<PAGE>
As filed with the Securities and Exchange Commission on November 21, 2000
Registration Statement No. 333-45950
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 2
To
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Plumtree Software, Inc.
(Exact name of Registrant as specified in its charter)
<TABLE>
<C> <S> <C>
California
(prior to reincorporation)
Delaware 7372 94-3249110
(after reincorporation) (Primary Standard Industrial (I.R.S. Employer
(State or Other Jurisdiction of Classification Code Number) Identification Number)
Incorporation or Organization)
</TABLE>
---------------
500 Sansome Street
San Francisco, CA 94111
(415) 263-8900
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------
John Kunze
President and Chief Executive Officer
Plumtree Software, Inc.
500 Sansome Street
San Francisco, CA 94111
(415) 263-8900
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------
Copies to:
<TABLE>
<S> <C>
Gregory C. Smith, Esq. Stanton D. Wong, Esq.
Keith L. Belknap, Jr., Esq. Paul C. McCoy, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Jennifer M. Lurie, Esq.
525 University Avenue, Suite 220 Pillsbury Madison & Sutro LLP
Palo Alto, California 94301 P.O. Box 7880
(650) 470-4500 San Francisco, California 94120-7880
(415) 983-1000
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file an amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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--------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 2000
5,000,000 Shares
[LOGO]
Common Stock
--------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$13.00 and $15.00 per share. We have applied to list our common stock on The
Nasdaq Stock Market's National Market under the symbol PLUM.
The underwriters have an option to purchase a maximum of 750,000 additional
shares to cover over-allotments of shares.
Investing in the common stock involves risks. See "Risk Factors" beginning
on page 6.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds To
Public Commissions Plumtree
-------------- -------------- --------------
<S> <C> <C> <C>
Per Share........................... $ $ $
Total............................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
Robertson Stephens
Dain Rauscher Wessels
The date of this prospectus is , 2000.
<PAGE>
[Near the center of the inside cover page is a view of a Plumtree Corporate
Portal computer screen snapshot. Several arrows are pointing towards different
elements of the screen snapshot. These arrows include call-out captions
describing the elements pointed out in the screen snapshot: "Search the
Plumtree Document Directory, a directory of Web pages, e-mail messages and
documents assembled from disparate systems and key Internet sites"; "See what
is happening in different departments and collaborate on key topics by visiting
Plumtree Portal Communities"; "Embed headlines from the directory on different
topics in a personalized portal page. Each headline is a link to a document
stored in an internal system or on the Internet."; "Embed a Plumtree Portal
Gadget for querying a customer database."; "Embed a view of a calendar or a
chart of inventory as a Plumtree Portal Gadget." At the bottom of the page is
the text "The Plumtree Corporate Portal: A Personalized Portal Page." Near the
center of the outside cover page is a graphic demonstrating how the corporate
portal makes key information and services available to the average user by
embedding plug-in portal components known as gadgets.
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note About Forward-Looking Statements............................ 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 33
</TABLE>
<TABLE>
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Page
----
<S> <C>
Management................................................................. 46
Certain Relationships and Related Transactions............................. 54
Principal Stockholders..................................................... 56
Description of Capital Stock............................................... 58
Shares Eligible for Future Sale............................................ 60
Underwriting............................................................... 61
Notice to Canadian Residents............................................... 64
Legal Matters.............................................................. 65
Experts.................................................................... 65
Available Information...................................................... 65
Index to Consolidated Financial Statements................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Dealer Prospectus Delivery Obligation
Until , 2000 (25 days after the commencement of the offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
i
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the securities being sold in this
offering, together with the consolidated financial statements and related notes
appearing elsewhere in this prospectus.
Plumtree Software, Inc.
We provide infrastructure software that brings together a wide range of
software applications, information and online services in a comprehensive Web
destination that we refer to as a corporate portal. The Plumtree Corporate
Portal gives employees, partners and customers a single, personalized
destination for the key information and services they need to do business with
an organization. Our product allows our customers and alliance members to
integrate electronic resources from other corporate systems and the Internet.
By combining these resources in a Web experience that virtually everyone can
understand, our software enables organizations to deliver new services to broad
audiences quickly, create greater returns on traditional software applications
and project a focused view of the business for faster growth and better
customer and partner support. We have enhanced our product's features through
alliances with over 90 technology vendors and systems integrators. We have sold
our software to more than 100 customers, with licenses for 10,000 or more users
at Andersen Consulting LLP, BP International Limited, Ford Motor Company, Hy-
Vee, Inc., Ketchum, Kmart Corporation, Motorola, Inc. and The Procter & Gamble
Company.
The Internet has led to a proliferation of new online services, and opened
software applications previously reserved for specialists to broader audiences.
In response to these changes in the business landscape, organizations are
investing substantial resources in Internet infrastructure software.
International Data Corporation, or IDC, estimates that the market for Internet
infrastructure software will grow at a compounded annual growth rate of 31%
from an estimated $9.4 billion in 1998 to $36.2 billion in 2003. To compete
effectively in this information-intensive environment, organizations are
seeking to give new classes of employees a complete view of the business, and
to provide customers and partners with a secure gateway to proprietary
information and services. Organizations' attempts to develop their own
solutions often fail to keep pace with the volume and variety of electronic
resources typically integrated in a corporate portal. Established software
vendors are Web-enabling their own applications, but are often limited by
architectures designed to process one type of data, and their applications
typically compete with other applications integrated in a portal. Emerging
software vendors may lack the product capabilities and partner support
necessary to offer a portal to a wide range of information and services.
The Plumtree Corporate Portal is designed to bring together in a single Web
destination a broad range of electronic resources for the broadest possible
audience. The portal assembles information and services from disparate systems
in a personalized page, and organizes documents in an enterprise-wide
directory. We designed our product to support enterprise-wide deployments to
hundreds of thousands of users, integrating thousands of different sources of
information and services. Our software platform is based on an open network
architecture for sharing the resources assembled by one portal with other
businesses, platforms and devices.
Our objective is to lead the corporate portal market with the most
comprehensive, innovative portal technology, the broadest alliance network and
the most satisfied customers. To accomplish this, we intend to:
. Establish our product as a platform for integrating all of an
organization's existing resources on the Internet, and for delivering new
services to that organization.
. Build new alliances with technology vendors and systems integrators that
can extend our platform to incorporate new types of information and
services.
. Increase our market share among industry-leading customers, increasing
the number of users of our product.
. Capitalize on a network effect, selling our software to new customers
that seek to exchange information and services with our existing
customers.
For the year ended December 31, 1999, we incurred net losses of
approximately $7.0 million, and for the nine months ended September 30, 2000,
we incurred net losses of approximately $14.6 million. As of September 30,
2000, we had an accumulated deficit of approximately $27.0 million.
Our principal executive offices are located at 500 Sansome Street, San
Francisco, California 94111, and our telephone number is 415-263-8900. Our Web
site is www.plumtree.com. The information on our Web site does not constitute
part of this prospectus.
3
<PAGE>
The Offering
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<C> <S>
Common stock offered....................... 5,000,000 shares
Common stock to be outstanding after the 28,985,754 shares
offering..................................
Use of proceeds............................ For working capital and other
general corporate purposes. In
addition, we may use a portion of
the net proceeds to acquire
complementary products,
technologies or businesses.
Proposed Nasdaq National Market symbol..... PLUM
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on the number of securities outstanding as of September 30, 2000, and
excludes:
. 5,096,414 shares issuable upon exercise of options outstanding as of
September 30, 2000 at a weighted average exercise price of $1.71 per
share;
. 11,285,240 additional shares available for future issuance under our
stock option plans;
. 1,000,000 shares available for future issuance under our employee stock
purchase plan; and
. 264,448 shares issuable upon exercise of warrants outstanding as of
September 30, 2000 at a weighted average exercise price of $2.23 per
share.
----------------
Unless otherwise indicated, information in this prospectus assumes:
. our reincorporation into the State of Delaware;
. the conversion of all outstanding shares of preferred stock into shares
of common stock upon completion of this offering; and
. no exercise of the underwriters' over-allotment option.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
---------------- -----------------
1998 1999 1999 2000
------- ------- ------- --------
(unaudited)
<S> <C> <C> <C> <C>
Consolidated Statements of Operations
Data:
Revenue.................................. $ 181 $ 3,354 $ 1,407 $ 17,531
Total cost of revenue.................... 19 1,208 358 7,514
Total operating expenses................. 3,972 9,025 5,947 24,873
Loss from operations..................... (3,810) (6,879) (4,898) (14,856)
Net loss................................. (3,782) (7,030) (5,035) (14,614)
------- ------- ------- --------
Net loss per common share, basic and
diluted................................. $ (1.08) $ (1.78) $ (1.33) $ (2.76)
======= ======= ======= ========
Pro forma net loss per common share,
basic and diluted (unaudited)........... $ (0.51) $ (0.70)
======= ========
Weighted average common shares
outstanding, basic and diluted.......... 3,509 3,944 3,777 5,298
======= ======= ======= ========
Pro forma weighted average shares
outstanding, basic and diluted
(unaudited)............................. 13,843 20,765
======= ========
</TABLE>
<TABLE>
<CAPTION>
September 30, 2000
-----------------------------------
Pro Forma
Actual Pro Forma As Adjusted
----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................. $15,666 $15,666 $79,266
Total assets.............................. 31,751 31,751 95,351
Long-term obligations, net of current
portion.................................. 420 420 420
Total stockholders' equity ............... 15,398 15,398 78,998
</TABLE>
----------------
The balance sheet data is shown on a pro forma basis to give effect to:
. the conversion of all outstanding shares of preferred stock into shares
of common stock upon completion of this offering.
The balance sheet data is shown on a pro forma as adjusted basis to give
effect to:
. the sale of the 5,000,000 shares of common stock that we are offering
under this prospectus at an assumed initial public offering price of
$14.00 per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses.
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below and the other
information in this prospectus before deciding to invest in shares of our
common stock. If any of the following risks actually occur, our business could
be harmed, the trading price of our common stock could decline, and you may
lose all or part of your investment.
Risks Relating to Our Business
We have a short operating history, which limits your ability to evaluate our
business and operating results and may increase the risk of your investment.
Our short operating history makes the evaluation of our business operations
and our prospects difficult. We were founded in 1996 and began offering version
1.0 of our corporate portal product in March 1998. Version 4.0 of our product
has only recently been released. We cannot predict whether this version of our
product will be successful. We have derived all of our revenue from licensing
our Plumtree Corporate Portal product and related services. Before buying our
common stock, you should consider the risks and difficulties frequently
encountered by early stage companies such as ours in new and rapidly evolving
markets, particularly those companies whose businesses depend on the Internet.
These risks and difficulties include:
. potential fluctuations in operating results and uncertain growth rates;
. limited market acceptance of our products;
. concentration of our revenue in a single product;
. our need to expand our direct sales forces and indirect sales channels;
. our need to manage rapidly expanding operations; and
. our need to attract and train qualified personnel.
We have a history of losses, we expect future losses, and we may never achieve
or sustain profitability.
We have incurred substantial net losses in each fiscal quarter since our
inception in July 1996 and do not expect to achieve profitability in the
foreseeable future. For the year ended December 31, 1999, we incurred net
losses of approximately $7.0 million, and for the nine months ended September
30, 2000, we incurred net losses of approximately $14.6 million. As of
September 30, 2000, we had an accumulated deficit of approximately $27.0
million.
Given the level of our planned operating and capital expenditures, we expect
to incur losses and negative cash flows for the foreseeable future. If our
revenue does not rapidly increase or if our expenses increase at a greater pace
than our revenue, we will never become profitable. Our ability to increase
revenue and achieve profitability also will be affected by other risks and
uncertainties described in this section and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The failure to
attain profitability will have a harmful effect on our business and the value
of our common stock.
Because our quarterly operating results are volatile and difficult to predict,
our operating results in one or more future periods are likely to fluctuate
significantly, and if we fail to meet the expectations of securities analysts
or investors, our stock price could decline significantly.
As a result of our limited operating history and the emerging nature of the
market in which we compete, our quarterly operating results have varied
significantly in the past and are likely to vary significantly in the future.
Our success is dependent upon our ability to enter into and maintain strategic
relationships with customers and to develop and maintain volume usage of our
product by our customers. Our license revenue is comprised substantially of
one-time license fees. As a result, we will be required to regularly and
increasingly sign additional customers with substantial license fees on a
timely basis to realize comparable or increased license revenue.
6
<PAGE>
Our services and maintenance revenue historically has been comprised almost
entirely of installation, modification and consulting fees and support and
maintenance fees. Our services revenue has lower gross margin than our license
revenue. If the percentage of our services revenue increases compared to the
percentage of license revenue, our profitability would be impaired. Our
maintenance contracts are generally renewable for 12-month periods. If our
customers elect not to renew their maintenance contracts, our revenue could
decline.
We expect to continue to experience significant fluctuations in our results
of operations due to a variety of factors, some of which are outside of our
control, including:
. our proposed expansion into international markets;
. introduction of products and services and enhancements by us and our
competitors;
. competitive factors that affect our pricing;
. the timing and magnitude of our capital expenditures, including costs
relating to the proposed expansion of our operations; and
. the size and timing of customer orders and deployments, particularly
large orders and deployments, some of which may represent more than 10%
of total revenue during a particular quarter.
As a result of these factors and other factors described in this prospectus,
we believe that quarter-to-quarter comparisons of our revenue and operating
results are not necessarily meaningful, and that these comparisons may not be
accurate indicators of future performance. Because our staffing and operating
expenses are based on anticipated revenue levels, and because a high percentage
of our costs are fixed, small variations in the timing of the recognition of
specific revenue could cause significant variations in operating results from
quarter to quarter. If we are unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall, any significant revenue
shortfall would likely have an immediate negative effect on our operating
results. If our operating results in one or more future quarters fail to meet
the expectations of securities analysts or investors, we would expect to
experience an immediate and significant decline in the trading price of our
stock.
Because our quarterly results often depend on a small number of large orders,
if we were unable to complete one or more of these orders during any future
period, our quarterly operating results and the trading price of our stock
could be harmed.
We derive a significant portion of our software license revenue in each
quarter from a small number of relatively large orders. For example, in seven
of the last seven quarters for the period ended September 30, 2000, we had at
least one customer that accounted for 10% or more of the total revenue for the
quarter. In 1999, AG Consulting Inc., Ministry of Small Business, Tourism and
Culture, VHA Inc., Optiva Corporation, Compaq Computer Corporation, Wm. Wrigley
Jr. Company, Alliance Data Systems Corporation, Allegheny Ludlum Corporation,
St. Onge Company, SCT Corporation, Electronic Data Systems Corporation, AT&T
Solutions, ISD Admin, Online Systems, Staples, Inc. and Chevron Corp. each
accounted for 10% or more of the total revenue during a particular quarter. In
2000, more than 10% of revenue for the first quarter was attributable to
Motorola, Inc. and in the second and third quarters to Ford Motor Company. We
consider The Procter & Gamble Company also to be a key customer. Our operating
results could be harmed if we were unable to complete one or more substantial
license sales in any future period.
Our business currently depends on revenue related to the Plumtree Corporate
Portal, and if the market does not increasingly accept this product and related
components, our revenue may decline.
We generate our revenue from licenses and services related to the product
comprising the Plumtree Corporate Portal, including the Plumtree Portal
Gadgets, the building blocks from which users assemble a personalized page. We
expect that this product, and future upgraded versions of this product, will
continue to account for a large portion of our revenue in the foreseeable
future. Our future financial performance will depend on increasing acceptance
of our current product and on the successful development, introduction and
7
<PAGE>
customer acceptance of new and enhanced versions of our product. If we fail to
deliver the enhancements to our product that customers want, demand for our
product and our revenue may decline.
Our sales and implementation cycles are long, unpredictable and subject to
seasonal fluctuations, making it difficult to accurately forecast our revenue
and causing it to fluctuate.
As a result of our limited operating history and the emerging nature of the
market in which we compete, the typical sales cycle of our product is long and
unpredictable. A successful sales cycle may last six months or longer, and
typically includes presentations to both business and technical decision
makers, often requiring us to expend substantial resources educating
prospective customers about our software. The implementation of our product can
be time-consuming and often involves a significant commitment of resources by
prospective customers. Our sales cycle is also affected by a number of other
factors over which we have little or no control, including the business
conditions of each prospective customer and seasonal fluctuations as a result
of customers' fiscal year budgeting and purchasing cycles, any of which could
harm our operating results.
We depend on technology licensed from third-party software developers,
including Verity, Inc., and if we fail to maintain these license arrangements,
this could delay or impair our ability to develop and sell our product and
services.
We incorporate into our product third-party software that enables the
functionality of our product. For example, we license our search engine, the
major third-party software product integrated into the Plumtree Corporate
Portal, from Verity. This third-party software may not continue to be available
on commercially reasonable terms or with acceptable levels of support, or at
all. Some of these third-party software developers, including Verity, offer
products that compete with the Plumtree Corporate Portal. Our loss of or
inability to maintain these software licenses could delay or impair the sale of
our product and services until equivalent software, if available, is
identified, licensed and integrated, which could adversely affect our business
and impair our future growth.
We depend on our direct sales force to sell our product and if we fail to hire
and train new sales personnel, our future growth will be constrained.
We primarily sell our product through our direct sales force and we expect
to continue to do so in the future. Our ability to achieve revenue growth in
the future will depend on our ability to recruit and train sufficient direct
sales personnel. We have in the past and may in the future experience
difficulty in recruiting qualified sales personnel. Our inability to rapidly
and effectively expand our direct sales force could impair our growth and cause
our stock price to fall.
If our alliances with systems integrators and resellers are discontinued, it
may be more difficult for us to maintain certain features of our product or
reach particular customers or markets.
We have relationships with over 60 systems integrators and resellers, such
as PricewaterhouseCoopers and Compaq Computer Corporation, to provide our
customers with rapid and comprehensive deployment of the Plumtree Corporate
Portal. Although our relationships are a key factor in our overall business
strategy, our alliance members may not view their relationships with us as
significant to their own businesses. A number of our competitors may have
stronger relationships with these systems integrators and, as a result, these
systems integrators may be more likely to recommend competitors' products and
services. Our arrangements generally rely on voluntary efforts of these systems
integrators and resellers. In addition, our agreements with these entities may
be terminated by either party with limited notice. While we currently invest
significant resources to develop these indirect sales channels and plan to
continue to do so, we may not succeed in establishing channels that can market
our product effectively and provide timely and cost-effective customer support
and services. If we are unable to maintain our existing relationships or fail
to enter into additional relationships, our ability to increase our sales and
reduce expenses will be harmed, and we could also lose anticipated customer
introductions and co-marketing benefits. Even if we succeed in establishing
these relationships, they may not result in additional customers or revenues.
8
<PAGE>
If our alliances with technology providers are discontinued, our future growth
will be impaired.
We have relationships with technology providers, such as Microsoft
Corporation and Documentum, Inc., to provide our customers with support of many
applications and services. Although these relationships are a key factor in our
overall business strategy, our alliance members may not view their
relationships with us as significant to their own businesses. A number of our
competitors may have stronger relationships with these technology and content
vendors, and, as a result, these alliance members may be more likely to support
our competitors' products and services. Our arrangements generally do not
establish minimum performance requirements but instead rely on voluntary
efforts. In addition, most of our agreements with these entities may be
terminated by either party with limited notice. We currently invest significant
resources to develop these alliances and plan to continue to do so. If we are
unable to maintain our existing relationships or fail to enter into additional
relationships, our ability to increase our sales could be harmed, and we could
also lose anticipated customer introductions and co-marketing benefits. Even if
we succeed in establishing these relationships, they may not result in
additional customers or revenue.
If our software contains errors, we may lose customers or experience reduced
market acceptance of our product.
Our software product is inherently complex and may contain defects and
errors that are detected only when the product is in use. The latest version of
our product, version 4.0, has only recently been released, which increases the
risk of undetected defects or errors. In addition, third-party software that we
incorporate into our product has contained, and will in the future contain,
defects or errors. Some of our Plumtree Corporate Portal customers require, or
may require, enhanced modifications of our software for their specific needs.
Modifications may increase the likelihood of undetected defects or errors.
Further, we often render implementation, consulting and other technical
services, the performance of which typically involves working with
sophisticated software, computing and networking systems. As a result of
product defects or failure to meet project milestones for services, we may lose
customers, customers may not implement our products more broadly within their
organization and we may experience product liability claims and reduced market
acceptance of our product.
If we are unable to develop products that are compatible and can be integrated
with a large variety of hardware, software, database and networking systems,
our ability to attract and retain customers will be harmed.
The Plumtree Corporate Portal is designed to support a broad set of software
applications and online services through Plumtree Portal Gadgets. To gain broad
market acceptance, we believe that we must support an increased number of
applications and services in the future. If the underlying applications and
services are upgraded or changed, maintaining this support may be difficult or
impossible. If we are unable to support an increased number of applications and
services in the future or if we are unable to maintain compatibility with these
systems, our ability to attract and retain customers will be harmed.
If we do not expand our customer base, we may never become profitable and our
stock price will likely decline.
The market for corporate portal software is newly emerging and there can be
no assurance that additional customers will adopt our product. Accordingly, we
cannot accurately estimate the potential demand for our product and services.
We believe that market acceptance of our product and services depends
principally on our ability to:
. effectively market the Plumtree Corporate Portal, related components and
services;
. hire, train and retain a sufficient number of qualified sales and
marketing personnel;
. provide high-quality and reliable customer support for our product;
9
<PAGE>
. distribute and price our product and services in a manner that is more
appealing to customers than that of our competitors;
. develop a favorable reputation among our customers, potential customers
and participants in the software industry; and
. withstand downturns in general economic conditions or conditions that
slow corporate spending on software products.
Some of these factors are beyond our control. If our customer base does not
expand, we may never become profitable.
Customers in a preliminary phase of implementing our product may not proceed on
a timely basis or at all.
Some of our customers, including Ford Motor Company, Kmart Corporation and
The Procter & Gamble Company, are currently in a pre-deployment or preliminary
stage of implementing our product and may encounter delays or other problems in
introducing it. These delays or other problems may result from matters specific
to the customer and unrelated to us or our product. A customer's decision not
to implement our product, or a delay in implementation, could result in a delay
or loss in related revenue or otherwise harm our business and prospects. We
cannot predict when any customer that is currently in a pilot or preliminary
phase will implement broader use of our product.
Security breaches with our software may lead to unexpected capital expenditures
and cause a loss in revenue and reputation.
Our product is designed to facilitate the secure transmission of sensitive
business information to specified parties outside the business over the
Internet. This includes product information, competitive intelligence, sales
and inventory data, sales reports and corporate e-mail. As a result, the
reputation of our software product for providing security is vital to its
acceptance by customers. Problems caused by security breaches could result in
loss of or delay in revenue, loss of market share, failure to achieve market
acceptance, diversion of research and development resources, harm to our
reputation, customer claims against us, increased insurance costs or increased
service and warranty costs.
Capacity restrictions of our software could reduce the demand for and use of
our product, which may limit our ability to generate license revenue.
Our product is designed to support enterprise-wide deployments with hundreds
of thousands of users. However, the amount of information and the number of
concurrent users that our product can support in any particular deployment is
uncertain. If the capacity boundaries are reached, our customers may be
dissatisfied with our product, and we may lose customers or fail to gain new
customers.
If we are unable to retain key personnel, our growth will be limited.
We are highly dependent on certain members of our management staff,
including, without limitation, our chief executive officer, John Kunze, our
vice president of engineering, John Hogan, and our vice president of worldwide
field operations, Jim Flatley. The loss of one or more of these officers might
impede the achievement of our business objectives.
If we are unable to hire and integrate new personnel, our operations will be
disrupted and our growth impaired.
Recruiting and retaining qualified technical personnel is critical to our
success. If our business grows, we will also need to recruit a significant
number of management, technical and other personnel for our business.
Competition for employees in our industry is intense, particularly in the
Silicon Valley region of Northern
10
<PAGE>
California where our principal offices are located. If we are not able to
continue to attract and retain skilled and experienced personnel on acceptable
terms, our growth may be limited due to our limited capacity to develop and
market our product. We are currently recruiting personnel for technical,
marketing, sales and administrative functions. Once hired, these people will
need time to familiarize themselves with Plumtree and our business practices.
We expect to continue to hire additional employees in order to grow our
business. The integration of new personnel has resulted and will continue to
result in some disruption to our ongoing operations. Our failure to complete
this integration in an efficient manner could harm our business and prospects.
Managing the growth of our operations will continue to strain managerial,
operational and financial resources.
The planned expansion of our operations will place a significant strain on
our management, financial controls, operations systems, personnel and other
resources. Our ability to manage our future growth, should it occur, will
depend in large part upon a number of factors, including our ability to
rapidly:
. build and train our sales and marketing staff to create an expanding
presence in the evolving corporate portal market, and keep them fully
informed over time regarding the technical features, issues and key
selling points of our product;
. develop our customer support capacity as sales of our product grow, so
that we can provide customer support without diverting resources from
product development efforts; and
. expand our internal management and financial controls significantly, so
that we can maintain control over our operations and provide support to
other functional areas within Plumtree as the number of our personnel and
size of our organization increases.
Our inability to achieve any of these objectives could harm our business and
operating results.
We may be unable to grow our international operations, which could impair our
overall growth.
Our revenue from sales outside the United States constituted less than 3% of
our total revenue during 1999 and approximately 10.5% of our total revenue for
the nine months ended September 30, 2000. We have expanded our international
operations, and we are seeking to increase the portion of our revenue that is
derived from sources outside the United States. If we are unable to grow our
international operations, we may not generate sufficient revenue to offset the
expenditures required to establish and maintain the international sales and
marketing operations, which could slow or undermine our overall growth.
We also expect to commit additional resources to modify our product for
selected international markets, including the United Kingdom, France, Germany
and Japan, and developing international sales and support organizations.
However, even if we successfully expand our international operations and
successfully modify our product, there can be no assurance that we will be able
to maintain or increase international market demand for our product.
Our planned international operations are subject to a number of risks,
including:
. costs of modifying our product for foreign countries;
. compliance with multiple, conflicting and changing foreign governmental
laws and regulations, including intellectual property, securities and
employment laws;
. longer sales cycles;
. import and export restrictions and tariffs;
. fluctuations in foreign currency exchange rates;
. difficulties in staffing and managing international operations; and
. greater difficulty or delay in accounts receivable collection.
11
<PAGE>
Product liability claims could divert management's attention and be costly to
defend.
Our license agreements with customers and alliance members typically contain
provisions designed to limit our exposure to potential product liability
claims. Not all domestic and international jurisdictions may enforce these
limitations. Although we have not experienced any product liability claims to
date, we may encounter this type of claim in the future. Product liability
claims brought against us, whether or not successful, could divert the
attention and resources of our management and key personnel, could be costly to
defend and could require us to pay significant monetary damages.
If we are unable to effectively protect our proprietary rights, our competitors
may be able to copy important aspects of our product or product presentation,
which would undermine the relative appeal of our product to customers and
reduce our sales.
We believe that proprietary rights are important to our business. We have
filed one provisional patent application with the U.S. Patent and Trademark
Office. However, our current or future patent applications may not be granted,
and it is possible that any patents issued to us may be circumvented by our
competitors or otherwise may not provide significant protection or commercial
advantage to us. Similarly, our trademark, service mark and copyright rights
may not provide significant protection or commercial advantage to us, and the
measures we take to maintain the confidentiality of our trade secrets may not
be effective.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use our software product or
technology without authorization. Policing unauthorized use of our product is
difficult, and we cannot be certain that the steps we have taken will prevent
misappropriation of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as those in the United
States.
We generally enter into confidentiality or license agreements with our
employees, consultants and alliance members, control access to our source code
and other proprietary technology and limit distribution of our software,
documentation and other proprietary information. These measures afford only
limited protection and may be inadequate. Others may develop noninfringing
technologies that are similar or superior to our own.
If our product employs technology that infringes the proprietary rights of
others, we may be forced to pay high prices to license technology or stop
selling our product.
We expect that software products may be increasingly subject to third-party
infringement claims as the number of competitors in our industry segment grows
and the functionality of products in different industry segments expands and
overlaps. Third parties may claim our product infringes their intellectual
property rights. Regardless of whether these claims have any merit, they could:
. be time-consuming to defend;
. result in costly litigation;
. divert our management's attention and resources;
. require us to indemnify alliance members or customers;
. require us to refund license fees;
. cause product shipment delays; or
. require us to enter into royalty or licensing agreements, which may not
be available on terms acceptable to us, if at all.
A successful claim of infringement against us or our failure or inability to
license the infringed or similar technology could damage our business because
we could be required to pay substantial monetary damages and would not be able
to sell our product without redeveloping them or otherwise incurring
significant additional expenses.
12
<PAGE>
We may be subject to misappropriation claims by former employers of our
personnel, which could be costly and disruptive to our business.
From time to time, we hire or retain employees or consultants who have
worked for independent software vendors or other companies developing products
similar to those offered by us. Those prior employers may claim that our
product is based on their products and that we have misappropriated their
intellectual property. Any claims of that variety, with or without merit, could
cause a significant diversion of management attention, result in costly and
protracted litigation, cause product shipment delays, require us to indemnify
our alliance members and customers, require us to refund license fees or
require us to enter into royalty or licensing agreements. Those royalty or
licensing agreements, if required, may not be available on terms acceptable to
us or at all, which could harm our business.
Acquisitions of companies or technologies may result in disruptions to our
business and management due to difficulties in assimilating personnel and
operations.
We may make acquisitions or investments in other companies or technologies.
We may not realize the anticipated benefits of any acquisition or investment.
If we make any acquisitions, we will be required to assimilate the operations,
products and personnel of the acquired businesses and train, retain and
motivate key personnel from the acquired businesses. We may be unable to
maintain uniform standards, controls, procedures and policies if we fail in
these efforts. Similarly, acquisitions may cause disruptions in our operations
and divert management's attention from day-to-day operations, which could
impair our relationships with our current employees, customers and strategic
partners. In addition, our profitability may suffer because of acquisition-
related costs, amortization costs for acquired goodwill and other intangible
assets, or undisclosed liabilities of the acquired business. The terms of our
existing Silicon Valley Bank loan and security agreement restrict our ability
to acquire other companies or their assets.
We will need significant additional funds, which we may be unable to obtain on
terms acceptable to us or at all.
The expansion and development of our business will require significant
capital to fund our operating expenses, working capital needs and capital
expenditures. During the next 18 months, we expect to meet our cash
requirements with existing cash and cash equivalents and short-term
investments, the net proceeds from this offering, cash flow from sales of our
product and services and proceeds from existing and future working capital
lines of credit and other borrowings. Our failure to generate sufficient cash
flows from sales of product and services or to raise sufficient funds may
require us to delay or abandon some or all of our development and expansion
plans or otherwise forego market opportunities.
Future equity or debt financing may not be available to us on favorable
terms or at all. The terms of our existing loan agreement with Silicon Valley
Bank limits our ability to incur additional indebtedness. Future borrowing
instruments, such as credit facilities and lease agreements, are also likely to
contain restrictive covenants and will likely require us to pledge assets as
security for borrowings under those future arrangements. If we raise additional
funds through the issuance of equity securities, the issuance could result in
substantial dilution to existing stockholders. Our inability to obtain
additional capital on satisfactory terms may result in a delay or failure to
develop and enhance our products, acquire new technologies or businesses,
expand operations and hire and train employees.
Risks Relating to Our Industry
Intense competition and consolidation in our industry could limit our ability
to attract and retain customers.
The market for our product is intensely competitive and highly fragmented,
characterized by rapid technological change, evolving industry standards and
changes in customer needs, and new product introductions and improvements. Our
current competitors include established software vendors that are Web-enabling
their applications or are building infrastructure software, emerging companies
offering competitive
13
<PAGE>
products and companies choosing to build their own solutions. Many of our
competitors have longer operating histories, significantly greater financial,
technical, marketing and other resources, greater name recognition, a broader
range of products and a larger installed customer base, any of which could
provide them with a significant competitive advantage. In addition, new
competitors, or alliances among existing and future competitors, may emerge and
rapidly gain significant market share. If we are unable to compete successfully
against current and future competitors, we may be unable to attract and retain
customers. Increased competition could also result in price reductions for our
product and lower profit margins and reduced market share, any of which could
harm our business, results of operations and financial condition.
Difficulties in introducing new products and enhancements in a timely manner
will make market acceptance of our products less likely.
New products, platforms and language support can require long development
and testing periods. Any delays in developing and releasing new products could
harm our business. New products or enhancements may not be released according
to schedule or may contain defects when released. For example, version 4.0 of
our product has been released only very recently, which increases the risk of
undetected defects or errors. Either situation could result in adverse
publicity, loss of sales, delay in market acceptance of our products or
customer claims against us, any of which could harm our business. We may be
unable to successfully develop and market product enhancements or new products
that respond to these technological changes, shifting customer tastes or
evolving industry standards, and may experience difficulties that could delay
or prevent the successful development, introduction and marketing of these
products. If we are unable to develop and introduce new products or
enhancements of existing products in a timely manner or if we experience delays
in the commencement of commercial shipments of new products and enhancements,
our ability to attract and retain customers will be harmed.
If we fail to manage technological change, demand for our product and services
will drop and our revenue will decline.
The market for corporate portals is still in an early stage of development
and is characterized by rapidly changing technology, evolving industry
standards, frequent new service and product introductions and changes in
customer demands. Our future success will depend to a substantial degree on our
ability to offer products and services that incorporate leading technologies
and respond to technological advances and emerging industry standards and
practices on a timely and cost-effective basis. You should be aware that:
. our technology or systems may become obsolete upon the introduction of
alternative technologies;
. the technological life cycles of our product are difficult to estimate;
. we may not have sufficient resources to develop or acquire new
technologies or to introduce new services capable of competing with
future technologies or service offerings; and
. the price of the products and services we provide may decline as rapidly
as, or more rapidly than, the price of any competitive alternatives.
We may not be able to effectively respond to the technological requirements
of the changing market for corporate portals. To the extent we determine that
new technologies and equipment are required to remain competitive, the
development, acquisition and implementation of those technologies and equipment
are likely to continue to require significant capital investment by us. We may
not have sufficient capital for this purpose in the future, and even if
available, investments in new technologies may not result in commercially
viable technological processes and there may not be commercial applications for
those technologies. If we do not develop and introduce new products and
services, and achieve market acceptance in a timely manner, demand for our
products and services will drop and our revenue will decline.
14
<PAGE>
If we fail to adequately respond to changes in customer needs, our ability to
attract and retain customers will suffer.
We expect that our customers increasingly will demand additional information
and reports with respect to the services we provide. To meet these demands, we
must develop and implement expanded customer support services to enable future
sales growth. In addition, if we are successful in implementing our marketing
strategy, we expect the demands on our technical support resources to grow
rapidly, and we may experience difficulties in responding to customer demand
for our services and providing technical support in accordance with our
customers' expectations. We expect that these demands will require not only the
addition of new management personnel, but also the development of additional
expertise by existing management personnel and the establishment of long-term
relationships with third-party service vendors. If we are unable to address
these customer demands, our ability to attract and retain customers will
suffer.
Risk Relating to this Offering
Future sales of common stock could depress our stock price.
We cannot predict if future sales of our common stock, or the availability
of our common stock for sale, will depress the market price for our common
stock or adversely affect our ability to raise capital by offering equity
securities. Sales of substantial amounts of common stock, or the perception
that these sales could occur, may depress prevailing market prices for the
common stock.
After this offering, approximately 28,985,754 shares of common stock will be
outstanding. All of the shares sold in this offering will be freely tradeable
except for any shares purchased by affiliates of Plumtree. The remaining shares
of common stock outstanding after this offering will be restricted as a result
of securities laws or lock-up agreements. These remaining shares will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
Date of Availability for Sale Number of Shares
----------------------------- ----------------
<S> <C>
As of the date of this prospectus......................... --
, 2000 (90 days after the date of this
prospectus).............................................. 6,095
, 2000 (180 days after the date of this
prospectus).............................................. 22,741,459
At various times thereafter upon expiration of applicable
holding periods.......................................... 100,000
</TABLE>
The above table excludes 1,138,200 shares issued upon early exercise of
options, which are not available for sale because they are subject to a
repurchase right in favor of Plumtree.
Credit Suisse First Boston Corporation may release all or a portion of the
shares subject to lock-up agreements at any time without notice.
Stock prices of infrastructure software companies are especially volatile, and
this volatility may depress our stock price.
We cannot predict the extent to which investor interest in Plumtree will
lead to the development of a trading market or how liquid that market might
become. Before this offering, there has been no public market for our common
stock. We intend to list the common stock on the Nasdaq National Market. The
initial public offering price for the shares of our common stock will be
determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market. The stock market has experienced significant price and volume
fluctuations and the market prices of securities of infrastructure software
companies have been highly volatile. You may not be able to resell your shares
at or above the initial public offering price or at all.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against the company. The institution of this type of litigation
against us could result in substantial costs and a diversion of our
management's attention and resources, which could harm our business and
prospects.
15
<PAGE>
Our stock ownership will continue to be concentrated in the hands of management
and existing stockholders, which could adversely affect our business and
depress our stock price.
Upon completion of this offering, our present directors, executive officers
and principal stockholders as a group will beneficially own approximately 63.0%
of the outstanding common stock (62.0% if the underwriters' over-allotment
option is exercised). Accordingly, if all or particular stockholders were to
act together, they would be able to exercise significant influence over or
control the election of our board of directors, the management and policies of
our company and the outcome of particular corporate transactions or other
matters submitted to our stockholders for approval, including mergers,
consolidations and the sale of all or substantially all of our assets.
Anti-takeover provisions in our certificate of incorporation and bylaws could
discourage or prevent an acquisition of our company, and could affect the price
of our common stock.
Provisions of the certificate of incorporation and bylaws that we intend to
adopt before the closing of this offering may inhibit changes of control that
are not approved by our board of directors. These include provisions
classifying our board of directors, prohibiting stockholder action by written
consent and requiring advance notice for nomination of directors and
stockholders' proposals. In addition, as a Delaware corporation, we will be
subject to Section 203 of the Delaware General Corporation Law which, in
general, prevents an interested stockholder, defined generally as a person
owning 15% or more of the corporation's outstanding voting stock, from engaging
in a business combination, as defined, for three years following the date that
person became an interested stockholder unless specified conditions are
satisfied. Our certificate of incorporation and bylaw provisions and Delaware
law could diminish the opportunities for a stockholder to participate in tender
offers, including tender offers at prices above the then-current fair market
value of our common stock, that could result from takeover attempts. In
addition, our certificate of incorporation will allow our board of directors to
issue, without further stockholder approval, preferred stock that could have
the effect of delaying, deferring or preventing a change in control. The
issuance of preferred stock also could adversely affect the voting power of the
holders of our common stock, including the loss of voting control to others.
The provisions of our certificate of incorporation and bylaws, as well as
provisions of Delaware law, may have the effect of discouraging or preventing
an acquisition, or disposition of, our business. These provisions could limit
the price that investors might be willing to pay in the future for shares of
our common stock.
Our management has broad discretion over the use of proceeds from this
offering, and the failure of management to apply these funds effectively could
seriously harm our business and results of operations.
We have not determined and cannot predict in which, if any, of our existing
or future opportunities we will ultimately invest. Therefore, we have broad
discretion as to how we spend the proceeds from this offering, and stockholders
may not agree with how we use the proceeds. We may not be successful in using
the proceeds from this offering in ways that will yield favorable results.
16
<PAGE>
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
Some of the matters discussed under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus include
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events, including, among
other things:
. implementing our business strategy;
. attracting and retaining customers and employees;
. obtaining and expanding market acceptance of the products and services we
offer;
. forecasts of Internet usage and the size and growth of relevant markets;
. rapid technological changes in our industry and relevant markets; and
. competition in our market.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "could," "predicts," "potential," "continue,"
"expects," "anticipates," "future," "intends," "plans," "believes," "estimates"
and similar expressions. These statements are based on our current beliefs,
expectations and assumptions and are subject to a number of risks and
uncertainties. Actual results, levels of activity, performance, achievements
and events may vary significantly from those implied by the forward-looking
statements. A description of risks that could cause our results to vary appears
under the caption "Risk Factors" and elsewhere in this prospectus.
17
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $63.6 million
from the sale of shares of our common stock in this offering. If the
underwriters exercise their over-allotment option in full, we estimate that we
will receive total net proceeds of approximately $73.4 million. These net
proceeds amounts are based upon an assumed initial public offering price of
$14.00 per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses. The principal purposes of this
offering are to obtain additional capital, to facilitate future access by us to
public equity markets and to provide increased visibility and credibility in
the marketplace.
Because of our need to be able to react to business opportunities and
competitive pressures, we cannot allocate precisely our use of these proceeds,
but we currently estimate that during the next 12 months we will use
approximately $30 to $35 million for sales and marketing expenses, including
expenses related to advertising and the hiring of additional sales personnel,
approximately $9 to $12 million for product development expenses, including
expenses related to the hiring of additional engineering personnel,
approximately $5 to $10 million for computer equipment, software and facilities
improvement, and the remainder for working capital and other general corporate
purposes. We may also use a portion of the net proceeds to acquire
complementary products, technologies or businesses; however, we currently have
no commitments or agreements relating to any such transactions.
We do not have more specific plans for the net proceeds from this offering.
The amounts and timing of any expenditures will vary depending on the amount of
cash generated by our operations, competitive and technological developments
and the rate of growth, if any, of our business. As a result, we will retain
broad discretion in the use of the net proceeds of this offering. Investors
will be relying on the judgment of our management regarding the application of
the proceeds of this offering. Pending use of the net proceeds as discussed
above, we intend to invest these funds in short-term, interest-bearing,
investment-grade obligations.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock. We presently
anticipate that we will retain all of our future earnings to finance the
development and expansion of our business and provide working capital.
Therefore, we do not anticipate paying any cash dividends on our common stock
for the foreseeable future. The terms of our existing Silicon Valley Bank loan
and security agreement prohibit the payment of dividends, except in specified
circumstances.
18
<PAGE>
CAPITALIZATION
The table below lists our capitalization as of September 30, 2000:
. on an actual basis;
. on a pro forma basis assuming the conversion of all outstanding shares
of preferred stock into shares of common stock and changes to our
authorized capital stock upon completion of this offering; and
. on a pro forma as adjusted basis assuming the sale of the 5,000,000
shares of common stock in this offering at an assumed initial public
offering price of $14.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses.
This information should be read in conjunction with our consolidated
financial statements and the related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
As of September 30, 2000
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
data)
(unaudited)
<S> <C> <C> <C>
Current portion of long-term obligations...................... $ 408 $ 408 $ 408
-------- -------- --------
Long-term capital lease obligations, excluding current
portion...................................................... 420 420 420
Stockholders' equity:
Convertible preferred stock, 16,981,528 shares authorized,
16,580,830 shares issued and outstanding, actual;
10,000,000 shares authorized, pro forma and pro forma as
adjusted; no shares issued and outstanding, pro forma and
pro forma as adjusted...................................... 16 -- --
Common stock, 31,660,032 shares authorized, 7,404,924 shares
issued and outstanding, actual; 48,641,560 shares
authorized, 23,985,754 shares issued and outstanding, pro
forma; 100,000,000 shares authorized, 28,985,754 shares
issued and outstanding, pro forma as adjusted.............. 7 23 28
Additional paid in capital.................................... 55,123 55,123 118,718
Warrants...................................................... 361 361 361
Note receivable from stockholder.............................. (520) (520) (520)
Stock-based compensation...................................... (12,623) (12,623) (12,623)
Accumulated other comprehensive income........................ 10 10 10
Accumulated deficit........................................... (26,976) (26,976) (26,976)
-------- -------- --------
Total stockholders' equity ............................... 15,398 15,398 78,998
-------- -------- --------
Total capitalization.................................... $ 16,226 $ 16,226 $ 79,826
======== ======== ========
</TABLE>
This table excludes, as of September 30, 2000:
. 5,096,414 shares of common stock issuable upon exercise of options
outstanding, at a weighted average exercise price of $1.71 per share;
. 11,285,240 additional shares of common stock available for future
issuance under our stock option plans;
. 1,000,000 shares of common stock available for issuance under our
employee stock purchase plan; and
. 264,448 shares of common stock issuable upon exercise of warrants
outstanding, at a weighted average exercise price of $2.23 per share.
19
<PAGE>
DILUTION
Pro forma net tangible book value
The pro forma net tangible book value of our common stock was approximately
$15.4 million, or approximately $0.64 per share, on September 30, 2000. We
calculated pro forma net tangible book value assuming all outstanding shares of
preferred stock will convert into common stock when the offering is completed.
Pro forma net tangible book value per share represents the amount of our total
tangible assets less total liabilities divided by the number of shares of
common stock outstanding.
Dilution after this offering
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of our common stock in this
offering and the net tangible book value per share of our common stock
immediately after this offering.
Assuming our sale of 5,000,000 shares of common stock offered by this
prospectus at an assumed initial public offering price of $14.00 per share, and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses, our pro forma net tangible book value at September 30, 2000
would have been approximately $79.0 million or $2.73 per share. This represents
an immediate increase in net tangible book value of $2.09 per share to the
existing stockholders and an immediate dilution of $11.27 per share to new
investors purchasing common stock in this offering.
The table below illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share........................... $14.00
Pro forma net tangible book value per share at September 30,
2000........................................................... $0.64
Increase per share attributable to new investors................ 2.09
-----
Pro forma net tangible book value per share after this offering... 2.73
------
Pro forma dilution per share to new investors..................... $11.27
======
</TABLE>
Differences between new and existing stockholders in number of shares and
amount paid
The table below summarizes, on a pro forma basis, as of September 30, 2000,
the differences between the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by existing
stockholders and by the new investors purchasing shares in this offering. We
used an assumed initial public offering price of $14.00 per share, and we have
not deducted estimated underwriting discounts and commissions and estimated
offering expenses in our calculations.
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price
------------------ -------------------- Per
Number Percent Amount Percent Share
---------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 23,985,754 82.8% $ 37,560,000 34.9% $ 1.57
New investors................... 5,000,000 17.2 70,000,000 65.1 14.00
---------- ----- ------------ ----- ------
Total......................... 28,985,754 100.0% $107,560,000 100.0% $ 3.71
========== ===== ============ ===== ======
</TABLE>
If the underwriters exercise the over-allotment option in full:
. the number of shares of common stock hold by existing stockholders will
decrease to approximately 80.7% of the total number of shares of our
outstanding common stock; and
. the number of shares held by new investors will increase to 5,750,000, or
approximately 19.3% of the total number of shares of our common stock
outstanding after completion of this offering.
20
<PAGE>
Except as indicated, the foregoing discussion and tables assume no exercise
of any stock options or warrants outstanding. As of September 30, 2000, there
were:
. 5,096,414 shares of common stock issuable upon exercise of options
outstanding as of September 30, 2000, at a weighted average exercise
price of $1.71 per share;
. 11,285,240 additional shares of common stock available for issuance under
our stock option plans;
. 1,000,000 shares of common stock available for issuance under our
employee stock purchase plan; and
. 264,448 shares of common stock issuable upon exercise of warrants
outstanding, at a weighted average exercise price of $2.23 per share.
The exercise of options or warrants outstanding having an exercise price less
than the initial public offering price would increase dilution to new
investors.
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statements of operations data for the period from our
incorporation on July 18, 1996 through December 31, 1996, and for the years
ended December 31, 1997, 1998 and 1999, and the consolidated balance sheet data
at December 31, 1997, 1998 and 1999, are derived from our audited consolidated
financial statements that have been prepared in accordance with generally
accepted accounting principles. The consolidated statements of operations data
for the nine months ended September 30, 1999 and 2000, and the consolidated
balance sheet data at September 30, 2000, are derived from our unaudited
consolidated financial statements which, in management's opinion, include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of our financial position and results of operations for those
periods. The following data should be read in conjunction with our consolidated
financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
Nine Months
Period from Ended
Inception, Year Ended December 31, September 30,
July 18, 1996 to ------------------------- -----------------
December 31, 1996 1997 1998 1999 1999 2000
----------------- ------- ------- ------- ------- --------
(unaudited)
(in thousands, except per share data)
Consolidated Statements of
Operations Data:
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Licenses................. $ -- $ -- $ 166 $ 2,701 $ 1,213 $ 11,847
Services and
maintenance............. 73 -- 15 653 194 5,684
----- ------- ------- ------- ------- --------
Total revenue(1)....... 73 -- 181 3,354 1,407 17,531
Cost of revenue:
Cost of licenses......... -- -- -- 90 30 1,379
Cost of services and
maintenance............. -- -- 19 1,118 328 6,135
----- ------- ------- ------- ------- --------
Total cost of revenue.. -- -- 19 1,208 358 7,514
Gross margin.............. 73 -- 162 2,146 1,049 10,017
Operating expenses:
Research and
development(2) ......... -- 635 1,109 1,677 1,179 4,810
Sales and marketing...... -- 575 2,418 5,616 3,632 13,163
General and
administrative.......... 49 386 445 1,407 972 3,969
Amortization of stock-
based compensation(3)... -- -- -- 325 164 2,931
----- ------- ------- ------- ------- --------
Total operating
expenses.............. 49 1,596 3,972 9,025 5,947 24,873
Operating income (loss)... 24 (1,596) (3,810) (6,879) (4,898) (14,856)
Other income (expense),
net...................... -- 22 28 (151) (137) 242
----- ------- ------- ------- ------- --------
Net income (loss)......... $ 24 $(1,574) $(3,782) $(7,030) $(5,035) $(14,614)
===== ======= ======= ======= ======= ========
Net income (loss) per
common share, basic and
diluted.................. $0.04 $ (0.46) $ (1.08) $ (1.78) $ (1.33) $ (2.76)
===== ======= ======= ======= ======= ========
Pro forma net loss per
common share, basic and
diluted (unaudited)...... $ (0.51) $ (0.70)
======= ========
Weighted average common
shares outstanding, basic
and diluted.............. 563 3,398 3,509 3,944 3,777 5,298
===== ======= ======= ======= ======= ========
Pro forma weighted average
common shares
outstanding, basic and
diluted (unaudited)...... 13,843 20,765
======= ========
-------------
<CAPTION>
(1) The revenue generated in 1996 related to miscellaneous consulting services
provided by the then chief executive officer.
(2) During the nine months ended September 30, 2000, we recorded a non-cash research
and development charge of $824,000 (see Note 8 to the consolidated financial
statements).
(3) Amortization of stock-based compensation excluded from the following expenses is
as follows:
<S> <C> <C> <C> <C> <C> <C>
Cost of services and maintenance.......................... $ 39 $ 10 $ 477
Research and development.................................. 105 56 1,111
Sales and marketing....................................... 171 95 678
General and administrative................................ 10 3 665
------- ------- --------
$ 325 $ 164 $ 2,931
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------- September 30,
1996 1997 1998 1999 2000
---- ------ ------ ------ -------------
(in thousands)
(unaudited)
Consolidated Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents............. $ 18 $1,124 $1,574 $2,344 $15,666
Working capital....................... -- -- 1,366 2,406 10,863
Total assets.......................... 49 1,351 2,100 5,600 31,751
Long-term obligations, net of current
portion.............................. -- 107 403 328 420
Total stockholders' equity............ 34 1,076 1,296 2,717 15,398
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and related notes that appear elsewhere in this prospectus. The
following discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or
contribute to these differences include, but are not limited to, those
discussed below and elsewhere in this prospectus, particularly in "Risk
Factors."
Overview
General
We provide infrastructure software that brings together a wide range of
applications and information in a comprehensive Internet platform known as a
corporate portal. From our inception in 1996 through the beginning of 1998, we
were engaged primarily in developing and marketing our corporate portal
product. In March 1998, we released version 1.0 of the Plumtree Corporate
Portal. As part of our strategy, we seek to continually enhance the
functionality of our software, and subsequently released version 2.0 in
November 1998, version 3.0 in June 1999 and version 3.5 in February 2000.
Version 4.0 of our portal was released in October 2000.
Sources of Revenue
We derive our revenue from software licenses, services and maintenance. To
date, substantially all of our revenue has been derived through direct sales.
We have recently focused on building our indirect sales channel. Our services
include installation, consulting and training. We plan to rely increasingly on
third-party consulting organizations to deliver these services. Maintenance
services include technical support and software updates. Maintenance contracts
are typically one year in duration and can be renewed annually.
Revenue Recognition
License revenue consists principally of revenue from the licensing of our
software and is generally recognized when a contract is executed, all delivery
obligations have been met, the fee is fixed or determinable, and collectibility
is probable. When licenses are sold together with services, in accordance with
the provisions of the American Institute of Certified Public Accountants'
Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2), license
fees are recognized upon delivery, provided that (1) the above criteria have
been met, (2) payment of the license fees is not dependent upon the performance
of the services, and (3) the services do not include significant modifications
to the features and functionality of the software.
We have not established vendor specific objective evidence (VSOE) for
license sales and recognize revenue from arrangements with multiple elements
involving software licenses under the residual method as outlined in SOP 97-2.
To the extent that a discount exists on any of the elements, we follow the
residual method and attribute that discount entirely to the delivered elements.
Service revenue consists of consulting, training and installation services
that we provide to our customers. Revenue from such services is generally
recognized as the service is performed. If services are included with a license
agreement, amounts related to services are unbundled from the license fee based
on VSOE as established by transactions where services have been sold
separately. Prior to December 1999, we had not yet established VSOE for service
revenue. Accordingly, we recognized license revenue sold together with services
as the services were performed. In December 1999, we formed a separate
professional services department and senior management set standard pricing
establishing VSOE for these services.
For the majority of our arrangements, the services provided are not
essential to the functionality of the software and typically could include:
. developing a project scope;
23
<PAGE>
. installing and configuring our product; and
. developing portal content including defining and setting up the initial
taxonomy of the directory.
In certain arrangements, the services that we provide are essential to the
functionality of the software and include:
. modifying the user interface to fit a specific environment;
. integrating our products into environments with legacy systems and custom
applications; and
. complex requirements of specific functionality of the product like
elaborate document management or search requirements.
For the arrangements in which the services provided are essential to the
functionality of the software, both the license revenue and service revenues
are recognized in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position 81-1, "Accounting for
Performance of Construction Type and Certain Production Type Contracts" (SOP
81-1). We account for these arrangements under the percentage of completion
contract method pursuant to SOP 81-1. Through September 30, 2000, there have
been four contracts accounted for under contract accounting.
Maintenance revenue relates to the technical support and software updates we
provide to customers. Revenue on maintenance contracts is recognized ratably
over the term of the contract. If maintenance is bundled with a license
agreement, amounts related to maintenance are unbundled from the license fee
based on vendor specific objective evidence as established by the renewal rates
we charge in accordance with our contracts and established pricing.
For arrangements which require delivery of unspecified future products over
a period, we use the subscription method and recognize revenue ratably over the
period.
For arrangements that involve extended payment terms, we recognize revenue
to the extent of the lesser of the amount determined under the methodology we
are using or the amount due.
Amortization of Stock-Based Compensation
In connection with stock option grants to our employees and others, we have
recorded stock-based compensation totaling approximately $15.9 million as of
September 30, 2000. This amount represents the difference between the exercise
price and the deemed fair market value of our common stock for accounting
purposes on the date we granted these stock options. This amount is included as
a component of stockholders' equity and is being amortized on an accelerated
basis by charges to earnings from operations over the vesting period of the
options, generally four years. For 1999, we recorded $325,000 of stock-based
compensation amortization expense. For the nine months ended September 30,
2000, we recorded approximately $2.9 million of stock-based compensation
amortization expense. The amortization of the remaining stock-based
compensation will result in additional charges to earnings from operations in
2001 and thereafter.
An important part of our strategy is to expand our operations and employee
base and build our sales, marketing, customer support and technical resources.
As of September 30, 2000 we had 198 full-time employees and we intend to hire a
significant number of employees in the future. Our planned expansion places
significant demands on our management and operational resources. To manage this
growth, we will continue to invest in and implement scalable operational
systems, procedures and controls. As of September 30, 2000, we had an
accumulated deficit of approximately $27.0 million. We expect to continue to
incur operating losses for the foreseeable future.
24
<PAGE>
Warrants
In May 2000, we entered into a research and development agreement with The
Procter & Gamble Company, a customer and stockholder. A warrant was issued to
this customer to purchase up to 100,000 shares of common stock at $2.00 per
share. The Procter & Gamble Company earned 20,000 shares covered by the warrant
per month for five consecutive months in return for providing engineering
services. The estimated fair value of the warrant was approximately $824,000
based upon the estimated fair value of the warrant shares on the vesting dates.
All of the warrant shares were fully vested and the estimated fair value was
recognized as a research and development expense for the nine months ended
September 30, 2000. The warrant was exercisable for a period of four months. As
of September 30, 2000, this warrant was exercised.
Results of Operations
The following table sets forth the statements of operations data for each of
the periods indicated as a percentage of total revenue. Data for the period
from inception (July 18, 1996) to December 31, 1996 and for the year ended
December 31, 1997 is not presented because we had no material revenue during
those periods.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
--------------- -----------------
1998 1999 1999 2000
------- ----- -------- --------
(unaudited)
<S> <C> <C> <C> <C>
Revenue:
Licenses............................. 91.7 % 80.5 % 86.2 % 67.6 %
Services and maintenance............. 8.3 19.5 13.8 32.4
------- ----- -------- --------
Total revenue...................... 100.0 100.0 100.0 100.0
Cost of revenue:
Cost of licenses..................... -- 2.7 2.1 7.9
Cost of services and maintenance..... 10.5 33.3 23.3 35.0
------- ----- -------- --------
Total cost of revenue.............. 10.5 36.0 25.4 42.9
Gross margin........................... 89.5 64.0 74.6 57.1
Operating expenses:
Research and development............. 612.7 50.0 83.8 27.4
Sales and marketing.................. 1,335.9 167.4 258.1 75.1
General and administrative........... 245.9 41.9 69.1 22.6
Amortization of stock-based
compensation........................ -- 9.7 11.7 16.7
------- ----- -------- --------
Total operating expenses........... 2,194.5 269.0 422.7 141.8
Operating loss......................... 2,105.0 205.0 348.1 84.7
Other income (expense), net:
Interest expense....................... (34.8) (5.4) (11.3) (0.5)
Other income, net...................... 50.3 0.9 1.6 1.8
------- ----- -------- --------
Total other income (expense), net.. 15.5 (4.5) (9.7) 1.4
Net loss............................... 2,089.5 % 209.5 % 357.8 % 83.4 %
======= ===== ======== ========
</TABLE>
Nine Months Ended September 30, 1999 and 2000
Revenue
Revenue increased from $1.4 million for the nine months ended September 30,
1999 to approximately $17.5 million for the nine months ended September 30,
2000. License revenue grew at a rate of 883% and services and maintenance
revenue grew at a rate of 2,838%.
25
<PAGE>
Licenses. Licenses revenue increased from $1.2 million for the nine months
ended September 30, 1999 to approximately $11.8 million for the nine months
ended September 30, 2000. The increase in license revenue was primarily due to
the addition of 107 new license customers in the nine months ended September
30, 2000. No one customer other than Ford Motor Company accounted for more
than 10% of the revenue in this period; revenue from Ford Motor Company was
approximately 10% of total revenue.
Services and Maintenance. Services and maintenance revenue increased from
$194,000 for the nine months ended September 30, 1999 to approximately $5.7
million for the nine months ended September 30, 2000. This increase was the
result of an increase in services and maintenance provided in connection with
license sales, and the absence of paid services in some of our earlier
contracts. This increase included approximately $1.1 million in additional
maintenance revenue and approximately $4.4 million in additional professional
services, training and other revenue. The number of professional services
consultants increased from 26 to 46 to accommodate increased services demand.
Deferred revenue at September 30, 2000 included $4.1 million of amounts
billed but not yet collected.
Cost of Revenue
Our cost of revenue includes licenses, services and maintenance costs. Cost
of revenue increased from $358,000 for the nine months ended September 30,
1999 to approximately $7.5 million for the nine months ended September 30,
2000. Cost of revenue as a percent of revenue increased from 25% of total
revenue for the nine months ended September 30, 1999 to 43% for the nine
months ended September 30, 2000. This change is primarily the result of
increased cost of maintenance and professional services, which was 82% of
total cost of revenue for the nine months ended September 30, 2000.
Licenses. Our cost of licenses consists of royalty expenses paid to a
third-party technology vendor. Cost of licenses increased from $30,000 for the
nine months ended September 30, 1999 to approximately $1.4 million for the
nine months ended September 30, 2000. Our cost of license revenue increased in
the nine months ended September 30, 2000 from 2.5% to 11.7% of total license
revenue due to an increase in the royalties paid to Verity for its search
technology.
Services and Maintenance. Our cost of services and maintenance includes
salaries and related expenses for our professional service organization, third
party consultants and technical support organization. Cost of services and
maintenance increased from $328,000 for the nine months ended September 30,
1999 to approximately $6.1 million for the nine months ended September 30,
2000. This increase was primarily due to a substantial increase in the number
of professional services staff in conjunction with increased demand for our
product. Historically, cost of services and maintenance has exceeded services
and maintenance revenue, and we expect this trend to continue over the near
term. For the nine months ended September 30, 2000, the cost of services and
maintenance exceeded the services and maintenance revenues by $451,000.
Operating Expenses
Research and Development. Research and development expenses consist of new
software development, the costs associated with our in-house development staff
and contract software developers. The costs associated with this in-house
development staff consist primarily of salaries, as well as other related
expenses. From time to time, this in-house development staff is supported by
outside developers on a contractual basis. The costs for the development of
new software products and substantial enhancements to existing software
products that are eligible for capitalization have not been significant to
date and, as such, are expensed as research and development costs in the
period in which they are incurred. Research and development expenses increased
from approximately $1.2 million for the nine months ended September 30, 1999
to approximately $4.8 million for the nine months ended September 30, 2000.
This increase was primarily due to an increase in the number of research and
development staff. As of September 30, 1999, we had 26 employees in research
and development, as compared
26
<PAGE>
to 49 employees as of September 30, 2000. We expect our research and
development expenses to increase in future periods as we continue to develop
new and enhanced software products. Research and development expense during the
nine months ended September 30, 2000 included approximately $824,000 in non-
cash charges related to a warrant issued to The Procter & Gamble Company for
research performed in connection with version 4.0 of our product.
Sales and Marketing. Sales and marketing expenses consist of payroll
expense, including salaries and commissions and related costs for sales and
marketing personnel, and promotion expenditures, including public relations,
advertising and trade shows. Sales and marketing expenses increased from
approximately $3.6 million for the nine months ended September 30, 1999 to
approximately $13.2 million for the nine months ended September 30, 2000. This
increase was primarily due to an increase in the number of sales and marketing
personnel from 21 to 72, in the sales commission paid to sales personnel due to
the significant increase in new customers and an increase in the rate at which
commissions are paid. We expect our sales and marketing expenses to increase as
we continue to increase our marketing efforts and expand our direct and
indirect sales forces.
General and Administrative. General and administrative expenses consist
primarily of salaries for administrative, executive and finance personnel,
recruiting costs and information services costs. General and administrative
expenses increased from approximately $1.0 million for the nine months ended
September 30, 1999 to approximately $4.0 million for the nine months ended
September 30, 2003. This increase was primarily due to increases in facilities
expenses of 987%, the number of personnel from 2 to 13, and professional
service fees. We expect that our general and administrative expenses will
continue to increase as we expand our operations and incur additional costs
related to being a public company.
Amortization of Stock-Based Compensation. In connection with options granted
to employees, directors and consultants during the nine months ended September
30, 1999 and September 30, 2000 we recorded stock-based compensation
representing the difference between the exercise price of options granted and
the deemed fair market value of our common stock at the date of grant.
Amortization of stock-based compensation was $164,000 for the nine months ended
September 30, 1999 and approximately $2.9 million for the nine months ended
September 30, 2000.
Other Income (Expense), Net
Other income (expense), net, primarily includes interest income from our
cash and cash equivalents, and investments. Interest expense relates to our
financing obligations, including bank borrowings. Other income (expense), net,
was $137,000 of interest expense for the nine months ended September 30, 1999
and $242,000 of interest income for the nine months ended September 30, 2000.
This increase was primarily due to a higher average cash balance as a result of
the proceeds from the issuance of shares of our preferred stock in August 1999
and May 2000.
Years Ended December 31, 1997, 1998 and 1999
Revenue
Revenue was $181,000 in 1998 and approximately $3.4 million in 1999. We did
not recognize any revenue in 1997. Revenue increased in 1999 as a result of
initial acceptance of our product following the hiring of our vice president of
Worldwide Field Operations in July of 1999.
Licenses. Licenses revenue was $166,000 in 1998 and approximately $2.7
million in 1999. The increase was due primarily to increased market acceptance
of the Plumtree Corporate Portal. The increase was primarily due to the release
of version 3.0 of our product, the addition of 25 new customers, increased
market acceptance of the Plumtree Corporate Portal and a larger and more
experienced sales force.
27
<PAGE>
Services and Maintenance. Services and maintenance revenue was $15,000 in
1998 and $653,000 in 1999. The increase was attributable primarily to an
increase in services and support provided in connection with increased license
sales and growth of our customer base, the increase in the number of
professional services consultants and the addition of professional management.
Cost of Revenue
Cost of revenue was $19,000 in 1998 and approximately $1.2 million in 1999.
We did not recognize any cost of revenue in 1997 and only limited costs in
1998.
Licenses. Cost of licenses revenue was $90,000 in 1999. We had no cost of
license revenue in 1997 or 1998 due to the limited revenue, if any, recognized
in these periods. We did not incur any royalty payments under our agreement
with Verity to license its software until 1999.
Services and Maintenance. Cost of services and maintenance revenue was
$19,000 in 1998 and approximately $1.1 million in 1999. We had no cost of
services and maintenance revenue in 1997. The increase in costs was primarily
due to increased salary and bonuses of the professional services consultants
and increased travel expenses.
Operating Expenses
Research and Development. Research and development expenses were $635,000 in
1997, approximately $1.1 million in 1998 and approximately $1.7 million in
1999. These increases were primarily due to the addition of personnel in our
research and development department over these periods. These increases were
primarily due to the addition of 16 personnel in our research and development
department over these periods.
Sales and Marketing. Sales and marketing expenses were $575,000 in 1997,
approximately $2.4 million in 1998 and approximately $5.6 million in 1999.
These increases were attributable primarily to hiring 21 additional sales and
marketing and customer support employees over these periods as well as
increased promotional costs.
General and Administrative. General and administrative expenses were
$386,000 in 1997, $445,000 in 1998 and approximately $1.4 million in 1999.
These increases were due primarily to hiring administrative personnel,
professional expenses for legal and accounting support, depreciation expenses
for new office equipment and amortization of improvements to our San Francisco
offices.
Amortization of Stock-Based Compensation. In connection with the granting of
options to purchase our common stock to certain employees, directors and
consultants during the year ended December 31, 1999, we recorded stock-based
compensation representing the difference between the exercise price of options
granted and the deemed fair market value of our common stock at the time of
grant. Amortization of stock-based compensation in the year ended December 31,
1999 was $325,000. For the years ended December 31, 1998 and 1997 we recorded
no stock-based compensation. In connection with the granting of options to
employees to purchase 274,000 shares of common stock subsequent to September
30, 2000, no stock-based compensation has been recorded in connection with
these grants as they were issued at fair value.
Other Income (Expense), Net
Other income (expense), net, was $22,000 in 1997, $28,000 in 1998 and an
expense of $151,000 in 1999. The interest expense in 1999 represented interest
expense on notes payable and capital leases.
28
<PAGE>
Provision for Income Taxes
From inception through September 30, 2000, we incurred net losses for
federal and state tax purposes and have not recognized any tax provision or
benefit. Given our losses incurred through September 30, 2000, our losses
projected for the remainder of fiscal 2000 and the difficulty in accurately
forecasting our future results, management does not believe that the
realization of the related deferred income tax asset meets the criteria
required by generally accepted accounting principles. Therefore, we have
recorded a 100% valuation allowance against the deferred income tax asset. See
Note 11 of Notes to our consolidated financial statements for the components
for the deferred income tax asset.
Quarterly Results of Operations
The following tables set forth selected unaudited consolidated statements of
operations data for the seven quarters ended September 30, 2000. This data has
been derived from the unaudited interim consolidated financial statements
prepared on the same basis as the audited financial statements prepared in
accordance with generally accepted accounting principles contained herein and,
in the opinion of management, include all adjustments consisting only of normal
recurring adjustments that we consider necessary for a fair presentation of
such information when read in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere in this prospectus. The
operating results for any quarter should not be considered indicative of
results of any future period.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------
March 31, June 30, September 30, December 31, March 31, June 30, September 30,
1999 1999 1999 1999 2000 2000 2000
--------- -------- ------------- ------------ --------- -------- -------------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Licenses.............. $ 130 $ 505 $ 578 $ 1,488 $ 2,674 $ 3,247 $ 5,926
Services and
maintenance.......... 45 5 144 459 1,225 1,697 2,762
------- ------- ------- ------- ------- ------- -------
Total revenue........ 175 510 722 1,947 3,899 4,944 8,688
------- ------- ------- ------- ------- ------- -------
Cost of Revenue:
Cost of licenses...... -- 16 14 60 52 398 929
Cost of services and
maintenance.......... 91 104 133 790 1,401 1,864 2,870
------- ------- ------- ------- ------- ------- -------
Total cost of
revenue............. 91 120 147 850 1,453 2,262 3,799
------- ------- ------- ------- ------- ------- -------
Gross margin............ 84 390 575 1,097 2,446 2,682 4,889
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 349 327 503 498 859 1,284 2,667
Sales and marketing... 841 1,152 1,639 1,984 2,232 4,275 6,656
General and
administrative....... 232 368 372 435 995 1,086 1,888
Amortization of stock-
based compensation... 12 30 122 161 225 840 1,866
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 1,434 1,877 2,636 3,078 4,311 7,485 13,077
------- ------- ------- ------- ------- ------- -------
Operating income
(loss)................. (1,350) (1,487) (2,061) (1,981) (1,865) (4,803) (8,188)
Other income (expense),
net.................... (6) (89) (42) (14) (16) 76 182
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(1,356) $(1,576) $(2,103) $(1,995) $(1,881) $(4,727) $(8,006)
======= ======= ======= ======= ======= ======= =======
</TABLE>
Our quarterly revenue increased throughout the periods presented primarily
as a result of the introduction of new versions of the Plumtree Corporate
Portal and the substantial growth of our direct sales force. Cost of revenue
has increased in each quarter primarily as a result of hiring new professional
services employees. Total operating expense has increased in each quarter
primarily due to increased expenses associated with building a
29
<PAGE>
sales and marketing infrastructure, including the development of a direct sales
force, and increased spending on research and development to support new
product introductions and an increase in general and administrative expenses to
manage our expanding operations.
Quarterly research and development expenses substantially increased from the
quarter ended June 30, 1999 to the quarter ended September 30, 1999 as a result
of significant hiring to develop version 3.5 of our product.
Research and development expenses for the quarter ended December 31, 1999 did
not increase at the rate of the previous quarter primarily due to a slower rate
of growth in personnel. General and administrative expenses increased from the
quarter ended December 31, 1999 to the quarter ended March 31, 2000 due to
increased professional services fees, implementation of a new financial
software system and the addition of new employees.
As a result of our limited operating history and the emerging nature of the
market in which we compete, we are unable to accurately forecast our revenue or
expenses. Our success is dependent upon our ability to enter into and maintain
strategic relationships with customers and to develop and maintain volume usage
of our products by our customers. Our license revenue is comprised
substantially of one-time license fees. As a result, we will be required to
regularly and increasingly sign additional customers with substantial license
fees on a timely basis to realize comparable or increased license revenue.
Our services and maintenance revenue historically has been comprised almost
entirely of installation, modification and consulting fees and support and
maintenance fees. Our services revenue has lower gross margin than our license
revenue. If the percentage of our services revenue increases compared to the
percentage of license revenue, our profitability would be impaired. Our
maintenance contracts are generally renewable for 12-month periods. If our
customers elect not to renew their maintenance contracts, our revenue could
decline.
We expect to experience significant fluctuations in our future results of
operations due to a variety of factors, some of which are outside of our
control, including:
. our proposed expansion into international markets;
. introduction of products and services and enhancements by us and our
competitors;
. competitive factors that affect our pricing;
. the timing and magnitude of our capital expenditures, including costs
relating to the expansion of our operations;
. the size and timing of customer orders and deployments, particularly
large orders and deployments, some of which may represent more than 10%
of total revenue during a particular quarter; and
. the size and timing of customer deployments.
As a result of these factors, we believe that quarter-to-quarter comparisons
of our revenue and operating results are not necessarily meaningful, and that
these comparisons may not be accurate indicators of future performance. Because
our staffing and operating expenses are based on anticipated revenue levels,
and because a high percentage of our costs are fixed, small variations in the
timing of the recognition of specific revenue could cause significant
variations in operating results from quarter to quarter. If we are unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall, any significant revenue shortfall would likely have an immediate
negative effect on our operating results. Moreover, our operating results in
one or more future quarters may fail to meet the expectations of securities
analysts or investors. If this occurs, we would expect to experience an
immediate and significant decline in the trading price of our stock.
Liquidity and Capital Resources
Since inception, we have primarily financed our operations and capital
expenditures through the private sales of convertible preferred stock, with net
proceeds of approximately $36.5 million, as well as through bank
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loans and equipment leases. We had approximately $15.7 million of cash and cash
equivalents and approximately $10.9 million in working capital as of September
30, 2000.
Our net cash used in operating activities was approximately $1.4 million in
1997, $3.8 million in 1998, $6.9 million in 1999 and $8.0 million for the nine
months ended September 30, 2000. The increase in cash used in operating
activities was due primarily to our net loss excluding non-cash charges
(consisting principally of depreciation and amortization of stock-based
compensation) and our working capital investments. Our working capital
investments consist principally of accounts receivable and prepaid expenses.
Our accounts receivable fluctuations are principally due to the significant
size of some individual software licensing agreements and the applicable method
of revenue recognition. Prepaid expenses are primarily related to advance
payments made to technology vendors and deposits on future trade shows.
Capital expenditures were $34,000 in 1997, $230,000 in 1998, $134,000 in
1999 and approximately $1.4 million for the nine months ended September 30,
2000. Our capital expenditures consisted of purchases of items to manage our
operations, including computer hardware and software, office furniture and
equipment and leasehold improvements. We expect that our capital expenditures
will continue to increase in the future.
Our net cash provided by convertible preferred stock financing activities
was approximately $2.5 million in 1997, $4.0 million in 1998, $8.0 million in
1999 and $22.0 million for the nine months ended September 30, 2000. Upon
completion of this offering, our outstanding convertible preferred stock will
automatically convert into common stock. For the nine months ended September
30, 2000, we also generated approximately $1.1 million of cash from the
exercise of stock options.
In April 1998, we entered into a loan and security agreement with Silicon
Valley Bank, amended in July 1998, whereby Silicon Valley Bank will make us one
or more non-revolving loans in an aggregate principal amount of up to $750,000.
To secure these loans, we have granted Silicon Valley Bank a security interest
in all of our assets. The loans and other amounts due under this agreement
mature on July 31, 2001. Interest on the loans are payable monthly and accrue
at one percentage point above the prime rate as announced by Silicon Valley
Bank. As of September 30, 2000, we had $170,000 outstanding under the loan and
security agreement. We are prohibited from declaring and paying dividends,
incurring any non-permitted indebtedness and acquiring the capital stock of any
other company under our loan agreements with Silicon Valley Bank.
In addition, we entered into a master equipment lease agreement with
Lighthouse Capital Partners III, L.P. whereby Lighthouse Capital will provide
funds to us under two lease line schedules in an aggregate principal amount of
up to $1.0 million. The lease line schedules are to be used only to finance or
refinance purchases of equipment.
During 2000, we provided letters of credit for $2.5 million to a lessor to
secure new facilities under operating leases. These letters are secured by
certificates of deposit maturing in 2001 and are restricted for various terms
exceeding one year. These balances are included in other assets on the
accompanying balance sheet as of September 30, 2000.
We expect to experience significant growth in our operating expenses,
particularly research and development and sales and marketing expenses, for the
foreseeable future in order to execute our business plan. As a result, we
anticipate that these operating expenses, as well as planned capital
expenditures, will constitute a material use of our cash resources. In
addition, we may utilize cash resources to fund acquisitions of complementary
businesses, technologies or product lines. We believe that our net proceeds
from this offering, together with cash and cash equivalents on hand, will be
sufficient to meet our cash requirements for at least the next 18 months,
including working capital requirements and planned capital expenditures. We may
require additional funds for other purposes, and these additional financing
sources may not be available or, if available, the financing may not be
attainable on terms favorable to us.
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Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
companies to record derivative financial instruments on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133," which amends SFAS No. 133 to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (or January 1, 2001
for us). In June 2000, the FASB issued Statement No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an Amendment of
FASB Statement No. 133." SFAS 138 amends SFAS 133 to (a) exclude from the scope
of SFAS No. 133 nonfinancial assets that will be delivered in quantities
expected to be used or sold by a company over a reasonable period in the normal
course of business and for which physical delivery is probable, (b) permit
hedging of a benchmark interest rate, (c) allow hedging of foreign-currency-
denominated assets and liabilities and (d) allow for limited hedging of net
foreign currency exposures. We have no derivative financial and commodity
instruments, forward contracts or hedging arrangements in cash and cash
equivalents. These statements should not have a material impact on our
financial condition or results of operations.
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 and SOP 98-3 by extending the deferral of the application of
certain provisions of SOP 97-2 amended by SOP 98-3 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. These statements will not have a material impact on our financial
condition or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements. We
have adopted SAB 101 as required for the filing of this initial public
offering.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation (an Interpretation of APB
Opinion No. 25)" ("FIN 44"). FIN 44 provides guidance on the application of APB
25, particularly as it relates to options. The effective date of FIN 44 is
July 1, 2000 and we have adopted FIN 44 as of that date.
Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2000, we had cash and cash equivalents of approximately
$15.7 million, which consist of cash and highly liquid short-term investments
with original maturities of three months or less at the date of purchase. These
investments may be subject to interest rate risk and will decrease in value if
market interest rates increase. A hypothetical increase or decrease in market
interest rates by 10% from the market interest rates at September 30, 2000
would cause the fair value of these short-term investments to change by an
immaterial amount. Declines in interest rates over time will, however, reduce
our interest income.
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BUSINESS
Industry Background
The Internet has transformed business, introducing broader audiences to
computing, opening enterprises to new relationships with customers and
partners, and creating connections between formerly isolated business systems.
The volume of information and the number of software applications available via
the Internet have increased dramatically. Businesses are devoting substantial
investments to integrate and distribute information to and from the Internet.
International Data Corporation, or IDC, estimates that the market for Internet
infrastructure software will grow at a compounded annual growth rate of 31%
from an estimated $9.4 billion in 1998 to $36.2 billion in 2003.
Many organizations are seeking to combine their most important information,
applications and Internet-based services into a single destination for everyone
who does business with the organization. The first challenge is to integrate
enterprise applications, such as sales databases and financial systems,
purchased at different times for different purposes, whose audience has been
limited to technical or functional specialists. The second challenge is to
create an enterprise-wide framework for organizing the enormous volume of
documents, e-mail messages, and Web pages now being created with desktop
publishing tools and personal computers. The third challenge is to combine
these resources with e-business applications, which are often initiated as
projects separate from an organization's technology infrastructure. These
challenges impair the ability of organizations to assemble a complete view of
their businesses on the Internet.
Creating a focal point for an organization's most important information and
services has a new urgency because the Internet has so greatly expanded their
potential users. To build a competitive workforce, many companies are now using
the Internet to reach all of their employees worldwide. Similarly, customers
and partners who do not want to visit multiple sites to do business with one
organization need a single point of access for all the electronic information
and services available from that organization. These organizations often lack
the infrastructure for assembling information and services from different
systems into a simple, powerful experience that can be delivered to a factory
floor kiosk, a salesperson's mobile device or a business partner's desktop.
There have been few solutions for integrating in one Web destination a wide
range of resources from other systems. Attempts to develop in-house solutions
often are costly, require significant resources and time, and provide limited
functionality. Emerging software vendors developing products focused on solving
these problems may lack the product capabilities and partner support necessary
to integrate many systems into a complete view of the business. Established
software vendors are Web-enabling their own software applications, but often
face architectural limitations when attempting to integrate data and services
from other software applications. In addition, many of these vendors are
unlikely to support access to data or services provided by an application from
a competing vendor.
As a result of these trends, there exists a significant market for
infrastructure software that can combine an organization's most important
information and online services in a single Web destination known as a
corporate portal. A corporate portal is a Web portal to information,
applications and Internet-based services.
Our Solution
We provide infrastructure software and services that enable a business to
deploy a corporate portal to information, applications and Internet-based
services. The Plumtree Corporate Portal is an open, scalable platform that
gives a broad audience of employees, partners and customers a single,
personalized destination for the key information and services they need to do
business with an organization.
Our extensible platform, our proprietary Massively Parallel Portal Engine
and our network of customers and alliance members are the foundation of our
corporate portal solution. Our platform is extensible because it
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enables customers and alliance members to develop plug-in components known as
Plumtree Portal Gadgets to integrate a wide variety of applications and
services into the portal. Together with our customers and alliance members, we
have developed hundreds of gadgets for integrating resources from a broad range
of applications. The Massively Parallel Portal Engine processes user requests
for these resources from multiple computers in parallel, to support large-
scale, enterprise-wide deployments with hundreds of thousands of users. This
open architecture allows customers to share the information and services
assembled by one portal deployment with other portal deployments, and with
other Internet platforms and devices, connecting alliance members and customers
in a network that we refer to as the Plumtree Portal Network. As a result, new
customers can draw upon an extensive set of shared services, and distribute
their own resources to a broad range of businesses. The Massively Parallel
Portal Engine is a feature contained in version 4.0 of our product, which was
released in October 2000.
This solution offers the following benefits to our customers:
Creates a Focused View of the Business
Our product is designed to assemble a comprehensive and dynamic view of the
business. Rather than having to negotiate access to a wide range of
applications and services to be productive, users can see everything relevant
to their work in a personalized portal page. This experience is particularly
powerful at orienting new employees to the information and services available
from the organization. A new salesperson may, for example, begin each day with
a portal page that includes sales leads from a database, e-mail and calendar
from a communication system, competitive updates from a marketing department
and the Internet, and an electronic form for sending marketing materials to
prospects. This experience was designed to help employees be more effective at
driving revenue, and allow the organization to grow faster.
Extends the Business Enterprise to Partners and Customers
As a portal for business people outside a company, our product provides a
secure forum for drawing customers and partners into the enterprise. For
example, a company's sales partner could visit the company's portal to check
inventory, search for support articles, query market demographics or share
sales leads. In addition, version 4.0 of our product includes a community
experience that allows organizations and their customers or partners to
collaborate. As a result, the customer or partner can work more closely with
the organization, creating opportunities for increased sales and better
service.
Accelerates Time-to-Benefit of New Applications and Services
Our extensible architecture allows new applications and services to be
integrated into the portal, which can accelerate their deployment and increase
their impact. We believe the portal can become the standard interface for our
customers' electronic data and services. In place of costly and time-consuming
rollouts of new systems, our customers can embed applications and services from
those systems in a portal that a large number of users already visits daily,
immediately creating a constituency that increases the likelihood of a
successful deployment and accelerates the impact of the new applications and
services on the business.
Leverages Existing Technology Investments
Our product opens software applications to broader audiences without
requiring changes to those software applications. Applications previously
limited to technical specialists deliver more value in a portal that everyone
visits. Widespread use throughout the extended enterprise has the potential to
increase the return on a broad legacy of applications in a new, cohesive e-
business setting.
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Strategy
Our objective is to lead the corporate portal industry with the most
innovative technology, broadest alliance network and most satisfied customers.
To achieve our goal, we are pursuing the following strategies:
Establish the Plumtree Corporate Portal as a Platform
We intend to establish the Plumtree Corporate Portal as the primary platform
for aggregating the information and services available to a company. To drive
this strategy, we seek to maximize the range of software applications
integrated into our platform. Beyond traditional enterprise systems, we are
integrating new e-business services, including transactional systems from
vendors such as Ariba, business process software from vendors such as
webMethods, collaboration capabilities from vendors such as eRoom, and Web
content management capabilities from vendors such as Vignette. We also seek to
develop new distribution capabilities based on our technology for syndicating
gadget content to other platforms and mobile devices. To accomplish this
objective, we intend to establish alliances with vendors of wireless services,
voice portals and other Web platforms. By delivering the resources assembled by
the portal to users almost anywhere, we believe this strategy can increase
portal audiences and enhance the value of the portal to our customers.
Once our solution becomes an enterprise-wide Web platform, businesses can
use that platform as a delivery channel for new services, from conference room
scheduling to online procurement. By deploying hosted services through the
portal, customers accelerate time-to-benefit, increase the likelihood of a
successful deployment and take advantage of a typically large existing
audience. We believe the delivery of new services can generate additional
revenue opportunities with existing customers, and further differentiate our
offering with new customers.
Build New Alliances with Technology Vendors and Systems Integrators
We intend to continue to develop a broad base of systems integrator and
technology vendor alliances. Building these alliances allows our customers to
integrate a greater range of information and services and provides additional
support for portal deployments spanning a wide variety of technologies and
disciplines. Our alliances with systems integrators can create demand for our
product at integrators' clients around the world, and provide deployment
expertise that allows us to focus on generating software license revenue.
Our alliances with technology vendors strengthen our brand and assure
prospective customers that our product can work with a wide range of best-of-
breed technologies. Many of these alliances have resulted in the development of
product extensions such as Plumtree Portal Gadgets, which can enhance our value
proposition to customers. As the number of customers grows, demand for gadgets
increases, providing alliance members with strong incentives to create
additional gadgets. This in turn generates more demand for our product. We have
created a special business unit for recruiting alliance members and customers
to develop Plumtree Portal Gadgets that we can certify and distribute to other
customers.
Increase Our Market Share Among Industry-Leading Customers
We believe our leadership position as a provider of infrastructure software
for corporate portals can be attributed to our platform, which is designed to
integrate a wide range of applications and Internet-based services and to scale
to support hundreds of thousands of users. Large organizations, such as
Andersen Consulting LLP, Ford Motor Company, The Procter & Gamble Company and
Kmart Corporation, have chosen the Plumtree Corporate Portal. We intend to
leverage our reputation for working on large and complex assignments to assist
us in attracting new customers and alliance members and increasing our market
share.
Capitalize on the Network Effect
We believe our platform's open architecture, which allows customers and
alliance members to exchange information and services between portal
deployments, can be the basis for a network effect that can accelerate
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sales. Each new deployment of our portal potentially contributes to the pool of
information and services on which prospective customers can draw. We intend to
target market-leading organizations in every industry and in government, as
hubs for sharing content and services with other organizations in that sector.
We believe this can drive additional sales to the customers and partners that
are receiving information and services from a hub account. To support this
strategy, we will continue to develop technologies for sharing information and
services between deployments, and will align our selling efforts to
systematically approach the organizations that work closely with our existing
customers.
Product
Our solution consists of the Plumtree Corporate Portal and a wide range of
extensions to that product for integrating content and services from other
systems.
Personalized Portal Page and Plumtree Portal Gadgets
The personalized portal page is a Web page assembled by each portal user,
combining categories drawn from the portal's document directory with
information and services integrated from different systems as Plumtree Portal
Gadgets. Gadgets are plug-in components that communicate with an underlying
application or Internet service via a programming interface or the Web,
generating extensible mark-up language, or XML, or hypertext mark-up language,
or HTML. A user chooses the gadgets from which to build his or her page using
the Plumtree Corporate Portal. Our Massively Parallel Portal Engine, a feature
of version 4.0 of our portal, prepares the page, retrieving gadget data and
hosting interactive services from other systems.
The gadgets now available with the Plumtree Corporate Portal are designed to
allow customers to deploy a portal that will provide access to their most
important systems rapidly, with little or no custom development. With a
separate Plumtree business unit dedicated to increasing the number of gadgets,
and a network of customers and partners developing gadgets that can be
certified and re-distributed, we believe the number of gadgets that will be
available to our customers will continue to grow.
Plumtree Portal Communities
Communities are similar to personalized portal pages, but are assembled by a
manager or project leader to communicate a group view of the business, and to
promote collaboration. Communities consist of gadgets and categories drawn from
the document directory, and also feature collaboration services for document
sharing, threaded conversation and assigning tasks to group members. A typical
portal deployment offers a wide variety of communities. Organizations can use
communities as business-to-employee resource centers, projecting a company-
wide, regional or departmental view of the business. Organizations can also use
communities as a business-to-business forum for collaborating with partners and
customers, or as an employee-to-employee working site for completing projects.
The portal enrolls new users in communities by supporting electronic mail
invitations that include a link for creating user accounts with pre-configured
profiles. The communities feature of our product is contained in version 4.0.
Plumtree Document Directory
The document directory organizes links to a wide variety of documents from
different sources in a hierarchy of categories defined by each Plumtree
customer. This hierarchy is known as a taxonomy. Users search or browse this
taxonomy, and can also draw categories from the taxonomy to embed in a
personalized or community portal page, which highlights the most recent
documents available for that category.
The directory indexes more than 15 types of documents, as well as Web pages,
database reports and electronic mail messages from Lotus Notes and Microsoft
Exchange. The portal stores only an index of the documents in the directory,
with links to their original location, avoiding content replication. To
identify new documents to index, our product automatically scans a wide variety
of document databases, file systems, Web
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sites and messaging databases. The portal can be extended to scan new types of
repositories using modular components called Plumtree Crawlers, and to index
documents in new formats using modular components called Plumtree Accessors.
These components operate on a server separate from the Web server hosting the
portal application, improving reliability and performance.
The document directory can be overseen by a large number of content experts
in different parts of an organization. These experts review the recommendations
of our categorization engine to determine if documents have been appropriately
indexed in the section of the taxonomy that they administer.
Plumtree Portal Network Architecture
The Plumtree Corporate Portal also offers a wide range of technologies for
distributing Plumtree Portal Gadgets assembled by the portal to other
businesses, platforms and devices. Because gadgets are hosted on separate
gadget servers and accessed via the open hyper-text transfer protocol, or HTTP,
multiple portal deployments can access a common gadget server, allowing
organizations to share interactive services with one another, or between
business units within a deployment.
Using a technology known as gadget syndication, version 4.0 of our product
allows customers to distribute gadget content to other Web platforms from
vendors such as Interwoven or Vignette, and other devices such as standard
telephones or personal digital assistants. The same technology can also be used
to distribute information between businesses. For example, one company's portal
could distribute on a scheduled basis competitive news, an inventory report and
a calendar of events to a partner's intranet, freeing the partner from having
to visit that company's portal to stay up-to-date.
The portal also features the ability to issue searches to other portals and
other systems, using the same technology that assembles gadget content from
multiple systems. This ability, known as networked search, allows a user of one
portal deployment to search another portal deployment in a different part of
one organization, or in a different organization that has agreed to share
information and services. Customers can plug-in new search components to
include search results from other systems, such as an Autonomy search index on
the corporate network, or a Google search index on the Internet. As a result, a
user of one portal deployment can, with a single search, retrieve results from
a wide range of systems.
Services
In addition to offering infrastructure software, we offer customers and
alliance members deployment and support services.
Professional Services
We offer professional services to deploy the Plumtree Corporate Portal at
customer sites, and to train alliance members, including technology vendors and
systems integrators. Our consultants are participating in joint deployments
with systems integrators, increasing our capacity to deploy at a large number
of customer sites.
Customer Care Services
We provide customer care through technical support and assigned account
managers. Technical support is offered for customers and alliance members
worldwide through our support centers in San Francisco and London. Standard
support is available via e-mail and telephone during normal business hours, and
premium support is available via telephone 24 hours per day, seven days per
week. Customers and alliance members may also receive technical support through
a portal community, which is available with version 4.0 of our product. In
addition, local account managers provide customers with an advocate within
Plumtree to assist them in defining their business requirements and obtaining
the needed resources for a successful enterprise-wide deployment.
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Training Services
We offer a series of training classes designed to provide our customers and
alliance members with the knowledge and tools necessary to deploy, administer
and expand the portal within the enterprise. Offered both at customer sites and
at training centers in various cities, these classes have, to date, enrolled
more than 500 individuals from customer and alliance member organizations.
Alliances
We have developed relationships with a wide range of technology and systems
integrator alliance members. These relationships generate new sales
opportunities, increase our deployment capacity and enhance our product's
features.
Technology Vendors
Because a portal exists to integrate access to a wide range of technologies,
we seek to further establish our platform by cultivating extensive alliance
support. Several alliance members have participated in gadget development,
augmenting our ability to develop new portal extensions. We also market our
product through technology alliance members, participating in joint events and
engaging alliance member sales people to promote joint solutions. We have
relationships with over 35 technology alliance members:
<TABLE>
<S> <C>
Actuate Corp. Multex.com (was BuzzCompany.com)
Blackstone Technology Group Netegrity, Inc.
Braun Consulting, Inc. Open Text, Inc.
Business Objects Americas Powerize.com
Business.com, Inc. Savvion, Inc. (was TDI)
Citrix Systems, Inc. ScreamingMedia Inc.
Cognos Inc. Semio Corp.
Conjoin, Inc. Siebel Systems, Inc.
Copernus, Inc. (was Giage, Inc.) Spherion Pacific LLC
Documentum, Inc. Stafford Technology
E.phiphany, Inc. StockMaster.com, Inc. (a subsidiary of
eRoom Technology, Inc. RedHerring Communications)
Information Builders, Inc. Sybase, Inc.
International Business Machines Syncronex, Inc.
Corporation Tacit Knowledge Systems, Inc.
Lexis-Nexis, Inc. Vignette Corporation
Microsoft Corporation West Group
MicroStrategy Services Corporation Work.com LLC
Moreover.com, Inc.
</TABLE>
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Systems Integrators
We have established relationships with over 60 systems integrators, and have
trained over 350 of their technicians on methodologies for deploying our
technology. By offering our customers deployment services, systems integrator
alliance members increase our ability to meet customers' needs and allow us to
focus on developing and licensing our software. Systems integrators also
collaborate with our engineers on the development of Plumtree Portal Gadgets,
and identify and pursue sales opportunities on our behalf. Among the systems
integrators participating in our alliance program are:
<TABLE>
<S> <C> <C>
AMH Communications, Inc. iCongo.com Pyxis International
answerthink Idea Integration R2 Solutions
Argus Connection, Inc. imc/2/ Revere Group
AverStar, Inc. Infodata Systems, Inc. Root Consulting, Inc.
Beaver Valley Systems Innavision LLC Saltmine LLC
Blackstone Technology Group InnerVision Technologies SEI Information Technology
Braun Consulting, Inc. Kraft, Kennedy & Lesser Silicon Plains Technologies,
Broadreach Consulting, Inc. Lexis Publishing Inc.
BRT, Inc. Liberty Technology Silver Helix, Inc.
CB Technologies, Inc. Services Soft Cell
CCD Online Systems LiveWire, Inc. Solution Builders, Inc.
Clarity CA Solutions, Inc. Luminant Worldwide Spectria Software
Compaq Computer Corporation Corporation Spherion Corporation
Cyber and Allied Solutions Mariner, LLC SRA International, Inc.
Diamond Technology Partners Meritage Technologies, Star Information Technology
e2i, Inc. Detroit Corp.
e-Central LLC Meritide, Inc. St. Onge Company
ExecSearch, Inc. OAO Technology Solutions Strafford Technology, Inc.
FutureNext Consulting, Inc. Park Hill Technologies, Systems Integration Solutions,
GE Capital ITS LLC Inc.
GeoQuest PricewaterhouseCoopers Techlaw Automation Partners,
Groundswell Primix Solutions Inc.
Project Performance Corp. TIS Worldwide
Vistronix, Inc.
Webegg SpA
</TABLE>
Customers
We have licensed our product to over 130 customers. Our clients represent a
broad spectrum of enterprises within diverse sectors, including manufacturing,
retail, financial, technology and government. In 1999, AG Consulting Inc.,
Ministry of Small Business, Tourism and Culture, VHA Inc., Optiva Corporation,
Compaq Computer Corporation, Wm. Wrigley Jr. Company, Alliance Data Systems
Corporation, Allegheny Ludlum Corporation, St. Onge Company, SCT Corporation,
Electronic Data Systems Corporation, AT&T Solutions, ISD Admin, Online Systems,
Staples, Inc. and Chevron Corp. each accounted for 10% or more of the total
revenue during a particular quarter. In 2000, more than 10% of revenue for the
first quarter was attributable to Motorola, Inc. and in the second and third
quarters to Ford Motor Company. We consider The Procter & Gamble Company also
to be a key customer. Customers from which we have recognized in excess of
$150,000 in revenue include the following:
<TABLE>
<S> <C> <C>
Access Data Consulting Compaq Computer The Procter & Gamble Company
Corporation Corporation Raytheon Company
ADC Telecommunications Inc. Federal Reserve Bank of Robertson Stephens, Inc.
Alliance Data Systems San Francisco R.W. Johnson Foundation
Corporation Ford Motor Company SCT Corporation
Ames Department Stores, GTE Corp. Staples, Inc.
Inc. GUESS?, Inc. State Street Corporation
Andersen Consulting LLP Hy-Vee Inc. Swiss Reinsurance Company
AT&T Solutions InVerge, Inc. Sytel, Inc.
Best Buy Co. Inc. Ketchum Thomas Weisel Partners LLC
BP International Kmart Corporation Universal Systems - Navair
Cambridge Technology Koch Industries, Inc. USinternetworking, Inc.
Partners Merant Viaken Systems Inc.
CB Technologies, Inc. Motorola, Inc. Viant Corporation
Chevron Corporation Pacific Life Insurance webMethods, Inc.
Comcast Cable Company
Communications, Inc. Pharmacia Corporation
</TABLE>
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Customer Profiles
The selected customer examples below are intended to illustrate how our
customers are using, or planning to use, the Plumtree Corporate Portal to solve
their business needs.
Ford Motor Company
Ford Motor Company, the world's second largest automaker, has chosen our
product to power an enterprise-wide corporate portal for more than 200,000
employees worldwide. Ford is in the process of deploying the Plumtree Corporate
Portal as part of an initiative to modernize Ford's intranet, hub.ford.com, and
drive collaboration within business units. Ford will use our product to
consolidate the hundreds of intranet sites that comprise hub.ford.com to create
a manageable Web experience for the entire enterprise. Hub.ford.com will
integrate through the portal key capabilities of enterprise applications and
Internet services, and over one million documents stored worldwide, in a
single, searchable document directory. To assemble comprehensive views of their
business in personalized portal pages, Ford employees will be able to choose
from hub.ford.com's menu of Plumtree Portal Gadgets, which will include real-
time newsfeeds, stock reports, company directories, benefits information and
local weather. To facilitate project management and foster collaboration, Ford
is creating community pages that correspond to functional roles within the
company, such as purchasing, manufacturing and marketing. Our product's
architecture is designed to make it possible for hub.ford.com to generate
gadgets for employees under peak loads, which Ford estimates will be 10,000
hits per minute. The Plumtree Corporate Portal will synchronize with Ford's
existing directory of over 150,000 users, helping ensure that employees see the
content and services that correspond to their security profiles and specific
roles when they log in to hub.ford.com. We offer Ford a framework for
controlling an extensive network of intranets, and a platform for enterprise-
wide collaboration, with the scalability and security features it needs to
support its global employee base. In May 2000, Ford purchased 312,500 shares of
our Series E preferred stock.
Procter & Gamble
The Procter & Gamble Company, one of the world's largest consumer goods
marketers, is in the process of deploying the Plumtree Corporate Portal
throughout its global enterprise to give over 100,000 employees and partners a
single Web destination for the information, applications and services they need
to do their jobs. Procter & Gamble will use our product to enhance the
productivity of employees. In a searchable document directory, the Plumtree-
powered portal will aggregate content from more than one million Web pages and
thousands of Lotus Notes databases and file servers on Procter & Gamble's
global network. Procter & Gamble is integrating a range of enterprise
applications into the Plumtree Corporate Portal as Plumtree Portal Gadgets,
including services from the company's SAP R/3 enterprise resource planning
system, Oracle data warehousing and business intelligence applications and
E.piphany E4 analytic customer relationship management system. Procter & Gamble
employees will be able to choose from a menu of gadgets to assemble a
comprehensive view of their business in personalized portal pages. For example,
an employee might embed an Oracle gadget for analyzing sales histories and an
SAP gadget for approving purchase orders in a MyPage alongside an e-mail inbox
and market news and product notices from the document directory. Procter &
Gamble will use our product to offer employees a single, simple point of access
to the applications and services they need to assess revenue opportunities,
shorten lead times on sales and collaborate more effectively. In May 2000,
Procter & Gamble purchased 208,333 shares of our Series E preferred stock.
Procter & Gamble also holds 100,000 shares of our common stock pursuant to the
exercise of a warrant issued in May 2000.
webMethods
webMethods, Inc., a provider of software solutions for business-to-business
integration, implemented the Plumtree Corporate Portal enterprise-wide to
provide each of its employees with a single portal to the information and
services they need to get their jobs done, whether in the office or in the
field. In addition, webMethods uses our product to help orient new employees to
the company quickly and keep them up to speed. Within a month of the decision
to deploy our product, webMethods rolled out the Plumtree-powered
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<PAGE>
mywebMethods.com, which brings together content dispersed throughout the
company intranet and a broad range of Internet services in a simple Web
experience for all webMethods' employees. Over 75 enterprise applications and
services have been integrated into mywebMethods.com as Plumtree Portal Gadgets,
including key capabilities of the company's Siebel customer relationship
management system, its Open Text Livelink document management system, calendar
and scheduling tools from CorporateTime and expense reporting services from
ExpensAble.com. From the portal, a webMethods sales representative can embed
Siebel gadgets for managing accounts, contacts, activities and sales
opportunities alongside an e-mail inbox gadget, a news-feed gadget and product
updates from the document directory. The portal preferences of new employees
are created according to their roles within the company to ensure that the
specific information and services they need to do their jobs begins to funnel
to their desktop the first time they log on. We are helping webMethods mobilize
the entire enterprise for growth with a gateway to the content and services
employees need to support customers, capitalize on sales opportunities and
cultivate new revenue channels.
California Casualty Management Company
California Casualty Management Company, a provider of group automobile and
home insurance for over 100 associations in 16 states, uses the Plumtree
Corporate Portal to give its policyholders personalized access to their
accounts online. When hundreds of the customers surveyed by California Casualty
requested the convenience of managing their accounts over the Web, the company
chose us to provide the infrastructure for MyAPlus.com, a secure self-service
portal for California Casualty's 165,000 policyholders. The integration of the
Plumtree Corporate Portal with the company's mainframe legacy insurance
applications allowed California Casualty to put billing and policy information
online within two months of deploying a corporate portal. California Casualty
customers can now assemble a complete, personalized view of their accounts on
the Web. A policyholder can embed Plumtree Portal Gadgets in his or her MyPage
to view billing or policy information, make a payment by credit card, request a
policy change or file a claim. The Plumtree-powered MyAPlus.com also features a
searchable directory of insurance concepts and terms. By December 31, 2000,
California Casualty expects to be able to present a policyholder's actual
policies in .pdf format from newly structured electronic policy archives via
the Plumtree Corporate Portal, and it also expects to deliver insurance quotes
in real time to both prospects and customers from their MyAPlus.com pages. The
use of our product by California Casualty cuts phoning, faxing, e-mailing and
mailing costs, and has the potential to increase customer acquisition and
retention for California Casualty.
Sales and Marketing
We pursue accounts using our direct sales force and through systems
integrators and independent software vendors. We focus our sales activities on
large businesses and government organizations, particularly market-leading
organizations in each industry, as hubs for distributing content and services
to other prospective accounts in that industry.
As of September 30, 2000, our direct sales organization consisted of 108
managers, account executives, product consultants and business development
professionals, divided into five regional teams. We have sales representatives
throughout the United States and Europe, located in major cities such as
Boston, New York, Washington D.C., Atlanta, Chicago, Cincinnati, Minneapolis,
Denver, Los Angeles, Seattle, London and San Francisco.
Our marketing efforts are conducted by a marketing organization and product
management team, which, as of September 30, 2000, consisted of 19
professionals. The marketing organization is generally responsible for product
positioning, product direction, communications, field events, sales tools,
competitive analysis and alliance marketing. The product management team drives
product direction, technical marketing and competitive analysis. We generate
sales leads from our communications programs that include our Web site, public
relations, on-line and local seminars, tradeshows and events. The alliance
marketing efforts are designed to support co-marketing programs with our
alliance members.
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Technology
Core Technologies
The Plumtree Corporate Portal is based on three core technologies.
Extensible Portal Server. Our product integrates a wide range of information
and services from other systems. Our product allows customers and partners to
develop plug-in components to integrate new types of content and new types of
services, maximizing the resources available to users through the portal. The
Plumtree Corporate Portal is extensible in five ways:
. Content: Plug-in modules called Plumtree Portal Accessors integrate
different types of content from different types of repositories in
Plumtree's document directory.
. Services: Plug-in modules called Plumtree Portal Gadgets integrate
application and Internet services in the portal's personalized and
community pages.
. Security: Plug-in modules called Plumtree Authentication Providers
synchronize users' security profiles from other systems, allowing the
portal to negotiate access to the wide range of secure resources
available to each user through different profiles.
. Search: Plug-in modules called Plumtree Search Providers open different
search indexes to the portal's search capability, empowering users to
search simultaneously the repositories indexed in the Plumtree portal as
well as other indexes maintained by other search engines on the Internet
and the corporate network.
. Media: Plug-in modules called Plumtree Transformers syndicate the content
assembled in the portal for distribution to other platforms and other
devices, including wireless devices and telephones.
Massively Parallel Portal Engine. To scale to meet the needs of a large
number of users with many gadgets in a personalized, secure way, we have
developed the Massively Parallel Portal Engine, which sends requests to
multiple gadget servers in parallel through HTTP. Our engine is designed to
retrieve content and services from a large number of Web servers, using
separate threads to retrieve each service in parallel, and optimizing the
number of network sockets opened to communicate with those servers. This
approach is more scalable because it divides the preparation of a potentially
large number of services among a large number of computers. If, for example, a
portal page embeds a gadget for listing e-mail messages that takes one second
to prepare, an inventory report gadget that takes one second to prepare and an
industry news gadget that takes one second to prepare, the Massively Parallel
Portal Engine assembles the page in approximately one second, instead of three.
This approach is also designed to be fault-tolerant, as gadgets operating on
separate computers cannot interfere with one another or with the portal's main
Web server.
Open Network. Because HTTP does not support intricate, continuous
communications between application components, we have developed an approach
for embedding complex configuration commands within the prefix section of an
HTTP communication, known as HTTP headers. By operating within the parameters
of the HTTP standard, this technology opens our portal infrastructure to
integrate a wide range of components, and allows our infrastructure to harness
the power of multiple computers connected over the Internet.
As a result, portal deployments can integrate services from any server
within an organization, or by connecting to a server on the Internet. Customers
that previously hosted gadgets within their own organization can now integrate
new services in the portal by connecting to gadget servers on the Internet,
hosted by partners, application solution providers and other customers. This
technology also allows portal deployments to connect to a common gadget server
via the Internet, sharing services between deployments.
Search Technology
Under our agreement with Verity, Verity licenses to us rights in Verity
software allowing us to develop, market and distribute Plumtree applications
incorporating Verity software components and providing Verity
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search functionality. We pay Verity license fees as well as fees for training,
software support and other services. The parties also agree to co-marketing
obligations, including Plumtree implementing the Verity search button as the
default search button in its application and the parties providing hot links on
their web pages to each other's web pages. The initial term of the agreement is
three years, with automatic one-year renewals, unless written notice of
termination is received by either party prior to the end of the then-current
initial or renewal term.
Research and Development
Since inception, we have devoted significant resources to develop our
product and technology. We believe our future success depends in large part on
continuing innovation and rapid development. Our engineering organization is
responsible for product architecture and technology, engineering and quality
assurance. As of September 30, 2000, our engineering organization consisted of
49 employees. The team is organized in groups focused on server architecture,
user interface design and implementation, extensibility architecture,
internationalization, UNIX development, gadget development and quality
assurance. For the year ended December 31, 1999, our research and development
expenses totaled approximately $1.7 million. For the nine months ended
September 30, 2000, research and development expenses totaled approximately
$4.8 million. We expect to continue to devote substantial resources to our
research and development activities.
Intellectual Property and Licensing
Our success and ability to compete is dependent in part on our ability to
develop and maintain the proprietary aspects of our technology and operate
without infringing the proprietary rights of others. We rely primarily on a
combination of copyright, trade secret and trademark laws, confidentiality
procedures, contractual provisions and other similar measures to protect our
proprietary information. For example, we license rather than sell our software
to customers and require licensees to enter into license agreements that impose
certain restrictions on their ability to utilize the software. We have filed
one provisional patent application with the U.S. Patent and Trademark Office.
There can be no assurance that any of our intellectual property rights will not
be challenged or invalidated.
We also enter into license agreements with respect to our technology,
documentation and other proprietary information. Those licenses are generally
non-transferable and typically have a perpetual term. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy,
reverse engineer or otherwise obtain and use our products or technology that we
consider proprietary, and third parties may attempt to develop similar
technology independently. Policing unauthorized use of our products is
difficult, particularly because the global nature of the Internet makes it
difficult to control the ultimate destination and security of software and
other data transmitted.
We integrate third-party software into our products. This third-party
software may not continue to be available on commercially reasonable terms. We
currently license our search engine, which is integrated into the Plumtree
Corporate Portal, from Verity, Inc. This technology provides users with the
ability to search and classify information. If we fail to maintain licenses to
this and other third-party software, shipments of our products could be delayed
until equivalent software could be developed or licensed and integrated into
our products, which could seriously harm our business, operating results and
financial condition.
We do not believe that any of our products infringe the proprietary rights
of third parties. However, third parties may assert infringement claims against
us in the future with respect to current or future products. Further, we expect
that software product developers will increasingly be subject to infringement
claims as the number of products and competitors in our industry segment grows
and the functionality of products in different industry segments overlaps. Any
claims of that variety, with or without merit, could cause a significant
diversion of management attention, result in costly and protracted litigation,
cause product shipment delays, refund license fees, indemnify our customers and
alliance members or require us to enter into royalty or licensing agreements.
Those royalty or licensing agreements, if required, may not be available on
terms acceptable to us or at all, which could seriously harm our business.
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Our policy is to require all of our employees to sign nondisclosure and
confidentiality agreements. From time to time, we hire or retain employees or
consultants who have worked for independent software vendors or other companies
developing products similar to those offered by us. Those prior employers may
claim that our products are based on their products and that we have
misappropriated their intellectual property. Any claims of that variety, with
or without merit, could cause a significant diversion of management attention,
result in costly and protracted litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. Those royalty or
licensing agreements, if required, may not be available on terms acceptable to
us or at all, which could harm our business.
Competition
The market for our product is intensely competitive and highly fragmented,
characterized by rapid technological change, evolving industry standards and
changes in customer needs, and new product introductions and improvements. Our
current competitors include established software vendors that are Web-enabling
their applications or are building infrastructure software, including Oracle
Corp. and Sun Microsystems, Inc., emerging companies offering competitive
products, including Sequoia Software Corporation and BroadVision, Inc., and
companies choosing to build their own solutions.
Some established software vendors are Web-enabling traditional client-server
applications, which in some cases are being labeled as portal applications.
Prospective customers who require only a Web view of their applications may not
need a corporate portal product and may be satisfied with this category of
products. Some established software vendors in the operating system business,
database business or application server business are offering portal-building
tools. These companies support a build-your-own alternative to our product.
Since many prospects already license other software from these vendors, a
customer-vendor relationship already exists between them. We face competition
from internal information technology departments of potential customers that
have developed or may develop in-house technologies that may substitute for
those offered by us. We expect these internal development initiatives will
continue to be a source of competition. We also face competition from emerging
software companies. These companies generally offer products that could
substitute for those offered by us.
We expect to face increased competition in the future from our current
competitors. In addition, new competitors, or alliances among existing and
future competitors, may emerge and rapidly gain significant market share. Many
of our competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources, greater name recognition,
a broader range of products to offer and a larger installed customer base, any
of which could provide them with a significant competitive advantage. We expect
that the rapid evolution of Internet-based software applications and standards
will require us to adapt our software products to remain competitive. If we are
unable to compete successfully, we may be unable to attract and retain
customers. Increased competition could also result in price reductions for our
products and lower profit margins, either of which could harm our business,
results of operations and financial condition.
We compete principally on the basis of:
. product features, quality and performance;
. interoperability of the product with existing applications;
. number, size and satisfaction of customers;
. number and significance of alliances; and
. strength of sales and services channels.
We may be unable to successfully compete against current and future
competitors, and competitive pressures we face may harm our business,
prospects, operating results and financial condition.
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Employees
As of September 30, 2000 we had 198 full-time employees, of whom 191 were
based in North America and 7 were based in Europe. Of those employees, 73 were
in sales and marketing, 49 were in product development, 60 were in professional
services, technical support and training, and 16 were in finance, human
resources, information systems and administrative functions. Our employees are
not represented by any collective bargaining agreements and we have never
experienced a work stoppage.
Facilities
Our principal headquarters facility is located in approximately 41,000
square feet of office space in San Francisco, California under a lease that
expires in 2006. We house additional headquarters employees in a separate San
Francisco facility with approximately 5,600 square feet of office space, under
a lease that expires in April 2001. We are seeking additional space in Northern
California to meet our expansion plans.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding the executive officers,
directors, and key employees of Plumtree as of November 15, 2000:
<TABLE>
<CAPTION>
Name Position Age
---- -------- ---
<S> <C> <C>
John Kunze.................. President, Chief Executive Officer and Director 37
Eric Borrmann............... Vice President and Chief Financial Officer 39
Glenn Kelman................ Co-Founder, Vice President of Product Management and Marketing 29
John Hogan.................. Vice President of Engineering 35
Jim Flatley................. Vice President of Worldwide Field Operations 40
John Dillon................. Director 50
Rupen Dolasia............... Director 37
Pierre Lamond............... Director 70
Bernard Whitney............. Director 44
</TABLE>
John Kunze has been President, Chief Executive Officer and member of the
board of directors since August 1998. Before joining Plumtree, Mr. Kunze spent
his entire professional career from 1985 to 1998 at Adobe Systems. Mr. Kunze
led development for the first releases of Adobe Illustrator and PhotoShop.
Mr. Kunze became Director and then Vice President of Product and Marketing at
Adobe Systems, with responsibility for all product marketing and strategic
acquisitions. Mr. Kunze was later promoted to Vice President of Adobe Systems
Internet Products Division, which defined Adobe Systems' Internet strategy.
Eric Borrmann has been Vice-President and Chief Financial Officer since July
2000. Before joining Plumtree, Mr. Borrmann served as Corporate Treasurer at
Network Associates since 1999, where he was responsible for all financial
planning and investor relations at the global security and network management
company. Previously, he served as Network Associates' Vice President of Finance
and Operations for Europe, the Middle East and Africa. Mr. Borrmann's
experience also includes senior management and systems engineering positions at
Network General from 1995 to 1997, Conner Peripherals from 1990 to 1995 and
Electronic Data Systems from 1985 to 1988.
Glenn Kelman, Co-Founder and Vice President of Product Management and
Marketing since March 1998, is responsible for corporate and product marketing,
and collaborates with our engineering department to set the features and design
of our products. Mr. Kelman managed the design and development of the first
release of the Plumtree Corporate Portal. Before founding Plumtree, Mr. Kelman
was a senior product manager at Informix Software, a company he joined via the
acquisition of Stanford Technology Group, from 1995 to 1997. As a product
manager for On-Line Analytical Processing software following Informix
Software's acquisition of Stanford Technology Group, Mr. Kelman was involved in
designing and launching a major release of Informix Software's On-Line
Analytical Processing product line.
John Hogan has been Vice President of Engineering since March 1998. Before
joining Plumtree, Mr. Hogan was the Director of Engineering for Informix
Software's On-Line Analytical Processing products from 1997 to 1998. Mr. Hogan
also worked at Informix Software as a business development manager from 1996 to
1997. Before joining Informix Software, Mr. Hogan was a senior developer for
Stanford Technology Group from 1994 to 1995. Mr. Hogan also worked as a manager
in various development and consulting organizations at Oracle Corporation from
1989 to 1994.
Jim Flatley, Vice President of Worldwide Field Operations since July 1999,
has responsibility for sales, professional services, business development, and
customer care. Before joining Plumtree, Mr. Flatley was Vice President from
March 1999 to June 1999 at Siebel Systems. Prior to working at Siebel, Mr.
Flatley managed a division of 700 sales operations employees across the U.S.,
Latin America and Canada for Network Associates from 1990 to 1999. At Network
Associates, Mr. Flatley held sales and management positions responsible for
both
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channel and corporate sales. Mr. Flatley worked at AT&T from 1988 to 1990 as
head of sales and marketing for a custom software solution to the airline
industry, and IBM from 1982 to 1988, in sales and marketing.
John Dillon has been a director of Plumtree since September 1997. Mr. Dillon
has been the President and Chief Executive Officer of Salesforce.com since
September 1999. Before joining Salesforce.com, Mr. Dillon was interim President
and Chief Executive Officer for Sanctum. Mr. Dillon spent five years with Arbor
Software from December 1993 to May 1999 as Vice President of Sales and then as
President and Chief Executive Officer. He also served as President and Chief
Executive Officer for Hyperion, the global enterprise software company formed
through the merger of Arbor Software and Hyperion Software. Earlier in his
career, he was employed at Oracle Corporation and GRiD Systems in various sales
management capacities, and at EDS as a systems engineer. Mr. Dillon serves on
the board of directors for Made2Manage Systems and Sanctum.
Rupen Dolasia has been a director of Plumtree since June 1998. Mr. Dolasia
is a founding member of Granite Ventures LLC (formerly H&Q Venture Associates,
LLC), a venture capital firm formed in July 1998. Prior to founding H&Q Venture
Associates, Mr. Dolasia was a Vice President in Hambrecht & Quist's Venture
Capital Department, which he joined in 1994. Prior to joining H&Q, Mr. Dolasia
was the Manager of Information Systems consulting at PEI Consultants. Prior to
joining PEI Consultants, Mr. Dolasia co-founded Grata Systems, Inc., a vendor
of PC-based control and monitoring software. Mr. Dolasia focuses on information
technology investments. Mr. Dolasia currently serves on the board of directors
of Apogee Networks, Covalent Technologies, Luna Information Systems, Lumedx and
Giganet Inc.
Pierre Lamond has been a director of Plumtree since February 1997, and is a
partner at Sequoia Capital, a Silicon Valley based venture capital firm. Mr.
Lamond focuses on semiconductor, communications and software investments. Prior
to joining Sequoia Capital in 1981, Mr. Lamond was a General Manager and
Technical Director of National Semiconductor, a company he co-founded. He
serves as Chairman of Vitesse Semiconductor and Redback Networks and is a
director of a number of private companies.
Bernard Whitney has been a director of Plumtree since November 2000.
Mr. Whitney has served as Chief Financial Officer and Secretary of Handspring,
Inc. since June 1999. From August 1997 to June 1999, he served as Executive
Vice President and Chief Financial Officer of Sanmina, Inc., an electronics
manufacturing company. From June 1995 to August 1997, Mr. Whitney served as
Vice President of Finance for Network General Corporation, a network fault
tolerance and performance management solutions company. From 1987 to June 1995,
Mr. Whitney held a variety of corporate finance positions at Conner
Peripherals, a storage device manufacturer.
Classified Board of Directors
Upon the closing of this offering, our certificate of incorporation will
provide for a classified board of directors consisting of three classes of
directors, each serving staggered three-year terms. As a result, a portion of
our board of directors will be elected each year. To implement the classified
structure, before the closing of the offering, three of the nominees to the
board will be elected to one-year terms, two will be elected to two-year terms
and two will be elected to three-year terms. Thereafter, directors will be
elected for three-year terms. Mr. Lamond has been designated a Class I director
whose term expires at the 2001 annual meeting of stockholders. Messrs. Dillon
and Dolasia have been designated Class II directors whose term expires at the
2002 annual meeting of stockholders. Mr. Kunze and Mr. Whitney have been
designated Class III directors whose terms expire at the 2003 annual meeting of
stockholders.
Executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been duly elected and qualified.
There are no family relationships among any of our directors, officers or key
employees.
Board Committees
We have established an audit committee and a compensation committee. The
audit committee reviews our internal accounting procedures and considers and
reports to the board of directors with respect to other
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auditing and accounting matters, including the selection of our independent
auditors, the scope of annual audits, fees to be paid to our independent
auditors and the performance of our independent auditors. The audit committee
currently consists of Messrs. Dillion, Dolasia and Whitney. The compensation
committee reviews and recommends to the board of directors the salaries,
benefits and stock option grants for all employees, consultants, directors and
other individuals compensated by us. The compensation committee also
administers our stock option and other employee benefit plans. The compensation
committee currently consists of Messrs. Dillon, Dolasia and Lamond.
Director Compensation
We reimburse our non-employee directors for all out-of-pocket expenses
incurred in the performance of their duties as directors of Plumtree. We
currently do not pay fees to our directors for attendance at meetings or for
their services as members of the board of directors.
Under our 1997 Equity Incentive Plan, directors are eligible to receive
stock option grants. On September 2, 1997, the board of directors granted
options to purchase an aggregate of 75,000 shares of common stock to Mr. Dillon
at an exercise price per share of $0.06. The board of directors granted Mr.
Kunze options to purchase an aggregate of 1,727,557 shares of common stock at
an exercise price per share of $0.09 on August 13, 1998 and options to purchase
an aggregate of 200,000 shares of common stock at an exercise price per share
of $2.20 on May 18, 2000.
Compensation Committee Interlocks and Insider Participation
No member of the compensation committee of Plumtree serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of our board of directors or
compensation committee.
Executive Compensation
Summary Compensation Table
The following table indicates information concerning compensation of our
chief executive officer and our four most highly compensated executive officers
other than the chief executive officer whose salary and bonus exceeded $100,000
for the year ended December 31, 1999. These executives are referred to as the
named executive officers elsewhere in this prospectus.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------- ------------
Securities
Name and Principal Underlying All Other
Position Year Salary ($) Bonus ($) Options (#) Compensation ($)
------------------ ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
John Kunze.............. 1999 250,000 -- -- --
President and Chief
Executive Officer
Eric Borrmann .......... 1999 -- -- -- --
Vice President and
Chief Financial Officer
Glenn Kelman............ 1999 122,500 -- -- --
Co-Founder, Vice
President of Product
Management and
Marketing
John Hogan.............. 1999 162,500 -- 75,000 --
Vice President of
Engineering
Jim Flatley ............ 1999 94,247 51,100 342,700 12,400
Vice President of
Worldwide Field
Operations
</TABLE>
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<PAGE>
Mr. Borrmann was appointed as our chief financial officer in July 2000. On
an annualized basis, Mr. Borrmann's salary is $180,000. Mr. Borrmann is
eligible to receive an annual bonus of up to $40,000. Mr. Flatley was appointed
as our vice president of worldwide field operations in July 1999. On an
annualized basis, Mr. Flatley's salary is $200,000. Mr. Flatley is eligible to
receive an annual bonus of up to $200,000. Mr. Flatley was also reimbursed for
relocation expenses in the amount of approximately $12,400.
Option Grants In Last Fiscal Year
The following table provides information concerning grants of options to
purchase our common stock made during the fiscal year ended December 31, 1999
to the named executive officers.
In the fiscal year ended December 31, 1999, we granted options to purchase
up to an aggregate of 1,894,566 shares to employees, directors and consultants.
All options were granted under our 1997 equity incentive plan at exercise
prices at the fair market value of our common stock on the date of grant, as
determined in good faith by the board of directors. All options have a term of
ten years. Generally, option shares vest over four years, with 25% of the
option shares vesting one year after the option grant date, and the remaining
option shares vesting ratably each month for the next 36 months.
The potential realizable values are based on an assumption that the price of
our common stock will appreciate at the compounded annual rate shown from the
date of grant until the end of the option term. These values do not take into
account amounts required to be paid as income taxes under the Internal Revenue
Code and any applicable state laws or option provisions providing for
termination of an option following termination of employment, non-
transferability or vesting. These amounts are calculated based on the
requirements promulgated by the Securities and Exchange Commission and do not
reflect our estimate of future stock price growth of the shares of our common
stock.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock Potential
Price Appreciation Realizable
Individual Grants for Option Term Value at
--------------------------------------------- --------------------- the Assumed
Number of Percent of Initial
Securities Total Options Public
Underlying Granted to Exercise Offering
Options Employees in Price Expiration Price Per
Name Granted Fiscal Year Per Share Date 5% 10% Share
---- ---------- ------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John Kunze.............. -- -- -- -- -- -- $ --
Eric Borrmann .......... -- -- -- -- -- -- $ --
Glenn Kelman............ -- -- -- -- -- -- $ --
John Hogan.............. 75,000 4.0% $0.087 7/03/09 $ 10,629 $ 16,925 $1,043,475
Jim Flatley............. 342,702 18.1% $0.087 7/13/09 $48,566 $77,333 $4,768,013
</TABLE>
In July 2000, when Mr. Borrmann joined the company, we granted him an option to
purchase 400,000 shares of common stock under our 1997 Equity Incentive Plan at
an exercise price of $2.60 per share.
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<PAGE>
Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option
Values
The following table describes for the named executive officers the
exercisable and unexercisable options held by them as of December 31, 1999. No
options were exercised by the named executive officers during the fiscal year
ended December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options Held at Fiscal In-The-Money Options at
Year-End (#) Fiscal Year-End ($)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John Kunze.................. 1,727,557 -- 402,521 --
Eric Borrmann............... -- -- -- --
Glenn Kelman................ -- -- -- --
John Hogan.................. 225,000 -- 56,475 --
Jim Flatley................. 342,702 -- 79,850 --
</TABLE>
The "Value of Unexercised In-the-Money Options at Fiscal Year End" is based
on a value of $0.32 per share, the fair market value of our common stock as of
December 31, 1999, as determined by the board of directors, less the per share
exercise price, multiplied by the number of shares issued upon exercise of the
option. All options were granted under our 1997 Equity Incentive Plan.
1997 Equity Incentive Plan
The 1997 equity incentive plan was adopted by our board of directors on June
30, 1997 and approved by our stockholders on the same date for the benefit of
our officers, directors and consultants. This plan has been amended, most
recently on July 19, 2000 to approve an additional 2,000,000 shares of common
stock for issuance under this plan, and this amendment was approved by our
stockholders. This plan provides for the grant of incentive stock options and
nonstatutory stock options. An aggregate of 9,700,000 shares of common stock is
reserved for issuance under this plan. As of September 30, 2000, options for an
aggregate of 5,096,414 shares of common stock were outstanding under this plan.
We will not be granting options under this plan following the offering.
In the event of certain mergers or consolidations of Plumtree, outstanding
options will be assumed or similar options substituted. In the event
outstanding options are not assumed or substituted for, these options will
terminate if not exercised before the event. In the event of a dissolution or
liquidation of Plumtree, outstanding options will terminate if not exercised
before these events.
2000 Omnibus Stock Incentive Plan
On September 7, 2000, subject to the approval of the stockholders, our board
of directors adopted the Plumtree 2000 Omnibus Stock Incentive Plan, or 2000
Plan, for the benefit of officers, directors, key employees, advisors and
consultants of Plumtree and its subsidiaries (including directors who are
employees) and reserved for issuance thereunder 10 million shares of common
stock initially, with an annual increase in shares of common stock reserved for
issuance equal to the lesser of
. three million shares; or
. 3% of the number of outstanding shares of common stock on the last
trading day of the immediately preceding fiscal year. The 2000 Plan is
scheduled to take effect upon the consummation of the initial public
offering.
The 2000 Plan provides for the issuance of stock-based incentive awards,
including stock options, restricted stock, restricted stock units, dividend
equivalents and other stock-based awards. An award may consist of one
arrangement or benefit or two or more of them in tandem or in the alternative.
Under the 2000
50
<PAGE>
Plan, awards covering no more than 3,000,000 of the shares reserved for
issuance under the plan may be granted to any participant in any one year.
The 2000 Plan will be administered by our board of directors, or a
specifically designated committee of the board. The committee has the
discretionary authority to interpret the 2000 Plan and may prescribe, amend or
rescind rules and make all other determinations necessary or desirable for the
administration of the 2000 Plan. The 2000 Plan permits the committee to select
the officers, directors, key employees, advisors and consultants of Plumtree
and its subsidiaries, including directors who are also employees, who will
receive awards and generally to determine the terms and conditions of those
awards.
In the event of a merger, consolidation, reorganization, recapitalization,
stock dividend or other change in corporate structure affecting the number of
issued shares of common stock, the committee may make an equitable substitution
or proportionate adjustment in the number and type of shares authorized by this
plan, the number and type of shares covered by, or with respect to which
payments are measured under, outstanding awards and the exercise prices.
The terms of this plan provide that the board of directors may amend,
suspend or terminate the 2000 Plan at any time, provided, however, that some
amendments may require approval of the shareholders. Further, no action may be
taken which adversely affects any rights under outstanding awards without the
holder's consent.
Under the 2000 Plan, upon election to the board of directors, or on the
effective date of the 2000 Plan if already a non-employee director, each non-
employee director will receive a grant of options to purchase 50,000 shares of
common stock at an exercise price per share equal to the fair market value of a
share of common stock on the date of grant. In addition, each non-employee
director will automatically receive an annual grant of options to purchase
20,000 shares of common stock at a per share exercise price equal to the fair
market value of a share of common stock on the date of grant immediately
following Plumtree's annual meeting of shareholders each year during the
director's term. Each such option shall be fully vested and immediately
exercisable upon the date of grant and shall have a five year term.
Plumtree may issue two types of stock options under the 2000 Plan: incentive
stock options, or ISOs, which are intended to qualify as such under the
Internal Revenue Code of 1986, as amended, and non-qualified stock options, or
NSOs. The committee will determine the exercise price, vesting period and
performance goals, if any, with respect to grants of stock options. The
exercise price of each ISO granted under this plan must be at least equal to
the fair market value of a share of common stock on the date the ISO is
granted.
Awards of restricted stock and restricted stock units may be granted under
the 2000 Plan. The committee will determine the purchase price, performance
period and performance goals, if any, with respect to grants of restricted
stock or restricted stock units. If the performance goals and other
restrictions are not attained, the participant will forfeit his or her shares
of restricted stock or restricted stock units. Participants with restricted
stock generally have all of the rights of a stockholder.
Dividend equivalents may also be issued under the 2000 Plan. Dividend
equivalents provide for the payment of stock, cash or other property equal in
value to dividends paid with respect to a specified number of shares.
The committee, in its discretion, may also grant other equity-based awards.
2000 Employee Stock Purchase Plan
The 2000 Employee Stock Purchase Plan, or Purchase Plan, is designed to
allow eligible employees to purchase Plumtree's common stock at a discount from
fair market value. On September 7, 2000, subject to the approval of the
stockholders, the board adopted the Purchase Plan and reserved for issuance
thereunder a total of 1,000,000 shares of common stock for each fiscal year
occurring during the term of the Purchase Plan. The Purchase Plan is scheduled
to take effect upon the consummation of the initial public offering.
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<PAGE>
The Purchase Plan will be administered by the compensation committee of the
board of directors or a specifically designated committee of the board, the
committee being referred to as the Plan Administrator. The Plan Administrator
has the discretionary authority to interpret the Purchase Plan and, subject to
its provisions, may prescribe, amend and rescind rules and make all other
determinations necessary or desirable for the administration of the Purchase
Plan.
The Purchase Plan contains offering periods that commence on the first
trading day on or after April 1 and October 1 of each year and end on the last
trading day before the commencement of the next offering period; provided,
however, that the first offering period under the plan will commence upon the
consummation of the initial public offering and end on the last trading day on
or before September 30, 2002. Subsequent offering periods shall be six months
in length beginning each April 1 and October 1 of each year. Stock purchases
are made at the end of each purchase period. Purchase periods are six months in
length beginning each April 1 and October 1 of each year; provided, however,
that the first purchase period under the plan will commence upon the
consummation of the initial public offering and end on the last trading day on
or before March 31, 2001.
Employees are eligible to participate if they are employed by Plumtree and
customarily work at least 20 hours per week. However, an employee may not be
granted the right to purchase stock under the Purchase Plan if the employee
. immediately after the grant would own stock possessing 5% or more of the
total combined voting power or value of all classes of Plumtree's capital
stock; or
. holds rights to purchase stock under any of our employee stock purchase
plans that together accrue at a rate which exceeds $25,000 worth of stock
for each calendar year.
The Purchase Plan permits each employee to purchase common stock through
payroll deductions of up to 15% of the employee's "compensation." Compensation
is defined as the employee's base salary, wages, commissions, overtime pay and
bonuses paid to an employee. The maximum number of shares an employee may
purchase during a single purchase period is 500 shares.
Amounts deducted and accumulated by the employee are used to purchase shares
of common stock at the end of each purchase period. The price of the common
stock offered under this plan is an amount equal to 85% of the lower of the
fair market value of the common stock at
. the beginning of the offering period; or
. the end of the purchase period.
Employees may end their participation in the Purchase Plan at any time
during an offering period, in which event, any amounts withheld through payroll
deductions and not otherwise used to purchase shares will be returned to them.
Participation ends automatically upon termination of employment with Plumtree
or any participating subsidiary.
Rights granted under the Purchase Plan are not transferable by any employee
other than by will or the laws of descent and distribution. The Purchase Plan
provides that, in the event of a merger, consolidation, reorganization,
recapitalization, stock dividend or other change in corporate structure
affecting the number of issued shares of Plumtree's stock, the Plan
Administrator will conclusively determine the appropriate equitable
adjustments. The Purchase Plan will terminate ten years after it becomes
effective. Plumtree's board has authority to amend or terminate the Purchase
Plan, except that no amendment or termination may adversely affect any
outstanding rights under the Purchase Plan.
Employment Agreements
We have offer letters with Mr. Kunze, Mr. Hogan, Mr. Flatley, and Mr.
Borrmann. Each of these officers may leave or be terminated at any time. Each
of these offer letters, with the exception of Mr. Hogan's letter,
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<PAGE>
provides that if the executive's employment is terminated by us without cause
within the first year of employment, the executive will receive 12 months of
base salary continuation, or, if so terminated following the first year of
employment, six months of base salary continuation. Generally, cause means a
willful act or omission involving material injury to Plumtree, gross misconduct
or fraud, willful disobedience of reasonable directives of the board of
directors, or conviction of a felony. In the event of an acquisition of
Plumtree or the sale of all or substantially all of the assets of Plumtree, 50%
of the executive's then unvested shares subject to stock options vest
immediately, except that, in the case of Mr. Hogan, all such unvested shares
vest.
Under the applicable offer letter, Mr. Kunze is entitled to an annual salary
of $200,000 and is eligible for a potential bonus of $100,000; Mr. Hogan is
entitled to an annual salary of $150,000; Mr. Flatley is entitled to an annual
salary of $200,000 and is eligible for a potential bonus of $200,000; and Mr.
Borrmann is entitled to an annual salary of $180,000 and is eligible for a
potential bonus of $40,000. Payment of bonuses is dependent on the attainment
of objectives established by our board of directors.
Loans to Executive Officers
In August 2000, we loaned $520,000 to Eric Borrmann, our chief financial
officer, in conjunction with the exercise of an option. The note evidencing
this indebtedness is a full recourse promissory note and is secured by a pledge
agreement. The note accrues interest at the rate of 6% per year and is payable
upon demand.
Limitation of Liability and Indemnification
Upon the closing of this offering, our certificate of incorporation will
include a provision that eliminates the personal liability of our directors for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from or limitation of liability is not permitted under
the Delaware General Corporation Law.
Our bylaws will further provide for the indemnification of our directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Plumtree
under the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission this indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
We intend to enter into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, will provide for indemnification of these
persons for expenses, judgments, fines and settlement amounts incurred by any
such person in any action or proceeding arising out of the person's services as
a director, or executive officer, as applicable, or at our request. We believe
that these provisions and agreements are necessary to attract and retain
qualified persons as directors, executive officers and board advisors.
53
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1997, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or are to be
a party in which the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our common stock, or an
immediate family member of any of the foregoing, had or will have a direct or
indirect interest other than:
. compensation arrangements, which are described where required under
"Management"; and
. the transactions described below.
All of the shares of our preferred stock will automatically convert into
shares of our common stock at a one-to-one ratio upon completion of this
offering. The holders of our preferred stock are entitled to registration
rights with respect to the shares of common stock issued or issuable upon
conversion of the preferred stock. Each of the shares of preferred stock and
common stock described below were issued at a price equal to the fair market
value of such share on the date of purchase.
Series E Preferred Stock Financing Round. In May 2000, we sold shares of
Series E preferred stock, at a purchase price of $9.60 per share, to the
following investors, among others:
. 348,200 shares of Series E preferred stock to Sequoia Capital VII, or to
entities affiliated with it.
. 99,653 shares of Series E preferred stock to H&Q Plumtree Investors,
L.P., or to entities affiliated with it.
. 43,829 shares of Series E preferred stock to Red Rock Ventures L.P.
. 47,780 shares of Series E preferred stock to Intel Corporation.
Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of Series E preferred stock and the
assumed initial public offering price per share of our common stock is $4.40.
Series D Preferred Stock Financing Round. In August and December 1999, we
sold shares of Series D preferred stock, at a purchase price of $1.59 per
share, to the following investors, among others:
. 1,257,861 shares of Series D preferred stock to Intel Corporation.
. 902,514 shares of Series D preferred stock to H&Q Plumtree Investors,
L.P., or to entities affiliated with it.
. 628,931 shares of Series D preferred stock to Sequoia Capital VII, or to
entities affiliated with it.
Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of Series D preferred stock and the
assumed initial public offering price per share of our common stock is $12.41.
Series C Preferred Stock Financing Round. In June 1998, we sold shares of
Series C preferred stock, at a purchase price of $0.87 per share, to the
following investors, among others:
. 1,730,769 shares of Series C preferred stock to H&Q Plumtree Investors,
L.P.
. 1,730,770 shares of Series C preferred stock to Sequoia Capital VII, or
to entities affiliated with it.
. 1,153,847 shares of Series C preferred stock to Red Rock Ventures L.P.
Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of Series C preferred stock and the
assumed initial public offering price per share of our common stock is $13.13.
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<PAGE>
Series B Preferred Stock Financing Round. In July 1997, we sold shares of
Series B preferred stock, at a purchase price of $0.66 per share, to the
following investors, among others:
. 3,030,305 shares of Series B preferred stock to Sequoia Capital VII, or
to entities affiliated with it.
Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of Series B preferred stock and the
assumed initial public offering price per share of our common stock is $13.34.
Series A Preferred Stock Financing Round. In February 1997, we sold shares
of Series A preferred stock, at a purchase price of $0.39 per share, to the
following investors, among others:
. 1,034,483 shares of Series A preferred stock to Sequoia Capital VII, or
to entities affiliated with it.
. 387,930 shares of Series A preferred stock to Kirill Sheynkman.
Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of Series A preferred stock and the
assumed initial public offering price per share of our common stock is $13.61.
Common Stock. In February 1997, we sold shares of our common stock, at a
purchase price of $0.0067 per share, to the following investors, among others:
. 1,200,000 shares of common stock to Glenn Kelman for a total
consideration of $8,000.
. 1,200,000 shares of common stock to Joe McVeigh for a total consideration
of $8,000.
. 2,400,000 shares of common stock to Kirill Sheynkman for a total
consideration of $16,000, of which 833,040 shares were subsequently
repurchased.
Based on an assumed initial public offering price of $14.00 per share, the
difference between the price paid per share of common stock by each of these
investors and the assumed initial public offering price per share of our common
stock is $13.99.
Indemnity Agreements. We intend to enter into indemnity agreements with each
of our officers and directors.
Promissory Note. In March 2000, we issued a promissory note to Red Rock
Ventures L.P. for $421,000, which amount reflected Red Rock Ventures LP's
advance payment of the purchase price of $421,000 for 43,829 shares of Series E
preferred stock. The reason for the note was to provide us with cash needed for
our business operations. This note did not accrue interest and was payable on
demand. This note was converted into 43,829 shares of Series E preferred stock
in May 2000.
License Transaction. In February 2000, we entered into an agreement with
Intel Corporation, a Series D preferred stockholder, for the sale of license,
services and maintenance. As of September 30, 2000, we have recognized $118,000
and have $11,000 in accounts receivable from Intel Corporation.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table indicates information as of September 30, 2000 regarding
the beneficial ownership of our common stock by:
. each person known to the board of directors to own beneficially 5% or
more of our common stock;
. each of our directors;
. the named executive officers; and
. all of our directors and executive officers as a group.
Information with respect to beneficial ownership has been furnished by each
director, officer or 5% or more stockholder, as the case may be. Except as
otherwise noted below, the address for each person listed on the table is c/o
Plumtree Software, Inc., 500 Sansome Street, San Francisco, California 94111.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power or
investment power with respect to those securities and includes shares of common
stock issuable pursuant to the exercise of stock options or warrants that are
immediately exercisable or exercisable within 60 days. Unless otherwise
indicated, the persons or entities identified in this table have sole voting
and investment power with respect to all shares shown as beneficially owned by
them, subject to applicable community property laws.
Percentage ownership calculations are based on 23,985,754 shares of common
stock outstanding as of September 30, 2000, which number includes shares of
common stock that will be outstanding upon the conversion of outstanding shares
of preferred stock upon the closing of the offering. To the extent that any
shares are issued upon exercise of options, warrants or other rights to acquire
our capital stock that are presently outstanding or granted in the future or
reserved for future issuance under our stock plans, there will be further
dilution to new public investors.
<TABLE>
<CAPTION>
Percent of Shares
Number of Outstanding
Shares --------------------
Beneficially Before the After the
Name Owned(1) Offering Offering
---- ------------ ---------- ---------
<S> <C> <C> <C>
Entities affiliated with Sequoia 6,772,689(2) 28.2% 23.4%
Capital.................................
3000 Sandhill Road
Building 4, Suite 280
Menlo Park, CA 94025
Entities affiliated with Granite Ventures
LLC..................................... 2,732,936(3) 11.4 9.4
One Bush Street
San Francisco, CA 94014
Intel Corporation........................ 1,305,641 5.4 4.5
2200 Mission College Boulevard
Santa Clara, CA 95052
John Kunze............................... 1,927,557(4) 8.0 6.7
Glenn Kelman............................. 1,275,000(5) 5.3 4.4
Joe McVeigh.............................. 1,200,000 5.0 4.1
Red Rock Ventures, L.P................... 1,197,676(6) 5.0 4.1
180 Lytton Avenue
Palo Alto, CA 94301
John Hogan............................... 625,000(7) 2.6 2.2
Jim Flatley.............................. 442,702(8) 1.8 1.5
Eric Borrmann............................ 400,000(9) 1.7 1.4
John Dillon.............................. 90,000 * *
Pierre Lamond............................ 6,787,689(10) 28.3 23.4
Rupen Dolasia............................ 2,732,936(11) 11.4 9.4
Bernard Whitney.......................... -- * *
Executive officers and directors as a
group (9 persons)....................... 14,280,884(12) 59.5 49.3
</TABLE>
56
<PAGE>
--------
* Less than 1% of the outstanding shares of common stock.
(1) This table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, we
believe that each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned.
(2) Includes, on an as converted basis, 6,216,757 shares of common stock held
by Sequoia Capital VII, 31,035 shares of common stock held by Sequoia 1995
LLC, 56,273 shares of common stock held by Sequoia 1997 LLC, 91,985 shares
of common stock held by Sequoia International Partners, 276,601 shares of
common stock held by Sequoia Technology Partners VII and 100,039 shares of
common stock held by SQP 1997. The General Partners of Sequoia Capital
VII, Sequoia Technology Partners, Sequoia 1995 LLC, Sequoia 1997 LLC and
SQP 1997, including Pierre Lamond, who is on the board of directors of
Plumtree, have shared voting and dispositive power over the shares owned
by Sequoia Capital VII, Sequoia Technology Partners, Sequoia 1995 LLC,
Sequoia 1997 LLC and SQP 1997.
(3) Includes 2,593,264 shares of common stock held by H&Q Plumtree Investors,
L.P. and 139,672 shares of common stock held by TODD U.S. Ventures LLC.
The general partnership of Granite Ventures LLC, including Rupen Dolasia,
who is on the board of directors of Plumtree, has voting and dispositive
power over the shares owned by entities affiliated with Granite Ventures
LLC.
(4) Includes 1,927,557 shares of common stock issuable pursuant to stock
options exercisable within 60 days of September 30, 2000.
(5) Includes 75,000 shares of common stock issuable pursuant to stock options
exercisable within 60 days of September 30, 2000.
(6) The general partnership of RRV Partners, LLC, comprising Bob Todd, Kip
Myers, Peter Dumanian, Laura Gwosden and Carol Pereira, has voting and
dispositive power over the shares owned by Red Rock Ventures, L.P.
(7) Includes 325,000 shares of common stock issuable pursuant to stock options
exercisable within 60 days of September 30, 2000.
(8) Includes 442,702 shares of common stock issuable pursuant to stock options
exercisable within 60 days of September 30, 2000.
(9) Includes 200,000 shares of common stock issuable pursuant to stock options
exercisable within 60 days of September 30, 2000.
(10) Includes 15,000 shares beneficially owned by Mr. Lamond, and 6,772,936
shares owned by the entities affiliated with Sequoia Capital. Mr. Lamond,
a General Partner of these entities, disclaims beneficial ownership of the
shares held by such entities except to the extent of his pro rata interest
in these entities.
(11) Includes 2,732,936 shares owned by the entities affiliated with Granite
Ventures LLC. Mr. Dolasia, a member of these entities, disclaims
beneficial ownership of the shares held by such entities except to the
extent of his pro rata interest in these entities.
(12) Includes 6,772,689 owned by the entities affiliated with Sequoia Capital
and 2,732,936 shares owned by the entities affiliated with Granite
Ventures LLC. See Notes (10) and (11) above.
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DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, we will be authorized to issue
100,000,000 shares of common stock, $0.001 par value per share, and 10,000,000
shares of preferred stock, $0.001 par value per share. All currently
outstanding shares of our preferred stock will automatically convert into
shares of our common stock at a one-to-one ratio upon completion of this
offering. The following description summarizes information regarding our
capital stock and assumes our reincorporation in Delaware before the closing of
this offering. This information does not purport to be complete and is subject
in all respects to the applicable provisions of the Delaware General
Corporation Law, our certificate of incorporation and our bylaws.
Common Stock
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of stockholders, including the election of directors.
Holders of common stock are entitled to receive ratably the dividends, if any,
declared from time to time by the board of directors out of legally available
funds. Holders of common stock have no conversion, redemption or preemptive
rights to subscribe to any of Plumtree's securities. In the event of any
liquidation, dissolution or winding-up of our affairs, holders of common stock
will be entitled to share ratably in our assets remaining after provision for
payment of liabilities to creditors and holders of outstanding preferred stock.
The rights, preferences and privileges of holders of common stock are subject
to the rights of the holders of any shares of preferred stock which we may
issue in the future.
Preferred Stock
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may
be greater than the rights of the common stock. We cannot predict the effect of
the issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the
holders of the preferred stock. However, the effects could include one or more
of the following:
. restricting dividends on the common stock;
. diluting the voting power of the common stock;
. impairing the liquidation rights of the common stock; or
. delaying or preventing a change in control of us without further action
by the stockholders.
Upon the consummation of this offering, no shares of preferred stock will be
outstanding, and we have no present plans to issue any shares of preferred
stock.
Warrants
As of September 30, 2000, we had the following warrants to purchase shares
of common stock outstanding:
. Lighthouse Capital Partners III, L.P. holds a warrant to purchase 11,250
shares at an exercise price of $2.00 per share; and
. WXI/SAN Realty, L.L.C. holds warrants to purchase an aggregate of 41,030
shares at an exercise price of $9.60 per share.
As of September 30, 2000, we had the following warrants to purchase shares
of preferred stock outstanding:
. Lighthouse Capital Partners II, L.P. holds a warrant to purchase 36,206
shares of Series A preferred stock at an exercise price of $0.39 per
share;
. Silicon Valley Bank holds a warrant to purchase 28,125 shares of Series C
preferred stock at an exercise price of $0.87 per share;
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. Silicon Valley Bank holds a warrant to purchase 138,462 shares of Series
D preferred stock at an exercise price of $0.87; and
. Lighthouse Capital Partners III, L.P. holds a warrant to purchase 9,375
shares of Series D preferred stock at an exercise price of $1.60.
All of the warrants listed above are currently exercisable and contain
standard anti-dilution provisions.
Registration Rights
Upon completion of this offering, the holders of an aggregate of 16,817,156
shares of common stock issuable upon conversion of preferred stock and upon the
exercise of warrants will be entitled to rights with respect to the
registration of these shares under the Securities Act of 1933, as amended, or
the Securities Act. Under the terms of the registration rights agreements, if
we propose to register any of our securities under the Securities Act, either
for our own account or for the account of security holders exercising
registration rights, these holders are entitled to notice of this registration
and are entitled to include shares of common stock in the registration. The
rights are subject to conditions and limitations, among them the right of the
underwriters of an offering subject to the registration to limit the number of
shares included in the registration. These registration rights have been waived
with respect to this offering. Holders of these rights may also require us to
file a registration statement under the Securities Act at our expense with
respect to their shares of common stock, and we are required to use our best
efforts to effect this registration, subject to conditions and limitations.
Furthermore, stockholders with registration rights may require us to file
additional registration statements on Form S-3, subject to conditions and
limitations.
Delaware Anti-Takeover Law
Upon the closing of this offering, we will be subject to Section 203 of the
Delaware General Corporation Law, an anti-takeover law. Generally, Section 203
of the Delaware General Corporation Law prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
. before the date of the business combination, the transaction is approved
by the board of directors of the corporation,
. upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at
least 85% of the outstanding stock, or
. on or after the date the business combination is approved by the board
and by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock. The existence of this provision would be expected
to have an anti-takeover effect with respect to transactions not approved in
advance by our board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held
by stockholders.
Transfer Agent and Registrar
EquiServe, L.P. will serve as Transfer Agent and Registrar for our common
stock.
Listing
We have applied to have our common stock approved for listing on The Nasdaq
Stock Market's National Market under the symbol PLUM.
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
We cannot predict if future sales of our common stock, or the availability
of our common stock for sale, will depress the market price for our common
stock or our ability to raise capital by offering equity securities. Sales of
substantial amounts of common stock, or the perception that these sales could
occur, may depress prevailing market prices for the common stock.
After this offering, approximately 28,985,754 shares of common stock will be
outstanding. All of the shares sold in this offering will be freely tradable
except for any shares purchased by affiliates of Plumtree. The remaining shares
of common stock outstanding after this offering will be restricted as a result
of securities laws or lock-up agreements. These remaining shares will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
Date of Availability for Sale Number of Shares
----------------------------- ----------------
<S> <C>
As of the date of this prospectus......................... --
, 2000 (90 days after the date of this prospectus)... 6,095
, 2000 (180 days after the date of this prospectus).. 22,741,459
At various times thereafter upon expiration of applicable
holding periods.......................................... 100,000
</TABLE>
The above table excludes 1,138,200 shares issued upon early exercise of
options, which shares are not available for sale because they are subject to a
repurchase right in favor of Plumtree.
Credit Suisse First Boston Corporation may release all or a portion of the
shares subject to this lockup agreement at any time without notice.
In general, under Rule 144, as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately 289,858 shares immediately after this offering; or
. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell the shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any of our employees, officers,
directors or consultants who purchased shares under a written compensatory plan
or contract may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell their shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares are
required to wait until 90 days after the date of this prospectus before selling
their shares. However, substantially all Rule 701 shares are subject to lock-up
agreements and will only become eligible for sale at the earlier of the
expiration of the 180-day lock-up agreements or no sooner than 90 days after
the offering upon obtaining the prior written consent of Credit Suisse First
Boston Corporation.
We intend to file a Registration Statement on Form S-8 registering shares of
common stock subject to outstanding options or reserved for future issuance
under our stock plans. As of September 30, 2000, options to purchase a total
5,096,414 shares were outstanding under our stock plans. Common stock issued
upon exercise of outstanding vested options, other than common stock issued to
our affiliates, is available for immediate resale in the open market.
60
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , we have agreed to sell to the underwriters named below,
for whom Credit Suisse First Boston Corporation, Robertson Stephens, Inc. and
Dain Rauscher Incorporated are acting as representatives, the following
respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation..........................
Robertson Stephens, Inc.........................................
Dain Rauscher Incorporated......................................
---------
Total....................................................... 5,000,000
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 750,000 additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a selling concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay:
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The representatives have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
relating to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof.
Our officers, directors and substantially all of our existing stockholders
have agreed that they will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of
our common stock, enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our common stock,
whether
61
<PAGE>
any of these transactions are to be settled by delivery of our common stock or
other securities, in cash or otherwise, or publicly disclose the intention to
make any offer, sale, pledge or disposition, or to enter into any transaction,
swap, hedge or other arrangement, without, in each case, the prior written
consent of Credit Suisse First Boston Corporation for a period of 180 days
after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the
other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be
required to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol PLUM.
Credit Suisse First Boston Corporation acted as placement agent in
connection with the sale of the Series E Preferred Stock for which it received
$1,283,485. Credit Suisse First Boston Venture Fund I, L.P. and Credit Suisse
First Boston Technology Group Fund II, L.P. purchased 87,500 and 37,500 shares
of Series E Preferred Stock, respectively, at $9.60 per share, which shares
were subsequently transferred to CSFB Technology Holdings 2000, LLC. Under the
NASD's Rules of Fair Practice, the difference between the initial public
offering price of our common stock and the purchase price could be deemed
underwriting compensation. These shares will be restricted from sale, transfer,
pledge, assignment or hypothecation for a period of one year from the effective
date of the offering. In September 2000, Robertson Stephens, Inc. purchased our
product on customary terms.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price has been determined by negotiation
between us and the representatives. The principal factors considered in
determining the public offering price include the following:
. The information included in this prospectus and otherwise available to
the representatives;
. The market conditions for initial public offerings;
. The history and prospects for the industry in which we will compete;
. The ability of our management;
. The present state of our development and our current financial condition;
. The general condition of the securities markets at the time of this
offering; and
. The recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
In connection with the offering the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Over-allotment involves sales by the underwriters of shares in excess of
the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not
greater than the number of shares that they may purchase in the over-
allotment option. In a naked short position, the number of shares
involved is greater than the
62
<PAGE>
number of shares in the over-allotment option. The underwriters may close
out any short position by either exercising their over-allotment option
and/or purchasing shares in the open market.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the over-
allotment option. If the underwriters sell more shares than could be
covered by the over-allotment option, a naked short position, the
position can only be closed out by buying shares in the open market. A
naked short position is more likely to be created if the underwriters are
concerned that there could be downward pressure on the price of the
shares in the open market after pricing that could adversely affect
investors who purchase in the offering.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of the
common stock. As a result the price of the common stock may be higher than the
price that might otherwise exist in the open market. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
A prospectus in electronic format may be made available on the Web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Internet distributions will
be allocated by the underwriters that will make Internet distributions on the
same basis as other allocations.
63
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock in Canada must
be made under applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made under available
statutory exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers are advised to
seek legal advice prior to any resale of the common stock.
Representations of Purchasers
By purchasing common stock in Canada and accepting a purchase confirmation a
purchaser is representing to us and the dealer from whom the purchase
confirmation is received that:
. the purchaser is entitled under applicable provincial securities laws to
purchase the common stock without the benefit of a prospectus qualified
under those securities laws,
. where required by law, that the purchaser is purchasing as principal and
not as agent, and
. the purchaser has reviewed the text above under "Resale Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser pursuant to this offering. The report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed for common stock acquired on the same date and under the same
prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.
64
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock being offered will be passed upon
for us by Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto, California.
Attorneys of Skadden, Arps, Slate, Meagher & Flom LLP, and an investment
partnership comprised of partners of that firm beneficially own an aggregate of
10,417 shares of common stock. Pillsbury Madison & Sutro LLP, San Francisco,
California, is acting as counsel to the underwriters in connection with
selected legal matters relating to the shares of common stock offered by this
prospectus.
EXPERTS
The audited financial statements included in this prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
AVAILABLE INFORMATION
We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of
common stock being offered. This prospectus does not contain all of the
information described in the registration statement and the related exhibits
and schedules. For further information with respect to Plumtree and the common
stock being offered, reference is made to the registration statement and the
related exhibits and schedule. Statements contained in this prospectus
regarding the contents of any contract or any other document to which reference
is made describe the material terms thereof. In each instance, reference is
made to the copy of the contract or other document filed as an exhibit to the
registration statement, each statement being qualified in all respects by the
reference. A copy of the registration statement and the related exhibits and
schedule may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, 13th Floor, New York, New York 10048, and copies of all or
any part of the registration statement may be obtained from these offices upon
the payment of the fees prescribed by the Commission. Information on the
operation of the Public Reference Room may be obtained by calling the
Commission at 1-800-SEC-0330. The Commission maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the site is http://www.sec.gov.
Plumtree intends to provide its stockholders with annual reports containing
financial statements audited by an independent accounting firm and quarterly
reports containing unaudited financial data for the first three quarters of
each year.
65
<PAGE>
PLUMTREE SOFTWARE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-7
Notes to Consolidated Financial Statements................................. F-8
</TABLE>
F-1
<PAGE>
After the reincorporation discussed in Note 14 to Plumtree Software, Inc.'s
consolidated financial statements is effected, we expect to be in a position to
render the following audit report.
Arthur Andersen LLP
May 2, 2000
San Francisco, California
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Plumtree Software, Inc.:
We have audited the accompanying balance sheets of Plumtree Software, Inc.
(a Delaware corporation) as of December 31, 1998 and 1999, and the related
statements of operations, stockholders' equity and cash flows for 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 financial position of Plumtree Software, Inc. as
of December 31, 1998 and 1999, and the results of its operations and its cash
flows for the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
F-2
<PAGE>
PLUMTREE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Pro Forma
As of Stockholders'
December 31, As of Equity at
----------------- September 30, September 30,
1998 1999 2000 2000
------- -------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents...... $ 1,574 $ 2,344 $ 15,666
Accounts receivable (net of
allowance for doubtful
accounts of $0, $78 and $562,
respectively)................. 66 2,317 9,121
Prepaids and other current
assets........................ 127 300 2,009
------- -------- --------
Total current assets......... 1,767 4,961 26,796
Property and equipment, net..... 315 513 2,059
Other assets.................... 18 126 2,896
------- -------- --------
Total assets................. $ 2,100 $ 5,600 $ 31,751
======= ======== ========
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable............... $ 52 $ 333 $ 328
Notes payable, current
portion....................... 200 200 170
Accrued liabilities............ 86 1,283 6,677
Deferred revenue............... 14 601 8,520
Current portion of capital
lease obligations............. 49 138 238
------- -------- --------
Total current liabilities.... 401 2,555 15,933
Notes payable, net of current
portion........................ 316 116 --
Long-term capital lease
obligations.................... 87 212 420
------- -------- --------
Total liabilities............ 804 2,883 16,353
------- -------- --------
Commitments and contingencies
(Note 6)
Stockholders' equity:
Convertible preferred stock,
$0.001 par value, aggregate
liquidation preference of
$37,937 as of September 30,
2000:
Authorized--16,981,528 shares;
Outstanding--9,108,602 shares,
14,150,047 shares,
16,580,830 shares and
0 shares, respectively....... 9 14 16 $ --
Common stock, $0.001 par value:
Authorized--13,776,538 shares,
24,055,865 shares and
31,660,032 shares;
Outstanding--4,057,430 shares,
5,399,928 shares,
7,404,924 shares and
23,985,754 shares,
respectively................. 4 5 7 23
Additional paid in capital..... 6,615 16,074 55,123 55,123
Warrants....................... -- 61 361 361
Note receivable from officer... -- -- (520) (520)
Stock-based compensation....... -- (1,075) (12,623) (12,623)
Accumulated other comprehensive
income........................ -- -- 10 10
Accumulated deficit............ (5,332) (12,362) (26,976) (26,976)
------- -------- -------- --------
Total stockholders' equity... 1,296 2,717 15,398 15,398
------- -------- -------- ========
Total liabilities and
stockholders' equity........ $ 2,100 $ 5,600 $ 31,751
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
PLUMTREE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the Nine Months
For the Year Ended December 31, Ended September 30,
-------------------------------------------------------------
1997 1998 1999 1999 2000
-------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Licenses................ $ -- $ 166 $ 2,701 $ 1,213 $ 11,847
Services and
maintenance............ -- 15 653 194 5,684
---------- ---------- ----------- ---------- -----------
Total revenue.......... -- 181 3,354 1,407 17,531
---------- ---------- ----------- ---------- -----------
Cost of revenue:
Licenses................ -- -- 90 30 1,379
Services and maintenance
....................... -- 19 1,118 328 6,135
---------- ---------- ----------- ---------- -----------
Total cost of revenue.. -- 19 1,208 358 7,514
---------- ---------- ----------- ---------- -----------
Gross margin........... -- 162 2,146 1,049 10,017
---------- ---------- ----------- ---------- -----------
Operating expenses:
Research and
development(*)......... 635 1,109 1,677 1,179 4,810
Sales and marketing .... 575 2,418 5,616 3,632 13,163
General and
administrative ........ 386 445 1,407 972 3,969
Amortization of stock-
based
compensation(**)....... -- -- 325 164 2,931
---------- ---------- ----------- ---------- -----------
Total operating
expenses.............. 1,596 3,972 9,025 5,947 24,873
---------- ---------- ----------- ---------- -----------
Loss from operations... (1,596) (3,810) (6,879) (4,898) (14,856)
Other income (expense):
Interest expense........ (10) (63) (181) (159) (82)
Other income............ 32 91 30 22 324
---------- ---------- ----------- ---------- -----------
Other income (expense),
net................... 22 28 (151) (137) 242
---------- ---------- ----------- ---------- -----------
Net loss................. $ (1,574) $ (3,782) $ (7,030) $ (5,035) $ (14,614)
========== ========== =========== ========== ===========
Net loss per common
share:
Basic and diluted....... $ (0.46) $ (1.08) $ (1.78) $ (1.33) $ (2.76)
========== ========== =========== ========== ===========
Pro forma basic and
diluted (unaudited).... $ (0.51) $ (0.70)
=========== ===========
Weighted average common
shares outstanding:
Basic and diluted....... 3,397,904 3,508,549 3,943,730 3,777,068 5,298,478
========== ========== =========== ========== ===========
Pro forma basic and
diluted (unaudited).... 13,843,121 20,764,809
=========== ===========
-------------
<CAPTION>
(*) During the nine months ended September 30, 2000, the Company recorded a non-
cash research and development charge of $824,000 (see Note 8).
(**) Amortization of stock-based compensation excluded from the following
expenses:
<S> <C> <C> <C> <C> <C>
Cost of services and maintenance............. $ 39 $ 10 $ 477
Research and development .................... 105 56 1,111
Sales and marketing ......................... 171 95 678
General and administrative .................. 10 3 665
----------- ---------- -----------
$ 325 $ 164 $ 2,931
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
PLUMTREE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Accumulated
Convertible Note Stock- Other Total
Preferred Stock Common Stock Additional Receivable based Compre- Accumulated Stock-
----------------- ----------------- Paid in from Compen- hensive Earnings holders'
Shares Amount Shares Amount Captial Warrants Stockholder sation Income (Deficit) Equity
---------- ------ --------- ------ ---------- -------- ----------- ------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1996............. -- $ -- 1,500,000 $ 2 $ 8 $ -- $ -- $ -- $ -- $ 24 $ 34
Issuance of
common stock.... -- -- 3,300,000 3 19 -- -- -- -- -- 22
Stock-based
compensation ... -- -- -- -- 63 -- -- -- -- -- 63
Issuance of
Series A
convertible
preferred stock,
net of issuance
costs of $11.... 1,422,413 1 -- -- 537 -- -- -- -- -- 538
Issuance of
Series B
convertible
preferred stock,
net of issuance
costs of $7..... 3,030,303 3 -- -- 1,990 -- -- -- -- -- 1,993
Net loss........ -- -- -- -- -- -- -- -- -- (1,574) (1,574)
---------- ----- --------- ---- ------- ----- ----- ------- ----- -------- -------
Balance at
December 31,
1997............. 4,452,716 4 4,800,000 5 2,617 -- -- -- -- (1,550) 1,076
Issuance of
Series C
convertible
preferred stock,
net of issuance
costs of $33.... 4,655,886 5 -- -- 3,997 -- -- -- -- -- 4,002
Exercise of
stock options... -- -- 90,470 -- 5 -- -- -- -- -- 5
Repurchase of
common stock.... -- -- (833,040) (1) (4) -- -- -- -- -- (5)
Net loss........ -- -- -- -- -- -- -- -- -- (3,782) (3,782)
---------- ----- --------- ---- ------- ----- ----- ------- ----- -------- -------
Balance at
December 31,
1998............. 9,108,602 9 4,057,430 4 6,615 -- -- -- -- (5,332) 1,296
Issuance of
Series D
convertible
preferred stock,
net of issuance
costs of $41.... 5,041,445 5 -- -- 7,970 -- -- -- -- -- 7,975
Issuance of
warrants........ -- -- -- -- -- 61 -- -- -- -- 61
Exercise of
stock options... -- -- 1,342,498 1 89 -- -- -- -- -- 90
Stock-based
compensation.... -- -- -- -- 1,400 -- -- (1,400) -- -- --
Amortization of
stock-based
compensation.... -- -- -- -- -- -- -- 325 -- -- 325
Net loss........ -- -- -- -- -- -- -- -- -- (7,030) (7,030)
---------- ----- --------- ---- ------- ----- ----- ------- ----- -------- -------
Balance at
December 31,
1999............. 14,150,047 $ 14 5,399,928 $ 5 $16,074 $ 61 $ -- $(1,075) $ -- $(12,362) $ 2,717
========== ===== ========= ==== ======= ===== ===== ======= ===== ======== =======
<CAPTION>
Compre-
hensive
Loss
--------
<S> <C>
Balance at
December 31,
1996............. $ --
Issuance of
common stock.... --
Stock-based
compensation ... --
Issuance of
Series A
convertible
preferred stock,
net of issuance
costs of $11.... --
Issuance of
Series B
convertible
preferred stock,
net of issuance
costs of $7..... --
Net loss........ (1,574)
--------
Balance at
December 31,
1997............. (1,574)
Issuance of
Series C
convertible
preferred stock,
net of issuance
costs of $33.... --
Exercise of
stock options... --
Repurchase of
common stock.... --
Net loss........ (3,782)
--------
Balance at
December 31,
1998............. (3,782)
Issuance of
Series D
convertible
preferred stock,
net of issuance
costs of $41.... --
Issuance of
warrants........ --
Exercise of
stock options... --
Stock-based
compensation.... --
Amortization of
stock-based
compensation.... --
Net loss........ (7,030)
--------
Balance at
December 31,
1999............. $(7,030)
========
</TABLE>
F-5
<PAGE>
PLUMTREE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--Continued
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Accumulated
Convertible Note Stock- Other Total
Preferred Stock Common Stock Additional Receivable based Compre- Accumulated Stock-
----------------- ----------------- Paid in from Compen- hensive Earnings holders'
Shares Amount Shares Amount Captial Warrants Stockholder sation Income (Deficit) Equity
---------- ------ --------- ------ ---------- -------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1999............. 14,150,047 $14 5,399,928 $ 5 16,074 $ 61 $ -- $ (1,075) $ -- $(12,362) $ 2,717
Issuance of
Series E
convertible
preferred stock,
net of issuance
costs of $1,235
(unaudited)..... 2,430,783 2 -- -- 21,997 -- -- -- -- -- 21,999
Issuance of
warrants
(unaudited)..... -- -- -- -- -- 1,124 -- -- -- -- 1,124
Exercise of
warrants
(unaudited)..... -- -- 100,000 -- 1,024 (824) -- -- -- -- 200
Exercise of
stock options
(unaudited)..... -- -- 1,919,286 2 1,452 -- (520) -- -- -- 934
Repurchase of
stock
(unaudited)..... -- -- (33,908) -- (3) -- -- -- -- -- (3)
Stock-based
compensation
(unaudited)..... -- -- -- -- 14,479 -- -- (14,479) -- -- --
Issuance of
common stock for
services
(unaudited)..... -- -- 19,618 -- 100 -- -- -- -- -- 100
Amortization of
stock-based
compensation
(unaudited)..... -- -- -- -- -- -- -- 2,931 -- -- 2,931
Translation
adjustment
(unaudited)..... -- -- -- -- -- -- -- -- 10 -- 10
Net loss
(unaudited)..... -- -- -- -- -- -- -- -- -- (14,614) (14,614)
---------- --- --------- --- ------ ------ ----- -------- ----- -------- --------
Balance at
September 30,
2000
(unaudited)...... 16,580,830 $16 7,404,924 $ 7 55,123 $ 361 $(520) $(12,623) $ 10 $(26,976) $ 15,398
========== === ========= === ====== ====== ===== ======== ===== ======== ========
<CAPTION>
Compre-
hensive
Loss
---------
<S> <C>
Balance at
December 31,
1999............. $ --
Issuance of
Series E
convertible
preferred stock,
net of issuance
costs of $1,235
(unaudited)..... --
Issuance of
warrants
(unaudited)..... --
Exercise of
warrants
(unaudited)..... --
Exercise of
stock options
(unaudited)..... --
Repurchase of
stock
(unaudited)..... --
Stock-based
compensation
(unaudited)..... --
Issuance of
common stock for
services
(unaudited)..... --
Amortization of
stock-based
compensation
(unaudited)..... --
Translation
adjustment
(unaudited)..... 10
Net loss
(unaudited)..... (14,614)
---------
Balance at
September 30,
2000
(unaudited)...... $(14,604)
=========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-6
<PAGE>
PLUMTREE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Nine
For the Year Ended Months Ended
December 31, September 30,
------------------------- -----------------
1997 1998 1999 1999 2000
------- ------- ------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(1,574) $(3,782) $(7,030) $(5,035) $(14,614)
Adjustments to reconcile net loss to net cash used
in operating activities:
Allowance for doubtful accounts.................. -- -- 78 26 484
Depreciation and amortization.................... 45 113 219 157 385
Amortization of stock-based compensation......... -- -- 325 164 2,931
Common stock issued for services................. 63 -- -- -- 100
Warrants issued for services..................... -- -- 61 -- 838
Changes in assets and liabilities:
Accounts receivable............................. 21 (66) (2,329) (964) (7,287)
Prepaids and other current assets............... (50) (95) (172) (151) (1,709)
Other long term assets.......................... -- -- (108) (99) (2,484)
Accounts payable................................ 80 (43) 281 241 (5)
Accrued liabilities............................. 32 54 1,197 566 5,394
Deferred revenue................................ -- 14 587 405 7,919
------- ------- ------- ------- --------
Net cash used in operating activities.......... (1,383) (3,805) (6,891) (4,689) (8,048)
------- ------- ------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment................ (34) (230) (134) (329) (1,431)
------- ------- ------- ------- --------
Net cash used in investing activities.......... (34) (230) (134) (329) (1,431)
------- ------- ------- ------- --------
Cash flows from financing activities:
Payments on capital lease obligations.............. (30) (33) (70) (45) (192)
Proceeds from notes payable........................ -- 516 1,500 1,500 --
Repayments on notes payable........................ -- -- (1,700) (1,650) (146)
Net proceeds from issuance of convertible preferred
stock............................................. 2,531 4,002 7,975 5,966 21,999
Proceeds from issuance of common stock............. 22 5 90 72 1,133
Repurchase of common stock......................... -- (5) -- -- (3)
------- ------- ------- ------- --------
Net cash provided by financing activities...... 2,523 4,485 7,795 5,843 22,791
------- ------- ------- ------- --------
Effect of change in exchange rates on cash.......... -- -- -- -- 10
------- ------- ------- ------- --------
Net increase in cash and cash equivalents........... 1,106 450 770 825 13,322
Cash and cash equivalents at beginning of period.... 18 1,124 1,574 1,574 2,344
------- ------- ------- ------- --------
Cash and cash equivalents at end of period.......... $ 1,124 $ 1,574 $ 2,344 $ 2,399 $ 15,666
======= ======= ======= ======= ========
Supplemental disclosure of cash flow information:
Cash paid for interest............................ $ 10 $ 61 $ 181 $ 158 $ 80
======= ======= ======= ======= ========
Non-cash financing activity:
Purchases of equipment subject to capital leases.. $ 178 $ 22 $ 284 $ -- $ 500
======= ======= ======= ======= ========
Note receivable from officer to purchase stock.... $ -- $ -- $ -- $ -- $ 520
======= ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 1999 and 2000 is unaudited)
1. Organization of the Company
Plumtree Software, Inc. (the "Company") is a California company incorporated
on July 18, 1996 to develop and market infrastructure software and services
that enable a business to deploy a corporate portal to information applications
and Internet-based services. The Company is planning to reincorporate in the
State of Delaware (see note 14).
The Company is subject to a number of risks associated with companies at a
similar stage of development including competition from larger, more
established companies, dependence on new product introductions, volatility of
the industry, ability to obtain adequate funding to support growth, dependence
on key individuals and the ability to attract and retain additional qualified
personnel to manage the anticipated growth of the Company.
2. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
Foreign Currency Translation
The functional currency of the Company's subsidiary is the local currency.
Accordingly, all assets and liabilities are translated into U.S. dollars at the
current exchange rate of the applicable balance sheet date. Revenues and
expenses are translated at the average exchange rate prevailing during the
period. Gains and losses resulting from the translation of the financial
statements are reported as a separate component of stockholders' equity.
Foreign currency transaction gains and losses are included in other income
(expense) and as of September 30, 2000 these transactions have not been
material.
Unaudited Interim Financial Statements
The accompanying consolidated financial statements as of September 30, 2000,
and for the nine months ended September 30, 1999 and 2000, are unaudited, but
in the opinion of management include all adjustments consisting of normal
recurring adjustments necessary for a fair presentation of results for the
interim periods. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted, although the Company believes that the
disclosures included are adequate to make the information presented not
misleading. Results for the nine months ended September 30, 2000, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
Unaudited Pro Forma Stockholders' Equity
The Company's Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of its
common stock in connection with a proposed initial public offering (the "IPO").
If the IPO is consummated under the terms presently anticipated, all of the
currently outstanding shares of convertible preferred stock will be converted
into 16,580,830 shares of common stock upon the closing of the IPO. The effect
of the convertible preferred stock conversion has been reflected as unaudited
pro forma stockholders' equity in the accompanying consolidated balance sheet
as of September 30, 2000.
F-8
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the Company
considers investments with an original maturity of three months or less from
the date of purchase to be cash and cash equivalents.
Concentration of Credit Risk
Two customers accounted for 17% and 12%, respectively, of accounts
receivable at December 31, 1999. Four customers accounted for 46%, 26%, 13% and
13%, respectively, of accounts receivable at December 31, 1998. Three customers
accounted for 25%, 17% and 12%, respectively, of net sales for fiscal year
1998.
Valuation Accounts
Below is a summary of the changes in the Company's allowance for doubtful
accounts for the nine months ended September 30, 2000 and the year ended
December 31, 1999:
<TABLE>
<CAPTION>
Beginning Ending
Balance Additions Deductions Balance
--------- --------- ---------- -------
<S> <C> <C> <C> <C>
Nine months ended September 30:
2000............................ $78 $484 $-- $562
1999............................ $-- $ 26 $-- $ 26
Year ended December 31:
1999............................ $-- $ 78 $-- $ 78
</TABLE>
The Company had no allowance for doubtful accounts prior to 1999. Deductions
include all charges against reserves. These deductions were made in the normal
course of business and only for the specific use for which the reserve was
identified and intended.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of three to four
years.
Stock-Based Compensation
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock-Based Compensation," in October 1995. This accounting standard
permits the use of either a fair value based method of accounting or the method
defined in Accounting Principles Board Opinion 25, "Accounting for Stock Issued
to Employees" ("APB 25") to account for stock-based compensation arrangements.
Companies that elect to employ the method proscribed by APB 25 are required to
disclose the pro forma net income (loss) that would have resulted from the use
of the fair value based method. The Company has elected to continue to account
for its stock-based compensation arrangements under the provisions of APB 25,
and, accordingly, it has included in Note 9 the pro forma disclosures required
under SFAS No. 123.
Software Development Costs
The Company accounts for internally generated software development costs in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed." Capitalization of software development costs begins upon the
F-9
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
establishment of technological feasibility of the product, which the Company
defines as the development of a working model and further defines as the
completion of beta testing of the software. The establishment of technological
feasibility and the ongoing assessment of the recoverability of these costs
requires considerable judgment by management with respect to certain external
factors, including, but not limited to, anticipated future gross product
revenue, estimated economic life and changes in technology. Such costs are
reported at the lower of unamortized cost or net realizable value. To date,
internal software development costs that were eligible for capitalization have
been insignificant and the Company has charged all software development costs
to research and development expense as incurred.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities 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.
Revenue Recognition
License revenue consists principally of revenue from the licensing of the
Company's software and is generally recognized when a contract is executed, all
delivery obligations have been met, the fee is fixed or determinable, and
collectibility is probable. When licenses are sold together with services, in
accordance with the provisions of the American Institute of Certified Public
Accountants' Statement of Position 97-2, "Software Revenue Recognition" (SOP
97-2), license fees are recognized upon delivery, provided that (1) the above
criteria have been met, (2) payment of the license fees is not dependent upon
the performance of the services, and (3) the services do not include
significant modifications to the features and functionality of the software.
The Company has not established vendor specific objective evidence (VSOE)
for license sales and recognizes revenue from arrangements with multiple
elements involving software licenses under the residual method as outlined in
SOP 97-2. To the extent that a discount exists on any of the elements, the
Company follows the residual method and attributes that discount entirely to
the delivered elements.
Service revenue consists of consulting, training and installation services
that the Company provides to its customers. Revenue from such services is
generally recognized as the service is performed. If services are included with
a license agreement, amounts related to services are unbundled from the license
fee based on VSOE as established by transactions where such services have been
sold separately. Prior to December 1999, the Company had not yet established
VSOE for service revenue. Accordingly, the Company recognized license revenue
sold together with services as the services were performed. In December 1999,
the Company formed a separate professional services department and senior
management set standard pricing establishing VSOE for these services.
For the majority of the Company's arrangements, the services provided are
not essential to the functionality of the software and typically could include:
. developing a project scope;
. installing and configuring the product; and
. developing portal content including defining and setting up the initial
taxonomy of the directory.
F-10
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
In certain arrangements, the services that the Company provides are
essential to the functionality of the software and include:
. modifying the user interface to fit a specific environment;
. integrating its products into environments with legacy systems and custom
applications; and
. complex requirements of specific functionality of the product like
elaborate document management or search requirements.
For the arrangements in which the services provided are essential to the
functionality of the software, both the license revenue and service revenue are
recognized in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position 81-1, "Accounting for
Performance of Construction Type and Certain Production Type Contracts" (SOP
81-1). The Company accounts for these arrangements under the percentage
completion contract method pursuant to SOP 81-1. Through September 30, 2000,
there have been four contracts accounted for under contract accounting.
Maintenance revenue relates to the technical support and software updates
the Company provides to its customers. Revenue on maintenance contracts is
recognized ratably over the term of the contract. If maintenance is bundled
with a license agreement, amounts related to maintenance are unbundled from the
license fee based on vendor specific objective evidence as established by the
renewal rates the Company charges in accordance with its contracts and its
established pricing.
For arrangements which require delivery of unspecified future products over
a period, the Company uses the subscription method and recognizes revenue
ratably over the period.
For arrangements that involve extended payment terms, the Company recognizes
revenue to the extent of the lesser of the amount determined under the
methodology the Company is using or the amount due.
F-11
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
Net Loss Per Share
Basic and diluted net loss per common share are presented in conformity with
SFAS No. 128, "Earnings Per Share," for all periods presented. In accordance
with SFAS No. 128, basic net loss per share is calculated by dividing net loss
by the weighted average common shares outstanding during the period, less
shares subject to repurchase. Diluted income per share is calculated by
dividing the net income by the weighted average common shares outstanding
adjusted for all potential common shares, which includes shares issuable upon
the exercise of outstanding common stock options, convertible preferred stock,
warrants, and other contingent issuances of common stock.
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
-------------------------------- ---------------------
1997 1998 1999 1999 2000
--------- --------- ---------- --------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net loss (in
thousands)............. $ (1,574) $ (3,782) $ (7,030) $ (5,035) $ (14,614)
========= ========= ========== ========= ==========
Basic and diluted:
Weighted average shares
of common stock
outstanding........... 4,371,000 4,114,637 4,233,913 4,124,816 6,618,825
Less: Weighted average
shares subject to
repurchase............. (973,096) (606,088) (290,183) (347,748) (1,320,347)
--------- --------- ---------- --------- ----------
Weighted average shares
used in computing basic
and diluted net loss
per common share....... 3,397,904 3,508,549 3,943,730 3,777,068 5,298,478
========= ========= ========== ========= ==========
Basic and diluted net
loss per common
share................. $ (0.46) $ (1.08) $ (1.78) $ (1.33) $ (2.76)
========= ========= ========== ========= ==========
Shares used above....... 3,943,730 5,298,478
Pro forma adjustment to
reflect weighted effect
of assumed conversion
of convertible
preferred stock
(unaudited)............ 9,899,391 15,466,331
---------- ----------
Shares used in computing
pro forma basic and
diluted net loss per
common share
(unaudited)............ 13,843,121 20,764,809
========== ==========
Pro forma basic and
diluted net loss per
common share
(unaudited)............ $ (0.51) $ (0.70)
========== ==========
</TABLE>
The Company has excluded all convertible preferred stock, warrants for
convertible preferred stock, outstanding stock options, and shares subject to
repurchase from the calculation of diluted net loss per common share because
all such securities are antidilutive for all periods presented.
F-12
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
Potentially dilutive securities included the following:
<TABLE>
<CAPTION>
As of December 31, As of
--------------------- September 30,
1998 1999 2000
---------- ---------- -------------
(unaudited)
<S> <C> <C> <C>
Common stock subject to repurchase..... 84,375 661,821 1,734,872
Options to purchase common stock....... 3,764,276 3,806,657 5,096,414
Warrants............................... 64,331 212,168 264,448
Series A preferred stock............... 1,422,413 1,422,413 1,422,413
Series B preferred stock............... 3,030,303 3,030,303 3,030,303
Series C preferred stock............... 4,655,886 4,655,886 4,655,886
Series D preferred stock............... -- 5,041,445 5,041,445
Series E preferred stock............... -- -- 2,430,783
---------- ---------- ----------
Total................................ 13,021,584 18,830,693 23,676,564
========== ========== ==========
</TABLE>
Common stock subject to repurchase includes founders' stock and common stock
issued pursuant to unvested option exercises (see Notes 9 and 10).
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletin
No. 98, convertible preferred stock and common stock issued or granted for
nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if they had been outstanding for all periods
presented. To date, the Company has not had any issuances or grants for nominal
consideration.
Pro Forma Net Loss Per Share (unaudited)
The calculation of pro forma net loss per share assumes that all series of
convertible shares have been converted into common stock as of the original
issuance date.
Stock Split
In July 1999, the Company amended and restated the Articles of Incorporation
which included a three for two stock split of the Company's common and
preferred shares which became effective immediately. All share and per share
information in these financial statements have been retroactively adjusted to
reflect this stock split.
Segment Reporting
As of September 30, 2000, management has concluded that the Company only
operates in one segment and almost exclusively in the United States.
Comprehensive Income (Loss)
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which the Company adopted beginning on
January 1, 1998. SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components in a full set of general purpose
financial statements. The objective of SFAS No. 130 is to report a measure of
all changes in equity of an enterprise that results from transactions and other
economic events of the period other than transactions with shareholders
("comprehensive income"). Comprehensive income is the total of net income
F-13
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
(loss) and all other non-owner changes in shareholders' equity. The Company's
only component of comprehensive income is net loss.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
companies to record derivative financial instruments on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133," which amends SFAS No. 133 to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (or January 1, 2001
for the Company). In June 2000, the FASB issued Statement No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities--an Amendment
of FASB Statement No. 133." SFAS 138 amends SFAS 133 to (a) exclude from the
scope of SFAS No. 133 nonfinancial assets that will be delivered in quantities
expected to be used or sold by a company over a reasonable period in the normal
course of business and for which physical delivery is probable, (b) permit
hedging of a benchmark interest rate, (c) allow hedging of foreign-currency-
denominated assets and liabilities and (d) allow for limited hedging of net
foreign currency exposures. The Company has no derivative financial and
commodity instruments, forward contracts or hedging arrangements in cash and
cash equivalents. These statements should not have a material impact on the
current financial condition or results of the Company's operations.
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 and SOP 98-4 by extending the deferral of the application of
certain provisions of SOP 97-2 amended by SOP 98-4 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. This statement did not have a material impact on the financial
condition or results of the Company's operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements.
The Company has adopted SAB 101 as required for companies filing initial public
offerings.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation (an Interpretation of APB Opinion No. 25)" ("FIN 44"). FIN 44
provides guidance on the application of APB 25, particularly as it relates to
options. The effective date of FIN 44 is July 1, 2000 and the Company has
adopted FIN 44 as of that date.
F-14
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
3. PREPAIDS AND OTHER CURRENT ASSETS
Prepaids and other current assets consist of the following (in thousands):
<TABLE>
<CAPTION>
As of
December 31, As of
------------- September 30,
1998 1999 2000
------ ------ -------------
(unaudited)
<S> <C> <C> <C>
Prepaid royalties.............................. $ -- $ -- $ 680
Prepaid other.................................. 127 300 1,329
------ ------ ------
$ 127 $ 300 $2,009
====== ====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
As of
December 31, As of
-------------- September 30,
1998 1999 2000
------ ------ -------------
(unaudited)
<S> <C> <C> <C>
Software and computer equipment............. $ 180 $ 243 $2,361
Furniture and fixtures...................... 48 51 293
Leasehold improvements and other............ 244 598 169
------ ------ ------
472 892 2,823
Accumulated depreciation and amortization... (157) (379) (764)
------ ------ ------
$ 315 $ 513 $2,059
====== ====== ======
</TABLE>
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
As of
December 31, As of
------------ September 30,
1998 1999 2000
----- ------ -------------
(unaudited)
<S> <C> <C> <C>
Accrued commissions and bonus................... $ -- $ 553 $3,695
Accrued sales taxes............................. -- 370 950
Accrued vacation................................ 46 131 409
Accrued legal................................... 23 -- 40
Accrued employee awards......................... -- -- 500
Accrued other................................... 17 229 1,083
----- ------ ------
$ 86 $1,283 $6,677
===== ====== ======
</TABLE>
F-15
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
6. COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The Company leases its facilities under operating lease agreements. The
leases expire at various dates through 2006. As of September 30, 2000 future
minimum lease payments under this agreement are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
<S> <C>
Three months ended December 31, 2000 (unaudited).............. $ 529
2001.......................................................... 1,880
2002.......................................................... 1,857
2003.......................................................... 1,965
2004.......................................................... 2,030
Thereafter.................................................... 3,876
-------
$12,137
=======
</TABLE>
Rent expense under operating leases was approximately $192,000, $420,000 and
$838,000 for the years ended December 31, 1998 and 1999, and the nine months
ended September 30, 2000, respectively.
During 2000, the Company provided letters of credit for $2,500,000 to a
lessor to secure new facilities under operating leases. These letters are
secured by certificates of deposit maturing in 2001 and are restricted for
various terms exceeding one year. These balances are included in other assets
on the accompanying balance sheet as of September 30, 2000.
Capital Lease Commitments
In 1997, the Company entered into an equipment lease line which resulted in
capital lease obligations expiring at various dates through the year 2002,
dependent upon the date equipment was received. These obligations are secured
by the underlying equipment which consists of software, computer equipment, and
office and furniture equipment. In connection with this lease line, the Company
issued warrants to purchase 36,206 shares of Series A at $0.39 per share (see
Note 8). In July 1999, the Company entered into an agreement to extend the
equipment lease line from $200,000 to $500,000. In connection with the
extension, the Company issued warrants to purchase 9,375 shares of Series D at
$1.60 per share (see Note 8). In April 2000, the Company entered into an
agreement for an additional equipment lease line of $500,000. In connection
with the extension, the Company issued warrants to purchase 11,250 shares of
common stock at $2.00 per share (see Note 8). As of September 30, 2000, the
Company had borrowed approximately $1,000,000 under the lease lines.
F-16
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
Minimum future lease payments under all noncancellable capital leases as of
September 30, 2000 are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
<S> <C>
Three months ended December 31, 2000 (unaudited).............. $ 56
2001.......................................................... 314
2002.......................................................... 322
2003.......................................................... 58
-----
Total......................................................... 750
Less: Amount representing interest at 8%...................... (92)
-----
Present value of minimum lease payments....................... 658
Less: Current portion......................................... (238)
-----
Long-term portion............................................. $ 420
=====
</TABLE>
Notes Payable
In April 1998, the Company entered into a loan agreement with a bank to
borrow $750,000 at an interest rate of one percent above the bank's prime rate
(10.5% at September 30, 2000). The loan is payable in 36 equal monthly
installments through July 2001. The loan is collateralized by substantially all
of the Company's assets. In connection with this loan, the Company issued
warrants to purchase 28,125 shares of Series C at $0.87 per share (see Note 8).
Principal payments due under the loan at September 30, 2000 are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
<S> <C>
Three months ended December 31, 2000.......................... $ 50
2001.......................................................... 120
----
$170
====
</TABLE>
The Company must comply with certain covenants under this arrangement
including liquidity ratios. The Company was in compliance with these covenants
at September 30, 2000.
In March 1999, the Company entered into a loan agreement with a bank to
borrow $1,500,000 at an interest rate of two percent above the bank's prime
rate. In connection with the loan, the Company issued warrants to purchase
138,462 shares of Series D at $0.87 per share (see Note 8). The loan was fully
repaid in August 1999.
In March 2000, the Company issued a promissory note to an investor for
$421,000. This note did not accrue interest and was payable on demand. The note
was converted into 43,829 shares of Series E preferred stock in May 2000.
Royalties
The Company entered into an arrangement in 1998 with a software provider to
license that company's software and include it in the Company's software. This
arrangement was amended in May 2000. The Company is required to pay a license
fee in the form of a royalty of a percentage of net revenue, as defined in the
F-17
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
agreement, generated from sales of its product. The Company did not incur any
royalty payments under their agreement until 1999. This agreement expires on
May 18, 2003.
In March 2000, the Company entered into a license agreement with another
software provider to include that provider's software in the Company's product.
In return for this license, the Company was required to pay $150,000 plus a
certain percentage of the Company's sales in the future. The agreement expires
in March 2002.
During May 2000, the Company entered into an additional agreement with a
software provider to license that company's software and include it in the
Company's software. In return for this license, the Company paid a fee of
$50,000 upon signing of the agreement and is committed to paying a license fee
in the form of a royalty based on a percentage of gross sales of the Company's
product, payable quarterly. This agreement expires on May 31, 2001.
At September 30, 2000, $680,000 of prepaid royalties was included in
prepaids and other current assets in the accompanying consolidated balance
sheet.
7. CONVERTIBLE PREFERRED STOCK
Convertible preferred stock, par value $0.001, consists of the following,
net of issuance costs (in thousands, except share information):
<TABLE>
<CAPTION>
As of December
31, As of
-------------- September 30,
1998 1999 2000
------ ------- -------------
(unaudited)
<S> <C> <C> <C>
Series A:
Authorized--1,458,621 shares
Outstanding--1,422,413 shares;
liquidation preference of $550.................. $ 538 $ 538 $ 538
Series B:
Authorized--3,030,303 shares
Outstanding--3,030,303 shares;
liquidation preference of $2,000................ 1,993 1,993 1,993
Series C:
Authorized--4,699,155 shares
Outstanding--4,655,886 shares;
liquidation preference of $4,035................ 4,002 4,002 4,002
Series D:
Authorized--0 shares, 5,189,282 shares and
5,189,282 shares, respectively
Outstanding--0 shares, 5,041,445 shares and
5,041,445 shares;
liquidation preference of $8,016................ -- 7,975 7,975
Series E:
Authorized--0 shares, 0 shares and
2,604,167 shares, respectively
Outstanding--0 shares, 0 shares and
2,430,783 shares, respectively;
liquidation preference of $23,336............... -- -- 21,999
------ ------- -------
$6,533 $14,508 $36,507
====== ======= =======
</TABLE>
Significant rights, restrictions and preferences of Series A, B, C, D and E
are as follows:
. The holders of each outstanding share of Series A, B, C, D and E are
entitled to receive annual, non-cumulative, dividends of $0.03, $0.05,
$0.07, $0.13 and $0.77 per share, respectively, when and as declared by
the board of directors, in preference to any distribution to the holders
of the common stock.
F-18
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
. In the event of a liquidation, dissolution or winding-up of the affairs
of the Company, the holders of each Series A, B, C, D and E shall be
entitled to receive $0.39, $0.66, $0.87, $1.59 and $9.60 per share,
respectively, plus all declared and unpaid dividends in preference to any
distribution to the holders of the common stock. In addition, holders of
Series A,B,C,D and E shall be entitled to limited participation with the
holders of common stock in the distribution of all residual assets, if
any.
. The preferred shares have full voting rights equivalent to the number of
common stock shares into which they are convertible.
. Each share of preferred stock is convertible, at the option of the
shareholder, into one share of common stock, subject to adjustments for
certain dilutive events. Each share shall automatically convert prior to
the closing of an underwritten public offering of the Company's common
stock with an aggregate offering price to the public of at least
$15,000,000 and a public offering price per share of at least $12.00.
8. WARRANTS
In connection with the original equipment lease line discussed in Note 6, a
warrant was issued to the leasing company for the purchase of 36,206 shares of
Series A preferred stock at an exercise price of $0.39 per share. The right to
purchase the Series A shares was immediately effective on signing and
exercisable (i) for a period of six years or (ii) upon the closing of an
initial public offering, whichever is earlier. The estimated fair value of the
warrant at the date of issuance was immaterial.
In April 1998, in connection with the loan agreement discussed in Note 6, a
warrant was issued to the bank for the purchase of 28,125 shares of Series C
preferred stock at an exercise price of $0.87 per share. The right to purchase
the Series C shares was immediately effective upon signing and exercisable (i)
for a period of five years or (ii) upon the closing of an initial public
offering, whichever is earlier. The estimated fair value of the warrant at the
date of issuance was immaterial.
In March 1999, in connection with the loan agreement discussed in Note 6, a
warrant was issued to the bank for the purchase of 138,462 shares of Series D
preferred stock at an exercise price of $0.87 per share. The right to purchase
the Series D shares was immediately effective upon signing and exercisable (i)
for a period of five years or (ii) upon the closing of an initial public
offering, whichever is earlier. The estimated fair value of the warrant at the
date of issuance was approximately $61,000. This amount was recognized as
additional interest expense over the term of the arrangement with the bank.
In connection with the extension of the lease line discussed in Note 6, a
warrant was issued to purchase 9,375 shares of Series D preferred stock at an
exercise price of $1.60 per share. The rights to purchase the Series D shares
was immediately effective on signing and exercisable (i) for a period of seven
years or (ii) upon the closing of an initial public offering, whichever is
earlier. The estimated fair value of the warrant at the date of issuance was
immaterial.
In April 2000, in connection with the extension of the equipment lease line
discussed in Note 6, a warrant was issued to the leasing company to purchase
11,250 shares of common stock at $2.00 per share. The right to purchase the
common stock was immediately effective upon signing and exercisable for a
period of seven years. The estimated fair value of the warrant at the date of
issuance was approximately $45,000. This amount will be recognized as
additional interest expense over the term of the lease line which expires in
2003.
In May 2000, in connection with the extension of an operating lease, a
warrant was issued to the leasing company to purchase 32,391 shares of common
stock at $9.60 per share. The right to purchase the common stock was
immediately effective upon signing and exercisable for a period of six years.
The estimated fair
F-19
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
value of the warrant at the date of issuance was approximately $155,000. This
amount will be recognized as additional rent expense over the term of the
operating lease which expires in 2006.
In May 2000, the Company entered into a research and development agreement
with a customer and stockholder. A warrant was issued to this customer to
purchase up to 100,000 shares of common stock at $2.00 per share. The customer
earned 20,000 shares under the warrant per month for five consecutive months in
return for providing certain engineering services. The estimated fair value of
the warrant was approximately $824,000 based upon the estimated fair value of
the warrant shares on the vesting dates. The warrant was fully vested and the
estimated fair value was recognized as a research and development expense in
the accompanying consolidated statement of operations for the nine months ended
September 30, 2000. The warrant was exercisable for a period of four months. As
of September 30, 2000, this warrant was exercised.
In September 2000, in connection with the extension of the operating lease
discussed in Note 6, a warrant was issued to the lessor to purchase 8,639
shares of common stock at $9.60 per share. The right to purchase the common
stock was immediately effective upon signing and exercisable for a period of
six years. The estimated fair value of the warrant at the date of issuance was
approximately $79,000. This amount will be recognized as additional rent
expense over the term of the operating lease which expires in 2006.
The fair market value of warrants on the date of grant was computed using
the Black-Scholes pricing model with the following assumptions: risk-free
interest rates ranging from 5.6 percent to 6.8 percent, expected dividend yield
of 0 percent, contractual lives of 0.1 to 7 years, and expected volatility of
70 percent.
F-20
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
9. 1997 EQUITY INCENTIVE PLAN
In June 1997, the Company adopted the 1997 Equity Incentive Plan (the
"Plan") and reserved 4,200,000 shares of common stock for issuance thereunder.
Under the Plan, the board of directors may grant incentive and nonqualified
stock options to purchase shares of the Company's common stock to employees,
directors and consultants of the Company. The exercise price per share for an
incentive stock option cannot be less than 100% of the fair market value as
determined by the board of directors on the date of grant. The exercise price
per share for nonqualified stock options cannot be less than 85% of the fair
market value, as determined by the board of directors, on the date of grant.
Options generally expire ten years after the date of grant and generally vest
over a four year period. In addition, the option holder is entitled to exercise
prior to the option's vesting as long as he or she is still an employee. Should
the employee subsequently leave, the Company has the right to repurchase
unvested shares at the exercise price as of the departure date. Option activity
under the Plan through September 30, 2000 was as follows:
<TABLE>
<CAPTION>
Shares Weighted
Available Options Average
for Grant Outstanding Exercise Price
---------- ----------- --------------
<S> <C> <C> <C>
Authorized....................... 4,200,000 -- $ --
Granted.......................... (1,740,000) 1,740,000 0.06
Cancelled........................ 215,625 (215,625) 0.06
---------- ---------- -----
Balance at December 31, 1997....... 2,675,625 1,524,375 $0.06
---------- ---------- -----
Granted.......................... (2,511,307) 2,511,307 --
Exercised........................ -- (90,470) 0.06
Cancelled........................ 180,936 (180,936) 0.06
---------- ---------- -----
Balance at December 31, 1998....... 345,254 3,764,276 $0.06
---------- ---------- -----
Authorized....................... 1,500,000 -- --
Granted.......................... (1,894,566) 1,894,566 0.12
Exercised........................ -- (1,342,498) 0.07
Cancelled........................ 509,687 (509,687) 0.07
---------- ---------- -----
Balance at December 31, 1999....... 460,375 3,806,657 $0.09
---------- ---------- -----
Authorized (unaudited)........... 14,000,000 -- --
Granted (unaudited).............. (3,386,450) 3,386,450 3.10
Exercised (unaudited)............ -- (1,919,286) 0.75
Repurchased (unaudited).......... 33,908 -- 0.07
Cancelled (unaudited)............ 177,407 (177,407) 1.64
---------- ---------- -----
Balance at September 30, 2000
(unaudited)....................... 11,285,240 5,096,414 $1.71
========== ========== =====
</TABLE>
The following table summarizes the options outstanding at September 30, 2000
(unaudited):
<TABLE>
<CAPTION>
Weighted Average
Range of Number of Options Remaining Contractual Weighted Average Number of
Exercise Prices Outstanding Life (Years) Exercise Price Options Vested
--------------- ----------------- --------------------- ---------------- --------------
<S> <C> <C> <C> <C>
$0.06-$0.09 2,357,294 8.06 $0.08 900,291
$0.16 52,750 8.94 0.16 8,688
$0.32 50,000 9.24 0.32 --
$1.25 25,112 9.29 1.25 --
$2.00-$2.60 2,041,758 9.65 2.12 --
$6.00-$9.00 569,500 9.91 $7.27 --
----------- --------- ---- ----- -------
$0.06-$9.00 5,096,414 8.93 $1.71 908,979
=========== ========= ==== ===== =======
</TABLE>
F-21
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
At September 30, 2000, 23,638,891 shares of common stock were subject to
repurchase by the Company. As a result of the early exercise provision, all
options outstanding were exercisable at September 30, 2000.
The Company accounts for its stock option plans pursuant to APB 25 whereby
the difference between the exercise price and the fair value at the date of
grant is recognized as compensation expense. Had compensation expense for stock
option plans been determined consistent with SFAS No. 123, net losses would
have increased to the following pro forma amounts (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
---------------------------- -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net loss as reported..... $ (1,574) $ (3,782) $ (7,030) $ (5,035) $ (14,614)
Net loss pro forma
(reflecting adjustment
for compensation expense
consistent with SFAS
No. 123)................ $ (1,580) $ (3,802) $ (7,063) $ (5,058) $ (14,836)
Net loss per share as
reported................ $ (0.46) $ (1.08) $ (1.78) $ (1.33) $ (2.76)
Net loss per share pro
forma (reflecting
adjustment for
compensation expense
consistent with SFAS
No. 123)................ $ (0.46) $ (1.08) $ (1.79) $ (1.34) $ (2.80)
</TABLE>
The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions for grants in 1997, 1998, 1999 and the nine months ended September
30, 2000.
<TABLE>
<CAPTION>
Nine Months Ended
Years ended December 31, September 30,
-------------------------------- ---------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Risk-free interest
rate................... 5.8 - 6.5% 5.0 - 5.7% 4.7 - 6.1% 4.7 - 6.0% 6.3 - 6.6%
Expected life of the
option................. 4 years 4 years 4 years 4 years 4 years
Dividend yield.......... 0% 0% 0% 0% 0%
Volatility.............. 0% 0% 0% 0% 0%
</TABLE>
In connection with the grant of certain stock options to employees during
the year ended December 31, 1999, the Company recorded stock-based compensation
of approximately $1.4 million, representing the difference between the deemed
value of the common stock for accounting purposes and the option exercise price
or stock sale price at the date of the option grant or stock sale. Such amount
is presented as a reduction of stockholders' equity and amortized on an
accelerated basis over the vesting period of the applicable options, generally
four years. Approximately $325,000 was expensed during the year ended December
31, 1999. In connection with the grant of certain stock options to employees
during the nine months ended September 30, 2000, the Company recorded stock-
based compensation of approximately $15.9 million. Approximately $2.9 million
was expensed during the nine months ended September 30, 2000. Compensation
expense is decreased in the period of forfeiture for any accrued but unvested
compensation arising from the early termination of an option holder's services.
During the year ended December 31, 1999, the Company issued options to
acquire approximately 14,000 shares of common stock to non-employees. The
options were immediately exercisable on the date of grant. The fair value of
the options on the date of grant was computed using the Black-Scholes pricing
model with the following assumptions: risk-free interest rates ranging from 6.0
percent to 6.2 percent, expected dividend yield of 0 percent, contractual lives
of 4 years and expected volatility of 70 percent. The estimated fair value of
the options was immaterial.
F-22
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
In April 2000, the Company issued 19,618 shares of common stock in exchange
for services. The common stock was issued without restrictions. The estimated
fair value of the stock was approximately $100,000 and was recognized as
general and administrative expense in the accompanying statement of operations
for the nine month period ended September 30, 2000.
10. COMMON STOCK
As of September 30, 2000, the Company has issued an aggregate of 4,890,470
shares of common stock to founders of the Company, all of which were subject to
repurchase rights in the event of termination of employment, at the option of
the Company, at $0.01 per share. Such repurchase rights expire at 50% on the
date of issuance and the remaining 50% expire ratably over a three-year period
commencing on the date of issuance. These rights of repurchase terminated in
January 2000.
In February 1998, the Company repurchased 833,040 shares of common stock
from a founder at $0.01 per share.
In 1997, the Company charged compensation expense of approximately $63,000
related to common stock issued to the Company's founders.
11. INCOME TAXES
The Company accounts for income taxes pursuant to the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS 109 requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined using the current
applicable enacted tax rate and provisions of the enacted tax law. The
components of the net deferred tax asset are as follows (in thousands):
<TABLE>
<CAPTION>
As of
December 31, As of
-------------- September 30,
1998 1999 2000
----- ------- -------------
(unaudited)
<S> <C> <C> <C>
Cumulative net operating
loss carryforwards..... $ 494 $ 4,249 $ 8,028
Capitalized start-up
costs.................. 7 7 --
Manufacturer's
investment credit...... 3 -- 6
Research and development
tax credits............ 114 141 523
Cumulative temporary
differences............ (84) (490) 1,155
----- ------- -------
Total deferred tax
assets................. 534 3,907 9,712
Valuation allowance..... (534) (3,907) (9,712)
----- ------- -------
Net deferred tax
assets................. $ -- $ -- $ --
===== ======= =======
</TABLE>
The Company has net operating loss carryforwards as of September 30, 2000 of
approximately $8.4 million and $1.3 million, respectively, to offset future
federal and state taxable income. The net operating loss carryforwards expire
at various dates through the year 2020. The state loss carryforward will expire
commencing in 2005. A valuation allowance has been recorded for the entire net
deferred tax asset as a result of management's uncertainties regarding
realization of the asset including limited operating history of the Company,
the lack of profitability and uncertainty over future operating profitability
and taxable income.
The Tax Reform Act of 1986 contains provisions which may limit the net
operating loss and credit carryforwards to be used in any given year upon the
occurrence of certain events, including a significant change in ownership
interest.
F-23
<PAGE>
PLUMTREE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1999 and 2000 is unaudited)
The provision for income taxes differs from the expected tax benefit amount
computed by applying the statutory Federal income tax rate of 35% to net loss
as follows:
<TABLE>
<CAPTION>
As of
December 31, As of
--------------- September 30,
1998 1999 2000
------ ------ -------------
(unaudited)
<S> <C> <C> <C>
Federal statutory rate....................... (35.0)% (35.0)% (35.0)%
State taxes net of federal benefit........... (5.8) (5.8) (5.8)
Non-deductible compensation.................. -- 2.3 9.7
Other........................................ (3.2) (9.5) (6.8)
Change in valuation allowance................ 44.0 48.0 37.8
------ ------ -----
-- % -- % -- %
====== ====== =====
</TABLE>
12. 401(k) PLAN
The Company maintains a 401(k) retirement plan for full-time employees and
may make discretionary contributions. No employer contributions have been made
to date.
13. RELATED PARTY TRANSACTIONS
In November 1999, the Company entered into an agreement with a customer for
the sale of license, services and maintenance. In December 1999, this customer
became a Series D preferred stockholder on terms identical to the other third
party Series D investors. As of December 31, 1999, the Company has recognized
approximately $165,000 in revenue from this customer.
In December 1999, the Company entered into an agreement with a customer for
the sale of license, services and maintenance. In May 2000, this customer
became a Series E preferred shareholder on terms identical to the other third
party Series E investors. As of September 30, 2000, the Company has recognized
approximately $876,000 in revenue and had $136,000 in accounts receivable from
this customer.
In February 2000, the Company entered into an agreement with a Series D
preferred shareholder for the sale of license and services. As of September 30,
2000, the Company has recognized $118,000 in revenue and had $11,000 in
accounts receivable from this customer.
In May 2000, the Company entered into an agreement with a customer for the
sale of license, services and maintenance. In May 2000, this customer became a
Series E preferred shareholder on terms identical to the other third party
Series E investors. As of September 30, 2000, the Company has recognized
approximately $1,693,000 in revenue and had $202,000 in accounts receivable
from this customer.
In August 2000, the Company entered into a note with an officer of the
Company in the amount of $520,000 to exercise options. This note is full
recourse at 6.0 percent per annum and is payable upon demand.
14. REINCORPORATION
In connection with the planned IPO, the Board of Directors approved, subject
to stockholder approval, the reincorporation of the Company into the State of
Delaware. The Company plans to affect the reincorporation prior to the
effectiveness of the IPO.
15. SUBSEQUENT EVENTS (unaudited)
In connection with the granting of options to employees to purchase 274,000
shares of common stock subsequent to September 30, 2000 at an exercise price of
$12.60 per share, no stock-based compensation has been recorded in connection
with these grants as they were issued at fair value.
F-24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in connection with
the offering described in this Registration Statement, all of which will be
paid by Plumtree. All amounts are estimates, other than the registration fee,
the NASD fee, and the Nasdaq listing fee.
<TABLE>
<S> <C>
SEC Registration fee............................................... 22,770
NASD Filing fee.................................................... 9,125
Nasdaq National Market listing fee................................. 95,000
Accounting fees and expenses....................................... 450,000
Legal fees and expenses............................................ 600,000
Printing and engraving expenses.................................... 200,000
Transfer agent fees and expenses................................... 10,000
Blue sky fees and expenses......................................... 3,000
Miscellaneous fees and expenses.................................... 110,105
---------
Total............................................................ 1,500,000
=========
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 102 of the Delaware General Corporation Law, or the DGCL, as
amended, allows a corporation to eliminate the personal liability of directors
of a corporation to the corporation or its stockholders for monetary damages
for a breach of fiduciary duty as a director, except where the director
breached his duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of a
dividend or approved a stock repurchase in violation of Delaware corporate law
or obtained an improper personal benefit.
Section 145 of the DGCL provides, among other things, that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of Plumtree) by reason of
the fact that the person is or was a director, officer, agent or employee of
Plumtree or is or was serving at our request as a director, officer, agent, or
employee of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with the action, suit or proceeding. The power to indemnify applies
(a) if the person is successful on the merits or otherwise in defense of any
action, suit or proceeding, or (b) if the person acted in good faith and in a
manner he reasonably believed to be in the best interest, or not opposed to the
best interest, of Plumtree, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
power to indemnify applies to actions brought by or in the right of Plumtree as
well, but only to the extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably incurred and not
to any satisfaction of judgment or settlement of the claim itself, and with the
further limitation that in these actions no indemnification shall be made in
the event of any adjudication of negligence or misconduct in the performance of
his duties to Plumtree, unless the court believes that in light of all the
circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that a director who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption may be held liable for these actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to
these actions to be entered in the books containing the minutes of the meetings
of the board of directors at the time the action occurred or immediately after
the absent director receives notice of the unlawful acts.
II-1
<PAGE>
The Registrant's Second Amended and Restated Certificate of Incorporation
includes a provision that eliminates the personal liability of its directors
for monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from or limitation of liability is not permitted under
the Delaware General Corporation Law.
The Registrant's Amended and Restated Bylaws provide that:
. the Company must indemnify its directors and officers to the fullest
extent permitted by Delaware law;
. the Company may indemnify its other employees and agents to the same
extent that we indemnified our officers and directors, unless otherwise
determined by our board of directors; and
. the Company must advance expenses, as incurred, to the Registrant's
directors and officers in connection with a legal proceeding to the
fullest extent permitted by Delaware law.
The indemnification provisions contained in the Registrant's Second Amended
and Restated Certificate of Incorporation and Amended and Restated Bylaws are
not exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise. In
addition, the Registrant maintains insurance on behalf of its directors and
executive officers insuring them against any liability asserted against them in
their capacities as directors or officers or arising out of this status.
The Registrant intends to enter into agreements to indemnify its directors,
and officers, in addition to indemnification provided for in the Registrant's
bylaws. These agreements, among other things, will provide for indemnification
of these persons for expenses, judgments, fines, and settlement amounts
incurred by any such person in any action or proceeding arising out of the
person's services as a director or officer of Registrant or as a director or
officer of another corporation or other enterprise at the Registrant's request.
Item 15. Recent Sales of Unregistered Securities.
During the past three years, the Registrant has issued unregistered
securities to a limited number of persons as described below. When the
Registrant has relied on Regulation D, Rule 506 thereof or Section 4(2) of the
Securities Act, the investors in unregistered securities have been accredited
investors.
(a) On February 2, 1997, Registrant issued and sold an aggregate of
1,422,413 shares of Series A preferred stock to 4 investors for $0.39
per share, or an aggregate of $550,000. Upon the closing of this
offering, each share of Series A preferred stock will automatically
convert into one share of common stock. The foregoing purchases and
sales were exempt from registration under the Securities Act pursuant
to Section 4(2) thereof and Regulation D promulgated thereunder on the
basis that the transaction did not involve a public offering.
(b) On July 11, 1997, Registrant issued and sold an aggregate of 3,030,305
shares of Series B preferred stock to 5 investors for $0.66 per share,
or an aggregate of $2,000,001. Upon the closing of this offering, each
share of Series B preferred stock will automatically convert into one
share of common stock. The foregoing purchases and sales were exempt
from registration under the Securities Act pursuant to Section 4(2)
thereof and Regulation D promulgated thereunder on the basis that the
transactions did not involve a public offering.
(c) On April 8, 1997, Registrant issued a warrant to Lighthouse Capital
Partners II, L.P. to purchase 36,206 shares of Series A preferred stock
for $0.39 per share. The issuance of this warrant was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof
on the basis that the transaction did not involve a public offering.
(d) On April 20, 1998, Registrant issued a warrant to Silicon Valley Bank
to purchase 28,125 shares of Series C preferred stock for $0.87 per
share. Upon the closing of this offering this warrant will be
automatically terminated unless otherwise exercised. The issuance of
this warrant was exempt from
II-2
<PAGE>
registration under the Securities Act pursuant to Section 4(2) thereof
on the basis that the transaction did not involve a public offering.
(e) On June 17, 1998, Registrant issued and sold an aggregate of 4,655,886
shares of Series C preferred stock to a total of 11 investors for $0.87
per share, or an aggregate of $4,035,101. Upon the closing of this
offering, each share of Series C preferred stock will automatically
convert into one share of common stock. The foregoing purchases and
sales were exempt from registration under the Securities Act pursuant
to Section 4(2) thereof and Regulation D promulgated thereunder on the
basis that the transactions did not involve a public offering.
(f) On April 2, 1999, Registrant issued a warrant to Silicon Valley Bank to
purchase 138,462 shares of Series D preferred stock for $0.87 per
share. The issuance of this warrant was exempt from registration under
the Securities Act pursuant to Section 4(2) thereof on the basis that
the transaction did not involve a public offering.
(g) On August 4, 1999, and December 12, 1999, Registrant issued and sold an
aggregate of 5,041,445 shares of Series D preferred stock to 15
investors for $1.59 per share, or an aggregate of $8,015,898. Upon the
closing of this offering, each share of Series D preferred stock will
automatically convert into one share of common stock. The foregoing
purchases and sales were exempt from registration under the Securities
Act pursuant to Section 4(2) thereof and Regulation D promulgated
thereunder.
(h) On September 25, 1999, Registrant issued a warrant to Lighthouse
Capital Partners III, L.P. to purchase up to 9,375 shares of Series D
preferred stock for a weighted average exercise price of $1.60 per
share. The issuance of this warrant was exempt from registration under
the Securities Act pursuant to Section 4(2) thereof on the basis that
the transaction did not involve a public offering.
(i) On April 5, 2000, Registrant issued and sold 19,618 shares of common
stock to Ramsey Bierne Associates in consideration for services
rendered. The foregoing purchase and sale was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof and
Regulation D promulgated thereunder on the basis that the transactions
did not involve a public offering.
(j) On April 27, 2000, Registrant issued a warrant to Lighthouse Capital
Partners III, L.P. to purchase 11,250 shares of common stock for $2.00
per share. The issuance of this warrant was exempt from registration
under the Securities Act pursuant to Section 4(2) hereof on the basis
that the transaction did not constitute a public offering.
(k) On May 2, 2000, May 8, 2000 and May 12, 2000, Registrant issued and
sold an aggregate of 2,430,784 shares of Series E preferred stock to 25
investors for $9.60 per share, or an aggregate of $23,333,526. Upon the
closing of this offering, each share of Series E preferred stock will
automatically convert into one share of common stock. The foregoing
purchases and sales were exempt from registration under the Securities
Act pursuant to Section 4(2) thereof and Regulation D promulgated
thereunder.
(l) On May 8, 2000, Registrant issued a warrant to The Procter & Gamble
Company to purchase 100,000 shares of common stock for $2.00 per share.
This warrant was exercised in September 2000. The issuance of this
warrant was exempt from registration under the Securities Act pursuant
to Section 4(2) thereof on the basis that the transaction did not
involve a public offering.
(m) On May 18, 2000, June 14, 2000 and on July 12, 2000, an aggregate of
225,000 shares of common stock was issued upon exercise of options
under the Registrant's 1997 Equity Incentive Plan at a weighted average
exercise price of $2.58 per share for an aggregate $580,500. The
foregoing purchases and sales were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof and Regulation D
promulgated thereunder on the basis that the transactions did not
involve a public offering.
(n) On May 31, 2000, Registrant issued a warrant to WXI/San Realty, L.L.C.
to purchase 32,391 shares of common stock for $9.60 per share. The
issuance of this warrant was exempt from registration
II-3
<PAGE>
under the Securities Act pursuant to Section 4(2) thereof on the basis
that the transaction did not involve a public offering.
(o) On September 20, 2000, Registrant issued a warrant to WXI/San Realty,
to purchase 8,639 shares of common stock for $9.60 per share. The
issuance of this warrant was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof on the basis that the
transaction did not involve a public offering.
(p) As of September 30, 2000, an aggregate of 3,318,346 shares of common
stock had been issued upon exercise of options under the Registrant's
1997 Equity Incentive Plan at a weighted average exercise price of
$0.29 per share or an aggregate of $896,200. The foregoing purchases
and sales were exempt from registration under the Securities Act
pursuant to Section 4(2) or Rule 701.
None of the foregoing transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, except that Credit Suisse
First Boston Corporation acted as placement agent in connection with the
transaction described in paragraph (k) above. See "Underwriting." The
recipients in such transactions represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution, and appropriate legends were affixed to the share
certificates and instruments issued in those transactions.
Item 16. Exhibits and Financial Statement Schedules.
a. Exhibits
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Specimen common stock certificate
4.2* Amendment No. 1 to Amended and Restated Investor Rights Agreement
4.3** Warrant to purchase Series A Preferred Stock, dated April 8, 1997,
issued to Lighthouse Capital Partners II, L.P.
4.4** Warrant to purchase Series C Preferred Stock, dated April 20, 1998,
issued to Silicon Valley Bank
4.5** Warrant to purchase Series D Preferred Stock, dated April 2, 1999,
issued to Silicon Valley Bank
4.6** Warrant to purchase Series D Preferred Stock, dated September 1,
1999, issued to Lighthouse Capital Partners III, L.P.
4.7** Warrant to purchase Common Stock, dated April 27, 2000, issued to
Lighthouse Capital Partners III, L.P.
4.8** Warrant to purchase Common Stock, dated May 8, 2000, issued to The
Procter & Gamble Company
4.9** Warrant to purchase Common Stock, dated May 31, 2000, issued to
WXI/SAN Realty, L.L.C.
4.10** Warrant to purchase Common Stock, dated September 20, 2000, issued
to WXI/SAN Realty, L.L.C.
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 Form of Indemnification Agreement between the Registrant and each of
its directors and officers
10.2** 1997 Equity Incentive Plan, as amended, and form of agreements
thereunder
10.3 2000 Omnibus Stock Incentive Plan, and Form of agreements thereunder
10.4 2000 Employee Stock Purchase Plan, and form of agreements thereunder
10.5** Form of Offer Letter between the Registrant and certain executive
officers
10.6+** OEM Agreement, dated April 2000, between the Registrant and Verity,
Inc.
10.7+** Software License Agreement, dated December 17, 1999, between the
Registrant and The Procter & Gamble Company
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
10.8+** Licensed Software Terms and Conditions, dated May 12, 2000, between
the Registrant and Ford Motor Company
10.9* Offer letter between the Registrant and John H. Kunze
10.10* Offer letter between the Registrant and Eric Borrmann
10.11* Offer letter between the Registrant and John Hogan
10.12* Offer letter between the Registrant and Jim Flatley
21* Subsidiary of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)
24.1** Power of Attorney (included on signature page)
27.1** Financial Data Schedule
</TABLE>
--------
* To be filed by amendment.
** Previously filed
+ We have sought confidential treatment from the Commission for selected
portions of this exhibit. The omitted portions will be separately filed with
the Commission.
b. Financial Statement Schedules
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing certificates in the denominations and registered in the names as
required by the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim for
indemnification by the registrant against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against pubic policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant under Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in San Francisco,
State of California, on November 21, 2000.
PLUMTREE SOFTWARE, INC.
/s/ John H. Kunze
By: _________________________________
John H. Kunze
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ John H. Kunze President, Chief Executive November 20, 2000
______________________________________ Officer and Director
John H. Kunze (Principal Executive
Officer)
/s/ Eric Borrmann Chief Financial Officer November 20, 2000
______________________________________ (Principal Financial and
Eric Borrmann Accounting Officer)
/s/ Peter Seidenberg* Controller November 20, 2000
______________________________________
Peter Seidenberg
/s/ John Dillon* Director November 20, 2000
______________________________________
John Dillon
/s/ Rupen Dolasia* Director November 20, 2000
______________________________________
Rupen Dolasia
/s/ Pierre Lamond* Director November 20, 2000
______________________________________
Pierre Lamond
/s/ Bernard Whitney* Director November 20, 2000
______________________________________
Bernard Whitney
</TABLE>
/s/ John H. Kunze
*By: ____________________________
John H. Kunze
(Attorney-in-fact)
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Specimen common stock certificate
4.2* Amendment No. 1 to Amended and Restated Investor Rights Agreement
4.3** Warrant to purchase Series A Preferred Stock, dated April 8, 1997,
issued to Lighthouse Capital Partners II, L.P.
4.4** Warrant to purchase Series C Preferred Stock, dated April 20, 1998,
issued to Silicon Valley Bank
4.5** Warrant to purchase Series D Preferred Stock, dated April 2, 1999,
issued to Silicon Valley Bank
4.6** Warrant to purchase Series D Preferred Stock, dated September 1, 1999,
issued to Lighthouse Capital Partners III, L.P.
4.7** Warrant to purchase Common Stock, dated April 27, 2000, issued to
Lighthouse Capital Partners III, L.P.
4.8** Warrant to purchase Common Stock, dated May 8, 2000, issued to The
Procter & Gamble Company
4.9** Warrant to purchase Common Stock, dated May 31, 2000, issued to
WXI/SAN Realty, L.L.C.
4.10* Warrant to purchase Common Stock, dated September 20, 2000, issued to
WXI/SAN Realty, L.L.C.
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 Form of Indemnification Agreement between the Registrant and each of
its directors and officers
10.2** 1997 Equity Incentive Plan, as amended, and form of agreements
thereunder
10.3 2000 Omnibus Stock Incentive Plan, and form of agreements thereunder
10.4 2000 Employee Stock Purchase Plan, and form of agreements thereunder
10.5** Form of Offer Letter between the Registrant and certain executive
officers
10.6+** OEM Agreement, dated April 2000, between the Registrant and Verity,
Inc.
10.7+** Software License Agreement, dated December 17, 1999, between the
Registrant and The Procter & Gamble Company
10.8+** Licensed Software Terms and Conditions, dated May 12, 2000, between
the Registrant and Ford Motor Company
10.9* Offer letter between the Registrant and John H. Kunze
10.10* Offer letter between the Registrant and Eric Borrmann
10.11* Offer letter between the Registrant and John Hogan
10.12* Offer letter between the Registrant and Jim Flatley
21* Subsidiary of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1)
24.1** Power of Attorney (included on signature page)
27.1** Financial Data Schedule
</TABLE>
--------
* To be filed by amendment.
** Previously filed.
+ We have sought confidential treatment from the Commission for selected
portions of this exhibit. The omitted portions will be separately filed with
the Commission.
