company issued 9,952,253 shares of Series B preferred
stock in consideration for the conversion of $4,000,000 in bridge notes,
comprised of $1,500,000 outstanding at December 31, 1999 and $2,500,000 issued
in 1999, and $75,647 in accrued interest under certain loan agreements. Each
share of Series B preferred stock is convertible into one share of common stock
subject to certain adjustments, at the holder's option, and automatically
converts upon the occurrence of an initial public offering. In the event of
liquidation, the preferred shareholders have preferential rights to liquidation
payments of $0.40952 per share. Each share of Series B preferred stock has a
priority as to dividends over Series A shares and common shares, if declared,
and shareholders have the same voting rights (on an as-converted basis) as the
common stock shareholders.
During June 1999, in connection with the issuance of the Series B preferred
stock, the Board of Directors declared a 2.19769223-to-1 stock split on the
Company's Series A preferred stock. The effect of the split was to increase the
number of authorized, issued, and outstanding shares of Series A preferred
stock. The number of shares issued and outstanding has been retroactively
adjusted to reflect these changes.
During August and November 1999, the Company sold an aggregate of 11,448,277
shares of Series C preferred stock, resulting in net proceeds of $3,295,000. In
August 1999, the Company issued 1,206,897 shares of Series C preferred stock in
consideration for the conversion of the $350,000 bridge loan received in July
1999. Each share of Series C preferred stock is convertible into one share of
common stock subject to certain adjustments, at the holder's option, and
automatically converts upon the occurrence of an initial public offering. In the
event of liquidation, the preferred shareholders have preferential rights to
liquidation payments of $0.29 per share. Each share of Series C preferred stock
has a priority over Series B shares, Series A shares, and
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (Deficit) (continued)
common shares as to dividends, if declared, and shareholders have the same
voting rights (on an as-converted basis) as the common stock shareholders.
On February 18, 2000, the Company sold an aggregate of 8,863,025 shares of
Series D preferred stock, resulting in net proceeds of $12,504,345. In
addition, the Company issued 3,221,620 shares of Series D preferred stock upon
conversion of $5,000,000 of promissory notes and related accrued interest of
$25,727. Each share of Series D preferred stock is convertible into one share of
common stock subject to certain adjustments, at the holder's option, and
automatically converts upon the occurrence of an initial public offering. In
the event of liquidation, the preferred shareholders have preferential rights to
liquidation payments of $1.56 per share. Each share of Series D preferred stock
has a priority over Series C shares, Series B shares, Series A shares, and
common shares as to dividends, if declared, and shareholders have the same
voting rights (on an as-converted basis) as the common stock shareholders.
Preferred Stock Warrants
During 1998, the Company issued warrants to purchase shares of Series A
preferred stock in connection with a capital lease financing arrangement. In
accordance with the warrant agreement, the number of shares originally issuable
and the related exercise price were adjusted based on a subsequent Series B
preferred financing in June 1999 whereby the warrants are for 109,885 shares of
Series A preferred stock with an exercise price of $0.41 per share. The
warrants expire at the earlier of (1) three years from the effective date of the
Company's initial public offering, (2) seven years, or (3) upon any sale,
conveyance, disposal, or encumbrance of all or substantially all of the
Company's property or business. The Company estimated the value of the warrants
to be approximately $0.23 per share, based on a Black-Scholes valuation model,
and recorded corresponding deferred debt issuance costs which are being
amortized over the life of the related capital lease.
In July 1999, in connection with a bank financing agreement, the Company issued
warrants to a bank to purchase up to 350,000 shares of Series B preferred stock
at a per share purchase price of $0.41, which expire in May 2009. The Company
estimated the value of the warrants to be approximately $0.27 per share, based
on a Black-Scholes valuation model, and recorded corresponding deferred debt
issuance costs which are being amortized over the term of the related financing
agreement.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (Deficit) (continued)
Amortization of debt issuance cost was $6,250, $29,331, and $9,958 in 1998,
1999, and the three months ended March 31, 2000, respectively.
As part of the placement fee associated with the Series D capital placement in
February 2000, the Company issued a warrant to purchase 114,085 shares of Series
D Preferred Stock at $1.56 per share. The warrant expires in 2005.
The Preferred Series A and Series B warrants were valued using the Black-Scholes
valuation model based upon the exercise prices described above, a risk free rate
of 6%, a dividend yield of 0%, volatility of .6 and an expected life of 7 years.
Common Stock Warrants and Options
In June 1999, the Company entered into a Web development, hosting, maintenance,
and licensing agreement with a contractor. As part of the agreement, the
Company issued warrants to the contractor to purchase 1,304,878 shares of common
stock with an exercise price of $0.01 per share in exchange for these services.
The warrants expire June 2009. The warrants become exercisable based on the
achievement of certain milestones or over the period for which the services are
performed through June 2002, as prescribed in the agreement. During 1999 and
the three months ended March 31, 2000, warrants for 359,756 shares and 179,878
shares, respectively, became exercisable for the services performed by the
contractor. The value of the services performed was determined based upon the
underlying value of the exercisable warrants. During 1999 and the three months
ended March 31, 2000, the Company recorded general and administrative costs
related to these services of $100,732 and $1,014,512, respectively. If and when
the warrants become exercisable as to additional shares, the Company will record
the cost for the services based on the then fair value of the exercisable
portion of the related warrant.
In July 1999, the Company obtained bridge financing in the form of a convertible
promissory note of $350,000 from a shareholder. In connection with that
financing the Company issued a warrant to the shareholder to purchase 85,466
shares of common stock at $0.04 per share. The warrant expires in 2004. The
Company estimated the value of the warrant to be approximately $0.02 per share
and recorded corresponding interest expense of $1,710 related to the warrant in
1999.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (Deficit) (continued)
In November 1999, the Company entered into a development agreement with a
contractor. As part of the agreement, the Company issued warrants to the
contractor to purchase 214,193 shares of common stock, with an exercise price of
$0.04 per share in exchange for these services. The warrants expire November
2004. The warrants become exercisable once certain performance milestones are
achieved, as prescribed in the agreement. During 1999 and the three months
ended March 31, 2000, warrants for 71,398 and 107,097 shares, respectively, were
exercisable. The value of the services performed were based upon the underlying
value of the exercisable warrants. During 1999 and the three months ended March
31, 2000, the Company recorded costs related to these services of $18,563 and
$585,464, respectively. If and when the warrants become exercisable as to
additional shares, based upon the counter party performance, the Company will
record the cost for the services based on the then fair value of the exercisable
portion of the related warrant.
The Company issued options for 80,000 shares at $0.04 per share of common stock
to consultants during 1999 which were fully vested at the date of grant. During
1999, the Company recognized compensation related expense of $2,667 related to
these equity awards.
The common stock warrants and options were valued using the Black-Scholes
valuation model based upon the exercise prices described above, a risk free rate
of 6%, a dividend yield of 0%, volatility of .6, and an expected life of two to
ten years.
In March 2000, the Company issued 40,000 shares of common stock in connection
with a professional service agreement. The Company estimated the value of the
common stock at $5.65 per share. In connection with the issuance of the stock,
the Company recognized costs of $226,000 for the value of the services.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (Deficit) (continued)
Authorized Shares of Common Stock
In connection with the stock split of the Series A preferred stock in June 1999,
the number of authorized shares of common stock was increased to 47.8 million
shares. In connection with the sale of the Series D preferred stock, the
number of authorized shares of common stock was increased to 75 million shares.
The number of common stock shares authorized has been retroactively adjusted to
reflect this change.
Common Stock Restriction Agreements
In 1997, the Company concluded an equity financing through a private offering of
7.8 million shares of common stock generating net proceeds of $20,800. These
common stock issuances are subject to common stock restriction agreements,
whereby if a shareholder ceases to be an employee of the Company, the Company
has the right to repurchase any remaining shares of restricted common stock at
the original issuance price paid by the shareholder. Generally, the
restrictions lapse ratably over five years. The Company repurchased shares of
two such employees who terminated their employment with the Company during 1998
and 1999. The number of shares subject to repurchase was 2,226,563 as of
December 31, 1999.
Common Stock Reserved
A summary of common stock reserved for issuance is as follows as of December 31,
1999:
<TABLE>
<S> <C>
Conversion of preferred stock 35,219,739
Stock option plan 6,905,686
Common stock warrants and non plan options 1,684,537
Preferred stock warrants 459,885
----------
44,269,847
==========
</TABLE>
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (Deficit) (continued)
Stock Option Plan
The Amended and Restated 1997 Stock Option Plan (the Plan), provides for the
granting of nonqualified and incentive stock options to officers, directors,
employees, and consultants. The Board of Directors is authorized to administer
the Plan and establish the stock option terms, including the grant price and
vesting period. The plan allows for the grant of options for 6,905,686 shares of
common stock.
Stock options typically vest over a four-year period and expire ten years from
the date of grant. Vested incentive stock options are exercisable during
continued employment or generally within 90 days of terminating employment.
Vested nonqualified stock options are exercisable until expiration.
In May 1999, the Company issued stock options under the Plan to consultants to
acquire 26,666 shares of common stock at an exercise price of $0.09 per share
which were fully vested at December 31, 1999, and expire in May 2009. The
Company recognized stock-based compensation expense of $267 related to these
stock options in 1999.
In October and December 1999, the Company issued stock options under the Plan to
consultants to acquire 230,812 shares of common stock at an exercise price of
$0.04 per share which expire in December 2009. Of these options, 30,812 shares
were vested on the date of grant. The remaining 200,000 shares vest over four
years. The Company recognized stock-based compensation expense of $924 and
$237,919 related to these stock options in 1999 and the three months ended
March 31, 2000, respectively.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (Deficit) (continued)
The following table summarizes the Company's stock option activity:
<TABLE>
<CAPTION>
Outstanding Options
-------------------
Weighted-
Shares Average
Available Number Exercise Price
for Grant of Shares
-----------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1997 (115,625 exercisable) 1,140,000 1,060,000 $0.09
Increase in shares available for grant 500,000 - -
Options granted (2,217,000) 2,217,000 0.09
Options forfeited 991,543 (991,543) 0.09
Options exercised - (8,333) 0.09
-----------------------------
Balance at December 31, 1998 (348,789 exercisable) 414,543 2,277,124 0.09
Increase in shares available for grant 4,205,686 - -
Options granted (6,841,721) 6,841,721 0.06
Options forfeited 2,599,877 (2,599,877) 0.09
Options exercised - (70,580) 0.09
-----------------------------
Balance at December 31, 1999 (692,617 exercisable) 378,385 6,448,388 0.06
Options granted (1,383,500) 1,383,500 5.22
Options forfeited 1,194,314 (1,194,314) 0.06
Options exercised - (75,249) 0.08
-----------------------------
Balance at March 31, 2000 (692,617 exercisable) 189,199 6,562,325 0.97
=============================
</TABLE>
The weighted-average remaining contractual life of options outstanding was 9.8
years, 9.6 years, and 9.3 years at December 31, 1997, 1998, and 1999,
respectively. The weighted-average fair value of options granted during 1997,
1998, and 1999 was $0.02, $0.02, and $0.01, respectively.
Pro Forma Stock-Based Compensation
Pro forma information regarding net loss is required by SFAS No. 123 and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value of the options was
estimated at the date of grant using the Minimum Value option pricing model with
risk-free interest rates ranging from 5.80% to 6.11%, a dividend yield of 0%,
and an average life of four years.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (Deficit) (continued)
For purposes of pro forma disclosures, the estimated fair value of the options
under SFAS No. 123 is recognized as expense over the options' vesting period.
The effects of applying SFAS No. 123 in the pro forma disclosure below are not
likely to be representative of the effects on reported net income or losses for
future years. If the Company elected to recognize compensation cost based on
the fair value at the date of grant for options awarded under the Plan as
prescribed by SFAS No. 123, the pro forma amounts of the Company's net loss for
the years ended 1999 and 1998 would have been as follows:
<TABLE>
<CAPTION>
December 31
1998 1999
------------------------------
<S> <C> <C>
Net loss - as reported $(7,356,425) $(5,185,053)
Net loss - pro forma (7,368,312) (5,216,919)
</TABLE>
8. Income Taxes
At December 31, 1999, the Company's net operating loss carryforward was
approximately $13 million, expiring through 2019. A valuation allowance has
been recognized to offset the related deferred tax assets due to the uncertainty
of realizing the benefit of the Company's net operating loss carryforward.
While the need for this allowance is subject to periodic review, the tax
benefits of the carryforward will be recorded when recognized as a reduction of
the Company's income tax expense.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
8. Income Taxes (continued)
Significant components of the Company's deferred tax liabilities and assets as
of December 31 are as follows:
<TABLE>
<CAPTION>
1998 1999
----------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 2,745,967 $ 4,432,412
Accrued compensation 32,559 30,518
Stock-based compensation - 66,240
----------------------------
Total deferred tax assets 2,778,526 4,529,170
Deferred tax liability:
Depreciation and amortization (9,021) (19,025)
Less valuation reserve (2,769,505) (4,510,145)
----------------------------
Net deferred taxes $ - $ -
============================
</TABLE>
9. Employee Benefit Plan
Effective May 1, 1998, the Company implemented a salary deferral 401(k) plan for
substantially all of its employees. Employees may contribute from 1% to 15% of
their compensation to the plan. The Company does not currently provide any
matching contributions.
10. Other Agreements
Software License
In 1997, the Company acquired a software license under the terms of an agreement
that grants the Company a perpetual, worldwide, nonexclusive, royalty-bearing
license to develop, market, distribute, and sublicense the licensed software.
Under the terms of the agreement, the Company made an initial payment of $50,000
that was capitalized as a deposit, and is obligated to make royalty payments
equal to 12% of net sales (as defined in the agreement), up to a maximum of $5
million. No sales were generated under the licensing agreement and the Company
discontinued using the software in 1998. Therefore, the Company wrote off the
$50,000 nonrefundable deposit to research and development expense in 1998.
<PAGE>
AtMobile.com, Inc.
Notes to Consolidated Financial Statements (continued)
10. Significant Agreements (continued)
Agreement with Consortium
The Company earned approximately 28% of its revenues for the year ended December
31, 1998, from the Universal Wireless Communications Consortium, L.L.C. (the
Consortium) under the terms of an administrative services and management
agreement (management contract). A Company officer and shareholder is the
president of the Consortium. Under the terms of the management contract, the
Company performs services to manage and direct the operations of the Consortium,
including providing dedicated employees, in exchange for a $5,000 monthly fee
plus a 10% commission on all new Consortium members' fees and reimbursement of
all direct and incidental costs. This agreement was terminated as of December
31, 1998.
11. Subsequent Events
Merger with Software.com, Inc.
On April 11, 2000, the Company completed a merger with Software.com, Inc., a
supplier of e-mail systems to Internet service providers. The parties plan to
account for the merger using the pooling-of-interest method.
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements give effect to
the combination of Software.com and AtMobile using the pooling of interests
method of accounting. The unaudited pro forma combined balance sheet assumes the
merger took place on March 31, 2000 and combines Software.com's historical
balance sheet with AtMobile's historical balance sheet at that date. The
unaudited pro forma combined statements of operations assume the merger took
place as of the beginning of each of the periods presented and combine
Software.com's and AtMobile's historical statements of operations.
This pro forma information is presented to give you a better understanding of
what the combined results of operations and financial position of Software.com
and AtMobile may have looked like had the merger occurred on an earlier date.
However, the unaudited pro forma combined statements of operations are not
necessarily indicative of operating results which would have been achieved had
the merger been consummated as of the beginning of such periods and should not
be construed as representative of future operations.
These unaudited pro forma combined financial statements should be read in
conjunction with the respective audited historical financial statements and the
notes thereto of AtMobile, which are included in this filing, and Software.com
which are included in it's annual report on Form 10-K for the year ended
December 31, 1999.
<PAGE>
SOFTWARE.COM, INC.
UNAUDITED PRO FORMA COMBINED
BALANCE SHEET
AS OF MARCH 31, 2000
(In thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(a)
Software.com AtMobile Pro Forma Combined
Historical Historical Adjustments Pro Forma
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 44,207 $ 16,004 $ - $ 60,211
Short-term investments 30,276 - - 30,276
Accounts receivables, net 28,434 463 - 28,897
Unbilled earned revenues - 153 - 153
Prepaid expenses and other current assets 1,618 83 - 1,701
-------- -------- --------- --------
Total current assets 104,535 16,703 - 121,238
Property and equipment, net 6,515 1,762 - 8,277
Deposits and other assets 547 196 - 743
Goodwill and other intangibles 7,625 - - 7,625
-------- -------- --------- --------
Total assets $119,222 $ 18,661 $ - $137,883
======== ======== ========= ========
Liabilities and shareholder's equity
Current liabilities:
Accounts payable $ 4,598 $ 588 $ - $ 5,186
Accrued liabilities 5,898 1,065 10,257 (b) 17,220
Deferred revenue 15,362 4 - 15,366
Current portion of capital lease obligations - 420 - 420
Current portion of long-term debt - 750 - 750
-------- -------- --------- --------
Total current liabilities 25,858 2,827 10,257 38,942
Capital lease obligations, less current portion - 163 - 163
Long-term debt, less current portion - 813 - 813
Shareholder's equity
Preferred stock - 30,499 (30,499) (c) -
Common stock 126,101 2,221 30,499 (c) 158,821
Deferred compensation (1,520) - - (1,520)
Accumulated comprehensive loss (32) - - (32)
Accumulated deficit (31,185) (17,862) (10,257) (b) (58,920)
-------- -------- --------- --------
Total shareholder's equity 93,364 14,858 (10,257) 97,965
-------- -------- --------- --------
Total liabilities and shareholder's equity $119,222 $ 18,661 $ - $137,883
======== ======== ========= ========
</TABLE>
<PAGE>
SOFTWARE.COM, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
(In thousands,except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
------------------------------------------------------------------------------
Software.com AtMobile Pro Forma Combined
Historical Historical Adjustments Pro Forma
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Software licenses $ 13,437 $ - $ - $ 13,437
Services 6,107 574 - 6,681
-----------------------------------------------------------------------------
Total Revenues 19,544 574 - 20,118
Cost of Revenues:
Software licenses 721 - - 721
Services 4,111 662 - 4,773
-----------------------------------------------------------------------------
Total cost of revenues 4,832 662 - 5,494
-----------------------------------------------------------------------------
Gross Profit 14,712 (88) - 14,624
Sales and marketing 6,482 885 - 7,367
Research and development 5,073 698 - 5,771
General and administration 2,176 2,466 - 4,642
Amortization of goodwill and purchased
intangible assets 423 - - 423
-----------------------------------------------------------------------------
14,154 4,049 - 18,203
-----------------------------------------------------------------------------
Income/ (loss) from operations 558 (4,137) - (3,579)
Interest and other income, net 1,085 44 26 (e) 1,155
-----------------------------------------------------------------------------
Income/ (loss) before income taxes 1,643 (4,093) 26 (2,424)
Provision for income taxes (34) - - (34)
-----------------------------------------------------------------------------
Net income/(loss) $ 1,609 $ (4,093) $ 26 $ (2,458)
=============================================================================
Basic net income (loss) per share $ 0.04 $ (0.05) (d)
========== ===========
Weighted average actual and pro forma
shares of common stock outstanding used in
computing basic net income (loss)
per share 43,338 2,869 (c) 46,207 (d)
========= ======= ===========
Diluted net income (loss) per share $ 0.03 $ (0.05) (d)
========= ===========
Weighted average actual and pro forma
shares of common stock outstanding used
in computing diluted net income (loss) 50,734 (4,527) (f) 46,207 (d)
per share ========= ======== ===========
</TABLE>
<PAGE>
SOFTWARE.COM, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
(In thousands,except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
---------------------------------------------------------------------------------
Software.com AtMobile Pro Forma Combined
Historical Historical Adjustments Pro Forma
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Software licenses $ 5,058 $ - $ - $ 5,058
Services 3,013 271 - 3,284
-----------------------------------------------------------------------------
Total Revenues 8,071 271 - 8,342
Cost of Revenues:
Software licenses 376 - - 376
Services 2,044 443 - 2,487
-----------------------------------------------------------------------------
Total cost of revenues 2,420 443 - 2,863
-----------------------------------------------------------------------------
Gross Profit 5,651 (172) - 5,479
Sales and marketing 3,560 307 - 3,867
Research and development 2,741 592 - 3,333
General and administration 1,178 471 - 1,649
-----------------------------------------------------------------------------
7,479 1,370 - 8,849
-----------------------------------------------------------------------------
Loss from operations (1,828) (1,542) - (3,370)
Interest and other income (expenses), net (157) (100) 38 (e) (219)
-----------------------------------------------------------------------------
Loss before income taxes (1,985) (1,642) 38 (3,589)
Provision for income taxes 68 - - 68
-----------------------------------------------------------------------------
Net loss (2,053) (1,642) 38 (3,657)
Accretion on redeemable convertible
preferred stock (210) - - (210)
-----------------------------------------------------------------------------
Net loss applicable to common shareholders $(2,263) $ (1,642) $ 38 $ (3,867)
=============================================================================
Basic and diluted net loss per share $ (0.08) $ (0.13) (d)
======== =========
Weighted average actual and pro forma shares
of common stock outstanding used in
computing basic and diluted net income (loss)
per share 28,749 1,544 (c) 30,293 (d)
====== ===== ========
</TABLE>
<PAGE>
SOFTWARE.COM, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
(In thousands,except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1999
--------------------------------------------------------------------
Software.com AtMobile Pro Forma Combined
Historical Historical Adjustments Pro Forma
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Software licenses $ 26,847 $ - $ - $ 26,847
Services 17,791 2,303 - 20,094
--------------------------------------------------------------------
Total Revenues 44,638 2,303 - 46,941
Cost of Revenues:
Software licenses 2,677 - - 2,677
Services 11,591 1,080 - 12,671
--------------------------------------------------------------------
Total cost of revenues 14,268 1,080 - 15,348
--------------------------------------------------------------------
Gross Profit 30,370 1,223 - 31,593
Sales and marketing 18,505 2,191 - 20,696
Research and development 14,080 1,830 - 15,910
General and administration 6,101 2,079 - 8,180
Amortization of goodwill and purchased
intangible assets 329 - - 329
Purchased in-process research and development 3,210 - - 3,210
Legal matter (200) - - (200)
--------------------------------------------------------------------
42,025 6,100 - 48,125
--------------------------------------------------------------------
Loss from operations (11,655) (4,877) - (16,532)
Interest and other income (expenses), net 1,334 (308) 76 1,102
--------------------------------------------------------------------
Loss before income taxes (10,321) (5,185) 76 (15,430)
Provision for income taxes 212 - - 212
--------------------------------------------------------------------
Net loss (10,533) (5,185) 76 (15,642)
Accretion on redeemable convertible
preferred stock (403) - - (403)
--------------------------------------------------------------------
Net loss applicable to common shareholders $ (10,936) $ (5,185) $ 76 $ (16,045)
====================================================================
Basic and diluted net loss per share $ (0.31) $ (0.43) (d)
=============== ===========
Weighted average actual and pro forma
shares of common stock outstanding used
in computing basic and diluted net income (loss)
per share 35,341 1,875 (c) 37,216 (d)
================ ======= ============
</TABLE>
<PAGE>
SOFTWARE.COM, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
(In thousands,except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
--------------------------------------------------------------------------------
Software.com AtMobile Pro Forma Combined
Historical Historical Adjustments Pro Forma
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Software licenses $ 17,462 $ - $ - $ 17,462
Services 8,157 1,520 - 9,677
------------------------------------------------------------------------------
Total Revenues 25,619 1,520 - 27,139
Cost of Revenues:
Software licenses 1,568 - - 1,568
Services 7,451 1,014 - 8,465
------------------------------------------------------------------------------
Total cost of revenues 9,019 1,014 - 10,033
------------------------------------------------------------------------------
Gross Profit 16,600 506 - 17,106
Sales and marketing 10,769 2,530 - 13,299
Research and development 8,716 3,377 - 12,093
General and administration 4,036 1,855 - 5,891
Legal matter (400) - - (400)
-----------------------------------------------------------------------------
23,121 7,762 - 30,883
------------------------------------------------------------------------------
Loss from operations (6,521) (7,256) - (13,777)
Interest and other income (expenses), net (436) (100) - (536)
------------------------------------------------------------------------------
Loss before income taxes (6,957) (7,356) - (14,313)
Provision for income taxes 446 - - 446
------------------------------------------------------------------------------
Net loss (7,403) (7,356) - (14,759)
Accretion on redeemable convertible
preferred stock (825) - - (825)
------------------------------------------------------------------------------
Net loss applicable to common shareholders $ (8,228) $ (7,356) $ - $ (15,584)
==============================================================================
Basic and diluted net loss per share $ (0.29) $ (0.53) (d)
========= =========
Weighted average actual and pro forma shares
of common stock outstanding used in
computing basic and diluted net income (loss)
per share 28,228 1,177 (c) 29,405 (d)
========== ====== =========
</TABLE>
<PAGE>
SOFTWARE,COM, INC,
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
(In thousands,except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-----------------------------------------------------------------------------
Software.com AtMobile Pro Forma Combined
Historical Historical Adjustments Pro Forma
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Software licenses $ 7,859 $ - $ - $ 7,859
Services 2,807 163 - 2,970
------------------------------------------------------------------------------
Total Revenues 10,666 163 - 10,829
Cost of Revenues:
Software licenses 689 - - 689
Services 2,675 40 - 2,715
------------------------------------------------------------------------------
Total cost of revenues 3,364 40 - 3,404
------------------------------------------------------------------------------
Gross Profit 7,302 123 - 7,425
Sales and marketing 8,607 188 - 8,795
Research and development 6,309 401 - 6,710
General and administration 3,093 412 - 3,505
Legal matter 1,000 - - 1,000
------------------------------------------------------------------------------
19,009 1,001 - 20,010
------------------------------------------------------------------------------
Loss from operations (11,707) (878) - (12,585)
Interest and other income (expenses), net 239 33 - 272
------------------------------------------------------------------------------
Loss before income taxes (11,468) (845) - (12,313)
Provision for income taxes 1 - - 1
------------------------------------------------------------------------------
Net loss (11,469) (845) - (12,314)
Accretion on redeemable convertible
preferred stock (730) - - (730)
------------------------------------------------------------------------------
Net loss applicable to common shareholders $ (12,199) $ (845) $ - $ (13,044)
==============================================================================
Basic and diluted net loss per share $ (0.44) $ (0.46) (d)
========== ==========
Weighted average actual and pro forma shares
of common stock outstanding used in
computing basic and diluted net income (loss)
per share 27,814 544 (c) 28,358 (d)
========= ===== ==========
</TABLE>
<PAGE>
SOFTWARE.COM, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(a) The unaudited pro forma combined financial statements for Software.com and
AtMobile give retroactive effect to the merger using the pooling of
interests method of accounting and, as a result, such statements are
presented as if the companies had been combined for all periods presented.
There were no material differences between the accounting policies of
Software.com and Atmobile.
(b) Reflects estimated costs to be incurred subsequent to March 31, 2000
associated with the merger of Software.com and AtMobile. These transaction
costs include legal, accounting, investment banker fees, printing and
registration expenses. Due to the non-recurring nature of these costs, they
have not been reflected in the pro forma statements of operations.
(c) Reflects the additional weighted average shares of Software.com common
stock that would have been outstanding for each period presented had the
merger taken place as of the beginning of each of the periods presented. As
a result of the merger, each outstanding share of AtMobile preferred stock
and common stock were converted into .0582 shares of Software.com no par
value common stock.
(d) Pro forma share and per share amounts are based upon the weighted average
shares outstanding during the period assuming the conversion of each
outstanding share of AtMobile preferred stock and common stock into .0582
shares of Software.com common stock. As required by accounting rules, we
have excluded additional potentially dilutive securities such as stock
options and warrants in determining pro forma diluted loss per common
share. If we had included those securities, we would have shown less of a
loss per common share.
(e) Interest expense on convertible notes payable have been excluded from pro
forma results of operations due to the assumed conversion of these notes
into preferred stock.
(f) This adjustment reflects the additional weighted average shares of
Software.com common stock that would have been outstanding had the merger
taken place as of the beginning of the period and also eliminates the
effect of common stock equivalents such as common stock options and
warrants that are included in the Software.com historical calculation of
weighted average shares outstanding in computing diluted earnings per share
as such common stock equivalents would be anti-dilutive on pro forma net
loss.
<PAGE>
INDEX TO EXHIBITS
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Exhibit
Number Description of Document
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23.1 Consent of Ernst & Young LLP, independent auditors.
