<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: December 13, 1999 Commission File No. 000-26981
----------------- ---------
(Date of earliest event reported)
SILVERSTREAM SOFTWARE, INC.
---------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 04-3318325
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Burlington Woods Drive, Suite 200, Burlington, Massachusetts 01803
- ---------------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(781) 238-5400
--------------
(Registrant's telephone number, including area code)
<PAGE> 2
The undersigned Registrant hereby amends Item 7 of its Current Report on Form
8-K filed on December 27, 1999, which excluded certain financial statements
because they were not available at the time of filing, to read in its entirety
as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
ObjectEra, Inc.
Report of Ernst & Young LLP, Boston Massachusetts,
Independent Auditors
ObjectEra, Inc.
Balance Sheets at November 30, 1999 and
December 31, 1998
ObjectEra, Inc.
Statements of Operations for the eleven months
ended November 30, 1999 and for the period of
October 8, 1998 (inception) to December 31, 1998
ObjectEra, Inc.
Statements of Stockholders' (Deficit) Equity
ObjectEra, Inc.
Statements of Cash Flows for the eleven months
ended November 30, 1999 and for the period of
October 8, 1998 (inception) to December 31, 1998
ObjectEra, Inc.
Notes to Financial Statements
GemLogic, Inc.
Report of Ernst & Young LLP, Boston Massachusetts,
Independent Auditors
GemLogic, Inc.
Balance Sheet at November 30, 1999
GemLogic, Inc.
Statement of Operations for the period of
January 4, 1999 (inception) to November 30, 1999
GemLogic, Inc.
Statement of Stockholders' Equity for the period of
January 4, 1999 (inception) to November 30, 1999
GemLogic, Inc.
Statement of Cash Flows for the period of
January 4, 1999 (inception) to November 30, 1999
GemLogic, Inc.
Notes to Financial Statements
(b) Unaudited Pro Forma Financial Information
Unaudited Pro Forma Condensed Statement of Operations for the
nine months ended September 30, 1999
(c) Exhibits
ITEM NO. DESCRIPTION
*2.1 Agreement and Plan of Merger, dated December 13, 1999, by
and among SilverStream Software, Inc., SilverStream
Acquisition Corporation and GemLogic, Inc.
*2.2 Stock Purchase Agreement, dated December 13, 1999, by and
among SilverStream Software, Inc., ObjectEra, Inc. and the
Stockholders of ObjectEra, Inc.
23.1 Consent of Ernst & Young LLP
*99.1 Press releases dated December 13, 1999 announcing the
completion of the acquisitions of GemLogic and ObjectEra.
*Incorporated by reference from the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 27, 1999.
-2-
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SILVERSTREAM SOFTWARE, INC.
By: /s/ Craig A. Dynes
------------------
Dated: January 25, 2000 Craig A. Dynes
Vice President and Chief Financial Officer
-3-
<PAGE> 4
ObjectEra, Inc.
Audited Financial Statements
Eleven Months ended November 30, 1999
and the Period from October 8, 1998
(inception) to December 31, 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors......................................... F-2
Financial Statements
Balance Sheets......................................................... F-3
Statements of Operations............................................... F-4
Statements of Stockholders'(Deficit) Equity ........................... F-5
Statements of Cash Flows............................................... F-6
Notes to Financial Statements.......................................... F-7
</TABLE>
F-1
<PAGE> 5
Report of Independent Auditors
To the Stockholders and Board
of Directors of ObjectEra, Inc.:
We have audited the accompanying balance sheets of ObjectEra, Inc. (the Company)
as of November 30, 1999 and December 31, 1998 and the related statements of
operations, stockholders' (deficit) equity, and cash flows for the eleven months
ended November 30, 1999 and the period from October 8, 1998 (inception) to
December 31, 1998. 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 audit 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 as to whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ObjectEra, Inc. at November 30,
1999 and the results of its operations and its cash flows for the eleven months
ended November 30, 1999 and the period from October 8, 1999 (inception) to
December 31, 1998 in conformity with accounting principles generally accepted in
the United States.
/s/ Ernst & Young LLP
December 29, 1999
Boston, Massachusetts
F-2
<PAGE> 6
ObjectEra, Inc.
Balance Sheets
<TABLE>
<CAPTION>
November 30, December 31,
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,076,734 --
Accounts receivable 156,670 --
Prepaid expenses 52,500 --
Deferred income taxes 461,000 --
----------- -----------
Total current assets 1,746,904 --
Furniture and equipment, net 14,498 $ 8,738
----------- -----------
Total assets $ 1,761,402 $ 8,738
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable $ 75,561 --
Note payable to stockholders -- $ 7,754
Income taxes payable 494,000 --
Deferred revenue 1,353,636 --
----------- -----------
Total current liabilities 1,923,197 7,754
Stockholders' equity:
Common stock, no par value; 1,000,000 shares authorized,
800,000 shares issued and outstanding 2,500 2,500
Retained deficit (164,295) (1,516)
----------- -----------
Total stockholders' (deficit) equity (161,795) 984
Total liabilities and stockholders' (deficit) equity $ 1,761,402 $ 8,738
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 7
ObjectEra, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Period from
October 8,
Eleven 1998
months ended (inception) to
November 30, December 31,
1999 1998
------------ -------------
<S> <C> <C>
Revenues:
Product licenses $ 64,019 --
Postcontract customer support 93,500 --
--------- ---------
Total revenues 157,519 --
Cost of revenues:
Product licenses 1,000 --
Postcontract customer support 12,985 --
--------- ---------
Total cost of revenues 13,985 --
Gross profit 145,534 --
Operating expenses:
Research and development 164,407 --
General and administrative 105,278 $ 1,516
Sales and marketing 15,666 --
--------- ---------
Total operating expenses 285,351 1,516
--------- ---------
Loss from operations (141,817) (1,516)
Interest income 12,038 --
--------- ---------
Loss before provision for income taxes (129,779) (1,516)
Provision for income taxes 33,000 --
--------- ---------
Net loss $(162,779) $ (1,516)
========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 8
ObjectEra, Inc.
Statements of Stockholders' (Deficit) Equity
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT DEFICIT (DEFICIT) EQUITY
--------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Balance at October 8, 1998 (inception) 800,000 $ 2,500 $ 2,500
Net loss $ (1,516) $ (1,516)
--------- --------- --------- ---------
Balance at January 1, 1999 800,000 2,500 (1,516) $ 984
Net loss (162,779) (162,779)
--------- --------- --------- ---------
Balance at November 30, 1999 800,000 $ 2,500 $(164,295) $(161,795)
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE> 9
ObjectEra, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Period from
Eleven months October 8, 1998
ended (inception) to
November 30, December 31,
1999 1998
------------ --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (162,779) $ (1,516)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 4,825 296
Deferred income taxes (461,000) --
Changes in operating assets and liabilities
Accounts receivable (156,670) --
Prepaid expenses (52,500) --
Accounts payable 75,561 --
Income taxes payable 494,000 --
Deferred revenue 1,353,636 --
Notes payable to stockholders (7,754) 7,754
----------- -----------
Net cash provided by operating activities 1,087,319 6,534
INVESTING ACTIVITIES
Purchase of furniture and equipment (10,585) --
----------- -----------
Net cash used in investing activities (10,585) --
Net increase in cash 1,076,734 --
Cash and cash equivalents at beginning of period -- --
----------- -----------
Cash and cash equivalents at end of period $ 1,076,734 --
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Issuance of common stock in exchange for note payable -- $ 2,500
=========== ===========
Contribution of fixed assets -- $ 9,034
=========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 10
ObjectEra, Inc.
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION
ObjectEra, Inc. (the Company) is incorporated in the state of California and
commenced operations in January 1999. The Company maintains its corporate
offices in San Jose, California. The Company has developed and provides a
distributed computing solution.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements reflect the application of certain
significant accounting policies as described in the following note and elsewhere
in the accompanying financial statements and notes.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investment instruments with an original
maturity when purchased of three months or less to be cash equivalents. At
November 30, 1999, cash and cash equivalents consist principally of a demand
deposit account.
ACCOUNTS RECEIVABLE
For financial reporting, current earnings are charged and an allowance is
credited with a provision for doubtful accounts based on experience. Accounts
deemed uncollectible are charged against this allowance. Receivables are
reported on the balance sheets net of such allowance, if any.
F-7
<PAGE> 11
ObjectEra, Inc.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
Financial instruments that subject the Company to concentrations of credit risk
consist of cash and cash equivalents and accounts receivable. Both these
financial instruments are carried at cost, which approximates fair value, due to
the short-term nature of these items. The Company's credit risk related to
investments in cash and cash equivalents and is minimal. The Company extends
credit based on an evaluation of a customer's financial condition, generally
without requiring collateral. Exposure to losses on accounts receivable, is
ultimately dependent on the customer's financial condition. The Company monitors
its exposure for credit losses and records allowances for anticipated losses, if
any.
For the eleven months ended November 1999, one customer accounted for
approximately 93% of total revenues. This same customer represented 96% of
accounts receivable at November 30, 1999.
FURNITURE AND EQUIPMENT
Furniture and equipment is stated at cost. Depreciation is computed by use of
the straight-line methods over the following estimated useful lives:
Office furniture 7 years
Computer equipment 3 years
Computer software 3 years
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Costs incurred by the Company that would qualify as capitalizable under
Statement of Financial Accounting Standards (SFAS) No. 86 "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed" have been
insignificant and therefore have been expensed as incurred.
F-8
<PAGE> 12
ObjectEra, Inc.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes under the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
REVENUE RECOGNITION
The Company derives revenue from software licenses and postcontract customer
support (PCS). PCS includes telephone support, bug fixes and rights to upgrades
on a when-and-if available basis.
Software Licenses
In software arrangements that include rights to multiple elements (e.g.,
software products, specified upgrades, PCS, and/or other services) for which
vendor-specific objective evidence is not determinable, the Company recognizes
the revenue on a ratable basis over the term of the arrangement that the
additional software products are expected to be delivered.
In software arrangements that include rights to multiple elements for which
vendor-specific objective evidence is determinable, the Company allocates the
total arrangement fee among each deliverable based on the relative fair value of
each of the deliverables determined based on vendor-specific objective evidence.
Postcontract Customer Support
Revenue allocable to PCS is recognized on a straight-line basis over the period
the PCS is provided.
During 1999, the Company has recognized revenue in accordance with Statement of
Position No. 97-2 (SOP 97-2), Software Revenue Recognition as amended by SOP
98-9, Modification of SOP 97-2, Software Revenue Recognition, with Respect to
Certain Transactions.
ADVERTISING COSTS
Advertising costs, which are included in sales and marketing, are expensed as
incurred and were $1,964 for the eleven months ended November 30, 1999.
F-9
<PAGE> 13
ObjectEra, Inc.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. The SAB
formalizes positions the staff has expressed in speeches and comment letters.
SAB 101 is effective no later than the first fiscal quarter of the fiscal year
beginning after December 15, 1999. The Company is presently analyzing the
effect, if any, that the adoption of SAB 101 will have on its financial
condition or results of operations.
3. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1999 1998
-------- --------
<S> <C> <C>
Computer equipment $ 14,490 $ 7,165
Office furniture 350 350
Computer software 4,779 1,519
-------- --------
19,619 9,034
Less accumulated depreciation (5,121) (296)
======== ========
$ 14,498 $ 8,738
======== ========
</TABLE>
F-10
<PAGE> 14
ObjectEra, Inc.
Notes to Financial Statements (continued)
4. INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Eleven
months ended
November 30,
1999
---------------
<S> <C>
Current:
Federal $ 420,000
State 74,000
---------
494,000
Deferred (prepaid):
Federal (461,000)
---------
(461,000)
=========
$ 33,000
=========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The Company's deferred tax asset is as follows:
<TABLE>
Eleven Period from
months ended October 8, 1998
November 30, (inception) to
1999 December 31,1998
-------------- ------------------
<S> <C> <C>
Deferred tax assets: $ 312
Net operating loss carryforward $ 312
Deferred revenue 461,000 --
--------- ---------
Valuation allowance (312) 312
--------- ---------
Total deferred tax assets $ 461,000 --
========= =========
</TABLE>
As of November 30, 1999 the Company had net operating loss carryforwards of
approximately $780 available to offset future Federal taxable income. These
carryforwards begin to expire in 2012.
F-11
<PAGE> 15
ObjectEra, Inc.
Notes to Financial Statements (continued)
The affective tax rate at November 30, 1999 differed from the United States
statutory rate as follows:
<TABLE>
<S> <C>
Statutory rate (34)%
State income taxes, net of federal income tax benefit (4)%
Non recoverable state income tax payments 60
Other items 3
===
25%
===
</TABLE>
5. SUBSEQUENT EVENTS
On December 13, 1999, SilverStream Software, Inc. ("SilverStream") purchased all
the outstanding stock of the Company for cash of $8,100,000. Under the terms of
the purchase agreement, SilverStream is committed to making additional payments
in a combination of cash and common stock, based upon the achievement of future
goals and deliverables.
SilverStream has committed to provide sufficient support for a period of at
least one year from December 31, 1999 to allow the Company to meet its financial
obligations as they come due.
6. YEAR 2000 (UNAUDITED)
The Company has assessed the effect of the Year 2000 issue on its operations.
Based upon its assessment and initiatives taken or planned, management believes
that the Year 2000 issue will not significantly affect the Company's normal
business activities.
F-12
<PAGE> 16
GemLogic, Inc.
(A company in the development stage)
Audited Financial Statements
For the period January 4, 1999 (inception) to November 30, 1999
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................... F-14
Financial Statements
Balance Sheet............................................................ F-15
Statement of Operations.................................................. F-16
Statement of Stockholders' Equity ....................................... F-17
Statement of Cash Flows.................................................. F-18
Notes to Financial Statements............................................ F-19
</TABLE>
F-13
<PAGE> 17
Report of Independent Auditors
To the Stockholders and
Board of Directors of GemLogic, Inc.
We have audited the accompanying balance sheet of GemLogic, Inc. (a company in
the development stage) (the Company) as of November 30, 1999, and the related
statements of operations, stockholders' equity, and cash flows for the period
January 4, 1999 (inception) to November 30, 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 audit.
We conducted our audit 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 as to whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GemLogic, Inc. at November 30,
1999, and the results of its operations and its cash flows for the period
January 4, 1999 (inception) to November 30, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
December 29, 1999
Boston, Massachusetts
F-14
<PAGE> 18
GemLogic, Inc.
(A company in the development stage)
Balance Sheet
<TABLE>
<CAPTION>
NOVEMBER 30,
1999
------------
<S> <C>
ASSETS
Current assets:
Cash $ 84,656
Prepaid and other current assets 1,360
---------
Total current assets 86,016
Property and equipment, net 23,377
---------
Total assets $ 109,393
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 71,613
Current portion of capital lease obligations 3,565
---------
Total current liabilities 75,178
Capital lease obligations, net of current portion 7,140
Stockholders' equity:
Common stock, $0.01 par value; 20,000 shares authorized, 10,000
shares issued and outstanding 100
Additional paid-in capital 371,900
Retained deficit (344,925)
---------
Total stockholders' equity 27,075
---------
Total liabilities and stockholders' equity $ 109,393
=========
</TABLE>
See accompanying notes.
F-15
<PAGE> 19
GemLogic, Inc.
(A company in the development stage)
Statement of Operations
Period January 4, 1999 (inception) to November 30, 1999
<TABLE>
<S> <C>
Revenues -
Operating expenses:
Research and development $ 156,085
General and administrative
188,082
-------------
Total operating expenses 344,167
Interest expense (758)
-------------
Net loss $(344,925)
=============
</TABLE>
See accompanying notes.
F-16
<PAGE> 20
GemLogic, Inc.
(A company in the development stage)
Statement of Stockholders' Equity
Period January 4, 1999 (inception) to November 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Issuance of Common Stock 10,000 $ 100 $ 49,900 $ 50,000
Capital contributions 322,000 322,000
Net loss $(344,925) (344,925)
------ ------ --------- --------- -----------
Balance at November 30, 1999 10,000 $ 100 $ 371,900 $(344,925) $ 27,075
====== ====== ========= ========= ===========
</TABLE>
See accompanying notes.
F-17
<PAGE> 21
GemLogic, Inc.
(A company in the development stage)
Statement of Cash Flows
January 4, 1999 (inception) to November 30, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss $(344,925)
Adjustments to reconcile net loss to net cash used in operating activities:
Expenses not paid in cash 182,000
Depreciation and amortization expense 5,074
Changes in operating assets and liabilities:
Prepaid and other assets (1,360)
Accounts payable and accruals 71,613
---------
Net cash used in operating activities (87,598)
INVESTING ACTIVITIES
Purchases of equipment (16,792)
---------
Net cash used in investing activities (16,792)
FINANCING ACTIVITIES
Proceeds from issuance of common stock and capital contributions 190,000
Payments on capital lease obligations (954)
---------
Net cash provided by financing activities 189,046
Net increase in cash 84,656
Cash at beginning of period --
---------
Cash at end of period $ 84,656
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 758
=========
Capital lease obligations incurred for purchase of equipment $ 11,659
=========
</TABLE>
See accompanying notes.
F-18
<PAGE> 22
GemLogic, Inc.
(A company in the development stage)
Notes to Financial Statements
November 30, 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
GemLogic, Inc. (the Company) is incorporated in the state of Connecticut and is
a provider of business-to-business integration solutions using Extensive Markup
Language (known as XML). The Company is a development-stage enterprise and has,
since inception, been engaged in the research and development of its software
product and raising capital to fund operations.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements reflect the application of certain
significant accounting policies as described in the following note and elsewhere
in the accompanying consolidated financial statements and notes.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and amortization is
computed by use of the straight-line method over three years.
F-19
<PAGE> 23
GemLogic, Inc.
(A company in the development stage)
Notes to Financial Statements
November 30, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CAPITAL LEASES
The Company leases certain computer related equipment under capital lease
agreements. The assets and liabilities under capital leases are recorded at the
lesser of the present value of future minimum lease payments, including
estimated bargain purchase options, or the fair value of the assets under lease.
Assets under capital lease are amortized over the lesser of their estimated
useful lives of three years or the term of the lease.
INCOME TAXES
The Company qualifies as a Subchapter S Corporation for federal and state income
tax purposes, and, as such, taxable income from the operations of the Company is
included in the federal and state tax returns filed by the individual
stockholders. Accordingly, the Company does not make provisions for income
taxes.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at November 30, 1999:
<TABLE>
<S> <C>
Computer equipment $ 10,309
Computer software 6,483
Equipment under capital lease 11,659
--------
28,451
Less accumulated depreciation and amortization (5,074)
--------
$ 23,377
========
</TABLE>
F-20
<PAGE> 24
GemLogic, Inc.
(A company in the development stage)
Notes to Financial Statements
November 30, 1999
4. CAPITAL LEASES
During 1999, the Company entered into capital lease arrangements for computer
equipment. These leases expire in 2001 and 2002. Annual minimum commitments
under these arrangements are as follows:
<TABLE>
<S> <C>
1999 $ 428
2000 5,137
2001 5,073
2002 3,131
-------
13,769
Less amount representing interest 3,064
-------
Present value of future lease payments 10,705
Less current portion 3,565
-------
$ 7,140
=======
</TABLE>
5. RELATED PARTY
The Company rents office space from one of its employees on a month-to-month
basis. The total office rent for the period ended November 30, 1999 was $1,750.
There was no amount due as of November 30, 1999.
During 1999, the two founders agreed to forego payment of compensation of
$182,000 for services rendered. This amount has been accounted for as a capital
contribution and charged to expense in the accompanying financial statements.
6. YEAR 2000 (UNAUDITED)
The Company has assessed the effect of the Year 2000 issue on its operations.
Based upon its assessment and initiatives taken or planned, management believes
that the Year 2000 issue will not significantly affect the Company's normal
business activities.
F-21
<PAGE> 25
GemLogic, Inc.
(A company in the development stage)
Notes to Financial Statements
November 30, 1999
7. SUBSEQUENT EVENTS
On December 13, 1999, SilverStream Software, Inc. ("SilverStream") purchased all
of the outstanding stock of the Company. The purchase price consists of 114,456
shares of SilverStream common stock valued at approximating $12,100,000. Under
the terms of the purchase agreement, SilverStream is committed to making
additional issuances of common stock based upon the achievement of future goals
and deliverables. In addition, GemLogic employees were issued options to
purchase SilverStream common stock at exercise prices ranging from $40 to $60
per share.
SilverStream has committed to provide sufficient support for a period of at
least one year from December 31, 1999 to allow the Company to meet its financial
obligations as they come due.
F-22
<PAGE> 26
SILVERSTREAM SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
OVERVIEW
On December 13, 1999, we acquired GemLogic, Inc. GemLogic, which was
incorporated in January 1999, provides XML software to enable customers to more
easily develop and deploy business-to-business e-commerce applications. The
purchase price was approximately $12.1 million. The acquisition was completed
through the issuance of approximately 114,456 shares of our common stock. Under
the terms of the GemLogic purchase agreement, we are committed to make
additional issuances of common stock, based upon the achievement of future goals
and deliverables. Contingent consideration, which would be added to goodwill and
amortized over the remaining life, may approximate $4.8 million. In addition we
issued options to purchase common stock to GemLogic employees at exercise prices
ranging from $40 to $60 per share. These options may result in a compensation
charge of up to approximately $5.6 million, which will be charged to operations
based upon vesting of these options over the next four to seven years. The
merger has been accounted for using the purchase method of accounting.
On December 13, 1999, we acquired ObjectEra, Inc. for $8.1 million.
ObjectEra, which commenced operations in January 1999, developed and distributes
a software program known as an Object Request Broker (ORB). $4.2 million of the
purchase price was paid at the closing, with $3.9 million to be paid on February
1, 2000. Under the terms of the ObjectEra purchase agreement, SilverStream is
committed to making additional payments in a combination of cash and common
stock, based upon the achievement of future goals and deliverables. Contingent
consideration, which would be added to goodwill and amortized over the remaining
life, may approximate $3.9 million. The merger has been accounted for using the
purchase method of accounting.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the nine months ended September 30, 1999 gives effect to the acquisitions of
GemLogic and ObjectEra, as if they had occurred on January 1, 1999. The
Unaudited Pro Forma Condensed Statement of Operations includes the historical
results of operations of GemLogic and ObjectEra for the nine months ended
September 30, 1999.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect
to the acquisition of GemLogic and ObjectEra as if it had occurred on September
30, 1999. The following pro forma statements and the accompanying notes should
be read in conjunction with the historical financial statements of SilverStream.
The Unaudited Pro Forma Condensed Consolidated Financial Information is
intended for informational purposes only and is not necessarily indicative of
the future position or future results of operations of the consolidated company
after the acquisitions of GemLogic and ObjectEra or of the financial position or
results of operations of the consolidated company that would have actually
occurred had the acquisitions of GemLogic and ObjectEra been effected on January
1, 1999. Since both ObjectEra and GemLogic had no substantial operations prior
to January 1, 1999 only pro forma information subsequent to January 1, 1999 has
been provided.
F-23
<PAGE> 27
SILVERSTREAM SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, PRO FORMA SEPTEMBER 30,
1999 GEMLOGIC OBJECTERA ADJUSTMENTS 1999
------------- -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents............ $ 51,323,975 $ 2,826 $381,026 $(4,200,000) 1(a) $ 47,507,827
Marketable securities................ 5,148,079 -- -- -- 5,148,079
Accounts receivable.................. 5,772,431 -- 361,155 -- 6,133,586
Prepaid expenses..................... 869,451 -- 125,400 -- 994,851
Other................................ 14,361 -- -- -- 14,361
------------ -------- -------- ----------- ------------
Total current assets............. 63,128,297 2,826 867,581 (4,200,000) 59,798,704
Furniture and fixtures, net.......... 2,662,925 13,425 17,073 -- 2,693,423
Intangibles, net..................... 1,852,445 -- -- 18,292,839 1(a) 20,145,284
------------ -------- -------- ----------- ------------
Total assets..................... $ 67,643,667 $ 16,251 $884,654 $14,092,839 $ 82,637,411
============ ======== ======== =========== ============
Current Liabilities:
Accounts payable..................... $ 3,146,027 $ -- $ 69,400 -- $ 3,215,427
Accrued expenses..................... 1,714,351 -- -- $ 3,900,000 1(a) 5,614,351
Deferred revenue..................... 2,636,937 -- 878,667 -- 3,515,604
Current portion of long-term debt.... 429,939 -- -- -- 429,939
------------ -------- -------- ----------- ------------
Total current liabilities........ 7,927,254 -- 948,067 3,900,000 12,775,321
Long-term debt, less current
portion............................ 621,219 -- -- -- 621,219
Common Stock......................... 18,016 80,000 2,500 (82,386) 1(b) 18,130
Additional paid-in capital........... 97,516,295 -- -- 12,132,222 1(a) 107,661,858
Deferred compensation................ (1,739,652) -- -- -- (1,739,652)
Accumulated deficit.................. (36,533,874) (63,749) (65,913) (1,856,997) 1(b) (38,520,533)
Other comprehensive loss............. (62,091) -- -- -- (62,091)
Notes receivable from stockholders... (103,500) -- -- -- (103,500)
------------ -------- -------- ----------- ------------
Total stockholders' equity
(deficit)...................... 59,095,194 16,251 (63,413) 10,192,839 69,240,871
------------ -------- -------- ----------- ------------
Total liabilities and
stockholders' equity
(deficit)...................... $ 67,643,667 $16,251 $884,654 $14,092,839 $ 82,637,411
============ ======== ======== =========== ============
</TABLE>
F-24
<PAGE> 28
SILVERSTEAM SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, SEPTEMBER 30,
1999 GEMLOGIC OBJECTERA ADJUSTMENTS 1999
------------- -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Software license........... $ 9,009,865 -- $ 25,764 -- $ 9,035,629
Services................... 5,024,498 -- 56,724 -- 5,081,222
------------ -------- -------- ----------- ------------
Total revenue......... 14,034,363 -- 82,488 -- 14,116,851
Cost of Revenue:
Software license........... 1,076,359 -- -- -- 1,076,359
Services................... 6,462,504 -- -- -- 6,462,504
------------ -------- -------- ----------- ------------
Total cost of
revenue............. 7,538,863 -- -- -- 7,538,863
Gross profit (loss)............. 6,495,500 -- 82,488 -- 6,577,988
Operating expenses:
Sales and marketing........ 13,220,030 -- -- -- 13,220,030
Research and development... 5,172,711 $ 63,749 152,914 -- 5,389,374
General and
administrative........... 2,599,871 -- -- -- 2,599,871
Compensation charge for
issuance of stock
options.................. 298,426 -- -- $ 921,430 2(a) 1,219,856
Amortization of goodwill... 81,348 -- -- 2,743,926 2(b) 2,825,274
------------ -------- -------- ----------- ------------
Total operating
expenses............ 21,372,386 63,749 152,914 3,665,356 25,254,405
Loss from operations............ (14,876,886) (63,749) (70,426) (3,665,356) (18,676,417)
Interest income................. 668,667 -- 4,513 (157,500)2(c) 515,680
Interest expense................ (153,929) -- -- -- (153,929)
------------ -------- -------- ----------- ------------
Net loss........................ (14,362,148) (63,749) (65,913) (3,822,856) (18,314,666)
Beneficial conversion feature of
Series D preferred stock...... (263,158) -- -- -- (263,158)
------------ -------- -------- ----------- ------------
Net loss applicable to common
stockholders.................. $(14,625,306) $(63,749) $(65,913) $(3,822,856) $(18,577,824)
============ ======== ======== =========== ============
Basic and diluted net loss per
share applicable to common
stockholders.................. $(2.58) $(3.25)
====== ======
Weighted-average common shares
used in computing basic and
diluted net loss per share
applicable to common
stockholders.................. 5,678,081 5,723,863
============ ============
</TABLE>
F-25
<PAGE> 29
SILVERSTEAM SOFTWARE, INC.
UNAUDITED NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
1. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS -- BALANCE SHEET
The pro forma adjustments to the unaudited pro forma condensed consolidated
balance sheet, assuming the acquisition occurred on September 30, 1999 are as
follows:
1(a) Adjustment to record the purchase price and intangible assets of
GemLogic and ObjectEra as follows:
<TABLE>
<S> <C>
Cash portion of ObjectEra purchase price.................... $ 4,200,000
Balance payable to ObjectEra................................ 3,900,000
-----------
Total purchase price for ObjectEra.......................... 8,100,000
Add: Fair value of ObjectEra estimated net liabilities as of
September 30, 1999........................................ (63,413)
-----------
Subtotal ObjectEra estimated goodwill....................... 8,163,413
Total purchase price for GemLogic based upon the fair value
of common stock issued.................................... 12,132,336
Less: In process research & development costs............... 1,986,659
Less: Fair value of GemLogic estimated net assets as of
September 30, 1999........................................ 16,251
-----------
Subtotal GemLogic estimated goodwill........................ 10,129,426
-----------
Estimated cost in excess of fair value of net assets
acquired (goodwill)....................................... $18,292,839
===========
</TABLE>
The Company has assumed the goodwill to have an estimated useful life of 5
years. The purchase price allocation and estimated useful life of goodwill is
preliminary and will be finalized upon an analysis by the Company of the
intangible assets acquired in connection with these acquisitions.
1(b) Adjustment to eliminate the equity and accumulated deficit of GemLogic
and ObjectEra in consolidation of $82,500 and $129,662 respectively
and adjustment to write off directly to accumulated deficit the in
process research and development of $1,986,659.
2. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS -- STATEMENT OF OPERATIONS
The pro forma adjustments to the unaudited pro forma condensed consolidated
statement of operations, assuming the acquisition occurred on January 1, 1999,
are as follows:
2(a) Adjustment to record 9 months of compensation charge for the issuance
of stock options below fair market value.
2(b) Adjustment to record 9 months of amortization associated with GemLogic
and ObjectEra intangible assets acquired.
2(c) Adjustment to reduce the interest income as a result of the payment of
$4,200,000 as if the transaction had occurred in January 1999.
2(d) In process research & development costs related to the acquisition of
GemLogic, Inc.
For calculation of the net loss per share the Company has excluded shares
subject to repurchase by the Company from the calculation of loss per share
because all such securities are antidilutive for all periods presented. Shares
subject to repurchase by the Company will be included in the computation of
earnings per share when the Company's option to repurchase these shares expires.
F-26
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-85829) pertaining to the Amended and Restated 1999 Employee Stock
Purchase Plan and the Amended and Restated 1997 Stock Incentive Plan of
SilverStream Software, Inc. of our report dated December 29, 1999 with respect
to the financial statements of ObjectEra, Inc. and of our report dated December
29, 1999 with respect to the financial statements of GemLogic, Inc. included in
the report on Form 8-KA dated January 25, 2000 filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
January 25, 2000
Boston, Massachusetts
