<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
February 27, 1998
-----------------
Date of Report (Date of earliest event reported)
ROGUE WAVE SOFTWARE, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-28900 93-1064214
---------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
5500 Flatiron Parkway
Boulder, CO 80301
-----------------
(Address of principal executive offices)
(303) 545-3000
--------------
(Registrant's telephone number, including area code)
<PAGE>
The undersigned registrant hereby amends its Form 8-K dated February 27,
1998 and filed on March 9, 1998 by adding Items 7(a) and 7(b).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED, PREPARED PURSUANT TO RULE
3.05 OF REGULATION S-X:
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Stingray Software, Inc.:
We have audited the accompanying balance sheet of Stingray Software, Inc.
as of December 31, 1997, and the related statements of operations, shareholders'
equity, and cash flows for the year ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Stingray Software, Inc. as
of December 31, 1997, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Raleigh, North Carolina
January 26, 1998
<PAGE>
STINGRAY SOFTWARE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------
ASSETS 1997
----
<S> <C>
Current assets:
Cash and cash equivalents...................................................... $ 806,256
Accounts receivable, trade (net of allowance for returns and
doubtful accounts of $29,000).............................................. 447,861
Prepaid advertising............................................................ 101,879
Other current assets........................................................... 34,098
----------
Total current assets.................................................... 1,390,094
Property and equipment, net....................................................... 363,486
Capitalized software.............................................................. 113,987
Organization costs................................................................ 262
----------
Total assets............................................................ $1,867,829
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................... $ 255,241
Deferred revenue............................................................... 793,776
Accrued expenses............................................................... 38,817
----------
Total current liabilities............................................... 1,087,834
Shareholders' equity:
Common stock, no par value; 10,000,000 shares authorized;
2,250,000 issued and outstanding.......................................... 15,000
Retained earnings.............................................................. 764,995
----------
Total shareholders' equity.............................................. 779,995
----------
Total liabilities and shareholders' equity.............................. $1,867,829
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STINGRAY SOFTWARE, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997
------------
<S> <C>
Net revenues.......................................... $4,452,542
----------
Expenses:
Personnel............................................ 1,769,126
Office operations.................................... 194,861
Direct product costs................................. 445,241
Marketing and advertising............................ 832,598
Provision for doubtful accounts...................... 6,117
Professional services................................ 100,931
Travel and entertainment............................. 91,238
Depreciation and amortization........................ 75,291
Miscellaneous........................................ 59,785
----------
Total expenses..................................... 3,575,188
----------
Income from operations............................. 877,354
Interest income....................................... 29,051
----------
Net income......................................... $ 906,405
==========
Basic earnings per share $ 0.40
======
Diluted earnings per share $ 0.40
======
Shares used in basic per share calculation 2,250,000
Dilutive effect of stock options 28,853
----------
Shares used in diluted per share calculation 2,278,853
==========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
STINGRAY SOFTWARE, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
EARNINGS
(ACCUMULATED
COMMON STOCK DEFICIT) TOTAL
---------------- -------------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1996............... $ 15,000 $ (410) $ 14,590
Net income................................. 906,405 906,405
Dividends paid............................. (141,000) (141,000)
---------------- -------------------- ---------------
Balance at December 31, 1997............... $ 15,000 $ 764,995 $ 779,995
================ ==================== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STINGRAY SOFTWARE, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997
-------------
<S> <C>
Cash flows from operating activities:
Net income......................................................................................... $ 906,405
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................................... 75,291
Provision for doubtful accounts................................................................. 6,117
Changes in operating assets and liabilities:
Accounts receivable........................................................................... (319,158)
Other current assets.......................................................................... (103,152)
Accounts payable.............................................................................. 192,434
Deferred revenue............................................................................. 622,872
Accrued liabilities........................................................................... (67,271)
----------
Net cash provided by operating activities................................................... 1,313,538
----------
Cash flows used in investing activities:
Purchase of software products...................................................................... (127,535)
Purchase of equipment.............................................................................. (342,447)
----------
Net cash used in investing activities....................................................... (469,982)
----------
Cash flows used in financing activities:
Payments of dividends.............................................................................. (141,000)
----------
Net increase in cash........................................................................ 702,556
Cash and cash equivalents at beginning of year....................................................... 103,700
----------
Cash and cash equivalents at end of year............................................................. $ 806,256
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STINGRAY SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS
Description of Business
Stingray Software, Inc. (the "Company") was incorporated in the State of
North Carolina on July 10, 1995. The Company designs, develops and markets
object-oriented developer tools for Windows software programmers worldwide. Its
products are designed to extend a popular development tool called Microsoft
Visual C++. During 1996, the Company entered the Java developers tool market by
offering its object-oriented tools in the form of Java class libraries that are
compatible with Microsoft Visual J++ and Symantec's Cafe product lines.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue in accordance with the provisions of AICPA
Statement of Position No. 91-1, "Software Revenue Recognition" (SOP 91-1).
Revenue from the non-exclusive licensing of off-the-shelf software products is
recognized when the software is delivered to the customer in accordance with the
terms of the contract. The Company provides customer support under its license
agreements and an appropriate portion of the license fees is deferred and
amortized over the initial support period, generally 60 days.
Revenue from recurring subscription contracts is recognized ratably over
the subscription period, which is generally twelve months. Subscription revenue
which is not yet earned is included in deferred revenue.
The Company grants its customers a 30-day money-back guarantee of
satisfaction on its software products. Accordingly, a provision for estimated
returns is recorded at the time of the sale.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is charged to
operations over the estimated useful lives of the property, using the straight-
line method.
The estimated useful lives are as follows:
Furniture and fixtures 7 years
Office equipment 5 years
Computer equipment 5 years
Expenditures for repairs and maintenance are charged to expense as
incurred. The costs of major renewals and betterments are capitalized and
depreciated over their estimated useful lives. The cost and
<PAGE>
related accumulated depreciation of the assets are removed from the accounts
upon disposition and any resulting gain or loss is reflected in operations.
The Company evaluates long-lived assets for potential impairment by
analyzing the operating results, trends and prospects for the Company, comparing
results to their competitors, and considering any other events and circumstances
which might indicate potential impairment.
Organization Costs
Organization costs of $525 are amortized by the straight-line method over
five years. Accumulated amortization was $263 at December 31, 1997.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of acquisition to be cash equivalents. Credit
card deposits-in-transit are also included in cash and cash equivalents due to
the short-term nature of these items.
Income Taxes
The Company has elected to be taxed as an S corporation for federal and
state income tax purposes. Therefore, taxable income is included in the income
tax returns of the shareholders. Accordingly, no provision for income tax
expense is reflected in the accompanying financial statements.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
value of Financial Instruments" requires the Company to disclose estimated fair
values of its financial instruments. The Company's financial instruments
consist of cash and cash equivalents and accounts receivable whose carrying
values approximate fair value because of their short maturity.
Profit Sharing
Profit sharing expense is determined as described in Note 5. The Company
accrues profit sharing expense during the year for which the expense relates.
Concentration of Credit Risk
Concentrations of credit risk that arise from financial instruments exist
for groups of counterparties when they have similar economic characteristics
that would cause their ability to meet contractual obligations to be similarly
affected by changes in economic or other conditions. The Company has no
significant exposure to any individual customer. The Company sells products and
provides services primarily to companies and institutions located throughout the
United States and generally requires no collateral. An allowance is provided in
an amount equal to the estimated returns and collection losses of accounts
receivable. The allowance is based on historical returns and collection
experience and a review of the current status of the existing receivables. The
Company maintains its cash in bank deposit accounts which, at times, exceed
federally insured limits. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Advertising Costs
Advertising costs of $794,693 during the year ended December 31, 1997, were
expensed as incurred. Additional advertising costs of $92,446 remain in other
current assets as of December 31, 1997. These items will be expensed as the
advertisements occur.
<PAGE>
Research and Development Costs
Research and development costs of approximately $94,000 during the year
ended December 31, 1997 were expensed as incurred. The Company has not
capitalized any research and development costs under Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
Be Sold, Leased, or Otherwise Marketed", because the portion of the Company's
research and development costs that would be subject to capitalization has not
been material to the results of operations.
Capitalized Software
The Company capitalizes software purchased for resale. These items are
recorded at cost and amortized on the straight-line method over a three-year
period. Accumulated amortization was $13,548 at December 31, 1997.
Computation of Net Income Per Share
Income per share is presented in accordance with the provisions of
`Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
128). SFAS 128 replaced the presentation of primary and fully diluted earnings
per share (EPS), with a presentation of basic EPS and diluted EPS. Under SFAS
128, basic EPS excludes dilution for potential common shares and is computed by
dividing income or loss available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock and resulted in the
issuance of common stock.
Accounting for Stock Based Compensation
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS No. 123"), the Company has
chosen to apply APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for its plan. Accordingly, no
compensation cost has been recognized for options granted under the plan.
However, the Company has disclosed in Note 7 the pro forma effects had
compensation cost been determined based on the fair value of the options at the
grant date.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
130, Reporting Comprehensive Income, which establishes standards for reporting
and display of comprehensive income and its components (revenue, expenses,
gains, and losses) in a full set of general-purpose financial statements. The
Company will adopt SFAS 130 in its fiscal year 1998. The Company does not expect
this new pronouncement to have a significant impact on the financial statements.
In June 1997, the FASB issued SFAS 131, Disclosure about Segments of an
Enterprise and Related Information, which changes the way public companies
report information about operating segments. SFAS 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenue. The Company will adopt SFAS
131 in its fiscal year 1998. The Company does not expect this new pronouncement
to have a significant impact on the financial statements.
In June 1997, the FASB issued SFAS 132, Employer's Disclosures about
Pensions and Other Postretirement Benefits, which standardized the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information and changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer useful. The
Company will adopt SFAS 132 in its fiscal year 1998. The Company does not
expect this new pronouncement to have a significant impact on the financial
statements.
<PAGE>
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1997:
<TABLE>
1997
----------
<S> <C>
Furniture and fixtures........................................ $ 13,305
Office equipment.............................................. 186,197
Computer equipment............................................ 246,810
--------
446,312
Less accumulated depreciation................................. 82,826
--------
$363,486
========
</TABLE>
Depreciation expense was $61,638 for the year ended December 31, 1997.
(4) LEASE OBLIGATIONS
Rent expense was $93,760 for the year ended December 31, 1997.
The Company leases its office facilities and certain equipment under
operating lease agreements expiring through November 30, 2003. Future lease
payments under noncancelable operating leases at December 31, 1997 are as
follows:
<TABLE>
Year ending December 31:
- ------------------------
<S> <C>
1998.................................................. $ 268,361
1999.................................................. 281,238
2000.................................................. 280,934
2001.................................................. 268,997
2002.................................................. 274,509
Thereafter............................................ 256,266
----------
Total minimum lease payments.......................... $1,630,305
==========
</TABLE>
(5) EMPLOYEE BENEFITS
The Company has a profit sharing plan which covers substantially all
employees. Contributions to the plan are determined by the Company's Board of
Directors and cannot exceed the amount deductible for federal income taxes.
There was no contribution to the profit sharing plan for the year ended December
31, 1997.
(6) COMMON STOCK
On March 25, 1997, the shareholders amended the Articles of Incorporation
to increase the number of shares authorized to 10,000,000 and executed a 300:1
stock split. The financial statements have been restated to reflect the effect
of the split.
(7) STOCK COMPENSATION
The Company has a stock option plan (the "Plan") whereby nonqualified and
incentive stock options are granted to key employees. Under the terms of the
Plan, options to purchase common stock are granted at an exercise price equal to
the market price of the Company's common stock on the date of grant.
<PAGE>
The Plan reserves 337,500 shares of the Company's common stock for issuance to
employees, consultants and directors of the Company. Options granted under the
Plan generally vest over four years.
Activity in the Plan for the year ended December 31, 1997 is summarized as
follows:
<TABLE>
<S> <C> <C> <C>
Weighted
Available Average
For Grant Outstanding Exercise Price
------------- ----------------- -----------------
Balance, December 31, 1996 -- --
Shares reserved for grant 337,500 --
Granted on June 10, 1997 (11,250) 11,250 $0.67
Granted on July 29, 1997 (62,450) 62,450 $0.65
Options cancelled at employee termination 5,750 (5,750) $0.65
------- ------ -----
Balance, December 31, 1997 269,550 67,950 $0.65
======= ====== =====
</TABLE>
The options granted in 1997 vest over a four-year period, 25% on each
anniversary of the grant date, and expire in 10 years. As of December 31, 1997,
none of these options were vested. The weighted average remaining contractual
life at December 31, 1997 was 9.6 years.
Had compensation cost been recognized based on the fair value of the
options at the grant dates for awards under the Plan consistent with the method
of SFAS No. 123, the Company's net income for the year ended December 31, 1997
would have been decreased to $904,283.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants during 1997. The weighted average fair value of
options granted during 1997 was $.29.
Dividend yield 0%
Risk-free interest rate 5.74%
Expected lives, in years 10
On July 29, 1997, the Company granted stock appreciation rights ("SAR's")
for 38,780 shares at an exercise price of $.65 per share. The SAR's vest over a
four-year period, 25% per year. At December 31, 1997, the Company recognized
compensation expense and accrued a liability of $28,867 for the estimated vested
value of the SAR's. All of the SAR's were outstanding as of December 31, 1997.
(8) LINE OF CREDIT
On July 3, 1997, the Company entered into a $100,000 Line of Credit
Agreement with Wachovia Bank to be used to fund general working capital as
needed. This agreement has an interest rate of prime plus one-half percent. As
of December 31, 1997, the Company has not borrowed under this line of credit.
(9) SUBSEQUENT EVENTS
On January 15, 1998, the shareholders entered into a merger agreement with
SR Acquisition Corporation ("SRA") and Rogue Wave Software, Inc. ("Rogue Wave"),
in which SRA will be merged into the Company, which will become a wholly-owned
subsidiary of Rogue Wave. The shareholders of the Company will receive shares
of Rogue Wave common stock based on an exchange ratio. The exchange ratio is
the difference between 19.99% of the outstanding shares of Rogue Wave common
stock on the date of closing less the number of shares required to satisfy
outstanding options on the Company's common stock divided by the number of
outstanding shares of the Company's common stock on the date of closing. Rogue
Wave will then assume liability for options outstanding under the Company's 1997
Stock Award Plan. This merger is scheduled to be consummated on February 28,
1998.
<PAGE>
(B) PRO FORMA FINANCIAL INFORMATION REQUIRED PURSUANT TO ARTICLE 11 OF
REGULATION S-X:
The following unaudited pro forma condensed combined financial statements
assume a business combination between Rogue Wave and Stingray accounted for on a
"pooling of interest" basis. The unaudited pro forma condensed combined
financial statements are based upon the respective historical financial
statements of Rogue Wave and Stingray and should be read in conjunction with
such historical financial statements and the notes thereto, which are
incorporated herein.
The pro forma information is presented for illustrative purposes only, and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated as presented in the
accompanying unaudited pro forma condensed combined financial information, nor
is it necessarily indicative of future operating results or financial position.
These unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
the related notes thereto of Rogue Wave and of Stingray.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(in thousands)
<TABLE>
DECEMBER 31, 1997
------------------
PRO FORMA
ASSETS ROGUE WAVE STINGRAY COMBINED
------ ---------- -------- --------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents......................................................... $ 6,750 $ 806 $ 7,556
Short-term investments............................................................ 29,603 -- 29,603
Accounts receivable, net.......................................................... 6,058 448 6,506
Prepaid expenses and other current assets......................................... 966 136 1,102
------- ------ -------
Total current assets.............................................................. 43,377 1,390 44,767
Furniture, fixtures and equipment, net............................................... 4,580 478 5,058
Other noncurrent assets, net......................................................... 2,168 0 2,168
------- ------ -------
Total assets...................................................................... $50,125 $1,868 $51,993
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................. 936 255 1,191
Accrued expenses.................................................................. 2,307 39 2,346
Deferred revenue.................................................................. 5,599 794 6,393
Current portion of long-term obligations.......................................... 184 -- 184
------- ------ -------
Total current liabilities......................................................... 9,026 1,088 10,114
Long-term obligations, less current portion.......................................... 321 -- 321
------- ------ -------
Total liabilities................................................................. 9,347 1,088 10,435
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value. Authorized 35,000 shares; issued and outstanding
10,063 shares at December 31, 1997................................................ 8 15 23
Additional paid-in capital...................................................... 36,806 -- 36,806
Retained earnings................................................................. 3,974 765 4,739
Cumulative translation adjustment................................................. (10) -- (10)
------- ------ -------
Total stockholders' equity........................................................ 40,778 780 41,558
------- ------ -------
Total liabilities and stockholders' equity........................................ $50,125 $1,868 $51,993
======= ====== =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Year ended September 30, 1995
------------------------------
<TABLE>
Pro forma
Rogue Wave STINGRAY Combined
------------------ ----------------- ----------------
Revenue:
<S> <C> <C> <C>
License revenue 10,417 65 $10,482
Service and maintenance revenue 1,520 - 1,520
------- ----- -------
Total revenue 11,937 65 12,002
------- ----- -------
Cost of revenue:
Cost of license revenue 1,048 11 1,059
Cost of service and maintenance revenue 1,123 - 1,123
------- ----- -------
Total cost of revenue 2,171 11 2,182
------- ----- -------
Gross profit 9,766 54 9,820
------- ----- -------
Operating expenses:
Product development 3,204 7 3,211
Sales and marketing 4,880 11 4,891
General and administrative 1,487 11 1,498
------- ----- -------
Total operating expenses 9,571 29 9,600
------- ----- -------
Income from operations 195 25 220
Other expense net (10) - (10)
------- ----- -------
Income before income taxes 185 25 210
Income tax expense 106 - 106
------- ----- -------
Net income $ 79 25 $ 104
======= ===== =======
Basic earnings per share $0.02 $0.03 $0.03
======= ===== =======
Diluted earnings per share $0.02 $0.03 $0.02
======= ===== =======
Shares used in basic per share calculation 3,342 787 4,129
Shares used in diluted per share calculation 4,154 787 4,941
See accompanying notes to unaudited pro forma condensed combined financial statements.
</TABLE>
<PAGE>
ROGUE WAVE SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended
September 30, 1996 Pro forma
------------------ ----------------
Rogue Wave STINGRAY Combined
------------------ ----------------- ----------------
<S> <C> <C> <C>
Revenue:
License revenue..... $14,986 $1,273 $16,259
Service and
maintenance revenue 3,859 120 3,979
------- ------ -------
Total revenue..... 18,845 1,393 20,238
------- ------ -------
Cost of revenue:
Cost of license
revenue............ 1,276 216 1,492
Cost of service and
maintenance revenue 1,663 -- 1,663
------- ------ -------
Total cost of
revenue.......... 2,939 216 3,155
------- ------ -------
Gross profit...... 15,906 1,177 17,083
------- ------ -------
Operating expenses:
Product development. 5,548 534 6,082
Sales and marketing. 8,234 364 8,598
General and
administrative..... 2,204 275 2,479
------- ------ -------
Total operating
expenses......... 15,986 1,173 17,159
------- ------ -------
Income (loss)
from operations.. (80) 4 (76)
Other income net..... 91 9 100
------- ------ -------
Income before
income taxes..... 11 13 24
Income tax benefit... (24) -- (24)
------- ------ -------
Net income........ $ 35 13 48
======= ====== =======
Basic earnings per
share............... $0.01 $0.01 $0.01
======= ====== =======
Diluted earnings per
share............... $0.01 $0.01 $0.01
======= ====== =======
Shares used in basic
per share
calculation......... 3,425 1,652 5,077
Shares used in
diluted per share
calculation......... 5,941 1,652 7,593
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended
September 30, 1997 Pro forma
-------------------- ------------------
Rogue Wave STINGRAY Combined
-------------------- -------------------- ------------------
<S> <C> <C> <C>
Revenue:
License revenue........ $21,351 $3,774 $25,125
Service and
maintenance revenue... 8,815 755 9,570
------- ------ -------
Total revenue........ 30,166 4,529 34,695
------- ------ -------
Cost of revenue:
Cost of license revenue 1,624 367 1,991
Cost of service and
maintenance revenue... 2,918 78 2,996
------- ------ -------
Total cost of revenue 4,542 445 4,987
------- ------ -------
Gross profit......... 25,624 4,084 29,708
------- ------ -------
Operating expenses:
Product development.... 6,496 1,166 7,662
Sales and marketing.... 13,187 1,436 14,623
General and
administrative........ 3,059 604 3,663
------- ------ -------
Total operating
expenses............ 22,742 3,206 25,948
------- ------ -------
Income (loss) from
operations.......... 2,882 878 3,760
Other income (expense),
net.................... 1,375 28 1,403
------- ------ -------
Income before income
taxes............... 4,257 906 5,163
Income tax expense
(benefit).............. 1,459 -- 1,459
------- ------ -------
Net income........... $ 2,798 906 $ 3,704
======= ====== =======
Basic earnings per share $0.48 $0.54 $0.49
======= ====== =======
Diluted earnings per
share.................. $0.32 $0.54 $0.36
======= ====== =======
Shares used in basic
per share calculation.. 5,844 1,652 7,496
Shares used in diluted
per share calculation.. 8,747 1,673 10,420
Pro forma net income data (unaudited):
Income before income
taxes, as reported.... $ 906 $ 5,163
Pro forma income tax
expense............... 317 1,776
------ -------
Pro forma net income.. $ 589 $ 3,387
====== =======
Pro forma diluted
earnings per share
(unaudited)............ $0.35 $0.33
====== =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER
31, 1997 Pro forma
------------------ ---------------
Rogue Wave STINGRAY Combined
------------------ --------------- ---------------
<S> <C> <C> <C>
Revenue:
License revenue.... $5,971 1,386 $ 7,357
Service and
maintenance
revenue........... 3,183 318 3,501
------ ------ -------
Total revenue.... 9,154 1,704 10,858
------ ------ -------
Cost of revenue:
Cost of license
revenue........... 408 131 539
Cost of service
and maintenance
revenue........... 901 32 933
------ ------ -------
Total cost of
revenue......... 1,309 163 1,472
------ ------ -------
Gross profit..... 7,845 1,541 9,386
------ ------ -------
Operating expenses:
Product development 1,938 367 2,305
Sales and marketing 3,911 526 4,437
General and
administrative.... 807 255 1,062
------ ------ -------
Total operating
expenses........ 6,656 1,148 7,804
------ ------ -------
Income from
operations...... 1,189 393 1,582
Other income net.... 584 12 596
------ ------ -------
Income before
income taxes.... 1,773 405 2,178
Income tax expense . 621 -- 621
------ ------ -------
Net income....... 1,152 405 $ 1,557
====== ====== =======
Basic earnings per
share.............. $0.14 $0.25 $0.16
====== ====== =======
Diluted earnings
per share.......... $0.13 $0.24 $0.14
====== ====== =======
Shares used in
basic per share
calculation........ 8,388 1,652 10,040
Shares used in
diluted per share
calculation........ 9,160 1,701 10,861
Pro forma net income data (unaudited):
Income before
income taxes, as
reported.......... $ 405 $ 2,178
Pro forma income
tax expense....... 142 763
------ -------
Pro forma net
income........... $ 263 $ 1,415
====== =======
Pro forma diluted
earnings per share
(unaudited)........ $0.15 $0.13
====== =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. On February 28, 1998, Rogue Wave Software, Inc. (the Company) acquired all
of the outstanding common stock of Stingray Software, Inc. (Stingray) in a
business combination accounted for as a pooling of interests. In connection
with the merger, the Company issued 1,652 shares based on an exchange rate of
0.73 shares of Rogue Wave Common Stock for each outstanding share of Stingray
Common Stock. All share and per share information has been restated for the
issuance of Rogue Wave common shares in the merger.
2. The accompanying Unaudited Pro Forma Condensed Combined Balance Sheet
include the accounts of Rogue Wave and Stingray as of December 31, 1997. The
accompanying Unaudited Pro Forma Condensed Combined Statements of Operations
include the accounts of Rogue Wave for each of the years ended September 30,
1995, 1996 and 1997 and the three months ended December 31, 1997 and the
accounts of Stingray for each of the years ended December 31, 1995, 1996, and
1997 and the three months ended December 31, 1997.
3. There were no material transactions between Rogue Wave and Stingray during
any period presented. In addition, it is currently expected that the impact of
any conforming accounting policies will not be material. Certain
reclassifications have been made to the Stingray historical financial statements
to conform to the Company's financial statement presentation.
4. To properly reflect the Company's pro forma net income, the net income of
Stingray which was not subject to income taxes due to their S corporation
status, has been tax effected and included as a pro forma adjustment to income
tax expense in the accompanying pro forma condensed combined statements of
operations. This adjustment was computed as if Stingray had been a taxable
entity subject to federal and state income taxes for the year and three months
ended December 31, 1997, all other periods have not been adjusted due to lack of
materiality.
(c) EXHIBITS
2.1* Agreement and Plan of Merger and Reorganization among Rogue Wave
Software, Inc., a Delaware corporation, SR Acquisition Corp., a North
Carolina corporation, Stingray Software, Inc., a North Carolina corporation
and the shareholders of Stingray Software, Inc., dated as of January 19,
1998.
2.2* Articles of Merger and Plan of Merger dated February 27, 1998, filed
with the Secretary of State of North Carolina on February 27, 1998.
4.1* Form of Registration Rights Agreement between Rogue Wave Software, Inc.
and the former shareholders of Stingray Software, Inc.
23.1 Consent of Coopers & Lybrand L.L.P.
_______________
* Incorporated herein by reference to the exhibit of the same number to the
Registrant's Form 8-K dated February 27, 1998 and filed on March 9, 1998
<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.
ROGUE WAVE SOFTWARE, INC.
Dated: May 12, 1998 By: /s/ Michael Scally
------------ ----------------------
Michael Scally
President and Chief Operating Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-----------------------
2.1* Agreement and Plan of Merger and Reorganization among Rogue Wave
Software, Inc., a Delaware corporation, SR Acquisition Corp., a North
Carolina corporation, Stingray Software, Inc., a North Carolina
corporation and the shareholders of Stingray Software, Inc., dated as
of January 19, 1998.
2.2* Articles of Merger and Plan of Merger dated February 27, 1998,
filed with the Secretary of State of North Carolina on February 27,
1998.
4.1* Form of Registration Rights Agreement between Rogue Wave Software,
Inc. and the former shareholders of Stingray Software, Inc.
23.1 Consent of Coopers & Lybrand L.L.P.
______________________
* Incorporated herein by reference to the exhibit of the same number to the
Registrant's Form 8-K dated February 27, 1998 and filed on March 9, 1998
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the in corporation by reference in the registration statements of
Rogue Wave Software, Inc. an subsidiaries on Forms S-8 (File Nos. 333-16749,
333-48485, and 333-48525) of our report dated January 26, 1998, on our audit of
the financial statements of Stringray Software, Inc. as of December 31, 1997 and
for the year then ended which report is included in this Current Report on Form
8-K/A.
Raleigh, North Carolina
May 12, 1998
