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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 3, 2000
Date of Earliest Event Reported: July 19, 2000
CHORDIANT SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
|
Delaware |
93-1051328 |
|
(State of incorporation) |
(I.R.S. Employer Identification No.) |
Commission file number:
000-29357
20400 Stevens Creek Blvd., Suite #400
Cupertino, CA 95014
(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 517-6100
N/A
(Former name or former address, if changed since last report)
TABLE OF CONTENTS
To jump to a section, double-click on the section name.
8-K/A
| Page No. | |
| Item 2. Acquisition or Disposal of Assets |
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| Item 7. Financial Statements, Pro Forma Financial Information and Exhibits |
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| Balance Sheet |
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| Income Statement |
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| Stockholders' Equity |
|
| Cash Flow Statement |
|
| Table 5 |
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| Table 6 |
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| Table 7 |
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| Table 8 |
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| Table 9 |
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| Item 7(b) |
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| Table 10 |
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| Table 11 |
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| Table 12 |
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| Income Statement2 |
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| Signatures |
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Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
REPORT OF INDEPENDENT ACCOUNTANTS
In our opinion, the accompanying balance sheets and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of White Spider Software, Inc. at
December 31, 1999, and the results of its operations and its cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of White
Spider Software, Inc.'s management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
September 8, 2000
San Jose, California
WHITE SPIDER SOFTWARE, INC.
December 31, June 30,
1999 2000
------------- -------------
Assets
Current Assets:
Cash and cash equivalents....................................... $17,147 65,710
Accounts receivable, net........................................ 34,627 61,674
Prepaid expeneses and other current assets...................... 2,166 35,999
------------- -------------
Total current assets......................................... 53,940 163,383
Property and equipment, net....................................... 11,980 24,585
------------- -------------
$65,920 $187,968
============= =============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable--third parties................................. $115 $5,590
Accrued expenses................................................ 5,177 41,561
Borrowings...................................................... -- 45,000
Notes payable, current.......................................... 33,318 0
------------- -------------
Total current liabilities.................................... 38,610 92,151
Commitments (Note 7)
Stockholders' Equity:
Common Stock: $0.01 par value: 10,000,000 shares
authorized at December 31, 1999 and June 30, 2000;
100,000 and 4,728,290 (unaudited) shares issued and outstanding
at December 31, 1999 and June 30, 2000 respectively............. 100 19,383
Additional paid-in capital...................................... 3,844 470,562
Retained earnings (accumulated deficit)......................... 23,366 (119,737)
Deferred stock-based compensation............................... -- (274,391)
------------- -------------
Total stockholders' equity................................... 27,310 95,817
------------- -------------
$65,920 $187,968
============= =============
The accompanying notes are an integral part of these financial statements.
WHITE SPIDER SOFTWARE, INC.
Year Ended Six Months Ended
December 31, June 30,
-------------------------
1999 1999 2000
------------ ------------ ------------
Service revenue.................................... $65,528 -- $281,028
Cost of service revenue (exclusive of stock-based
compensation expense of $70,812 in 2000)........ 12,295 -- 108,607
------------ ------------ ------------
Gross profit....................................... 53,233 0 172,421
------------ ------------ ------------
Operating expenses:
Research and development (exclusive of stock-based
compensation expense of $46,482 in 2000)........ 12,986 -- 114,468
Sales and marketing............................... -- 33,118
General and administrative........................ 13,209 470 49,880
Stock-based compensation.......................... -- -- 117,294
------------ ------------ ------------
Total operating expenses...................... 26,195 470 314,760
------------ ------------ ------------
Income/(loss) from operations...................... 27,038 (470) (142,339)
Interest expense................................... -- -- (764)
------------ ------------ ------------
Net income (loss).................................. $27,038 ($470) ($143,103)
============ ============ ============
The accompanying notes are an integral part of these financial statements.
WHITE SPIDER SOFTWARE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1999 AND SIX MONTHS ENDED JUNE 30,2000
Retained
Additional Earnings Deferred Total
Common Stock Paid-In (Accumulated Stock-based Stockholders
Shares Amount Capital Deficit) Compensation Equity
------------ --------- --------- ------------ ------------ ------------
Balance at December 31, 1998 $100,000 $100 $3,844 ($3,672) -- $272
Net income -- -- -- 27,038 -- 27,038
------------ --------- --------- ------------ ------------ ------------
Balance at December 31, 1999 100,000 100 3,844 23,366 -- 27,310
Common Stock issued to founders upon
cancellation of notes payable (unaudited) 3,000,000 3,000 -- -- -- 3,000
Common Stock issued to employees upon
cancellation of notes payable (unaudited) 20,790 208 8,108 -- -- 8,316
Common Stock issued to employees
for services (unaudited) 1,400,000 14,000 -- -- -- 14,000
Common Stock issued for cash (unaudited) 207,500 2,075 80,925 -- -- 83,000
Deferred stock-based compensation (unaudited) -- -- 377,685 -- (377,685) --
Stock-based compensation expense (unaudited) -- -- -- -- 103,294 103,294
Net loss (unaudited) -- -- -- (143,103) -- (143,103)
------------ --------- --------- ------------ ------------ ------------
Balance at June 30, 2000 (unaudited) $4,728,290 $19,383 $470,562 ($119,737) ($274,391) $95,817
============ ========= ========= ============ ============ ============
The accompanying notes are an integral part of these financial statements.
WHITE SPIDER SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
Year Ended Six Months Ended
December 31, June 30,
-----------------------
1999 1999 2000
----------- ----------- -----------
(UNAUDITED)
Cash flows from operating activities:
Net income (loss)..................................... $27,038 ($470) ($143,103)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization........................ 563 -- 3,747
Stock compensation expense........................... -- -- 117,294
Changes in assets and liabilities:
Accounts receivable................................. (34,627) -- (27,047)
Prepaid expenses and other current assets........... (1,994) (237) (33,833)
Accounts payable.................................... 115 -- 5,475
Accrued liabilities................................. 5,177 -- 36,384
----------- ----------- -----------
Net cash used in operating activities............. (3,728) (707) (41,083)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment................... (12,543) -- (16,352)
----------- ----------- -----------
Net cash provided used in investing activities.... (12,543) -- (16,352)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock................ -- -- 83,000
Proceeds from (repayment of) note payable............. 33,318 1,006 --
Repayment of note payable............................. -- -- (22,002)
Proceeds from bank borrowings......................... -- -- 45,000
----------- ----------- -----------
Net cash provided by financing activities......... 33,318 1,006 105,998
----------- ----------- -----------
Net increase in cash and cash equivalents.............. 17,047 299 48,563
Cash and cash equivalents at beginning of period....... 100 100 17,147
----------- ----------- -----------
Cash and cash equivalents at end of period............. $17,147 $399 $65,710
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
WHITE SPIDER SOFTWARE, INC. NOTES TO FINANCIAL STATEMENTS Note 1 - The Company and Summary of Significant Accounting Policies: The Company White Spider Software, Inc. (the "Company"), provides software
consulting services, including contract software development, technology
planning and strategy services. Recently, the Company has shifted its focus to
development its first knowledge management software product, the Integrated
Knowledge Network ("INN"). The INN will allow organizations to retain
and leverage knowledge and enable collaborations in support of customer
relationship management. The Company was incorporated in Delaware on
July 21, 1998. Unaudited interim results The financial information as of June 30, 2000 and for each of the six
month period ended June 30, 1999 and 2000, together with the related notes,
are unaudited. The unaudited interim financial information have been prepared on
the same basis as the financial statements as of December 31, 1999 and for
the year then ended and, in the opinion of management, reflect all adjustments,
which include only normal recurring adjustments, necessary to present fairly the
Company's results of operations and its cash flow for each of the six month
periods ended June 30, 1999 and 2000. The results of operations of any interim
period are not necessarily indicative of the results of operations for the full
year. Use of estimates The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Stock split On January 24, 2000, the Company's Board of Directors approved a
ten-for-one Common Stock split. All share numbers in these financial statements
and notes thereto for all periods presented have been adjusted to reflect the
ten-for-one Common Stock split. Revenue recognition The Company derives its revenues primarily from consulting service agreements
(both fixed-price and time-and-materials agreements). Revenues are recognized
over the period of each engagement using primarily the percentage-of-completion
method using labor hours incurred as a measure of progress towards completion.
Provision for contract adjustments and losses are recorded in the period such
adjustments are identified. Software development costs Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed," requires capitalization of certain software
development process, technological feasibility is established upon successful
development of a working model. For all periods presented herein, technological
feasibility has not been achieved. Accordingly, the Company has charged all such
costs to research and development expense. Cash equivalents The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Fair value of financial instruments The Company's financial instruments including cash and cash equivalents,
accounts receivable, other current assets, accounts payable, notes payable,
borrowings and other accrued liabilities are carried at cost, which approximates
fair value due to the short maturities of these instruments. Concentration of credit risk All of the Company's cash and cash equivalents are invested in deposits
with one major financial institution in the United States. Deposits with this
bank may exceed the amount of insurance cover provided on such deposits. The
Company has not experienced any losses on its deposits of cash and cash
equivalents to date. Financial instruments that potentially subject the Company to a concentration
of credit risk consist of cash, cash equivalents and accounts receivable. The
Company's accounts receivable are derived from revenue earned from customers
located in the U.S. The Company performs ongoing credit evaluations of its
customers' financial condition and, generally, requires no collateral from its
customers. The Company maintains an allowance for doubtful accounts receivable
based upon the expected collectibility of accounts receivable. The following table summarizes the revenues from customers in excess of 10%
of the total revenues: At December 31, 1999, one customer accounted for 94% of total accounts
receivable. At June 30, 2000, one customer accounted for 96% (unaudited) of
total accounts receivable. Property and equipment Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally 3
to 5 years. Long-lived assets The Company evaluates the recoverability of its long-lived assets in
accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS No. 121
requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. Segment information Effective January 1, 1998, the Company adopted the provisions of SFAS
No. 131, Disclosures about Segments of an Enterprise and Related
Information. The Company identifies its operating segments based on business
activities, management responsibility and geographical location. For all periods
presented, the Company operated in a single business segment in the United
States. Stock-based compensation The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion
("APB") No. 25, Accounting for Stock Issued to Employees,
and Financial Accounting Standards Board Interpretation ("FIN")
No. 28, Accounting for Stock Appreciation Rights and Other Variable
Stock Option or Award Plans, and complies with the disclosure provisions of
SFAS No. 123, Accounting for Stock-Based Compensation. Under APB
No. 25, compensation expense is based on the difference, if any, on the
date of grant, between the fair value of the Company's Common Stock and the
exercise price. SFAS 123 defines a "fair value" based method of
accounting for an employee stock option or similar equity investment. The pro
forma disclosures of the difference between the compensation expense included in
net loss and the related cost measured by the fair value method are presented in
Note 11. The Company accounts for equity instruments issued to nonemployees
in accordance with provisions of SFAS No. 123 and Emerging Issues Task
Force ("EITF") 96-18, Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling
Goods or Services. Recent accounting pronouncements In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities, and
is effective for fiscal years beginning after June 15, 2000, as amended by
SFAS No. 137. The Company believes the adoption of this pronouncement will
have no material impact on the Company's financial position and results of
operations. In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue
Recognition in Financial Statements. SAB 101 summarizes certain of the
SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. In June 2000, the SEC issued SAB
No. 101B to defer the effective date of implementation of SAB No. 101
until the fourth quarter of fiscal 2000. The Company does not expect the
adoption of SAB 101 to have a material effect on its financial position or
results of operations. In March 2000, the FASB issued interpretation No. 44, Accounting for
Certain Transactions Involving Compensation - an interpretation of APB Opinion
No. 25 ("FIN 44"). FIN 44 clarifies the application
of Accounting Practice Board Opinion No. 25, Accounting for Stock Issued
to Employees. FIN 44 is effective July 1, 2000. The Company
believes that FIN 44 will not have a material effect on its financial
position or results of operations. Note 2 - Supplemental Cash Flow Information:
Six Months
Year Ended Ended
December 31, June 30,
1999 2000
------------ -----------
(UNAUDITED)
Customer A 81% 87%
Year Ended Six Months Ended
December 31, June 30,
1999 1999 2000
------------ ----------- -----------
(UNAUDITED)
Supplemental cash flow information:
Cash paid for interest $0 $0 $764
------------ ----------- -----------
Supplemental noncash investing and financing activity:
Common Stock issued to founders upon
cancellation of notes payable $0 $0 $3,000
------------ ----------- -----------
Common Stock issued to employees upon
cancellation of notes payable $0 $0 $8,316
------------ ----------- -----------
Issuance of Common Stock for employee services $0 $0 $14,000
------------ ----------- -----------
Note 3 - Balance Sheet Components:
December 31, June 30, 1999 2000 ------------ ----------- (UNAUDITED) Accounts receivable: Accounts receivable $34,627 $57,924 Unbilled fees and services -- 3,750 ------------ ----------- $34,627 $61,674 ============ =========== Property and equipment, net: Computer equipment $12,096 $24,173 Furniture and fixtures 447 4,722 ------------ ----------- 12,543 28,895 Less: Accumulated depreciation and amortization (563) (4,310) ------------ ----------- $11,980 $24,585 ============ =========== Accrued liabilities: Payroll and related expenses $2,279 $9,837 Legal -- 31,595 Other 2,898 129 ------------ ----------- $5,177 $41,561 ============ ===========
Note 4 - Related Party Transactions:
In March 1999, the President of the Company loaned money to the Company in a form of an interest free notes payable (the "Loan") for the principal sum of $25,000. The Loan can be repaid at any time without penalty.
During the six months ended June 30, 2000, the Company issued Common Stock and paid cash in full settlement of the Loan.
Note 5 - Income Taxes:
The primary components of the net deferred tax assets are as follows:
December 31, June 30,
1999 2000
------------ -----------
(UNAUDITED)
Deferred tax assets:
Net operating loss carryforwards $0 $10,050
Research credits 593 593
Depreciation and amortization 26 26
------------ -----------
619 10,669
------------ -----------
Deferred tax liabilities:
Unbilled revenue $0 ($1,275)
------------ -----------
Net deferred tax assets 619 9,394
Valuation allowance (619) (9,394)
------------ -----------
$0 $0
============ ===========
Management believes that, based on a number of factors, it is more likely than not that the deferred tax assets will not be utilized, such that a full valuation allowance has been recorded.
At June 30, 2000, the Company had approximately $29,559 (unaudited) of federal and $0 (unaudited) of state net operating loss carryforwards available to offset future taxable income which expire in varying amounts beginning in 2020. The Company underwent an ownership change and as such is limited on the amount of net operating losses than can be used each year under the Tax Reform Act of 1986. The limitation is greater than the amount of net operating loss. Therefore, the net operating loss will be available to offset future taxable income without limitation.
Note 6 - Borrowings:
Line of credit
At June 30, 2000, the Company had $45,000 outstanding and due under a line of credit with a financial institution. The line of credit provides for borrowings of up to $50,000 which are secured by personal collateral of the President. The line of credit is repayable on demand and bears interest at a rate of 11% per annum. Under the line of credit, the Company is required to maintain the following financial covenants: the Company shall not incur any indebtedness other than to the financial institution granting the line of credit, the Company shall not create any lien on any of its assets, the Company shall not sell any accounts receivable or financial instruments and the Company shall not make any distributions.
Notes payable
Notes payable consists of amounts payable to the President and employees as follows:
December 31, June 30,
1999 2000
------------ -----------
(UNAUDITED)
President and founder $25,002 $0
Employees 8,316 --
------------ -----------
33,318 --
Less: Current portion 33,318 --
------------ -----------
Long term portion $0 $0
============ ===========
Note 7 - Commitments:
Royalty obligations
Under an agreement signed with IBM in June 2000, the Company is required to pay an annual fee of $3,000 and royalties of 2% of all license revenues generated from selling IBM software. As at June 30, 2000, no such sales have as yet been made.
Leases
The Company leases office space and equipment under noncancelable operating leases with various expiration dates through October 2000. Rent expense for the six months ending June 30, 1999, the year ended December 31, 1999 and the six months ending June 30, 2000 was nil, $1,383 and $5,530, respectively. The terms of the facility lease provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid.
Future minimum lease payments under noncancelable operating leases, including lease commitments entered into subsequent to June 30, 2000, are as follows:
Operating
Leases
------------
Total minimum lease payments, six months
ended June 30, 2000 $9,900
============
Note 8 - Stock Option Plans:
In 2000, the Company adopted the 2000 Stock Incentive Plan (the "Plan"). The Plan provides for the granting of stock options to employees and consultants of the Company. Options granted under the Plan may be either incentive stock options or nonqualified stock options. Incentive stock options ("ISO") may be granted only to Company employees (including officers and directors who are also employees). Nonqualified stock options ("NSO") may be granted to Company employees and consultants. The Company has reserved 2,000,000 shares of Common Stock for issuance under the Plan as of June 30, 2000.
Options under the Plan may be granted for periods of up to ten years and at prices no less than 85% of the estimated fair value of the shares on the date of grant as determined by the Board of Directors, provided, however, that (i) the exercise price of an ISO and NSO shall not be less than 100% and 85% of the estimated fair value of the shares on the date of grant, respectively, and (ii) the exercise price of an ISO and NSO granted to a 10% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant, respectively. Options are exercisable immediately subject to repurchase options held by the Company which lapse over a maximum period of 10 years at such times and under such conditions as determined by the Board of Directors. To date, options granted generally vest over four years.
Activity under the Plan is as follows:
Options Outstanding ------------------- Weighted Shares Average Available Exercise for Grant Shares Price ------------ ----------- ----------- Balance at December 31, 1999 -- -- -- Shares reserved in 2000 1500000 -- 0.01 Additional shares reserved 500000 -- 0.01 Options granted (1,710,000) 1710000 0.01 ------------ ----------- Balance at June 30, 2000 (unaudited) 290000 1710000 $0.01 ============ ===========
Information regarding options outstanding and exercisable at June 30, 2000 (unaudited) is as follows:
Options Outstanding Options Vested and Exercisable
--------------------------------- -----------------------------
Weighted
Average Weighted Number Weighted
Remaining Average Vested Average
Exercise Number Contractual Exercise and Exercise
Price Outstanding Life (Years) Price Exercisable Price
--------- ----------- ----------- --------- -------------- --------------
0.01 1710000 9.42 0.01 0 0.01
Fair value disclosure
The Company elected to adopt the disclosure only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The Company, however, applies APB Opinion No. 25 "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plan. Accordingly, no compensation cost has been recognized for options granted to employees under the 2000 Plan. Had compensation cost for the Plan been determined based on the fair value of the options at the grant date for awards consistent with the provisions of SFAS No. 123, the Company's net loss would not have been materially different from the reported net loss in 2000.
The fair value of each option grant is estimated on the date of grant using the minimum value method with following weighted average assumptions used for grants:
Risk-free interest rate 6.68% - 6.70 Expected life of option 5 years Expected dividends nil Volatility 0%
The expected average life is based on the assumption that stock options on average are exercised once they are fully vested. The risk-free interest rate was calculated in accordance with the grant date and expected life calculated.
Note 10 subsequent event:
On July 19, 2000, the Company was acquired by Chordiant Software, Inc. Under the terms of the acquisition, Chordiant issued 476,515 shares of its Common Stock in exchange for all outstanding shares and assumed stock options. The purchase price is estimated at approximately $6.2 million.
CHORDIANT SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL SATEMENTS
(In thousands, except share and per share information)
Shares of Chordiant common
stock
$5,904
Options to purchase Chordiant common
stock
2,122
Less Intrinsic value of unvested options allocated to
deferred stock-based
compensation
(2,033)
Direct acquisition
cost
200
------
$6,193
------
The value of the options included in the purchase price was determined using the Black-Scholes option pricing model. In accordance with FIN 44, Accounting for Certain Transactions Involving Stock Compensation - an interpretation of APB 25, unvested stock options granted by Chordiant in exchange for options held by White Spider will be considered part of the purchase price paid by Chordiant. However, to the extent that service will be required subsequent to the date of the acquisition in order to vest in the replacement options, a portion of the intrinsic value of the unvested options will be deducted from the fair value of the options issued and allocated to unearned compensation. The amount allocated to deferred stock-based compensation will be based on the portion of the intrinsic value of the replacement options at the acquisition date related to future vesting period and will be recognized as compensation expense over the remaining future vesting period.
The accompanying unaudited pro forma combined balance sheet combines the unaudited consolidated balance sheet of Chordiant as of June 30, 2000 with the unaudited consolidated balance sheet of White Spider as of the same date, and gives effect to the acquisition of white Spider as if it occurred on such date.The accompanying unaudited pro forma combined statements of operations
combine Chordiant statements of operations for the year ended December 31, 1999,
and for the six months ended June 30, 2000 with the statements of operations of
White Spider for the same periods and gives effect to the acquisition as if it
occurred on January 1, 1999.
These unaudited pro forma combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of the combined
financial position or results of operations in future periods or the results
that actually would have been realized had Chordiant and White Spider been a
combined company during the periods presented. The unaudited pro forma combined
financial statements should be read in conjunction with the unaudited
consolidated financial statements of Chordiant included in Chordiant's quarterly
report on Form 10-Q for the quarter ended June 30, 2000, the audited
consolidated financial statements of Chordiant included in Chordiant Annual
Report on Form 10-K for the year ended December 31, 1999 and the unaudited
consolidated financial statements of White Spider contained elsewhere in this
Form 8-K.
CHORDIANT SOFTWARE, INC.
Pro Forma Pro Forma
Chordiant White Spider Adjustments Combined
------------- ------------- ----------- ---------
Assets
Current Assets:
Cash and cash equivalents........................ $66,148 $66 -- $66,214
Short-term investments........................... 8,322 -- -- 8,322
Accounts receivable--third parties, net.......... 20,307 61 (54) (7) 20,314
Accounts receivable--related parties............. 1,211 -- -- 1,211
Other current assets............................. 6,018 36 -- 6,054
------------- ------------- ----------- ---------
Total current assets.......................... 102,006 163 (54) 102,115
Property and equipment, net........................ 3,606 25 -- 3,631
Accounts receivable - third parties, non current... 4,557 -- -- 4,557
Goodwill and intangible assets, net -- -- 5,367 (1) 5,367
Other assets....................................... 531 -- -- 531
------------- ------------- ----------- ---------
$110,700 $188 $5,313 $116,201
============= ============= =========== =========
Liabilities and Stockholders' Equity
Current Liabilities:
Borrowings....................................... $1,097 $45 -- $1,142
Accounts payable--third parties.................. 2,737 6 (54) (7) 2,689
Accrued expenses................................. 7,621 41 200 (2) 7,862
Deferred revenue................................. 19,409 -- -- 19,409
------------- ------------- ----------- ---------
Total current liabilities..................... 30,864 92 146 31,102
Borrowings, long-term.............................. 134 -- -- 134
Deferred revenue, non current...................... 11,393 -- -- 11,393
Other liabilities.................................. 247 -- -- 247
------------- ------------- ----------- ---------
Total liabilities............................. 42,638 92 146 42,876
------------- ------------- ----------- ---------
Stockholders' Equity:
Common stock..................................... 37 19 (15)(3)(4) 41
Additional paid-in capital....................... 161,225 471 6,821 (3)(4) 168,517
Note receivable from stockholder................. (1,862) -- -- (1,862)
Unearned compensation............................ (7,727) (120) (1,913)(3)(5) (9,760)
Accumulated deficit.............................. (83,611) (274) 274 (3) (83,611)
------------- ------------- ----------- ---------
Total stockholders' equity
(deficit)................................... 68,062 96 5,167 73,325
------------- ------------- ----------- ---------
$110,700 $188 $5,313 $116,201
============= ============= =========== =========
See Notes to Unaudited Pro Forma Combined Financial Statements.
CHORDIANT SOFTWARE, INC.
Year ended December 31, 1999
-----------------------------------------------------
Pro Forma Pro Forma
Chordiant White Spider Adjustments Combined
------------ ------------ ------------ ------------
Net revenues:
License--third parties...................... $5,938 -- -- $5,938
License--related parties.................... 2,069 -- -- 2,069
Service--third parties...................... 9,007 66 (54)(7) 9,019
Service--related parties.................... 574 -- -- 574
------------ ------------ ------------ ------------
Total net revenues...................... 17,588 66 (54) 17,600
Cost of net revenues:
License--third parties...................... 263 -- -- 263
License--related parties.................... 134 -- -- 134
Service--third parties...................... 13,999 13 (54)(7) 13,958
Service--related parties.................... 353 -- -- 353
------------ ------------ ------------ ------------
Total cost of net revenues.............. 14,749 13 (54) 14,708
------------ ------------ ------------ ------------
Gross profit................................. 2,839 53 0 2,892
------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing......................... 13,368 -- -- 13,368
Research and development.................... 6,494 13 -- 6,507
General and administrative.................. 2,668 13 -- 2,681
Stock-based compensation.................... 2,660 -- 530 (6) 3,190
Amortization of intagible assets............ -- -- 1,789 (5) 1,789
------------ ------------ ------------ ------------
Total operating expenses................ 25,190 26 2,319 27,535
------------ ------------ ------------ ------------
Loss from operations......................... (22,351) 27 (2,319) (24,643)
Interest expense............................. (1,067) -- -- (1,067)
Other income (expense), net.................. 281 -- -- 281
------------ ------------ ------------ ------------
Net loss..................................... (23,137) 27 (2,319) (25,429)
============ ============ ============ ============
Pro forma net loss per share:
Basic and diluted........................... ($4.34) ($4.48)
============ ============
Shares used to compute pro forma net loss per share
Basic and diluted........................... 5,326,831 349,954 (8) 5,676,785
============ ============ ============
See Notes to Unaudited Pro Forma Combined Financial Statements.
CHORDIANT SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINDED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
Six months ended June 30, 2000
-----------------------------------------------------
Pro Forma Pro Forma
Chordiant White Spider Adjustments Combined
------------ ------------ ------------ ------------
Net revenues:
License--third parties...................... $3,724 -- -- $3,724
License--related parties.................... 1,695 -- -- 1,695
Service--third parties...................... 3,080 281 (245)(7) 3,116
Service--related parties.................... 3,910 -- -- 3,910
------------ ------------ ------------ ------------
Total net revenues...................... 12,409 281 (245) 12,445
Cost of net revenues:
License--third parties...................... 184 -- -- 184
License--related parties.................... 39 -- -- 39
Service--third parties...................... 6,342 109 (245)(7) 6,206
Service--related parties.................... 1,018 -- 0 1,018
------------ ------------ ------------ ------------
Total cost of net revenues.............. 7,583 109 (245) 7,447
------------ ------------ ------------ ------------
Gross profit................................. 4,826 172 0 4,998
------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing......................... 10,076 33 -- 10,109
Research and development.................... 10,410 114 -- 10,524
General and administrative.................. 2,379 50 -- 2,429
Stock-based compensation.................... 4,309 117 265 (6) 4,691
Amortization of intagible assets............ -- -- 155 (5) 155
------------ ------------ ------------ ------------
Total operating expenses................ 27,174 314 420 27,908
------------ ------------ ------------ ------------
Loss from operations......................... (22,348) (142) (420) (22,910)
Interest expense............................. (220) (1) -- (221)
Other income (expense), net.................. 1,521 -- -- 1,521
------------ ------------ ------------ ------------
Net loss..................................... ($21,047) ($143) ($420) ($21,610)
============ ============ ============ ============
Pro forma net loss per share:
Basic and diluted........................... ($0.71) ($0.72)
============ ============
Shares used to compute pro forma net loss per share
Basic and diluted........................... 29,491,815 349,954 (8) 29,841,769
============ ============ ============
See Notes to Unaudited Pro Forma Combined Financial Statements.
CHORDIANT SOFTWARE, INC.
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Pro Forma Adjustments and Assumptions
The unaudited pro forma combined financial statements have been prepared on the basis of assumptions relating to the allocation of consideration paid for the assets and liabilities based on primarily estimates of their fair value. The actual allocation of the consideration for the acquisition to the tangible and identifiable intangible assets acquired and liabilities assumed will be based on the basis of their estimated fair values on the effective date of the acquisition and may differ from those assumptions reflected in the unaudited combined financial statements after final valuations have been completed. Chordiant does not expect that the final allocation of the purchase price will differ materially from the primarily allocation. Assuming that the acquisition of White Spider had occurred on June 30, 2000, the purchase price allocation would have been as follows:
Tangible assets of White Spider acquired principally include cash and cash equivalents, accounts receivable, fixed assets and other assets. Liabilities of White Spider assumed principally include borrowing, accounts payables and accrued expenses.
The value of the purchase in-process technology was determined by estimating the projected net cash flows related to the product, determined based upon Chordiant's estimates of costs to complete the development of the technology and the future revenue to be earned upon commercialization of the products. The estimated stage of completion (expressed as a percentage of completion) for each project was calculated and then was applied to the net cash flow for the product. The cash flows were then discounted back to their net present value.
The value attributed to in process technology will be charged to expense in the period the acquisition is consummated but has not been reflected in the Chordiant Unaudited combined Statements of operations as it is non-recurring in nature.
The write-off will be necessary because the acquired in-process technology has not yet reached technological feasibility and has no future alternatives uses. The product under development may not achieve commercial viability. The nature of the efforts required to develop the purchased in-process technology into a commercially viable product principally relate to the completion of all planning, designing, prototyping, verification and testing activities that are necessary to establish that the product can be produced to meet its designed specifications, including functions, features and technical performance requirements.
The value allocated to the assembled workforce is attributable to the White Spider workforce in place after the acquisition which eliminates the need to hire new replacement employees. The value was determined by estimating the cost involved in assembling a new workforce including costs of salaries, benefits, training and recruiting.
The excess of purchase price over tangible and identifiable intangible assets acquired and liabilities assumed will be recorded as goodwill.
The following adjustments have been reflected in the unaudited pro forma condensed combined financial statements:
SIGNATURE
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Signature |
Title |
Date |
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/s/ Steven R. Springsteel Steven R. Springsteel |
Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |
October 3, 2000 |
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