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Filed Pursuant to Rule 424(b)(4)
Registration No. 333-45304
PROSPECTUS
2,500,000 SHARES
[INFORMATICA CORPORATION LOGO]
COMMON STOCK
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Informatica Corporation is offering 2,000,000 shares of its common stock and the
selling stockholders are offering 500,000 shares of common stock. We will not
receive any of the proceeds from the shares of common stock sold by the selling
stockholders.
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Our common stock is listed on the Nasdaq National Market under the symbol
"INFA." On September 27, 2000, the reported last sale price of our common stock
on the Nasdaq National Market was $86 51/64 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 12.
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PRICE $85 A SHARE
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UNDERWRITING PROCEEDS TO PROCEEDS TO
DISCOUNTS AND INFORMATICA SELLING
PRICE TO PUBLIC COMMISSIONS CORPORATION STOCKHOLDERS
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Per Share................... $85.00 $4.25 $80.75 $80.75
Total....................... $212,500,000 $10,625,000 $161,500,000 $40,375,000
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Informatica Corporation has granted the underwriters the right to purchase up to
an additional 375,000 shares of common stock to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares to purchasers on October 3, 2000.
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Joint Book-Running Managers
MORGAN STANLEY DEAN WITTER CREDIT SUISSE FIRST BOSTON
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ROBERTSON STEPHENS
THOMAS WEISEL PARTNERS LLC
FAC/EQUITIES
SEPTEMBER 27, 2000
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FRONT INSIDE COVER ART DESCRIPTION
Under the title, "The Informatica Solution" appears a graphic comprised of
two concentric disks designed to provide a functional overview of our product
line. The first disk, which is the inner disk of the two concentric disks, is
labeled with the text "Enterprise Data Integration" and includes three
triangular, or pie-shaped, sub-segments labeled with the text "ERP",
"e-Business", and "Legacy". The second disk is labeled with the text "Cross
Value-Chain Analytics" and includes seven triangular, or pie-shaped,
sub-segments labeled with the text "Human Resources", "Finance", "Operations",
"e-Business", "Marketing", "Sales", and "Procurement". Attached to the two
concentric disks by dotted lines, which are designed to represent the specific
technical interface various functional users of our system employ to access
information from our system, are four smaller disks, which are designed to
represent these users. These disks are organized under the subtitle
"Personalized Information Delivery" and include the following labels: "Business
Analysts" accessing information through "Client Server", "Executives/Managers"
accessing information through "Web/Client Server", "Mobile Workers" accessing
information through "Wireless/Voice" and "Trading Partners" accessing
information through "Web".
Under the graphic appears the text: "We are a leading provider of
e-business infrastructure and analytic software that enables our customers to
automate the integration, analysis and delivery of critical corporate
information. Using our products, managers and executives gain valuable business
insight they can use to improve operational performance and enhance competitive
advantage."
At the bottom of the page is an Informatica logo with the tagline "Now You
Know" under the logo.
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TABLE OF CONTENTS
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Prospectus Summary..................... 4
Risk Factors........................... 12
Special Note Regarding Forward-Looking
Statements........................... 21
Use of Proceeds........................ 22
Dividend Policy........................ 22
Price Range of Common Stock............ 22
Capitalization......................... 23
Dilution............................... 24
Selected Consolidated Financial Data... 25
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Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 26
Management............................. 38
Principal and Selling Stockholders..... 40
Underwriters........................... 42
Legal Matters.......................... 43
Experts................................ 44
Where You Can Find More Information.... 45
Index to Consolidated Financial
Statements........................... F-1
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You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We are offering to
sell shares of common stock and seeking offers to buy shares of common stock
only in jurisdictions where offers and sales are permitted. The information
contained in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of the
common stock.
In this prospectus "Informatica," "we," "us" and "our" refer to Informatica
Corporation and its subsidiaries. Informatica, the Informatica logo, PowerCenter
and PowerMart are our registered trademarks. Additionally, PowerBridge,
PowerCenter.e, PowerConnect >and PowerPlug are our trademarks. This prospectus
contains other product names, trade names and trademarks of Informatica and of
other organizations.
All of the information disclosed in this prospectus assumes no exercise of
the underwriters over-allotment option and gives effect to the two-for-one stock
split effected in the form of a stock dividend to each stockholder of record as
of February 18, 2000.
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information concerning our company, the common stock being sold in this offering
and our financial statements appearing in this prospectus and in the documents
incorporated by reference in this prospectus. Because this is only a summary,
you should read the rest of this prospectus, including the documents
incorporated by reference in this prospectus, before you invest in our common
stock. Read this entire prospectus carefully, especially the risks described
under "Risk Factors."
OUR BUSINESS
We are a leading provider of e-business infrastructure and analytic
software that enables our customers to automate the integration, analysis and
delivery of critical corporate information. Using our products, managers and
executives gain valuable business insight they can use to improve operational
performance and enhance competitive advantage.
Over the last two decades, companies have made significant investments in a
variety of applications that automate specific business functions. As a result,
companies have amassed large volumes of information stored in disparate
databases. More recently, the adoption of the Internet as a business tool and
the deployment of e-business applications have accelerated this trend by
exponentially increasing electronic transaction activity and the volume of
associated data. These developments have made it increasingly difficult for
managers and executives to access and analyze comprehensive information
regarding their customers, operations and suppliers in a timely manner.
International Data Corporation, or IDC, an independent market research firm,
estimates that the worldwide market for data warehouse software totaled $5.1
billion in 1999 and is expected to grow to $11.2 billion in 2003. IDC also
estimates that the worldwide market for analytic applications software totaled
$1.9 billion in 1999 and is expected to grow to $5.2 billion in 2003.
We provide our customers with a comprehensive suite of software products
that are designed to support more effective and timely business decision-making.
Our infrastructure products simplify the process of integrating and analyzing
data from multiple systems, while our complementary packaged analytic
applications provide our customers with reports and metrics that can be extended
to meet their unique business requirements. Using our products, customers can
evaluate the performance of their entire business value-chain, including direct
and indirect sales, marketing, customer service, operations, human resources,
procurement and finance. We plan to extend our products to allow a broader range
of corporate employees to access corporate information through wireless devices,
voice recognition technology and the Internet. We believe our products provide
our customers with the following primary benefits:
- integrated information across a wide range of business functions and
disparate data sources;
- timely access to personalized corporate information; and
- comprehensive business insight and enhanced business decision-making.
We have over 900 customers, which include companies in a wide variety of
industries, ranging from e-business to manufacturing, and from financial
services to telecommunications. Our top ten customers by revenue for the six
quarters ending June 30, 2000 are Bell Atlantic, Citibank, Deutsche Post,
Gateway, General Electric, Hewlett-Packard, Lucent Technologies, Merrill Lynch,
Philips Electronics and UUNET Technologies. We also maintain relationships with
a variety of strategic partners to jointly develop, market, sell and implement
our solutions. Our significant strategic partners include Andersen Consulting,
Ariba, BroadVision, Business Objects, Deloitte Consulting, KPMG, PeopleSoft,
PricewaterhouseCoopers, SAP, Siebel Systems and Sybase. We market and sell our
software and services through our direct sales force in the United States,
Canada, Germany, Switzerland and the United Kingdom. We also have relationships
with distributors in various regions, including Asia-Pacific, Australia, Europe,
Japan and Latin America, who sublicense our products and provide service and
support within their territories. More than 20 independent software vendors,
including several of our strategic partners, have licensed our technology for
inclusion in their products.
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For the six months ended June 30, 2000, our total revenues increased to
$59.8 million from $25.0 million for the same period in 1999, representing
growth of 139%. These increases were driven by a higher average transaction size
and increasing adoption of our products by both end users and original equipment
manufacturers, or OEMs. Our license revenues for the six months ended June 30,
2000 increased to $38.6 million from $16.5 million for the same period in 1999,
representing growth of 133%. Service revenues for the six months ended June 30,
2000, increased to $21.3 million from $8.5 million for the six months ended June
30, 1999, representing growth of 151%. For the six months ended June 30, 2000,
excluding amortization of stock-based compensation of $0.5 million, amortization
of goodwill and other intangible assets of $4.2 million and purchased in-process
research and development of $2.2 million, we had operating income of $3.6
million. For additional information see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our Consolidated Financial
Statements.
OUR PRODUCTS
Our products enable our customers to build the necessary infrastructure for
deploying and managing business intelligence and analytic applications across
their organizations. Our product line, which includes infrastructure products
and a suite of packaged analytic applications, enables enterprises to implement
a decision support architecture that can be as sophisticated -- or as
simple -- as required. Our infrastructure products include our flagship data
integration platform and a set of supporting products that simplify the
integration, transformation and analysis of data from disparate sources. Earlier
this year we extended our product offerings to include an integrated suite of
analytic applications that complement and leverage our infrastructure products.
Using our products, customers can evaluate the performance of their entire
business value-chain, including direct and indirect sales, marketing, customer
service, operations, human resources, procurement and finance.
The following information summarizes the key features and benefits of our
products and services.
INFRASTRUCTURE PRODUCTS
Our infrastructure products feature a high-performance, scalable
architecture designed to support the demanding requirements of global companies
and rapidly growing e-businesses. Our core offerings, PowerCenter, PowerCenter.e
and PowerMart, are enterprise data integration platforms that integrate and
unify the diverse applications, and the various types of users, that populate
today's enterprises. Our infrastructure products extract data from operational
sources, including legacy, relational and enterprise resource planning, or ERP,
data, enrich it for decision support, catalog it for use and reuse, and deliver
it to business intelligence and analytic applications. In addition, we offer a
number of extension products that provide technical capabilities to accelerate
and simplify customer implementation of our products, including PowerConnects,
PowerPlugs and PowerBridge.
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PRODUCT DESCRIPTION BENEFIT
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POWERCENTER A scalable enterprise data integration Speeds integration and simplifies
platform for deploying and managing management of enterprise-wide information
distributed data warehouses and by integrating decision support components,
sophisticated analytic applications. This enforcing consistent data definitions and
platform manages the integration, synchronizing and integrating disparate
transformation and analysis of data from data marts and data warehouses.
disparate sources and allows centralized
management of distributed resources.
POWERCENTER.E A PowerCenter extension to support various Allows analysis of Web-based e-commerce
e-business data integration requirements information in order to evaluate and
including XML, Internet server log files improve e-business performance.
and third-party demographic data.
POWERMART A data integration platform for quickly Speeds integration and simplifies
building, deploying and managing management of departmental information by
line-of-business or departmental data marts integrating decision support components and
and analytic applications. enforcing consistent data definitions.
POWERCONNECTS A set of extensions to enhance access to Simplifies access to e-business, ERP and
POWERPLUGS various enterprise data sources and legacy data and allows the reuse of
POWERBRIDGE metadata, including SAP, PeopleSoft, DB2 metadata in order to reduce information
and Hyperion. technology cost and improve system
manageability.
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ANALYTIC APPLICATION PRODUCTS
Our application products are comprised of a tightly integrated suite of
analytic applications that provide standardized reports and business metrics
across a range of business functions. These analytic applications are designed
to integrate data from a variety of operational systems, such as Ariba,
BroadVision, Oracle, PeopleSoft, SAP, Siebel Systems, legacy systems and Web
commerce servers, and provide unique business insight by enabling companies to
analyze and manipulate the aggregated and normalized information. Our packaged
analytic applications are designed to help companies leverage industry best
practices and minimize implementation time and cost for enterprise-wide
analytics. Because our analytic application products span multiple business
functions, we believe they uniquely offer managers and executives an integrated
cross-functional view of their businesses that they have not traditionally been
able to achieve. Our analytic applications are based on our infrastructure
products and can therefore be modified and extended to meet the unique
requirements of each enterprise.
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PRODUCT DESCRIPTION BENEFIT
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ECRM An integrated suite for analyzing the Helps companies to increase sales by
effectiveness of customer-facing business attracting, retaining and servicing
processes, including direct and indirect customers.
sales, marketing and customer service.
EBUSINESS OPERATIONS An integrated suite for analyzing Helps companies to reduce costs, improve
back-office business operations, including responsiveness and better manage human
finance, human resources, manufacturing and resources and other corporate assets.
logistics.
EPROCUREMENT An integrated suite for analyzing Helps companies reduce procurement time and
procurement processes, including the costs, improve product quality and monitor
acquisition of raw materials, components supplier performance.
and other supplies, as well as supplier
relationships.
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SERVICES
We offer a comprehensive set of professional services, including
product-related consulting services, training and customer support. Our
consulting services range from designing and deploying analytic applications to
data transformation and performance tuning. Our consulting strategy is to
provide specialized expertise regarding our products to enable our end user
customers and systems integrator partners to successfully implement our
products. Our systems integrator partners include Andersen Consulting, Cap
Gemini Ernst & Young, Computer Sciences Corporation, Deloitte Consulting, EDS,
KPMG and PricewaterhouseCoopers. We also offer a comprehensive curriculum of
product-related training to help our customers and strategic partners build
proficiency in using our products. Through our two technical support centers, we
offer high-quality technical support on a global basis to customers through the
phone, e-mail and the Internet.
OUR STRATEGIC PARTNERS AND CUSTOMERS
Our strategic partners include industry leaders in enterprise and
e-business software, business intelligence tools, computer hardware and systems
integration. We offer a comprehensive strategic partnership program for major
vendors in these areas so that they can provide sales and marketing leverage,
access to required technology and complementary products and services to our
joint customers. In addition to our systems integrator partners listed above,
our strategic partners include Ariba, Brio Technology, BroadVision, Business
Objects, Cognos, Compaq Computer, EMC, Hewlett-Packard, Hyperion Solutions, IBM,
Inktomi, InterWorld, Kana Communications, Microsoft, MicroStrategy, Mitsubishi
Electronics, PeopleSoft, SAP, SageTree, Siebel Systems, Sun Microsystems and
Sybase.
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Our customers include leading companies in a wide range of industries as
well as major governmental and educational institutions. A representative
sampling of customers who have licensed at least $150,000 of our software since
January 1996 includes:
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EBUSINESS / INTERNET MANUFACTURING / HIGH TECH COMMUNICATIONS
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- Barnesandnoble.com - 3Com - Honeywell - AirTouch Cellular - One2One
- Cisco Systems - Autodesk - Intuit - AT&T - SBC
- CNET - Advanced Micro - International Paper - BellSouth - Scottish Telecom
- eBay Devices - Lockheed Martin - Cable & Wireless - Sprint
- EMC - Avery-Dennison - Lucent Technologies - GTE - TCI
- Inktomi - Boeing - Macromedia - Mannesmann - Telenor
- Media Metrix - Bosch - Motorola - McLeod - Time Warner Telecom
- Priceline.com - Cummins Engine - Palm Communications - Williams
- Storerunner.com - EMC - Philips Electronics Communications
- Submitorder.com - Ericsson - Qualcomm
- UUNET Technologies - Freightliner - Rayovac
- Ventro - Gateway - Siemens
- WebMD - General Electric - Thomson
- Goodyear Tire - Toyota
- Hewlett-Packard - Ultramar Diamond
Shamrock
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INSURANCE BANKING / FINANCIAL SERVICES RETAIL / CONSUMER PACKAGED GOODS
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- Allstate Insurance - Abbey National - Lincoln Financial - BT Office Products - J. Crew
- AXA - ADP - Massachusetts - Borders - Liz Claiborne
- Blue Cross/Blue - BancOne Financial Services - Campbell Soup - Musicland
Shield - Banque de France - Merrill Lynch - Circuit City - Nike
- Equitable Life - Barclays Bank - Morgan Stanley - Dial - Pepsico
- Great American Life - Charles Schwab Dean Witter - First Brands - Polo Ralph Lauren
- Hartford Insurance - Citibank - NatWest Bank - The Gap - Staples
- John Hancock - Credit Suisse First - Oppenheimer
- Metropolitan Life Boston - PNC Bank
- Mutual of Omaha - Deutsche Bank - Putnam Investments
- Prudential - First Union - Salomon Smith Barney
Insurance - GMAC - UBS
- ReliaStar Life - JP Morgan
- Zurich Insurance
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PHARMACEUTICALS / UTILITIES / ENERGY OTHER
CHEMICALS
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- Equistar Chemicals - Chevron - Florida Power & - Air France - Hearst Corporation
- Ethicon - Commonwealth Edison Light - BC Rail - Hertz
- Genentech - Enron - Northeast Utilities - Cargill - La Poste
- Glaxo Wellcome - First Energy - PacBell - Carlson Wagonlit - Manpower
- Parke Davis - Southern Company - Cendant Corp. - Robert Half
- Pharmacia & Upjohn - Delta Airlines International
- Roche Bioscience - Deutsche Post - Warner Brothers
- SmithKline Beecham - FedEx - Waste Management
- Takeda - Fox Entertainment
- Warner Lambert Group
- Zeneca
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OUR COMPETITIVE STRENGTHS
Analytic Solutions Spanning the Entire e-Business Value Chain. Both our
infrastructure and application products afford our customers with a complete,
enterprise-wide analytic capability that can span the full range of business
functions, such as direct and indirect sales, marketing, customer service,
operations, human resources, procurement and finance. By leveraging this
integrated and cross-functional view of their operations, our customers are
better able to manage their businesses and improve their competitive position.
Highly Scalable and Flexible Data Integration Architecture. Our products
are capable of supporting the needs of large global enterprises and demanding
e-businesses due to our highly scalable architecture. In addition, our platform
supporting infrastructure products are developed to be compatible with most
software applications. Our platform and supporting infrastructure products are
both flexible and extensible, allowing customers to build sophisticated analytic
applications to meet their specific requirements. The open architecture design
of our products enables our customers to support and inter-operate with a wide
range of computing platforms, applications and data sources.
E-business Support. We have extended our infrastructure products to
support leading e-business standards, such as XML and Web logs. In addition, we
have built product extensions to simplify integration with leading e-business
applications and Web commerce servers, including those offered by Ariba,
BroadVision, Kana Communications and Siebel Systems. Especially when combined
with our eCRM application suite, our products allow companies to easily
integrate their Internet and back office applications and to perform valuable
analysis of their combined operations.
Significant Installed Customer Base. We have an installed customer base
that spans a wide range of industries. Our products have been licensed by over
900 customers around the world. As of June 30, 2000, our customers included
approximately half of the Fortune 100 companies. Our success in these
deployments serves to strengthen our brand awareness while providing an
opportunity to license additional products to these existing customers.
Strong Base of Leading Strategic Partners. We have alliances and strategic
partnerships with leading enterprise and e-business software providers, systems
integrators and hardware vendors. These alliances provide sales and marketing
leverage and access to required technology while also providing complementary
products and services to our joint customers. Currently, more than 100 companies
market and resell our solutions around the world, which we believe has helped
accelerate market adoption of our products.
OUR STRATEGY
Enhance Position as a Leading Independent Analytic Infrastructure
Vendor. We intend to maintain and enhance our leading position as the open data
integration infrastructure of choice for enterprise-wide business analytics. In
particular, our strategy is to ensure that our products inter-operate with the
products offered by the leading enterprise and e-business software vendors. We
believe that this technical independence from any particular application product
provides a competitive advantage over function-specific analytic solutions
offered by some of our competitors. We plan to continue to license our software
to end-users as well as aggressively pursue OEM relationship with other software
vendors who can base their products in part on our technology.
Broaden Deployments with Existing Customers. We believe our existing
customer base provides us with significant additional sales opportunities. We
plan to broaden the use of our infrastructure products across enterprises based
on our successful implementations to date within each company. Additionally, our
recently released analytic application products provide new growth
opportunities. We believe we are aligning our marketing activities and sales
model to capture these additional opportunities.
Extend Functionality of Analytic Application Products. We intend to
increase the number and capabilities of our analytic application products. To
date, we have completed two acquisitions to support our efforts in this area,
and we have an ongoing joint development effort with PricewaterhouseCoopers to
leverage our collective domain expertise. In addition, we intend to increase the
size of our development team focused on these products.
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Expand Strategic Alliances and Geographic Coverage. In order to increase
our revenues and our market penetration, we intend to expand our strategic
alliances with systems integration firms, resellers and other software vendors
for the joint sales, marketing and development of our products. In addition, we
intend to broaden our geographic coverage through the expansion of our direct
and indirect sales efforts.
Extend Our Product Line to Deliver Information through Wireless Devices,
Voice Technologies and the Internet. While access to analytic information is
currently limited primarily to business analysts within large organizations, we
believe that a broad range of corporate employees would benefit from mobile and
remote access to such information. Towards this end, we plan to extend both our
infrastructure and application products to provide analytic information access
through a number of interface technologies, including wireless phones and
pagers, other mobile devices, voice recognition technology and the Internet.
RECENT DEVELOPMENTS
Effective as of August 31, 2000, we acquired Zimba, a privately held
developer of applications that provide mobile professionals with real-time
access to corporate and external information through wireless devices, voice
recognition technology and the Internet. Under the terms of the definitive
agreement, we acquired Zimba in a stock-for-stock merger transaction valued at
approximately $26 million. The merger will be accounted for as a purchase
transaction and is intended to qualify as a tax-free exchange of shares under
the Internal Revenue Service, or IRS, regulations.
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Our principal executive offices are located at 3350 W. Bayshore Road, Palo
Alto, California 94303, and our telephone number is (650) 687-6200. We are
incorporated in Delaware.
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THE OFFERING
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Common stock offered by us.......... 2,000,000 shares
Common stock offered by the selling
stockholders...................... 500,000 shares
Total............................. 2,500,000 shares
Total common stock to be outstanding
after this offering............... 36,479,275 shares
Over-allotment option............... 375,000 shares
Use of proceeds..................... We intend to use the proceeds of this offering for
working capital and other general corporate purposes.
See "Use of Proceeds."
Nasdaq National Market symbol....... INFA
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The above information is based upon 34,479,275 shares outstanding as of
June 30, 2000. This information does not include 7,891,633 shares of common
stock subject to outstanding options and 3,421,062 shares of common stock
reserved for future issuance under our stock plans. See "Capitalization" for
additional information concerning the number of outstanding shares of our
capital stock and stock options.
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1997 1998 1999 1999 2000
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(UNAUDITED)
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues.............................. $12,741 $30,346 $62,379 $25,012 $59,838
Total cost of revenues...................... 2,582 5,389 10,996 4,494 12,000
Gross profit................................ 10,159 24,957 51,383 20,518 47,838
Merger-related costs and purchased
in-process research and development....... -- -- 2,082 -- 2,199
Amortization of stock-based compensation.... 2 98 742 287 529
Amortization of goodwill and other
intangible assets......................... -- -- -- -- 4,172
Loss from operations........................ (8,217) (9,391) (1,909) (951) (3,350)
Loss before income taxes.................... (8,018) (9,285) (671) (767) (2,628)
Net loss.................................... $(8,018) $(9,285) $(1,495) $(1,067) $(3,503)
Net income (loss) per share:
Basic and diluted net loss per share...... $ (1.18) $ (1.21) $ (0.06) $ (0.07) $ (0.10)
Shares used in calculation of basic and
diluted net loss per share:............... 6,777 7,652 23,783 16,132 33,517
</TABLE>
The following table presents our summary consolidated balance sheet data as
of June 30, 2000. The as adjusted data gives effect to the sale of 2,000,000
shares of common stock that we are offering under this prospectus at the public
offering price of $85.00 per share after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.
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JUNE 30, 2000
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AS
ACTUAL ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 31,831 $192,511
Restricted cash............................................. 20,282 20,282
Working capital............................................. 14,587 175,267
Total assets................................................ 112,188 272,868
Stockholders' equity........................................ 74,385 235,065
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only risks we face.
Additional risks we are not presently aware of or that we currently believe are
immaterial may also impair our business operations. Our business could be harmed
by any of these risks. The trading price of our common stock could decline due
to any of these risks, and you may lose all or part of your investment. In
assessing these risks, you should also refer to the other information contained
or incorporated by reference in this prospectus, including our financial
statements and related notes.
OUR QUARTERLY RESULTS FLUCTUATE, WHICH MAY CAUSE OUR STOCK PRICE TO EXPERIENCE
SIGNIFICANT FLUCTUATIONS.
Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to also
significantly fluctuate or experience declines. Some of the factors that could
cause our operating results to fluctuate include:
- the size and timing of customer orders, which can be affected by customer
order deferrals in anticipation of future new product introductions or
product enhancements and customer budgeting and purchasing cycles;
- market acceptance of our products;
- the length and variability of our sales cycle for our products;
- the length of time and costs associated with the implementation of our
products;
- introduction or enhancement of our products or our competitors' products
and changes in our or our competitors' pricing policies;
- our ability to develop, introduce and market new products on a timely
basis;
- the mix of our products and services sold and the mix of distribution
channels utilized;
- our success in expanding our sales and marketing programs;
- an increase in analytic applications licensing, which may result in a
smaller percentage of our revenue from licenses being recognized when
such licenses are made, and increased implementation cost;
- seasonality with respect to our license revenues;
- technological changes in computer systems and environments; and
- general economic conditions, which may affect our customers' capital
investment levels.
Our product revenues are not predictable with any significant degree of
certainty. Historically, we have recognized a substantial portion of our
revenues in the last month of the quarter. If customers cancel or delay orders,
it can have a significant adverse impact on our revenues and results of
operations for the quarter. To the extent any such cancellations or delays are
for large orders, this impact will be greater. To the extent that the average
size of our orders increases, customers' cancellations or delays of orders will
more likely harm our revenues and results of operations. Our quarterly product
license revenues are difficult to forecast because we historically have not had
a substantial backlog of orders, and therefore revenues in each quarter are
substantially dependent on orders booked and shipped in that quarter and cash
collections from international customers and specific resellers. Our product
license revenues are also difficult to forecast because the market for our
products is rapidly evolving, and our sales cycles, which may last many months,
vary substantially from customer to customer and vary in general due to a number
of factors over which we have little or no control. Nonetheless, our short-term
expense levels are relatively fixed and based, in part, on our expectations of
future revenues.
The difficulty we have in predicting our quarterly revenue means revenue
shortfalls are likely to occur at some time, and our inability to adequately
reduce short-term expenses means such shortfalls will affect not only our
revenue, but also our overall business, results of operations and financial
condition. Due to the uncertainty surrounding our revenues and expenses, we
believe that quarter-to-quarter comparisons of our
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operating results are not a good indication of our future performance. While we
achieved significant quarter-to-quarter revenue growth in the past, you should
not take these recent quarterly results to be indicative of our future
performance. We do not expect to sustain this same rate of sequential quarterly
revenue growth in future periods. Moreover, our future quarterly operating
results may fall below the expectations of stock analysts and investors. If this
happens, the price of our common stock may fall.
THE MARKET IN WHICH WE SELL OUR PRODUCTS IS HIGHLY COMPETITIVE.
The market for our products is highly competitive, quickly evolving and
subject to rapidly changing technology. Many of our competitors have longer
operating histories, substantially greater financial, technical, marketing or
other resources, or greater name recognition than we do. Our competitors may be
able to respond more quickly than we can to new or emerging technologies and
changes in customer requirements. Competition could seriously impede our ability
to sell additional products and services on terms favorable to us. Our current
and potential competitors may develop and market new technologies that render
our existing or future products obsolete, unmarketable or less competitive. We
believe we currently compete more on the basis of our products' functionality
than on the basis of price. If our competitors develop products with similar or
superior functionality, we may have difficulty competing on the basis of price.
Our current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with other solution
providers, thereby increasing the ability of their products to address the needs
of our prospective customers. Our current and potential competitors may
establish or strengthen cooperative relationships with our current or future
strategic partners, thereby limiting our ability to sell products through these
channels. Competitive pressures could reduce our market share or require us to
reduce our prices, either of which could harm our business, results of
operations or financial condition. We compete principally against providers of
decision support, data warehousing and analytic application software. Such
competitors include Acta Technology, Broadbase Software, E.piphany, Informix
Corporation and Sagent Technology.
In addition, we compete against database vendors that currently offer, or
may develop, products with functionalities that compete with our solutions.
These products typically operate specifically with these competitors'
proprietary databases. Such competitors include IBM, Microsoft and Oracle.
ANY SIGNIFICANT DEFECT IN OUR PRODUCTS COULD CAUSE US TO LOSE REVENUE AND EXPOSE
US TO PRODUCT LIABILITY CLAIMS.
The software products we offer are inherently complex and, despite
extensive testing and quality control, have in the past and may in the future
contain errors or defects, especially when first introduced. These defects and
errors could cause damage to our reputation, loss of revenue, product returns,
order cancellations or lack of market acceptance of our products, and as a
result, harm our business, results of operations or financial condition. We have
in the past and may in the future need to issue corrective releases of our
software products to fix these defects or errors. For example, we issued
corrective releases to fix problems with the version of our PowerMart released
in the first quarter of 1998. As a result, we had to allocate significant
customer support resources to address these problems. Our license agreements
with our customers typically contain provisions designed to limit our exposure
to potential product liability claims. The limitation of liability provisions
contained in our license agreements, however, may not be effective as a result
of existing or future national, federal, state or local laws or ordinances or
unfavorable judicial decisions. Although we have not experienced any product
liability claims to date, the sale and support of our products entails the risk
of such claims, which could be substantial in light of the use of our products
in enterprise-wide applications. If a claimant successfully brings a product
liability claim against us, it would likely significantly harm our business,
results of operations or financial condition.
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BECAUSE WE SELL A LIMITED NUMBER OF PRODUCTS, IF THESE PRODUCTS DO NOT ACHIEVE
BROAD MARKET ACCEPTANCE, OUR REVENUES WILL BE ADVERSELY AFFECTED.
To date, substantially all of our revenues were derived from our
PowerCenter, PowerCenter.e, PowerConnects, PowerMart, our analytic application
software products and related services. We expect revenues derived from these
products and related services to comprise substantially all of our revenues for
the foreseeable future. Even if the emerging software market in which these
products are sold grows substantially, if any of these products do not achieve
market acceptance, our revenues will be adversely affected. In particular, we
recently released our analytic application products and the degree of market
acceptance for these products is unknown. Market acceptance of our products
could be affected if, among other things, applications suppliers integrate their
products to such a degree that the utility of the data integration functionality
that our products provide is minimized or rendered unnecessary.
IF THE MARKET IN WHICH WE SELL OUR PRODUCTS AND SERVICES DOES NOT GROW AS WE
ANTICIPATE, OUR REVENUES WILL BE HARMED.
The market for software solutions that enable more effective business
decision-making by helping companies aggregate and use data stored throughout an
organization is relatively new and still emerging. Substantially all of our
revenues are attributable to the sale of products and services in this market.
If this market does not grow at the rate we anticipate, our business, results of
operations and financial condition will be adversely affected. One of the
reasons this market might not grow as we anticipate is that many companies are
not yet fully aware of the benefits of using these software solutions to help
make business decisions or the benefits of our specific product solutions. As a
result, we believe large companies to date have deployed these software
solutions to make business decisions on a relatively limited basis. Although we
have devoted and intend to continue to devote significant resources to promote
market awareness of the benefits of these solutions, our efforts may be
unsuccessful or insufficient.
TECHNOLOGICAL ADVANCES AND EVOLVING INDUSTRY STANDARDS COULD ADVERSELY IMPACT
OUR FUTURE PRODUCT SALES.
The market for our products is characterized by continuing technological
development, evolving industry standards and changing customer requirements. The
introduction of products by our direct competitors or others embodying new
technologies, the emergence of new industry standards or changes in customer
requirements could render our existing products obsolete, unmarketable or less
competitive. In particular, an industry-wide adoption of uniform open standards
across heterogeneous analytic applications could minimize the importance of the
integration functionality of our products and harm the competitiveness and
market acceptance of our products. Our success depends upon our ability to
enhance existing products, to respond to changing customer requirements and to
develop and introduce in a timely manner new products that keep pace with
technological and competitive developments and emerging industry standards.
We have in the past experienced delays in releasing new products and
product enhancements and may experience similar delays in the future. As a
result, some of our customers have deferred purchasing products until their
upgrades were released. For example, an upgrade to a version of our PowerMart
product, which was scheduled to be released in December 1997, was not shipped
until February 1998. As a result, some of our customers deferred purchasing this
version of our PowerMart product until the upgrade was released. Future delays
or problems in the installation or implementation of our new releases may cause
customers to forego purchases of our products and purchase those of our
competitors instead. Failure to develop and introduce new products, or
enhancements to existing products, in a timely manner in response to changing
market conditions or customer requirements will harm our business, results of
operations and financial condition.
IF WE DO NOT MAINTAIN AND STRENGTHEN OUR RELATIONSHIPS WITH OUR STRATEGIC
PARTNERS, OUR ABILITY TO GENERATE REVENUE AND CONTROL IMPLEMENTATION COSTS WILL
BE ADVERSELY AFFECTED.
We believe that our ability to increase the sales of our products and our
future success will depend in part upon maintaining and strengthening successful
relationships with our current or future strategic partners. In addition to our
direct sales force, we rely on established relationships with a variety of
strategic partners, such
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as systems integrators, resellers and distributors, for marketing, licensing,
implementing and supporting our products in the United States and
internationally. We also rely on relationships with strategic technology
partners, such as enterprise resource planning providers, for the promotion and
implementation of our solutions. In particular, our ability to market our
products depends substantially on our relationships with significant strategic
partners, including Andersen Consulting, Ariba, BroadVision, Business Objects,
Deloitte Consulting, KPMG, PeopleSoft, PricewaterhouseCoopers, SAP, Siebel
Systems and Sybase. In addition, our strategic partners may offer products of
several different companies, including, in some cases, products that compete
with our products. We have limited control, if any, as to whether these
strategic partners devote adequate resources to promoting, selling and
implementing our products.
We may not be able to maintain our strategic partnerships or attract
sufficient additional strategic partners who are able to market our products
effectively, who are qualified to provide timely and cost-effective customer
support and service or who have the technical expertise and personnel resources
necessary to implement our products for our customers. In particular, if our
strategic partners do not devote adequate resources for implementation of our
products, we will incur substantial additional costs associated with hiring and
training additional qualified technical personnel to timely implement solutions
for our customers. Furthermore, our relationships with our strategic partners
may not generate enough revenue to offset the significant resources used to
develop these relationships.
WE RELY ON THIRD-PARTY TECHNOLOGIES AND IF WE ARE UNABLE TO USE OR INTEGRATE
THESE TECHNOLOGIES, OUR PRODUCT AND SERVICE DEVELOPMENT MAY BE DELAYED.
We intend to continue to license technologies from third parties, including
applications used in our research and development activities and technologies,
which are integrated into our products and services. If we cannot obtain or
integrate any of these licenses, we may experience a delay in product and
service development until equivalent technology can be identified, licensed and
integrated. These technologies may not continue to be available to us on
commercially reasonable terms or at all. We may not be able to successfully
integrate any licensed technology into our products or services, which would
harm our business and operating results. Third-party licenses also expose us to
increased risks that include:
- risks of product malfunction after new technology is integrated;
- the diversion of resources from the development of our own proprietary
technology; and
- our inability to generate revenue from new technology sufficient to
offset associated acquisition and maintenance costs.
THE LENGTHY SALES CYCLE AND IMPLEMENTATION PROCESS OF OUR PRODUCTS MAKES OUR
REVENUES SUSCEPTIBLE TO FLUCTUATION.
Our sales cycle can be lengthy because the expense, complexity, broad
functionality and company-wide deployment of our products typically requires
executive-level approval for investment in our products. In addition, to
successfully sell our products, we frequently must educate our potential
customers about the full benefits of our products, which also can require
significant time. Due to these factors, the sales cycle associated with the
purchase of our products is subject to a number of significant risks over which
we have little or no control, including:
- customers' budgetary constraints and internal acceptance review
procedures;
- the timing of budget cycles;
- concerns about the introduction of our products or competitors' new
products; or
- potential downturns in general economic conditions.
Further, our sales cycle may lengthen as we continue to focus our sales
efforts on large corporations. The implementation of our products, and
particularly our analytic application products, is also a complex and time-
consuming process, the length and cost of which is difficult to predict. If our
sales cycle and implementation
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process lengthens unexpectedly, it could adversely affect the timing of our
revenues or increase costs, either of which may independently cause fluctuations
in our revenue.
WE EXPECT SEASONAL TRENDS TO CAUSE OUR QUARTERLY REVENUES TO FLUCTUATE.
In recent years, there has been a relatively greater demand for our
products in the fourth quarter than in each of the first three quarters of the
year, particularly the first quarter. As a result, we historically have
experienced relatively higher bookings in the fourth quarter and relatively
lighter bookings in the first quarter. While some of this effect can be
attributed to the rapid growth of revenues in recent years, we believe that
these fluctuations are caused by customer buying patterns (often influenced by
year-end budgetary pressures) and the efforts of our direct sales force to meet
or exceed year-end sales quotas. In addition, European sales may tend to be
relatively lower during the summer months than during other periods. We expect
that seasonal trends will continue for the foreseeable future. This seasonal
impact may increase as we continue to focus our sales efforts on large
corporations.
WE RECOGNIZE REVENUE FROM SPECIFIC CUSTOMERS AT THE TIME WE RECEIVE PAYMENT FOR
OUR PRODUCTS, AND IF THESE CUSTOMERS DO NOT MAKE TIMELY PAYMENT, OUR REVENUES
COULD DECREASE.
We recognize revenue from sales to OEMs, specific resellers, international
customers and specific customers based on their credit history, at the time we
receive payment for our products, rather than at the time of sale. If these
customers do not make timely payment for our products, our revenues could
decrease. Further, if our revenues from sales to these customers increase as a
percentage of total revenues, our revenues could decrease. If our revenues
decrease, the price of our common stock may fall.
WE HAVE A LIMITED OPERATING HISTORY AND A HISTORY OF LOSSES, AND WE MAY NOT BE
ABLE TO ACHIEVE PROFITABLE OPERATIONS.
We were incorporated in 1993 and began selling our products in 1996; and
therefore, we have a limited operating history upon which investors can evaluate
our operations, products and prospects. We have incurred significant net losses
since our inception, and we may not achieve profitability. We incurred net
losses of $8.0 million, $9.3 million and $1.5 million in 1997, 1998 and 1999,
and $3.5 million for the six-month period ended June 30, 2000. As of December
31, 1999, we had an accumulated deficit of $23.9 million, and as of June 30,
2000, our accumulated deficit was $27.4 million. We intend to increase our
operating expenses significantly in the next 12 months; therefore, our operating
results will be harmed if revenues do not increase significantly.
OUR BUSINESS COULD SUFFER AS A RESULT OF OUR STRATEGIC ACQUISITIONS AND
INVESTMENTS.
In December 1999, we acquired Influence, a developer of analytic
applications for e-business, in a transaction accounted for as a
pooling-of-interests. In February 2000, we acquired Delphi, a distributor of our
products in Switzerland, in a transaction accounted for as a purchase. In August
2000, we acquired Zimba, a provider of applications that enable mobile
professionals to have real-time access to enterprise and external information
through wireless devices, voice recognition technologies and the Internet, in a
transaction accounted for as a purchase. In April 2000, we acquired certain
PricewaterhouseCoopers intellectual property rights and personnel in exchange
for shares of our common stock. We may not be able to effectively integrate
these companies, intellectual property, or personnel, and our attempts to do so
will place an additional burden on our management and infrastructure. These
acquisitions will subject us to a number of risks, including:
- the loss of key personnel, customers and business relationships;
- difficulties associated with assimilating and integrating the new
personnel and operations of the acquired company;
- the potential disruption of our ongoing business;
- the expense associated with maintenance of uniform standards, controls,
procedures, employees and clients;
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- the risk of product malfunction after new technology is integrated;
- the diversion of resources from the development of our own proprietary
technology; and
- our inability to generate revenue from new technology sufficient to
offset associated acquisition and maintenance costs.
There can be no assurance that we will be successful in overcoming these
risks or any other problems encountered in connection with our acquisitions.
WE MAY ENGAGE IN FUTURE ACQUISITIONS OR INVESTMENTS THAT COULD DILUTE OUR
EXISTING STOCKHOLDERS, OR CAUSE US TO INCUR CONTINGENT LIABILITIES, DEBT OR
SIGNIFICANT EXPENSE
From time to time, in the ordinary course of business, we may evaluate
potential acquisitions of, or investments in, related businesses, products or
technologies. Future acquisitions could result in the issuance of dilutive
equity securities, the incurrence of debt or contingent liabilities.
Furthermore, there can be no assurance that any strategic acquisition or
investment will succeed. Any future acquisition or investment could harm our
business, financial condition and results of operation.
Recently, the Financial Accounting Standards Board, or FASB, voted to
eliminate pooling-of-interests accounting for acquisitions and the ability to
write-off in-process research and development has been limited by recent
pronouncements. The effect of these changes would be to increase the portion of
the purchase price for any future acquisitions that must be charged to our cost
of revenues and operating expenses in the periods following any such
acquisitions. As a consequence, our results of operations could be harmed.
Although these changes would not directly affect the purchase price for any of
these acquisitions, they would have the effect of increasing the reported
expenses associated with any of these acquisitions. To that extent, these
changes may make it more difficult for us to acquire other companies, product
lines or technologies.
OUR INTERNATIONAL OPERATIONS EXPOSE US TO GREATER INTELLECTUAL PROPERTY,
COLLECTIONS, EXCHANGE RATE FLUCTUATIONS, REGULATORY AND OTHER RISKS, WHICH COULD
LIMIT OUR FUTURE GROWTH.
We intend to expand our international operations, and as a result, we may
face significant additional risks. Our failure to manage our international
operations and the associated risks effectively could limit the future growth of
our business. International revenues accounted for 6%, 12%, and 18% of total
consolidated revenues in 1997, 1998 and 1999, and 21% for the six-month period
ended June 30, 2000, substantially all of which consisted of sales to customers
in Europe. The expansion of our existing international operations and entry into
additional international markets will require significant management attention
and financial resources.
Our international operations face numerous risks. Our products must be
localized -- customized to meet local user needs -- in order to be sold in
particular foreign countries. Developing local versions of our products for
foreign markets is difficult and can take longer than we anticipate. We
currently have limited experience in localizing products and in testing whether
these localized products will be accepted in the targeted countries. We cannot
assure you that our localization efforts will be successful. In addition, we
have only a limited history of marketing, selling and supporting our products
and services internationally. As a result, we must hire and train experienced
personnel to staff and manage our foreign operations. However, we may experience
difficulties in recruiting and training an international staff. We must also be
able to enter into strategic relationships with companies in international
markets. If we are not able to maintain successful strategic relationships
internationally or recruit additional companies to enter into strategic
relationships, our future growth could be limited.
Our international business is subject to a number of risks, including the
following:
- greater difficulty in protecting intellectual property;
- greater difficulty in staffing and managing foreign operations;
- greater risk of uncollectible accounts;
- longer collection cycles;
- potential unexpected changes in regulatory practices and tariffs;
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- potential unexpected changes in tax laws;
- sales seasonality;
- the impact of fluctuating exchange rates between the U.S. dollar and
foreign currencies in markets where we do business; and
- general economic and political conditions in these foreign markets.
We may encounter difficulties predicting the extent of the future impact of
these conditions. These factors and other factors could harm our ability to gain
future international revenues and consequently on our business, results of
operations and financial condition.
DIFFICULTIES WE MAY ENCOUNTER MANAGING OUR GROWTH COULD HARM OUR RESULTS OF
OPERATIONS.
We have experienced a period of rapid and substantial growth that has
placed and, if such growth continues, will continue to place a strain on our
administrative and operational infrastructure. We increased the number of our
employees from 187 at December 31, 1998, to 332 at December 31, 1999, and to 552
as of June 30, 2000. Our revenues increased from $30.3 million in 1998 to $62.4
million in 1999, and our revenues for the six-month period ended June 30, 2000
were $59.8 million. If we are unable to manage this growth effectively, our
business, results of operations or financial condition may be significantly
harmed. Our ability to manage our operations and growth effectively requires us
to continue to improve our operational, financial and management controls,
reporting systems and procedures and hiring programs. We may not be able to
successfully implement improvements to our management information and control
systems in an efficient or timely manner, and we may discover deficiencies in
existing systems and controls.
IF WE ARE NOT ABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, OUR BUSINESS
COULD BE HARMED.
Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. Our pending patent applications may not be allowed or
our competitors may successfully challenge the validity or scope of any of our
four US and one European issued patents or any future issued patents. Our
patents alone may not provide us with any significant competitive advantage.
Third parties could copy or otherwise obtain and use our products or technology
without authorization, or develop similar technology independently. We cannot
easily monitor any unauthorized use of our products, and, although we are unable
to determine the extent to which piracy of our software products exists,
software piracy is a prevalent problem in our industry in general.
Furthermore, effective protection of intellectual property rights is
unavailable or limited in various foreign countries. The protection of our
proprietary rights may be inadequate and our competitors could independently
develop similar technology, duplicate our products or design around any patents
or other intellectual property rights we hold.
WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT COULD BE COSTLY TO
DEFEND AND RESULT IN OUR LOSS OF SIGNIFICANT RIGHTS.
As is common in the software industry, we have received and may continue
from time to time receive notices from third parties claiming infringement by
our products of third-party patent and other proprietary rights. Third parties
could claim that our current or future products infringe their patent or other
proprietary rights. Any claims, with or without merit, could be time-consuming,
result in costly litigation, cause product shipment delays or require us to
enter into royalty or licensing agreements, any of which could adversely effect
our business, financial condition and operating results. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
us, or at all. Legal action claiming patent infringement could be commenced
against us, and we may not prevail in such litigation given the complex
technical issues and inherent uncertainties in patent litigation. Moreover, the
cost of defending patent litigation could be substantial, regardless of the
outcome. In the event a patent claim against us was successful and we could not
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obtain a license on acceptable terms, license a substitute technology or
redesign to avoid infringement, our business, financial condition and operating
results would be significantly harmed.
AFTER THIS OFFERING, OUR DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
STOCKHOLDERS WILL CONTROL INFORMATICA.
After this offering, our officers, directors and principal stockholders
(i.e., greater than 5% stockholders) will together control approximately 36.7%
of our outstanding common stock. As a result, these stockholders, if they act
together, will be able to control our management and affairs and all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may have
the effect of delaying or preventing a change in control and might affect the
market price of our common stock.
OUR STOCK PRICE FLUCTUATES AS A RESULT OF OUR BUSINESS AND STOCK MARKET
FLUCTUATIONS.
The market price for our common stock has experienced significant
fluctuations and may continue to fluctuate significantly. The market price for
our common stock following this offering will be affected by a number of
factors, including the following:
- the announcement of new products or product enhancements by us or our
competitors;
- quarterly variations in our or our competitors' results of operations;
- changes in earnings estimates or recommendations by securities analysts;
- developments in our industry; and
- general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.
In addition, stock prices for many companies in the technology and emerging
growth sectors have experienced wide fluctuations that have often been unrelated
to the operating performance of such companies. After periods of volatility in
the market price of a particular company's securities, securities class action
litigation has often been brought against that company. We may become involved
in this type of litigation in the future, which is often expensive and diverts
management's attention and resources, which could harm our ability to execute
our business plan. Such factors and fluctuations, as well as general economic,
political and market conditions, may cause the market price of our common stock
to decline.
THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, PARTICULARLY IN THE SILICON VALLEY AREA, WHERE WE ARE HEADQUARTERED,
COULD HARM OUR RESULTS OF OPERATIONS.
We believe our success depends upon our ability to attract and retain
highly skilled personnel, including Gaurav S. Dhillon, our Chief Executive
Officer, Diaz H. Nesamoney, our President and Chief Operating Officer, and other
key members of our management team. We currently do not have any key-man life
insurance relating to our key personnel, and their employment is at-will and not
subject to employment contracts.
We may not be successful in attracting, assimilating and retaining key
personnel in the future. As we seek to expand our operations, the hiring of
qualified sales and technical personnel will be difficult due to the limited
number of qualified professionals. Competition for these types of employees,
particularly in the Silicon Valley area, where we are headquartered, is intense.
We have in the past experienced difficulty in recruiting qualified sales and
technical personnel. Failure to attract, assimilate and retain key personnel,
particularly sales and technical personnel, would harm our business, results of
operations and financial condition.
A SUBSTANTIAL PERCENTAGE OF OUR OUTSTANDING COMMON STOCK MAY BE SOLD IN THE
MARKET, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.
Sales of a substantial number of shares of our common stock in the public
market, or the appearance that such shares are available for sale, could
adversely affect the market price for our common stock. Upon completion of this
offering (based upon shares outstanding as of June 30, 2000), we will have
36,479,275
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shares of common stock outstanding, or 36,854,275 shares if the underwriters
exercise their over-allotment option. Based upon shares held as of September 1,
2000, the 8,205,343 shares (including options exercisable within 60 days) that
will still be held by our selling stockholders, certain 5% stockholders and by
other executive officers and directors after completion of this offering, are
subject to a 90-day lock-up agreement and will be available for public resale on
the 91st day after the date of this prospectus.
In addition to the shares that are currently outstanding we have:
- 7,891,633 shares issuable upon exercise of options outstanding as of June
30, 2000, with a weighted average exercise price of $25.85 per share; and
- 3,421,062 shares of common stock available for issuance as of June 30,
2000, under our stock plans.
Shares underlying vested options are eligible for immediate resale in the public
market, unless such shares are held by our directors and executive officers, in
which case the shares will be eligible for sale in the public market at the
expiration of the 90-day lock-up agreement entered into in connection with this
offering.
IF YOU PURCHASE SHARES OF OUR COMMON STOCK IN THIS OFFERING, YOU WILL INCUR
IMMEDIATE AND SUBSTANTIAL DILUTION.
If you purchase shares of our common stock in this offering, you will incur
immediate and substantial dilution in pro forma net tangible book value. If the
holders of outstanding options or warrants exercise those options or warrants,
you will incur further dilution. See "Dilution."
WE HAVE BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS OFFERING.
We currently have no specific plan for using substantially all of the
proceeds of this offering. As a consequence, we will have the discretion to
allocate a large percentage of the proceeds to uses which the stockholders may
not agree.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE
AVAILABLE ON REASONABLE TERMS TO US, IF AT ALL.
We expect that the net proceeds of this offering will be sufficient to meet
our working capital needs for at least the next 12 months. However, if we need
additional capital prior to that, and after that period, we may not generate
sufficient revenue from operations to offset our operating or other expenses. As
a result, in the future, we may need to raise additional funds through public or
private debt or equity financings. We may not be able to borrow money or sell
more of our equity securities to meet our cash needs. Even if we are able to do
so, it may not be on terms that are favorable or reasonable to us. If we are not
able to raise additional capital when we need it in the future our business
could be seriously harmed.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT COULD
DISCOURAGE A TAKEOVER.
Our basic corporate documents and Delaware law contain provisions that
might enable our management to resist a takeover. These provisions might
discourage, delay or prevent a change in the control of Informatica or a change
in our management. Our amended and restated certificate of incorporation
provides that we will have a classified board of directors, with each class of
directors subject to re-election every three years. This classified board has
the effect of making it more difficult for third parties to insert their
representatives on our board of directors and gain control. These provisions
could also discourage proxy contests and make it more difficult for you and
other stockholders to elect directors and take other corporate actions. The
existence of these provisions could limit the price that investors might be
willing to pay in the future for shares of the common stock.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under the sections entitled "Prospectus Summary,"
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," as well as the documents incorporated by reference
into this prospectus, constitute forward-looking statements. All statements
other than statements of historical fact are "forward-looking statements for
purposes of these provisions, including any projections of earnings, revenues or
other financial items, any statements of the plans and objectives of management
for future operations, any statements concerning proposed new products or
services, any statements regarding future economic conditions or performance,
and any statement of assumptions underlying any of the foregoing. In some cases,
you can identify forward-looking statements by the use of terminology such as
"may," "will," "expects," "plans," "anticipates," "estimates," "potential," or
"continue," or the negative thereof or other comparable terminology. Although we
believe that the expectations reflected in the forward-looking statements
contained herein are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. You should not place undue reliance on
these forward-looking statements. Future financial condition and results of
operations, as well as any forward-looking statements, are subject to known and
unknown risks and inherent uncertainties, including but not limited to the
factors described under "Risk Factors" and the reasons described elsewhere in
this prospectus. All forward-looking statements and reasons why results may
differ included in this prospectus are made as of the date hereof, and we assume
no obligation to update any such forward-looking statement or reason why actual
results might differ.
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USE OF PROCEEDS
The net proceeds to us from the sale of 2,000,000 shares of common stock
offered by us are estimated to be approximately $161.0 million, or $191.0
million if the underwriters' over-allotment option is exercised in full, with a
public offering price of $85.00 per share and after deducting underwriting
discounts and commissions and estimated offering expenses payable by us. We will
not receive any proceeds from the sale of shares by the selling stockholders.
We intend to use the net proceeds of this offering primarily for general
corporate purposes, including working capital and capital expenditures. A
portion of the proceeds may also be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
However, we have no present agreements or commitments and are not currently
engaged in any negotiations with respect to any such transactions. We cannot
specify with certainty the particular uses for the net proceeds to be received
upon the completion of this offering. Pending such uses, we intend to invest the
net proceeds of this offering in short-term, interest-bearing, investment grade
obligations.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. We currently intend to retain future earnings, if any, for
use in our business.
PRICE RANGE OF COMMON STOCK
The following table presents the high and low bid prices per share for our
common stock, as reported by the Nasdaq National Market, for the periods
indicated. Our initial public offering occurred on April 29, 1999; prior to that
date, there was no public trading market for our common stock.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Second Quarter.............................................. $ 18 $ 9 1/2
Third Quarter............................................... 32 5/16 16 1/16
Fourth Quarter.............................................. 54 11/16 25 1/4
YEAR ENDED DECEMBER 31, 2000:
First Quarter............................................... 110 7/8 41 1/8
Second Quarter.............................................. 86 26 3/8
Third Quarter (through September 27, 2000).................. 105 1/16 70 1/16
</TABLE>
A recent reported last sale price per share for our common stock on the
Nasdaq National Market is set forth on the cover page of the prospectus. On
September 1, 2000, there were approximately 199 holders of record of our common
stock.
The above information has been restated to reflect a two-for-one stock
split effected in the form of a stock dividend to each stockholder of record as
of February 18, 2000.
22
<PAGE> 23
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2000 as
adjusted to give effect to the sale of the 2,000,000 shares of common stock we
are offering under this prospectus at the public offering price of $85.00 per
share after deducting underwriting discounts and commissions and estimated
offering expenses payable by us. This table should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 2000
---------------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C>
Long-term debt.............................................. $ 42 $ 42
-------- --------
Stockholders' equity:
Common stock, $0.001 par value, 200,000,000 shares
authorized; 34,479,275 shares outstanding at June 30,
2000, 36,479,275 shares outstanding as adjusted........ 105,685 266,365
Deferred stock-based compensation........................... (3,592) (3,592)
Accumulated deficit......................................... (27,387) (27,387)
Accumulated other comprehensive income (loss)............... (321) (321)
-------- --------
Total stockholders' equity.................................. 74,385 235,065
-------- --------
Total capitalization...................................... $ 74,427 $235,107
======== ========
</TABLE>
------------
The outstanding share information excludes:
- 7,891,633 shares issuable upon exercise of outstanding stock options as
of June 30, 2000 with a weighted average exercise price of $25.85 per
share; and
- 3,421,062 shares reserved for issuance under our stock plans.
23
<PAGE> 24
DILUTION
As of June 30, 2000, our actual net tangible book value was approximately
$40.0 million, or $1.16 per share of common stock. Actual net tangible book
value per share represents the amount of our total tangible assets less total
liabilities, divided by 34,479,275 shares, which reflects shares of common stock
outstanding as of June 30, 2000. After giving effect to the receipt of the net
proceeds from the sale of 2,000,000 shares of our common stock by us at the
public offering price of $85.00 per share and after deducting underwriting
discounts and commissions and the estimated offering expenses, our as adjusted
net tangible book value as of June 30, 2000 would have been approximately $201.0
million, or $5.50 per share. This represents an immediate increase in as
adjusted net tangible book value of $4.34 per share to existing stockholders and
an immediate dilution of $79.50 per share to new investors purchasing shares at
the assumed public offering price. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Public offering price per share............................. $85.00
Net tangible book value per share as of June 30, 2000..... $1.16
Increase attributable to new investors.................... 4.34
-----
Net tangible book value per share after this offering....... 5.50
------
Dilution per share to new investors......................... $79.50
======
</TABLE>
The above discussion and table assumes no exercise of any stock options
outstanding as of June 30, 2000. As of June 30, 2000, there were options
outstanding to purchase a total of 7,891,633 shares of our common stock with a
weighted-average exercise price of $25.85 per share. If any of these options are
exercised, there will be further dilution to new public investors.
24
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated balance sheet and
consolidated statement of operations data as of and for the fiscal years ended
December 31, 1995 through 1999 and for the six month periods ended June 30, 1999
and 2000. The consolidated balance sheet data as of December 31, 1998 and 1999
and the consolidated statement of operations data for the fiscal years ended
December 31, 1997, 1998 and 1999 are based on audited financial statements
included elsewhere in this prospectus. The consolidated balance sheet data as of
December 31, 1995, 1996 and 1997 and the consolidated statement of operations
data for the fiscal years ended December 31, 1995 and 1996 are based on audited
financial statements not included in this prospectus. The data gives retroactive
effect to our acquisition of Influence in December 1999, which was accounted for
as a pooling-of-interests. The information as of and for the six-month periods
is unaudited and has been prepared on the same basis as our annual consolidated
financial statements. In the opinion of management, this quarterly information
reflects all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information for the periods presented.
The results of operation for the six months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 2000, or any other future period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- ------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA(1):
Revenues:
License.............................................. $ 44 $ 1,843 $10,242 $21,582 $41,184 $16,528 $38,569
Service.............................................. 545 217 2,499 8,764 21,195 8,484 21,269
------ ------- ------- ------- ------- ------- -------
Total revenues..................................... 589 2,060 12,741 30,346 62,379 25,012 59,838
------ ------- ------- ------- ------- ------- -------
Cost of revenues:
License.............................................. -- 34 190 376 686 253 793
Service.............................................. 180 124 2,392 5,013 10,310 4,241 11,207
------ ------- ------- ------- ------- ------- -------
Total cost of revenues............................. 180 158 2,582 5,389 10,996 4,494 12,000
------ ------- ------- ------- ------- ------- -------
Gross Profit........................................... 409 1,902 10,159 24,957 51,383 20,518 47,838
------ ------- ------- ------- ------- ------- -------
Operating expenses:
Research and development............................. 641 2,141 4,747 8,385 11,843 5,233 9,876
Sales and marketing.................................. 203 3,676 11,219 22,733 33,613 13,916 30,101
General and administrative........................... 89 702 2,408 3,132 5,012 2,033 4,311
Merger-related costs................................. -- -- -- -- 2,082 -- --
Amortization of stock-based compensation............. -- -- 2 98 742 287 529
Amortization of goodwill and other intangible
assets............................................. -- -- -- -- -- -- 4,172
Purchased in-process research and development........ -- -- -- -- -- -- 2,199
------ ------- ------- ------- ------- ------- -------
Total operating expenses........................... 933 6,519 18,376 34,348 53,292 21,469 51,188
------ ------- ------- ------- ------- ------- -------
Loss before income taxes............................... (518) (4,609) (8,018) (9,285) (671) (767) (2,628)
Income tax provision................................... -- -- -- -- 824 300 875
------ ------- ------- ------- ------- ------- -------
Net loss............................................... $ (518) $(4,609) $(8,018) $(9,285) $(1,495) $(1,067) $(3,503)
====== ======= ======= ======= ======= ======= =======
Basic and diluted net loss per share(2)................ $(0.10) $ (0.85) $ (1.18) $ (1.21) $ (0.06) $ (0.07) $ (0.10)
====== ======= ======= ======= ======= ======= =======
Shares used in calculation of basic and diluted net
loss per share(2).................................... 5,034 5,428 6,777 7,652 23,783 16,132 33,517
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, JUNE 30,
--------------------------------------------------- --------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA(1):
Cash and cash equivalents................................... $ 906 $3,023 $ 8,888 $ 7,167 $57,521 $ 31,831
Restricted cash............................................. -- -- -- -- -- 20,282
Working capital (deficit)................................... 896 3,206 5,376 (3,242) 39,951 14,587
Total assets................................................ 1,104 5,059 13,356 12,165 68,523 112,188
Long-term obligations, less current portion................. -- 270 1,428 1,480 1,438 42
Redeemable convertible preferred stock...................... 1,472 8,593 17,586 17,586 -- --
Total stockholders' equity (deficit)........................ (469) (5,022) (12,587) (21,580) 40,124 74,385
</TABLE>
------------
(1) Amounts and per share data for all periods presented have been retroactively
restated to reflect the merger of Influence in a pooling-of-interests
transaction effective December 15, 1999.
(2) Amounts have been restated to reflect a two-for-one stock split, effected in
the form of a stock dividend to each stockholder of record as of February
18, 2000.
25
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our
consolidated financial statements and notes thereto appearing elsewhere in this
prospectus. Except for historical information, the following discussion contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements involve risks and uncertainties, including, among
other things, statements regarding our anticipated product, customer and
geographic revenue mix, gross margins and operating costs and expenses. Our
actual results may differ significantly from those projected in the
forward-looking statements. Factors that might cause future results to differ
materially from those discussed in the forward-looking statements include, but
are not limited to, those discussed in "Risk Factors" and elsewhere in this
prospectus as well as in the documents incorporated by reference in this
prospectus.
OVERVIEW
We are a leading provider of e-business infrastructure and analytic
software that enables our customers to automate the integration, analysis and
delivery of critical corporate information. Using our products, managers and
executives gain valuable business insight they can use to improve operational
performance and enhance competitive advantage. We were founded in February 1993.
We initially generated revenues and cash flow through consulting contracts for
data extraction and data warehousing assignments while our engineering team
developed our initial software product. The first design concept for our
PowerMart product was completed in 1994, and we closed our first equity
financing shortly afterwards in 1995. We shipped the first commercial release of
PowerMart in May 1996. With the initial release and early acceptance of
PowerMart, we accelerated the recruitment of personnel, purchased additional
operating assets, commenced marketing our products and substantially invested in
building a direct sales force and a service and support capability.
In 1997, we invested heavily in expanding our business by growing our
product development team, opening a sales office and incorporating a subsidiary
in the United Kingdom. We also expanded our distribution to include original
equipment manufacturer and reseller channels. In 1998, we shipped the first
commercial release of our PowerCenter product. We also incorporated a subsidiary
in Germany in 1998 to further expand our international sales. In April 1999, we
completed our initial public offering of our common stock and realized net
proceeds from the offering of approximately $43.5 million.
We sell our products through direct sales forces in Germany, Switzerland
and the United Kingdom, and also through resellers throughout Europe.
International total consolidated revenues from both our direct sales force and
foreign indirect strategic partners accounted for 6%, 12% and 18% of our total
consolidated revenues for 1997, 1998 and 1999. Substantially all of our
international sales have been in Europe. Sales outside of North America and
Europe to date have been less than 1% of total consolidated revenues during the
last three fiscal years, although we anticipate expanding outside of these two
regions in the future.
Through June 30, 2000, we derived substantially all of our net revenues
from sales of our PowerMart and PowerCenter products. Although we expect our
packaged application analytic software products to become an increasingly
important revenue contributor, we anticipate that the PowerMart and PowerCenter
products will continue to account for a significant portion of our net revenues
for the foreseeable future. Any factor adversely affecting the demand for these
products would harm our business, financial condition, cash flows and results of
operations.
BUSINESS COMBINATIONS AND STRATEGIC ALLIANCE
We acquired Influence, a developer of analytic applications for e-business
in December 1999. The merger was accounted for using the pooling-of-interests
method of accounting and as such our historical financial results for all dates
and periods prior to the merger have been restated to reflect the merger.
In February 2000, we acquired Delphi, a distributor of Informatica products
in Switzerland. The agreement was structured as a share purchase and accounted
for as a purchase transaction. The estimated
26
<PAGE> 27
purchase price includes payments associated with 1999 revenues and projections
for 2000 revenues. The first payment of approximately $3.6 million was paid in
February 2000, and the estimated second payment of approximately $5.6 million is
payable in January 2001. The purchase price of the transaction was allocated to
the acquired assets and liabilities based on their estimated fair values as of
the date of the acquisition. Amounts allocated to goodwill and other intangible
assets are being amortized on a straight-line basis over a two-year period.
In April 2000, we announced a strategic alliance with
PricewaterhouseCoopers to jointly develop, sell and support end-to-end analytic
solutions for the business-to-business e-commerce market worldwide. In
connection with the agreement, PricewaterhouseCoopers received 409,138 shares of
our common stock. The total purchase price, including related expenses, was
approximately $31.8 million.
Effective as of August 31, 2000, we acquired Zimba, a privately held
developer of applications that provide mobile professionals with real-time
access to corporate and external information through wireless devices, voice
recognition technology and the Internet. Under the terms of the definitive
agreement, we acquired Zimba in a stock-for-stock merger transaction valued at
approximately $26 million. The merger will be accounted for as a purchase
transaction and is intended to qualify as a tax-free exchange of shares under
IRS regulations.
SOURCE OF REVENUES AND REVENUE RECOGNITION POLICY
We generate revenues from sales of software licenses and services. Our
license revenues are derived from our infrastructure and packaged analytic
software products. We receive software license revenues from licensing our
products directly to end users and indirectly through resellers and OEMs. We
receive service revenues from maintenance contracts and training and consulting
services that we perform for customers that license our products either directly
from us or indirectly through resellers.
We recognize license revenues when a noncancelable license agreement has
been signed, the product has been shipped, the fees are fixed and determinable,
collectibility is probable and vendor-specific objective evidence exists to
allocate the total fee to elements of the arrangement. Vendor-specific objective
evidence is based on the price charged when an element is sold separately. In
the case of an element not sold separately, the price is established by
authorized management. For our packaged analytic software products we recognize
the bundled license and support revenue ratably over the support period,
generally one year. Our support for the analytic software products for the first
year is never sold separately and in consideration of the complexities and
timeliness of the implementation, the customer is entitled to receive support
services that are different than the standard annual support services. If an
acceptance period is required, we recognize revenue upon customer acceptance or
the expiration of the acceptance period. We also enter into reseller
arrangements that typically provide for sublicense fees based on a percentage of
list price. For direct sales, revenue is recognized upon shipment to the end
user and when collectibility is probable. We recognize revenue from sales to
OEMs, specific resellers, international customers and specific customers based
on their credit history, at the time we receive payment for our products, rather
than at the time of sale. Our agreements with our customers and resellers do not
contain product return rights.
We recognize revenues from services, which consist of fees for ongoing
support and product updates ratably over the term of the contract, typically one
year. Consulting revenues are primarily related to implementation services and
product enhancements performed on a time-and-materials basis or a fixed fee
arrangement under separate service arrangements related to the installation of
our software products. We recognize revenues from consulting and training
services as the services are performed or contract milestones are met.
27
<PAGE> 28
RESULTS OF OPERATIONS
The following table presents certain financial data as a percentage of
total revenues:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED JUNE 30
----------------------- --------------
1997 1998 1999 1999 2000
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
License................................................ 80% 71% 66% 66% 64%
Service................................................ 20 29 34 34 36
--- --- --- --- ---
Total revenues...................................... 100 100 100 100 100
--- --- --- --- ---
Cost of revenues:
License................................................ 1 1 1 1 1
Service................................................ 19 17 17 17 19
--- --- --- --- ---
Total cost of revenues.............................. 20 18 18 18 20
--- --- --- --- ---
Gross profit............................................. 80 82 82 82 80
--- --- --- --- ---
Operating expenses:
Research and development............................... 37 28 19 21 17
Sales and marketing.................................... 88 75 54 56 50
General and administrative............................. 19 10 8 8 7
Merger-related costs................................... -- -- 3 -- --
Amortization of stock-based compensation............... -- -- 1 1 1
Amortization of goodwill and other intangible assets... -- -- -- -- 7
Purchased in-process research and development.......... -- -- -- -- 4
--- --- --- --- ---
Total operating expenses............................ 144 113 85 86 86
--- --- --- --- ---
Loss from operations..................................... (64) (31) (3) (4) (6)
Interest income (expense), net........................... 1 -- 2 1 1
--- --- --- --- ---
Loss before income taxes................................. (63) (31) (1) (3) (5)
Income tax provision..................................... -- -- (1) 1 1
--- --- --- --- ---
Net loss................................................. (63)% (31)% (2)% (4)% (6)%
=== === === === ===
Costs of license revenues, as a percentage of license
revenues............................................... 2% 2% 2% 2% 2%
Costs of service revenues, as a percentage of service
revenues............................................... 96% 57% 49% 50% 53%
</TABLE>
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
REVENUES
Our total revenues increased from $12.7 million in 1997 to $30.3 million in
1998 and to $62.4 million in 1999, representing growth of 138% from 1997 to 1998
and 106% from 1998 to 1999. Our license revenues increased from $10.2 million in
1997 to $21.6 million in 1998 and to $41.2 million in 1999, representing growth
of 111% from 1997 to 1998 and 91% from 1998 to 1999. These increases were due
primarily to increases in the number of licenses sold and the average
transaction size, reflecting increased acceptance of PowerCenter, PowerMart and
analytic software products as well as expansion of our direct sales organization
and reseller channels. Service revenues increased from $2.5 million in 1997 to
$8.8 million in 1998 and to $21.2 million in 1999, representing growth of 251%
from 1997 to 1998 and 142% from 1998 to 1999. These increases were due primarily
to an increase in consulting, training and maintenance fees associated with both
the increased number of licenses sold and the increased average transaction
size, along with a larger installed license base in each successive year.
28
<PAGE> 29
Our international revenues increased from $0.8 million in 1997 to $3.6
million in 1998 and to $11.2 million in 1999, representing growth of 339% from
1997 to 1998 and 209% from 1998 to 1999. The increase in 1999 was due primarily
to expansion throughout Europe with increased sales being generated by direct
sales, increased volume through existing distributors and new distributors
brought on during the year. Growth in 1998 was primarily driven by increased
sales activities in Germany and the United Kingdom. See Note 9 of Notes to
Consolidated Financial Statements for the year ending December 31. 1999 for
additional information about revenues in geographic areas.
Total revenues have been reduced by sales and return allowances of $0.2
million and $0.9 million in 1997 and 1998. Because management determined that
the reserve at December 31, 1998 was adequate, there were no additional sales
and returns allowances recorded in 1999. The sales and return allowances
recorded in 1997 and 1998 were due primarily to increases in revenues, the
number of customers in our customer base and an increase in our average
transaction size. While our policy is not to accept sales returns, circumstances
can arise in which we accept returns to preserve customer relationships.
COST OF REVENUES
Cost of License Revenues. Our cost of license revenues consists primarily
of product packaging, documentation, production costs and software royalties.
Cost of license revenues was $0.2 million, $0.4 million and $0.7 million in
1997, 1998 and 1999, and was approximately 1% of total revenues in each of these
years. The increase in absolute dollar amount was due primarily to increases in
license revenues and increases in royalty expense.
Cost of Service Revenues. Our cost of service revenues is a combination of
costs of maintenance, training and consulting revenues. Our cost of maintenance
revenues consists primarily of costs associated with software upgrades,
telephone support services and on-site visits. Cost of training revenues
consists primarily of the costs of providing training classes and materials,
which are provided both off-site and at our headquarters. Cost of consulting
revenues consists primarily of personnel costs and expenses incurred in
providing consulting services at customers' facilities. Because we believe that
providing a high level of support to customers is a strategic advantage, we have
invested significantly in personnel and infrastructure. Cost of service revenues
was $2.4 million, $5.0 million and $10.3 million, in 1997, 1998 and 1999,
representing 96%, 57% and 49% of service revenues for the respective periods.
Cost of service revenues decreased on a percentage basis in each of these years
due primarily to economies of scale achieved as our revenues and operations
grew.
OPERATING EXPENSES
Research and Development. Our research and development expenses consist
primarily of salaries and other personnel-related expenses associated with the
development of new products, the enhancement and localization of existing
products, quality assurance and development of documentation for our products.
Research and development expenses increased from $4.7 million to $8.4 million
and $11.8 million in 1997, 1998 and 1999, representing 37%, 28% and 19% of total
revenues for the respective periods. The total dollar amount increases in each
of these periods was due primarily to an increase in personnel costs in each
such period for development of future products and enhancement of existing
products. The decrease as a percentage of total revenues was due primarily to
growth in our total revenues. To date, all software and development costs have
been expensed in the period incurred because costs incurred subsequent to the
establishment of technological feasibility have not been significant. We believe
that continued investment in research and development is critical to attaining
our strategic objectives, and, as a result, we expect research and development
expenses to increase in absolute dollars in future periods.
Sales and Marketing. Our sales and marketing expenses consist primarily of
personnel costs, including commissions, as well as costs of public relations,
seminars, marketing programs, lead generation, travel and trade shows. Sales and
marketing expenses increased from $11.2 million to $22.7 million and $33.6
million in 1997, 1998 and 1999, representing 88%, 75% and 54% of our total
revenues for the respective periods. The total dollar amount increases reflect
the hiring of additional sales and marketing personnel in connection with
building our direct, original equipment manufacturer and reseller channels,
higher sales commissions
29
<PAGE> 30
associated with increased sales volume, and increased spending associated with
trade shows, user conference and other marketing programs. The decrease as a
percentage of total revenues was due primarily to growth in total revenues.
General and Administrative. Our general and administrative expenses
consist primarily of personnel costs for finance, human resources, legal and
general management, as well as professional services expense associated with
recruiting, legal and accounting. General and administrative expenses increased
from $2.4 million to $3.1 million and $5.0 million in 1997, 1998 and 1999,
representing 19%, 10% and 8% of our total revenues for the respective periods.
Expenses increased in each period due primarily to increased staffing in
finance, human resources, legal, information technology and administration to
manage and support our growth as well as increased costs paid to outside
professional service providers and increased facilities costs. The decrease as a
percentage of our total revenues was due primarily to the growth in our total
revenues.
Bad debt expense charged to operations was $0.4 million, $0.3 million and
$0.2 million in 1997, 1998 and 1999, representing less than 3%, 1% and 1% of
total revenues for the respective periods. The expense declined in absolute
dollars and as a percentage of revenues in each year due primarily to an
increase in repeat business with existing customers which contributed to more
successful collection efforts.
Merger-Related Costs. In 1999, we recorded estimated one-time costs of
$2.1 million related to the acquisition of Influence, which was accounted for as
a pooling-of-interests. These costs consisted primarily of investment banking
and professional fees and other direct costs associated with the merger. As of
December 31, 1999, there was a balance of $1.8 million remaining in accrued
liabilities that was used for final settlement expenditures in January 2000.
Stock-Based Compensation. We use the intrinsic value method of accounting
for our employee stock-based compensation plans. Accordingly, no compensation
cost is recognized for any of our stock options when the exercise price of each
option equals or exceeds the fair value of the underlying common stock as of the
grant date for each stock option with respect to the options granted. From
inception through December 1999, we recorded deferred stock-based compensation
of $3.7 million for the difference at the grant date between the exercise price
and the fair value of the common stock underlying the options. This amount is
included as a component of stockholders' equity and is being amortized on a
graded vesting method by charges to operations over the vesting period of the
options. Such amortization amounted to approximately $2,000, $0.1 million and
$0.7 million for the years ended December 31, 1997, 1998 and 1999.
NET INTEREST INCOME (EXPENSE)
Interest income (expense) represents interest income earned on our cash and
cash equivalents and interest expense on capital equipment leases and
shareholder loans. Net interest income decreased from $0.2 million to $0.1
million and increased to $1.2 million in 1997, 1998 and 1999. The increase in
1999 was primarily due to increased average cash balance as a result of the
completion of our initial public offering of our common stock with net proceeds
of $43.5 million in April 1999.
PROVISION FOR INCOME TAXES
We incurred net operating losses in 1997 and 1998 and consequently paid no
federal, state and foreign income taxes in those years. We recorded an income
tax provision of $0.8 million in 1999, due primarily to foreign income taxes
payable.
As of December 31, 1999, we had federal and state net operating loss
carryforwards of approximately $18.8 million and $4.4 million. We also had
federal and state research and development tax credit carryforwards of
approximately $1.1 million and $0.7 million. Our net operating loss and tax
credit carryforwards will expire at various dates beginning in 2000, if not
utilized.
As of December 31, 1998 and 1999, we had deferred tax assets of
approximately $7.8 million and $12.5 million. Our net deferred tax assets have
been fully offset by a valuation allowance. Our net valuation allowance
increased by $3.4 million and $4.7 million during 1998 and 1999. Deferred tax
assets relate
30
<PAGE> 31
primarily to net operating loss carryforwards and deferred revenue. See Note 7
of Notes to Consolidated Financial Statements for the year ended December 31,
1999.
SIX MONTHS ENDED JUNE 30, 1999 AND 2000
REVENUES
Our total revenues increased from $25.0 million for the six months ended
June 30, 1999 to $59.8 million for the six months ended June 30, 2000,
representing growth of 139%. Our license revenues increased from $16.5 million
for the six months ended June 30, 1999 to $38.6 million for the six months ended
June 30, 2000, representing growth of 133%. These increases were due primarily
to increases in the number of licenses sold and the average transaction size,
reflecting increased acceptance of our PowerCenter, PowerMart and analytic
software products as well as expansion of our direct sales organization and
reseller channels. Our service revenues increased from $8.5 million for the six
months ended June 30, 1999 to $21.3 million for the six months ended June 30,
2000, representing growth of 151%. These increases in our service revenues were
due primarily to an increase in consulting, training and maintenance fees
associated with both the increased number of licenses sold and the increased
average transaction size, along with a larger installed license base. Service
revenues have increased modestly as a percentage of total revenues as our
installed license base grew and as we continued to provide additional services
to our customer base and may increase modestly in future periods to the extent
these trends continue.
COST OF REVENUES
Cost of License Revenues. For the six months ended June 30, 1999 and 2000,
our cost of license revenues increased from $0.3 million to $0.8 million,
representing 2% of license revenues in each of these periods. The increase in
our cost of license revenues in absolute dollars was due primarily to increases
in license revenues and increases in royalty expense.
Cost of Service Revenues. Our cost of service revenues was $4.2 million
and $11.2 million for the six months ended June 30, 1999 and 2000, representing
50% and 53% of service revenues. Cost of service revenues as a percentage of
service revenues increased due to an increase in personnel associated with our
consulting business. Because we believe that providing a high level of support
to customers is a strategic advantage, we have continued to invest significantly
in personnel and infrastructure. For the remainder of 2000, we expect our cost
of service revenues as a percentage of total revenues to remain at or slightly
above our June 30, 2000 level as we grow and expand our consulting business.
OPERATING EXPENSES
Research and Development. Research and development expenses for the six
months ended June 30, 1999 and 2000 were $5.2 million and $9.9 million,
representing 21% and 17% of total revenues. The increase in total dollars was
due primarily to an increase in personnel costs for development of future
products and enhancement of existing products. The decrease as a percentage of
total revenues was due primarily to growth in our total revenues. To date, all
software and development costs have been expensed in the period incurred because
costs incurred subsequent to the establishment of technological feasibility have
not been significant. We believe that continued investment in research and
development is critical to attaining our strategic objectives, and, as a result,
we expect research and development expenses to increase in absolute dollars in
future periods. For the remainder of 2000, we expect research and development
expense as a percentage of total revenues to be at or slightly above our June
30, 2000 level.
Sales and Marketing. For the six months ended June 30, 1999 and 2000,
sales and marketing expenses were $13.9 million and $30.1 million. The increases
were due primarily to the hiring of additional sales and marketing personnel in
connection with the building of our direct, original equipment manufacturer and
reseller channels, higher sales commissions associated with increased sales
volume, and increased spending associated with trade shows and other marketing
programs. For the six months ended June 30, 1999 and 2000, sales and marketing
expenses represented 56% and 50% of total revenues. The decline in sales and
marketing expenses as a percentage of total revenues for these periods was due
primarily to growth in total revenues. We
31
<PAGE> 32
expect to continue hiring additional sales and marketing personnel and to
increase promotion and other marketing expenditures in the future. For the
remainder of 2000, we expect sales and marketing expense as a percentage of
total revenue to remain at or slightly below the June 30, 2000 level.
General and Administrative. For the six months ended June 30, 1999 and
2000, general and administrative expenses were $2.0 million and $4.3 million,
representing 8% and 7% of total revenues. Expenses increased due primarily to
increased staffing in finance, human resources, legal, information technology
and administration to manage and support our growth as well as increased costs
paid to outside professional service providers and increased facilities costs.
The decrease as a percentage of our total revenues was due primarily to the
growth in our total revenues. We expect that for the remainder of 2000, our
general and administrative expenses as a percentage of total revenue will remain
at or slightly below our June 30, 2000 level.
For the six months ended June 30, 1999 and 2000, the bad debt expense
charged to operations was $145,000 and $122,000.
Amortization of Stock-based Compensation. From inception through June 30,
2000, we recorded deferred stock-based compensation of $4.9 million. This amount
is included as a component of stockholder's equity and is being amortized on a
graded vesting method by charges to operations over the vesting period of the
options. Such amortization amounted to $0.3 million and $0.5 million for the six
months ended June 30, 1999 and 2000.
Amortization of Goodwill and Other Intangible Assets. Intangible assets
consist of goodwill, which represents the excess of the aggregate purchase price
over the fair value of the tangible and identifiable intangible assets we have
acquired. In February 2000, we acquired Delphi, a distributor of Informatica
products in Switzerland. The agreement was structured as a share purchase and
accounted for as a purchase transaction. Amounts allocated to intangible assets
are being amortized on a straight-line basis over a two-year period.
Amortization expense of $1.5 million was recorded for the six months ended June
30, 2000.
In April 2000, we announced a strategic alliance with
PricewaterhouseCoopers to jointly develop, sell and support end-to-end analytic
solutions for the business-to-business e-commerce market worldwide. In
connection with the agreement, PricewaterhouseCoopers received 409,138 shares of
our common stock. We recorded goodwill and other intangible assets totaling
$31.8 million, which is being amortized on a straight-line basis over two to
three years. Amortization of goodwill and other intangible assets was $2.7
million for the six months ended June 30, 2000.
Purchased In-Process Research and Development. In connection with the
strategic alliance with PricewaterhouseCoopers we recorded a charge to
operations of $2.2 million for purchased in-process research and development for
the three months ended June 30, 2000. The in-process technology had not reached
technological feasibility and had no alternative uses. The value of the
purchased in-process research and development was computed using a discounted
cash flow analysis based on management's estimates of future revenues, cost of
revenues and operating expenses related to the products and technologies
acquired from PricewaterhouseCoopers.
NET INTEREST INCOME (EXPENSE)
For the six months ended June 30, 1999 and 2000, net interest income
increased from $0.2 million to $0.7. The increase was primarily due to an
increased average cash balance as a result of the completion of our initial
public offering of our common stock with net proceeds of $43.5 million in April
1999.
PROVISION FOR INCOME TAXES
For the six months ended June 30, 1999 and 2000 we recorded an income tax
provision of $0.3 million and $0.9 million.
32
<PAGE> 33
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA
The following tables set forth our unaudited quarterly condensed
consolidated statements of operation data for each of the six quarters ended
June 30, 2000, and this data expressed as a percentage of our net revenues for
each of these six quarters. This quarterly information is unaudited and has been
prepared on the same basis as our annual consolidated financial statements. In
the opinion of management, this quarterly information reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information for the periods presented. The operating results
for any quarter are necessarily indicative of the results of any other future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1999 1999 1999 1999 2000 2000
------------- ------------- ------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues
License......................... $ 7,347 $ 9,181 $11,003 $13,653 $16,836 $21,733
Service......................... 3,633 4,851 5,799 6,912 9,097 12,172
------- ------- ------- ------- ------- -------
Total revenues................ 10,980 14,032 16,802 20,565 25,933 33,905
------- ------- ------- ------- ------- -------
Cost of Revenues
License......................... 142 111 191 242 434 359
Service......................... 1,876 2,365 2,797 3,272 4,621 6,586
------- ------- ------- ------- ------- -------
Total cost of revenues........ 2,018 2,476 2,988 3,514 5,055 6,945
------- ------- ------- ------- ------- -------
Gross profit...................... 8,962 11,556 13,814 17,051 20,878 26,960
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development........ 2,353 2,880 3,310 3,300 4,088 5,788
Sales and marketing............. 6,533 7,383 8,802 10,895 13,434 16,667
General and administrative...... 934 1,099 1,280 1,699 1,953 2,358
Merger-related costs............ -- -- -- 2,082 -- --
Amortization of stock-based
compensation.................. 125 162 186 269 399 130
Amortization of goodwill and
other intangible assets....... -- -- -- -- 374 3,798
Purchased in-process research
and development............... -- -- -- -- -- 2,199
------- ------- ------- ------- ------- -------
Total operating expenses...... 9,945 11,524 13,578 18,245 20,248 30,940
------- ------- ------- ------- ------- -------
Income (loss) from operations..... (983) 32 236 (1,194) 630 (3,980)
Interest income (expense), net.... (42) 226 548 506 301 421
------- ------- ------- ------- ------- -------
Income (loss) before income
taxes........................... (1,025) 258 784 (688) 931 (3,559)
Income tax provision.............. 150 150 201 323 233 642
------- ------- ------- ------- ------- -------
Net income (loss)................. ($1,175) $ 108 $ 583 ($1,011) $ 698 ($4,201)
======= ======= ======= ======= ======= =======
Net income (loss) per share:
Basic............................. ($ 0.14) $ 0.00 $ 0.02 ($ 0.03) $ 0.02 ($ 0.12)
======= ======= ======= ======= ======= =======
Diluted........................... ($ 0.14) $ 0.00 $ 0.02 ($ 0.03) $ 0.02 ($ 0.12)
======= ======= ======= ======= ======= =======
Shares used in calculation of net
income (loss) per share:
Basic............................. 8,367 23,894 31,029 31,671 32,822 34,212
Diluted........................... 8,367 29,787 37,625 31,671 39,046 34,212
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
---------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1999 1999 1999 1999 2000 2000
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
License......................... 67% 65% 65% 66% 65% 64%
Service......................... 33 35 35 34 35 36
------- ------- ------- ------- ------- -------
Total revenues................ 100 100 100 100 100 100
------- ------- ------- ------- ------- -------
Cost of Revenues
License......................... 1 1 1 1 1 1
Service......................... 17 17 17 16 18 19
------- ------- ------- ------- ------- -------
Total cost of revenues........ 18 18 18 17 19 20
------- ------- ------- ------- ------- -------
Gross profit...................... 82 82 82 83 81 80
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development........ 21 21 20 16 16 17
Sales and marketing............. 60 52 52 53 52 49
General and administrative...... 9 8 8 9 8 7
Merger-related costs............ -- -- -- 10 -- --
Amortization of stock-based
compensation.................. 1 1 1 1 1 --
Amortization of goodwill and
other intangible assets....... -- -- -- -- 1 11
Purchased in-process research
and development............... -- -- -- -- -- 7
------- ------- ------- ------- ------- -------
Total operating expenses...... 91 82 81 89 78 91
------- ------- ------- ------- ------- -------
Income (loss) from operations..... (9) 0 1 (6) 3 (11)
Interest income (expense), net.... 0 2 3 3 1 1
------- ------- ------- ------- ------- -------
Income (loss) before income
taxes........................... (9) 2 4 (3) 4 (10)
Income tax provision.............. 2 1 1 2 1 2
------- ------- ------- ------- ------- -------
Net income (loss)................. (11)% 1% 3% (5)% 3% (12)%
======= ======= ======= ======= ======= =======
Costs of license revenues, as a
percentage of license
revenues........................ 2% 1% 2% 2% 3% 2%
Costs of service revenues, as a
percentage of service
revenues........................ 52% 49% 48% 47% 51% 54%
</TABLE>
FACTORS THAT MAY CAUSE FLUCTUATIONS IN OUR REVENUE AND OPERATING RESULTS
In the past, our quarterly operating results have fluctuated, and we expect
these fluctuations to continue. Future operating results are likely to vary
depending on a number of factors, many of which are outside our control.
Historically, we have recognized a substantial portion of our revenues in the
last month of the quarter. In addition, European sales may tend to be relatively
lower during the summer months than during other periods. If customers cancel or
delay orders, it can have a significant adverse impact on our revenues and
results of operations for the quarter. Our quarterly product license revenues
are difficult to forecast because we historically have not had a substantial
backlog of orders and because the market for our products is rapidly evolving,
and our sales and implementation cycles, which may last many months, vary
substantially from customer to customer.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily through our initial public offering
of common stock in April 1999, private sales of preferred equity securities and
capital equipment leases. As of June 30, 2000, we had $52.1 million in cash,
cash equivalents and restricted cash.
Our operating activities resulted in net cash outflows of $3.8 million and
$2.4 million in 1997 and 1998, respectively. Net cash provided by operating
activities was $7.2 million for the year ended December 31, 1999. Uses of cash
in operating activities in each period were primarily due to net operating
losses and increases in accounts receivable. The sources of cash in each period
were primarily increases in deferred revenue, increases in accounts payable and
accrued liabilities and increases in accrued compensation and related expenses.
Our operating activities resulted in net cash outflows of $2.3 million in
the six months ended June 30, 2000. The net cash provided by operating
activities was primarily due to increases in deferred revenue, amortization of
goodwill and other intangible assets and purchased in-process research and
development. Uses
34
<PAGE> 35
of cash in operating activities were due primarily to net operating losses and
increases in accounts receivable, prepaid expenses and other current assets and
other assets.
For the six months ended June 30, 1999, our operating activities resulted
in a net cash inflows of $3.1 million. The net cash provided by operating
activities was primarily due to increases in deferred revenue, accounts payable
and accrued liabilities and accrued compensation and related expenses. Uses of
cash in operating activities were primarily due to net operating losses and
increases in accounts receivable.
Net cash used in investing activities was $0.9 million in 1997, $1.0
million in 1998 and $1.4 million in 1999. Uses of cash in investing activities
in each period were for the purchase of property and equipment in all periods.
Investing activities used cash of $0.6 million in the six months ended June
30, 1999 and $25.3 million in the six months ended June 30, 2000. Of the $25.3
million used in investing activities in the six months ended June 30, 2000,
$20.3 million was associated with requirements for restricted cash, $2.3 million
was associated with the acquisition of our distributor in Switzerland, Delphi.
The other $2.7 million was for the purchase of property and equipment. The use
of cash in investing activities in the six months ended June 30, 1999 was due
primarily to the purchase of property and equipment.
Net cash provided by financing activities for the years ended December 31,
1997, 1998 and 1999 were $10.6 million, $1.6 million and $44.7 million,
respectively. Net cash provided by financing activities for the year ended
December 31, 1997 was primarily through the issuance of preferred stock and from
the proceeds of notes payable. Net cash provided by financing activities for the
year ended December 31, 1998 was primarily from the proceeds of notes payable
associated with financing Influence which was an S corporation prior to the
acquisition in December 1999. Net cash provided by financing activities for the
year ended December 31, 1999 was primarily from the proceeds of our initial
public offering of $43.5 million as well as proceeds from the issuance of common
stock
Financing activities provided cash of $2.2 million for the six months ended
June 30, 2000. Net cash provided by financing activities was from the exercise
of stock options, partially offset by final payments on notes payable to
stockholders associated with the acquisition of Influence in December 1999.
Financing activities provided $43.4 million for the six months ended June 30,
1999, primarily through the completion of our initial public offering of common
stock in April 1999.
As of December 31, 1999, our principal commitments consisted of obligations
under operating and capital leases and promissory notes. In 1997 and 1998, we
issued promissory notes to three shareholders in exchange for cash advances and
payment for services. These notes bear interest at the bank's prime rate (8.5%
at December 31, 1999) plus 2% per annum, with a maximum rate of 10% per annum.
Principal and accrued interest on these notes at December 31, 1997, 1998 and
1999 was $1.3 million, $3.1 million and $3.4 million, respectively. The
principal and accrued interest on these notes were repaid in February 2000. As
of December 31, 1999, we had $0.2 million in outstanding borrowings under
capital lease agreements which are payable through 2001. During 1998, we
maintained a revolving line of credit which provided for borrowings of up to
$3.0 million based on 80% of eligible accounts receivable. Borrowings under this
line of credit bore interest, payable monthly, at 0.25% above prime rate.
Borrowings were secured by substantially all of our assets, and the agreement
also required us to comply with certain financial covenants. We chose not to
renew this line of credit when it expired in December 1998. See Notes 2 and 3 of
Notes to Consolidated Financial Statements.
As of June 30, 2000, our principal commitments consisted of obligations
under operating and capital leases. As of June 30, 1999 and 2000, we had $0.3
million and $0.2 million, in outstanding borrowings under capital lease
agreements, which are payable through 2001. In addition, the principal and
accrued interest on the notes to stockholders of $3.6 million were fully repaid
in February 2000.
On February 22, 2000, we entered into two lease agreements for new
corporate headquarters in Redwood City, California. The facility is under
construction and is expected to be completed in June 2001. The lease expires 12
years after occupancy. As part of these leases, we provided certificates of
deposit totaling
35
<PAGE> 36
$12.2 million as a security deposit for one year's lease payments or until
certain financial covenants are met. These certificates of deposit are
classified as restricted cash in the balance sheet.
Deferred revenues consist primarily of the unrecognized portion of revenues
received under maintenance contracts. For international customers, specific
resellers, OEMs and specific customers based on their credit history, revenue is
recognized upon cash collections, and is not recorded on the balance sheet or
income statement until collectibility is no longer determined to be uncertain.
As of June 30, 2000, we had $15.0 million of sales related to shipments to
international customers, thinly capitalized resellers and OEMs for which revenue
had not been recognized.
We believe that our cash balances and the cash flows generated by
operations will be sufficient to satisfy our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. Thereafter, we
may require additional funds to support our working capital requirements, or for
other purposes, and may seek to raise such additional funds through public or
private equity financings or from other sources. We may not be able to obtain
adequate or favorable financing at that time. Any financing we obtain may dilute
your ownership interests.
A portion of our cash may be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
From time to time, in the ordinary course of business, we may evaluate potential
acquisitions of such businesses, products or technologies.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
MARKET RISK
The following discusses our exposure to market risk related to changes in
interest rates, foreign currency exchange rates and equity prices. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in "Risk Factors".
INTEREST RATE RISK
Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio. We do not use derivative financial instruments in
our investment portfolio. The primary objective of our investment activities is
to preserve principal while maximizing yields without significantly increasing
risk. Our investments consist primarily of commercial paper. Due to the nature
of our investments, we believe that there is no material risk exposure. All
investments are carried at market value, which approximates cost.
FOREIGN CURRENCY RISK
We develop products in the United States and market our products in North
and South America, Europe and the Asia-Pacific region. As a result, our
financial results could be affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. As our
sales are primarily in U.S. dollars, a strengthening of the dollar could make
our products less competitive in foreign markets.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. SAB
101 provides guidance with respect to the recognition, presentation and
disclosure of revenue in financial statements of all public registrants. The
company has not fully assessed the impact of the adoption of SAB 101 and has not
determined the effect, if any, that it will have on our reported revenues or
results of operations in future periods.
36
<PAGE> 37
In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44)
Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25. FIN 44 clarifies the application of
Opinion 25 for (a) the definition of employee for purposes of applying Opinion
25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence for various modifications
to the terms of a previously fixed stock option award and (d) the accounting for
an exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, but certain provisions cover specific events that occur
after either December 15, 1998, or January 12, 2000. The adoption of certain
other provisions of FIN 44 prior to March 31, 2000 did not have a material
effect on our financial statements. We do not expect that the adoption of the
remaining provisions will have a material effect on our financial statements.
37
<PAGE> 38
MANAGEMENT
OUR EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages and positions as of
September 13, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gaurav S. Dhillon...................... 35 Chief Executive Officer, Secretary and Director
Diaz H. Nesamoney...................... 35 President, Chief Operating Officer and Director
Clive A. Harrison...................... 43 Executive Vice President, Worldwide Field Operations
Earl E. Fry............................ 41 Chief Financial Officer and Senior Vice President
Barton S. Foster....................... 35 Senior Vice President, Worldwide Marketing
David W. Pidwell....................... 52 Director
A. Brooke Seawell...................... 52 Director
Vincent R. Worms....................... 47 Director
</TABLE>
Mr. Dhillon is one of our co-founders and has been our Chief Executive
Officer, Secretary and a member of our board of directors since our inception.
Prior to co-founding Informatica in February 1993, Mr. Dhillon was employed by
Sterling Software, a software company, from December 1991 to November 1992,
where his last position was Project Manager. Prior to that, he was a Systems
Architect with Unisys Corporation. Mr. Dhillon holds a B.S.E.E. from Punjab
University, India.
Mr. Nesamoney is one of our co-founders and has been a member of our board
of directors and an officer since our inception. He is currently our President
and Chief Operating Officer. Prior to co-founding Informatica in February 1993,
Mr. Nesamoney was employed by Unisys Corporation from May 1988 to February 1993,
where his last position was Development Manager. Mr. Nesamoney holds an M.S.C.S.
degree from Birla Institute of Technology & Science, India.
Mr. Harrison joined us in January 1996 as Senior Vice President, Sales and
became Executive Vice President, Worldwide Field Operations in January 1999. Mr.
Harrison held sales management responsibility at Oracle Corporation from June
1995 to January 1996. From September 1989 to June 1995, he was Regional Vice
President of Sales at Information Resources, an enterprise decision support
software company. Mr. Harrison holds a B.S. degree in operational research and
economics from Aston University in England.
Mr. Fry has been Chief Financial Officer and Senior Vice President since
December 1999. From November 1995 to December 1999, Mr. Fry was Vice President
and Chief Financial Officer at Omnicell.com. From July 1994 to November 1995, he
was Vice President and Chief Financial Officer at C*ATS Software, Inc. Mr. Fry
holds a B.B.A. degree in Accounting from the University of Hawaii and an M.B.A.
degree in Finance and Marketing from Stanford University.
Mr. Foster has served as Senior Vice President, Worldwide Marketing since
June 2000. Prior to joining us, Mr. Foster held various management positions at
CrossWorlds Software, including Senior Vice President, Marketing and Business
Development from June 1998 to June 2000. Prior to CrossWorlds, Mr. Foster served
as Executive Vice President, Sales and Marketing at Connect, Inc. from March
1996 to June 1998. From November 1993 to March 1996, Mr. Foster held various
management positions at Oracle Corporation, including Vice President
Applications and Industry Marketing. Mr. Foster holds a B.A. degree from
Stanford University and an M.B.A. degree from the Harvard University Graduate
School of Business Administration.
Mr. Pidwell has been one of our directors since February 1996. From January
1988 to January 1996, Mr. Pidwell was President and Chief Executive Officer of
Rasna Corporation, a software company. Mr. Pidwell is currently a Venture
Partner with Alloy Ventures and serves on the boards of directors of a number of
private companies. Mr. Pidwell holds a B.S.E.E. in electrical engineering and a
M.S.I.S.E. degree in computer systems engineering from Ohio University.
Mr. Seawell has been one of our directors since December 1997. Mr. Seawell
is a General Partner of Technology Crossover Ventures, a venture capital firm.
From January 1997 to August 1998, Mr. Seawell was
38
<PAGE> 39
Executive Vice President of NetDynamics, an Internet applications server
company. From March 1991 to January 1997, Mr. Seawell was Senior Vice President
and Chief Financial Officer of Synopsys. Mr. Seawell holds a B.A. degree in
Economics and an M.B.A. degree in Finance and Accounting from Stanford
University. Mr. Seawell serves on the board of directors of NVIDIA Corporation,
a 3D (three-dimensional) graphics processor company, Accrue Software, Inc., a
developer of web visitor analytics software and Mediaplex, Inc., an advertising
technology company.
Mr. Worms has been one of our directors since September 1995. From 1982 to
the present, Mr. Worms has served as Co-President of Partech International,
Inc., a venture capital firm that manages a group of our investors. Mr. Worms
holds a M.S. degree in science from the Ecole Polytechnique in Paris, France and
a M.S. degree in Civil Engineering from the Massachusetts Institute of
Technology. Mr. Worms serves on the boards of directors of SangStat Medical
Corporation and Business Objects, in addition to serving on the board of a
number of private companies.
39
<PAGE> 40
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to us with respect to
beneficial ownership of our common stock as of September 1, 2000 as adjusted to
reflect the sale of shares offered hereby, by (a) each person known by us to own
beneficially more than 5% of the outstanding shares of common stock, (b) each of
our directors, (c) each named executive officer, (d) each selling stockholder
and (e) all current executive officers and directors as a group.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR OWNERSHIP AFTER
TO OFFERING(1) OFFERED THE OFFERING(1)
------------------------- NUMBER -------------------------
NUMBER PERCENTAGE(2) OF SHARES NUMBER PERCENTAGE(2)
------ ------------- --------- ------ -------------
<S> <C> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS, DIRECTORS AND
5% STOCKHOLDERS:
Putnam Investments Inc.(3)............. 4,170,334 11.9% -- 4,170,334 11.2%
One Post Office Square
Boston, MA 02109
Pilgrim Baxter & Associates Ltd.(4).... 3,012,200 8.6% -- 3,012,200 8.1%
825 Duportail Road
Wayne, PA 19087
Gaurav S. Dhillon(5)................... 2,669,504 7.5% 125,000 2,544,504 6.8%
Diaz H. Nesamoney(6)................... 2,525,144 7.1% 125,000 2,400,144 6.4%
Partech Entities(7).................... 1,601,080 4.6% -- 1,601,080 4.3%
50 California Street, Ste. 3200
San Francisco, CA 94111
Vincent R. Worms(8).................... 1,341,423 3.8% 10,000 1,331,423 3.6%
Clive A. Harrison(9)................... 368,916 1.0% 25,000 343,916 *
David W. Pidwell(10)................... 150,250 * -- 150,250 *
A. Brooke Seawell(11).................. 78,333 * -- 78,333 *
All executive officers and directors as
a group (8 persons)(12).............. 7,301,016 20.2% 285,000 7,016,016 18.4%
ALL OTHER SELLING STOCKHOLDERS:
Srinivasan Subramanian................. 629,412 1.8% 25,000 604,412 1.6%
PricewaterhouseCoopers(13)............. 365,496 1.0% 77,000 288,496 *
The Vasu & Latha Devan Family Trust.... 304,191 * 60,000 244,197 *
Marvin L. Mouchawar(14)................ 186,390 * 25,000 161,390 *
Mark Burton(15)........................ 49,113 * 6,416 42,697 *
David Lyle(16)......................... 34,300 * 15,000 19,300 *
Carol A. Taubman(17)................... 32,582 * 6,584 25,998 *
</TABLE>
---------------
* Less than 1% of the outstanding common stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of September 1, 2000
are deemed outstanding. Such shares, however, are not deemed outstanding
for the purpose of computing the percentage ownership of each other person.
To our knowledge, except as set forth in the footnotes to this table and
subject to applicable community property laws, each person named in the
table has the voting and investment power with respect to the shares set
forth opposite such person's name.
(2) Percentage beneficially owned is based on 35,080,695 shares of common stock
outstanding as of September 1, 2000, including shares distributed in
connection with our acquisition of Zimba on August 31, 2000, and assumes
37,080,695 shares of common stock will be outstanding after the offering.
(3) Based upon a Schedule 13G/A filed with the Securities and Exchange
Commission on February 17, 2000.
40
<PAGE> 41
(4) Based upon a Schedule 13G/A filed with the Securities and Exchange
Commission on January 7, 2000.
(5) Share numbers include 389,832 shares subject to options exercisable within
60 days of September 1, 2000.
(6) Share numbers include 389,832 shares subject to options exercisable within
60 days of September 1, 2000. Also includes 5,332 shares held by Mr.
Nesamoney's spouse.
(7) Share numbers include 419,760 shares held by Partech U.S. Partners III,
C.V., 419,758 shares held by Parvest U.S. Partners II, C.V., 97,918 shares
held by Vendome Capital LLC, 141,456 shares held by Multinvest LLC, 186,432
shares held by Axa U.S. Growth Fund, LLC, 46,312 shares held by Thomas G.
McKinley, 248,624 shares held by Almanori Limited, 14,152 shares held by
Partech International Profit Sharing Plan, 13,334 shares held by Parallel
Capital I LLC, and 13,334 shares held by Parallel Capital II LLC. Mr.
Worms, one of our directors, is either a general partner, managing member,
attorney-in-fact or trustee of each Partech Entity except Vendome Capital
LLC, Almanori Limited and the shares held by Thomas G. McKinley. Mr. Worms
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein.
(8) Share numbers include 1,208,226 shares held by several of the Partech
Entities. Mr. Worms disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein.
(9) Share numbers include 92,668 shares subject to options exercisable within
60 days of September 1, 2000.
(10) Share numbers include 10,000 shares subject to options exercisable within
60 days of September 1, 2000. Also includes 105,000 shares held of record
by the Pidwell Family Living Trust dated June 25, 1987, of which David
Pidwell is trustee.
(11) Share numbers include 78,333 shares subject to options exercisable within
60 days of September 1, 2000.
(12) Share numbers include options to purchase 983,581 shares of common stock
exercisable within 60 days of September 1, 2000, held by all our directors
and executive officers.
(13) PricewaterhouseCoopers is one of our significant strategic partners.
(14) Mr. Mouchawar is our Senior Vice President and General Manager,
Applications Business Unit. Share numbers include 37,170 shares subject to
options exercisable within 60 days of September 1, 2000.
(15) Mr. Burton is our Senior Vice President, Sales -- Americas. Share numbers
include 10,709 shares subject to options exercisable within 60 days of
September 1, 2000.
(16) Mr. Lyle is our Vice President Development, Application Business Unit.
Share numbers include 30,355 shares subject to options exercisable within
60 days of September 1, 2000.
(17) Ms. Taubman is our Vice President of Finance. Share numbers include 26,582
shares subject to options exercisable within 60 days of September 1, 2000.
41
<PAGE> 42
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation,
Robertson Stephens, Inc., Thomas Weisel Partners LLC and First Albany
Corporation are acting as representatives, have severally agreed to purchase,
and we have agreed to sell to them, severally, the number of shares indicated
below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated........................... 843,600
Credit Suisse First Boston Corporation...................... 843,600
Robertson Stephens, Inc..................................... 199,800
Thomas Weisel Partners LLC.................................. 199,800
First Albany Corporation.................................... 133,200
Cochran, Caronia Securities LLC............................. 40,000
First Analysis Securities Corporation....................... 40,000
Edward D. Jones & Co., L.P.................................. 40,000
McDonald Investments Inc., a Keycorp Company................ 40,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 40,000
Prudential Securities Incorporated.......................... 40,000
Wasserstein Perella Securities, Inc......................... 40,000
---------
Total................................................ 2,500,000
=========
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The underwriters are obligated to take and pay for all of the
shares of common stock offered by this prospectus, other than those covered by
the underwriters' over-allotment option described below, if any such shares are
taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $2.76 a share under the public offering price. After
the initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of 375,000
additional shares of common stock at the public offering price set forth on the
cover page of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with this offering of the shares
common stock. To the extent this over-allotment option is exercised, each
underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number set forth next to each underwriter's name in the preceding table bears to
the total number of shares of common stock set forth next to the names of all
underwriters in the preceding table.
Each of Informatica, our officers, directors and certain other stockholders
has agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, during the period ending 90 days
after the date of this prospectus, they will not, directly or indirectly:
42
<PAGE> 43
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock;
whether any such transaction described above is to be settled by delivery of
common stock or such other securities in cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
- the sale to the underwriters of the shares of common stock under the
underwriting agreement;
- transfers of shares of common stock or any security convertible into
common stock as a bona fide gift or gifts, under certain circumstances
where the donee agrees to the same restrictions;
- distributions of shares of common stock or any security convertible into
common stock to limited partners or stockholders under certain
circumstances, where the transferee agrees to the same restrictions; or
- transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after the
completion of this offering.
Promptly after the 90-day period following the date of this prospectus, we
have agreed to file a registration statement on Form S-3 covering the resale of
the remaining 288,496 shares of our common stock that will be owned by
PricewaterhouseCoopers following the completion of this offering.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to position in the
common stock for their own account. In addition, to cover over-allotments or to
stabilize the price of the common stock, the underwriters may bid for, and
purchase, shares of common stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the common stock in the offering if the syndicate repurchases
previously distributed shares of common stock in transactions to cover syndicate
short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the common stock above
independent market levels. The underwriters are not required to engage in these
activities and may end any of these activities at any time.
The underwriting agreement provides that we and the underwriters will
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on several
filed and completed public offerings of equity securities. Thomas Weisel
Partners does not have any material relationship with us or any of our officers,
directors or other controlling persons, except with respect to its contractual
relationship with us pursuant to the underwriting agreement entered into in
connection with this offering.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered pursuant
to this prospectus will be passed upon for us by Morrison & Foerster LLP, Palo
Alto, California. The underwriters have been represented by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California.
43
<PAGE> 44
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and financial statement schedule included in our Annual
Report on Form 10-K for the year ended December 31, 1999 and the financial
statements of Zimba as of December 31, 1998 and 1999 and for the period from
inception (June 24, 1998) through December 31, 1999, as set forth in their
reports, which are included in this prospectus. Our financial statements and
financial statement schedule and the financial statements of Zimba are included
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
44
<PAGE> 45
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the Act we
file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information filed can be inspected and copied at the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C., 20549, and at the
following regional offices of the Commission: Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a web site
(http://www.sec.gov) containing reports, proxy and information statements and
other information of registrants, including ours, that file electronically with
the Commission. In addition, the Common Stock is listed on the Nasdaq National
Market and similar information concerning us can be inspected and copied at the
offices of the National Association of Securities Dealers, Inc., 9513 Key West
Avenue, Rockville, Maryland 20850.
The Commission allows us to "incorporate by reference" the information we
filed with them, which means that we can disclose important information to you
by referring you to those documents. The documents listed below have been filed
by Informatica Corporation under the Exchange Act with the Commission and are
incorporated herein by reference:
- Our Annual Report on Form 10-K filed on March 30, 2000 for the year ended
December 31, 1999;
- Our Quarterly Report on Form 10-Q filed on May 15, 2000 for the quarter
ended March 31, 2000;
- Our Quarterly Report on Form 10-Q filed on August 14, 2000 for the
quarter ended June 30, 2000;
- Our Current Report on Form 8-K dated September 6, 2000;
- Our Definitive Proxy on Form 14A filed on April 20, 2000; and
- The description of our common stock contained in our registration
statement on Form 8-A (File No. 000-25871).
Each document we file pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act subsequent to the date of this prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this prospectus and to be part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein (or in the applicable prospectus supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
Copies of all documents incorporated herein by reference (not including the
exhibits to such information, unless such exhibits are specifically incorporated
by reference in such information) will be provided without charge to each
person, including any beneficial owner, to whom this prospectus is delivered
upon written or oral request. Requests should be directed to Earl E. Fry, Chief
Financial Officer, 3350 W. Bayshore Road, Palo Alto, California 94303, telephone
number: (650) 687-6200.
45
<PAGE> 46
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. 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-6
Notes to Consolidated Financial Statements.................. F-7
Financial Statements (unaudited for periods ending June 30,
1999 and 2000):
Condensed Consolidated Balance Sheets as of December 31,
1999 and June 30, 2000.................................... F-19
Condensed Consolidated Statements of Income for the Three
and Six Month Periods Ended
June 30, 1999 and June 30, 2000........................... F-20
Condensed Consolidated Statements of Cash Flows for the Six
Month Periods Ended
June 30, 1999 and June 30, 2000........................... F-21
Notes to Condensed Consolidated Financial Statements........ F-22
Financial Statements for Zimba:
Report of Independent Auditors.............................. F-26
Balance Sheets.............................................. F-27
Statements of Operations.................................... F-28
Statements of Stockholders' Equity.......................... F-29
Statements of Cash Flows.................................... F-30
Notes to Financial Statements............................... F-31
Selected Unaudited Pro Forma Condensed Combined Financial
Information:
Introduction................................................ F-38
Selected Unaudited Pro Forma Condensed Combined Balance
Sheet..................................................... F-39
Selected Unaudited Pro Forma Condensed Combined Statement of
Operations for the Year Ended December 31, 1999........... F-40
Selected Unaudited Pro Forma Condensed Combined Statement of
Operations for the Six Months Ended June 30, 2000......... F-41
Notes to Selected Unaudited Pro Forma Condensed Combined
Financial Information..................................... F-42
</TABLE>
F-1
<PAGE> 47
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Informatica Corporation
We have audited the accompanying consolidated balance sheets of Informatica
Corporation as of December 31, 1998 and 1999 and the related consolidated
statements of operations, redeemable convertible preferred stock and
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Informatica Corporation at December 31, 1998 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Palo Alto, California
January 24, 2000
F-2
<PAGE> 48
INFORMATICA CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 7,167 $ 57,521
Accounts receivable, net of allowances of $1,731 and
$1,977 in 1998 and 1999, respectively.................. 3,707 8,119
Prepaid expenses and other current assets................. 563 1,272
-------- --------
Total current assets................................... 11,437 66,912
Property and equipment, net................................. 592 1,482
Other assets................................................ 136 129
-------- --------
Total assets........................................... $ 12,165 $ 68,523
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities.................. $ 4,354 $ 7,999
Accrued compensation and related expenses................. 3,589 6,264
Income taxes payable...................................... -- 813
Current portion of capital lease obligations.............. 242 150
Current portion of notes payable to stockholders.......... 1,921 2,075
Deferred revenue.......................................... 4,573 9,660
-------- --------
Total current liabilities.............................. 14,679 26,961
Capital lease obligations, less current portion............. 217 66
Notes payable to stockholders, less current portion......... 1,263 1,372
Commitments
Redeemable convertible preferred stock, no par value,
issuable in series:
16,340,000 shares authorized in 1998; and 2,000,000 shares
authorized in 1999 15,880,000 issued and outstanding at
December 31, 1998...................................... 17,586 --
Stockholders' equity (deficit):
Common stock, $0.001 par value; 100,000,000 shares
authorized; 8,160,348 and 31,998,618 shares issued and
outstanding at December 31, 1998 and 1999,
respectively........................................... 1,213 67,020
Notes receivable from stockholders........................ (40) (40)
Deferred stock-based compensation......................... (383) (2,888)
Accumulated deficit....................................... (22,389) (23,884)
Accumulated other comprehensive income (loss)............. 19 (84)
-------- --------
Total stockholders' equity (deficit)................... (21,580) 40,124
-------- --------
Total liabilities, redeemable convertible preferred
stock and stockholders' equity (deficit).............. $ 12,165 $ 68,523
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 49
INFORMATICA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues:
License................................................... $10,242 $21,582 $41,184
Service................................................... 2,499 8,764 21,195
------- ------- -------
Total revenues......................................... 12,741 30,346 62,379
Cost of revenues:
License................................................... 190 376 686
Service................................................... 2,392 5,013 10,310
------- ------- -------
Total cost of revenues................................. 2,582 5,389 10,996
------- ------- -------
Gross profit................................................ 10,159 24,957 51,383
Operating expenses:
Research and development.................................. 4,747 8,385 11,843
Sales and marketing....................................... 11,219 22,733 33,613
General and administrative................................ 2,408 3,132 5,012
Merger-related costs...................................... -- -- 2,082
Amortization of stock-based compensation.................. 2 98 742
------- ------- -------
Total operating expenses............................... 18,376 34,348 53,292
------- ------- -------
Loss from operations........................................ (8,217) (9,391) (1,909)
Interest income (expense), net.............................. 199 106 1,238
------- ------- -------
Loss before income taxes.................................... (8,018) (9,285) (671)
Income tax provision........................................ -- -- 824
------- ------- -------
Net loss.................................................... $(8,018) $(9,285) $(1,495)
======= ======= =======
Net loss per share:
Basic and diluted......................................... $ (1.18) $ (1.21) $ (0.06)
======= ======= =======
Shares used in calculation of net loss per share:
Basic and diluted......................................... 6,777 7,652 23,783
======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 50
INFORMATICA CORPORATION
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------
REDEEMABLE
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE DEFERRED
---------------------- -------------------- FROM STOCK-BASED
SHARES AMOUNT SHARES AMOUNT STOCKHOLDERS COMPENSATION
----------- -------- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1996............. 11,380,000 $ 8,593 5,603,920 $ 104 $(40) $ --
Components of comprehensive loss:
Net loss.............................. -- -- -- -- -- --
Foreign currency translation
adjustment.......................... -- -- -- -- -- --
----------- -------- ---------- ------- ---- -------
Comprehensive loss......................
Issuance of common stock................ -- -- 1,115,094 450 -- --
Repurchase of common stock.............. -- -- (4,956) (2) -- --
Common stock options exercised.......... -- -- 288,610 14 -- --
Issuance of Series D preferred stock,
net of issuance costs................. 4,500,000 8,993 -- -- -- --
Deferred stock-based compensation....... -- -- -- 85 -- (85)
Amortization of stock-based
compensation.......................... -- -- -- -- -- 2
----------- -------- ---------- ------- ---- -------
BALANCES AT DECEMBER 31, 1997............. 15,880,000 17,586 7,002,668 651 (40) (83)
Components of comprehensive loss:
Net loss.............................. -- -- -- -- -- --
Foreign currency translation
adjustment.......................... -- -- -- -- -- --
----------- -------- ---------- ------- ---- -------
Comprehensive loss......................
Repurchase of common stock.............. -- -- (6,194) (3) -- --
Common stock options exercised.......... -- -- 1,163,874 167 -- --
Deferred stock-based compensation....... -- -- -- 398 -- (398)
Amortization of stock-based
compensation.......................... -- -- -- -- -- 98
----------- -------- ---------- ------- ---- -------
BALANCES AT DECEMBER 31, 1998............. 15,880,000 17,586 8,160,348 1,213 (40) (383)
Components of comprehensive loss:
Net loss.............................. -- -- -- -- -- --
Foreign currency translation
adjustment.......................... -- -- -- -- -- --
----------- -------- ---------- ------- ---- -------
Comprehensive loss......................
Issuance of common stock in connection
with initial public offering, net of
offering costs........................ -- -- 6,000,000 43,514 -- --
Conversion of redeemable convertible
preferred stock into common stock..... (15,880,000) (17,586) 15,880,000 17,586 -- --
Repurchase of common stock.............. -- -- (8,672) (3) -- --
Common stock options exercised.......... -- -- 1,569,396 1,251 -- --
Exercise of warrants.................... -- -- 397,546 212 -- --
Deferred stock-based compensation....... -- -- -- 3,247 -- (3,247)
Amortization of stock-based
compensation.......................... -- -- -- -- -- 742
----------- -------- ---------- ------- ---- -------
BALANCES AT DECEMBER 31, 1999............. -- $ -- 31,998,618 $67,020 $(40) $(2,888)
=========== ======== ========== ======= ==== =======
<CAPTION>
STOCKHOLDERS' EQUITY (DEFICIT)
-------------------------------------------
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE STOCKHOLDERS'
ACCUMULATED INCOME EQUITY
DEFICIT (LOSS) (DEFICIT)
----------- ------------- -------------
<S> <C> <C> <C>
BALANCES AT DECEMBER 31, 1996............. $ (5,086) $ -- $(5,022)
Components of comprehensive loss:
Net loss.............................. (8,018) -- (8,018)
Foreign currency translation
adjustment.......................... -- (11) (11)
-------- ----- -------
Comprehensive loss...................... (8,029)
Issuance of common stock................ -- -- 450
Repurchase of common stock.............. -- -- (2)
Common stock options exercised.......... -- -- 14
Issuance of Series D preferred stock,
net of issuance costs................. -- -- --
Deferred stock-based compensation....... -- -- --
Amortization of stock-based
compensation.......................... -- -- 2
-------- ----- -------
BALANCES AT DECEMBER 31, 1997............. (13,104) (11) (12,587)
Components of comprehensive loss:
Net loss.............................. (9,285) -- (9,285)
Foreign currency translation
adjustment.......................... -- 30 30
-------- ----- -------
Comprehensive loss...................... (9,255)
Repurchase of common stock.............. -- -- (3)
Common stock options exercised.......... -- -- 167
Deferred stock-based compensation....... -- -- --
Amortization of stock-based
compensation.......................... -- -- 98
-------- ----- -------
BALANCES AT DECEMBER 31, 1998............. (22,389) 19 (21,580)
Components of comprehensive loss:
Net loss.............................. (1,495) -- (1,495)
Foreign currency translation
adjustment.......................... -- (103) (103)
-------- ----- -------
Comprehensive loss...................... (1,598)
Issuance of common stock in connection
with initial public offering, net of
offering costs........................ -- -- 43,514
Conversion of redeemable convertible
preferred stock into common stock..... -- -- 17,586
Repurchase of common stock.............. -- -- (3)
Common stock options exercised.......... -- -- 1,251
Exercise of warrants.................... -- -- 212
Deferred stock-based compensation....... -- -- --
Amortization of stock-based
compensation.......................... -- -- 742
-------- ----- -------
BALANCES AT DECEMBER 31, 1999............. $(23,884) $ (84) $40,124
======== ===== =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 51
INFORMATICA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(8,018) $(9,285) $(1,495)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation.............................................. 516 1,716 550
Sales and returns allowances.............................. 241 886 --
Other receivable allowances............................... 440 320 246
Amortization of stock-based compensation.................. 2 98 742
Interest expense related to notes payable................. 34 167 289
Changes in operating assets and liabilities:
Accounts receivable..................................... (2,554) (1,756) (4,658)
Prepaid expenses and other assets....................... (208) (305) (702)
Accounts payable and accrued liabilities................ 2,128 1,838 3,645
Income taxes payable.................................... -- -- 813
Accrued compensation and related expenses............... 1,216 2,017 2,675
Deferred revenue........................................ 2,364 1,887 5,087
------- ------- -------
Net cash provided by (used in) operating activities......... (3,839) (2,417) 7,192
INVESTING ACTIVITIES
Purchase of property and equipment, net..................... (869) (954) (1,440)
------- ------- -------
Net cash used in investing activities....................... (869) (954) (1,440)
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock................... 8,993 -- --
Proceeds from initial public offering, net.................. -- -- 43,514
Proceeds from issuance of common stock, net of payments for
repurchases............................................... 462 164 1,248
Proceeds exercise of warrants............................... -- -- 212
Proceeds from notes payable to stockholders................. 1,293 1,691 1,286
Payments on notes payable to stockholders................... -- -- (1,312)
Payments on capital lease obligations....................... (164) (235) (243)
------- ------- -------
Net cash provided by (used in) financing activities......... 10,584 1,620 44,705
------- ------- -------
Effect of foreign currency translation on cash and cash
equivalents............................................... (11) 30 (103)
------- ------- -------
Increase (decrease) in cash and cash equivalents............ 5,865 (1,721) 50,354
------- ------- -------
Cash and cash equivalents at beginning of year.............. 3,023 8,888 7,167
------- ------- -------
Cash and cash equivalents at end of year.................... $ 8,888 $ 7,167 $57,521
======= ======= =======
SUPPLEMENTAL DISCLOSURES:
Interest paid............................................. $ 40 $ 48 $ 29
======= ======= =======
Income taxes paid......................................... -- -- $ 10
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations incurred........................ $ -- $ 437 $ --
======= ======= =======
Conversion of redeemable convertible preferred stock into
common stock............................................ $ -- $ -- $17,586
======= ======= =======
Deferred stock-based compensation related to options
granted................................................. $ 85 $ 398 $ 3,247
======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 52
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING
POLICIES
DESCRIPTION OF THE COMPANY
Informatica Corporation (the "Company") was incorporated in California in
February 1993 and reincorporated in Delaware in March 1999. The Company operates
in one business segment which provides software solutions that help large
companies deploy, manage, maintain and grow systems that enable more effective
business decision-making.
On December 15, 1999, the Company acquired all of the outstanding stock of
Influence Software, Inc. (Influence), a developer of analytic applications for
eBusiness. The transaction was recorded using the pooling-of-interests method of
accounting, and as such, financial information for all dates and periods prior
to the acquisition has been restated to reflect the acquisition.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
The functional currency of the Company's foreign subsidiaries is the local
currency. The Company translates all assets and liabilities to U.S. dollars at
the current exchange rates as of the applicable balance sheet date. Revenue and
expenses are translated at the average exchange rate prevailing during the
period. Gains and losses resulting from the translation for the foreign
subsidiaries' financial statements are reported as a separate component of
stockholders' equity. Net gains and losses resulting from foreign exchange
transactions were not significant during any of the periods presented.
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 amounts reported in the financial statements and
accompanying notes. Changes in these estimates and assumptions may have a
material impact on the financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts to conform
to the current year presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents, which consist of cash and highly liquid
short-term government securities with insignificant interest rate risk and
original maturities of three months or less at date of purchase, are stated at
cost, which approximates fair value.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over estimated useful
lives of the related assets, generally three years or less.
SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs in accordance with
Financial Accounting Standards Board ("FASB") Statement No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed", under
which certain software development costs incurred subsequent to the
F-7
<PAGE> 53
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
establishment of technological feasibility are capitalized and amortized over
the estimated lives of the related products. Technological feasibility is
established upon completion of a working model. Through December 31, 1999, costs
incurred subsequent to the establishment of technological feasibility have not
been significant and all software development costs have been charged to
research and development expense in the accompanying consolidated statements of
operations.
CONCENTRATIONS OF CREDIT RISK AND CREDIT EVALUATIONS
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of trade accounts receivable. The Company performs
ongoing credit evaluations of its customers, which are primarily located in the
U.S., Europe and Canada, and generally does not require collateral. Allowances
for credit risks and for estimated future returns are provided upon shipment.
Returns to date have not been material. Actual credit losses and returns may
differ from the Company's estimates and such differences could be material to
the financial statements.
REVENUE RECOGNITION
The Company generates revenues through two sources, software licenses and
services. The Company's license revenues are generated from licensing the
Company's products directly to end users and indirectly through resellers and
original equipment manufacturers. Service revenues are generated from
maintenance contracts and training and consulting services performed for
customers that license the Company's products directly and indirectly through
resellers.
License revenues are recognized when a noncancelable license agreement has
been signed, the product has been shipped, the fees are fixed and determinable,
collectibility is probable and vendor-specific objective evidence exists to
allocate the total fee to elements of the arrangement. Vendor-specific objective
evidence is based on the price charged when an element is sold separately. In
the case of an element not sold separately, the price is established by
authorized management.. For our Informatica Application Products we recognize
the bundled license and support revenue ratably over the support period. Our
support for the Informatica Application Products for the first year is never
sold separately and in consideration of the complexities and timeliness of the
implementation, the customer is entitled to receive services which are different
than the standard annual support services. If an acceptance period is required,
revenue is recognized upon customer acceptance or the expiration of the
acceptance period. The Company also enters into reseller arrangements that
typically provide for sublicense fees based on a percentage of list price. For
direct sales, revenue is recognized upon shipment to the end user and when
collectibility is probable. We recognize revenue from sales to OEMs, specific
resellers, international customers and specific customers based on their credit
history, at the time we receive payment for our products, rather than at the
time of sale. The Company's agreements with its customers and resellers do not
contain product return rights.
Revenues from services, which consist of fees for ongoing support and
product updates, are recognized ratably over the term of the contract, typically
one year. Consulting revenues are primarily related to implementation services
and product enhancements performed on a time-and-materials basis under separate
service arrangements related to the installation of the Company's software
products. Training revenues are generated from classes offered both on-site and
at customer locations. Revenues from consulting and training services are
recognized as the services are performed.
Deferred revenue includes deferred maintenance revenue and prepaid training
and consulting fees. Deferred license revenue amounts do not include items which
are both deferred and unbilled. The Company's practice is to net such deferred
items against the related receivables balances. As of December 31, 1999 and
1998, there were $9.2 million and $3.3 million of unbilled receivables netted
against deferred license revenue, respectively.
F-8
<PAGE> 54
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STOCK-BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and, accordingly, recognizes no compensation expense for the
stock option grants.
NET LOSS PER SHARE
Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share reflects
the potential dilution of securities by adding other common stock equivalents,
including stock options, warrants and convertible preferred stock, to the
weighted average number of common shares outstanding during the period, if
dilutive. Potentially dilutive securities have been excluded from the
computation of diluted net loss per share as their inclusion would be
antidilutive.
The calculation of basic and diluted net loss per share is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net loss.............................................. $(8,018) $(9,285) $(1,495)
======= ======= =======
Weighted average shares of common stock outstanding
used in calculation of basic and diluted net loss
per share........................................... 6,777 7,652 23,783
======= ======= =======
Basic and diluted net loss per share................ $ (1.18) $ (1.21) $ (0.06)
======= ======= =======
</TABLE>
If the Company had reported net income, the calculation of diluted earnings
per share would have included the shares used in the computation of basic net
loss per share as well as an additional 3,372,000, 4,480,000 and 6,144,000
common equivalent shares related to outstanding stock options and warrants not
included in the calculations above (determined using the treasury stock method)
for 1997, 1998 and 1999, respectively.
COMPREHENSIVE INCOME (LOSS)
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components in the financial statements. The only item of other
comprehensive income (loss) which the Company currently reports is foreign
currency translation adjustments, which are included in accumulated other
comprehensive income (loss) in the consolidated statements of redeemable
convertible preferred stock and stockholders' equity (deficit). Tax effects of
comprehensive income (loss) are not considered material.
INCOME TAXES
The Company accounts for income taxes in accordance with FASB Statement No.
109, "Accounting for Income Taxes", which requires the use of the liability
method in accounting for income taxes. Under this method, deferred tax assets
and liabilities are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse. Valuation allowances are
established, when necessary, to reduce the deferred tax assets to the amounts
expected to be realized.
F-9
<PAGE> 55
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. SAB
101 provides guidance with respect to the recognition, presentation and
disclosure of revenue in financial statements of all public registrants. The
company has not fully assessed the impact of the adoption of SAB 101 and has not
determined the effect, if any, that it will have on the Company's reported
revenues or results of operations in future periods.
In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44)
Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25. FIN 44 clarifies the application of
Opinion 25 for (a) the definition of employee for purposes of applying Opinion
25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence for various modifications
to the terms of a previously fixed stock option award, and (d) the accounting
for an exchange of stock compensation swards in a business combination. FIN 44
is effective July 1, 2000, but certain provisions cover specific events that
occur after either December 15, 1998, or January 12,2000. The adoption of
certain other provisions of FIN 44 prior to March 31, 2000 did not have a
material effect on the financial statements. The Company does not expect that
the adoption of the remaining provisions will have a material effect on the
financial statements.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Computer and office equipment............................... $ 1,100 $ 2,540
Furniture and fixtures...................................... 125 125
------- -------
1,225 2,665
Less accumulated depreciation and amortization.............. (633) (1,183)
------- -------
$ 592 $ 1,482
======= =======
</TABLE>
Included in property and equipment are assets acquired under capital lease
obligations with an original cost of approximately $927,000 as of December 31,
1999 and 1998. Accumulated amortization of these assets was $146,000 and
$342,000 at December 31, 1998 and 1999, respectively. The related amortization
is included with depreciation expense.
3. LEASE OBLIGATIONS
The Company had an equipment financing agreement which provided up to
$564,000 for the purchase of property and equipment and expired in January 1998.
In February 1998, the Company entered into another equipment financing agreement
with the same lender which increased the line to $1,510,000 for the purchase of
property and equipment. Borrowings under these agreements bear interest at a
rate of 3.07% and 3.19%, respectively, for 36 months. The Company is also
required to choose to either pay a supplemental additional interest portion of
20% of the original purchase price due and payable at the end of the agreement
term or to extend the agreement term for an additional year at a monthly
interest rate of 2.05% of the original purchase amount. As of December 31, 1999,
total borrowings under these agreements amounted to $927,000 of which $216,000
was outstanding.
The Company leases its office facilities and certain office equipment under
noncancelable lease agreements which require the Company to pay operating costs,
including property taxes, normal maintenance
F-10
<PAGE> 56
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and insurance. Rent expense amounted to $501,000, $1,653,000 and $2,005,000 for
1997, 1998 and 1999, respectively.
Future minimum lease payments under noncancelable operating and capital
leases are summarized as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Years ending December 31:
2000...................................................... $ 3,824 $161
2001...................................................... 2,446 67
2002...................................................... 2,314 --
2003...................................................... 2,364 --
2004...................................................... 2,415 --
Thereafter.................................................. 5,674 --
------- ----
Total minimum lease payments................................ $19,037 228
=======
Less interest............................................... 12
----
Present value of minimum lease payments..................... 216
Less current portion........................................ 150
----
$ 66
----
</TABLE>
4. STOCKHOLDERS' EQUITY
BRIDGE FINANCING AND WARRANTS
In connection with the issuance of short-term promissory notes in May 1996,
the Company granted warrants to the lenders to purchase up to 410,000 shares of
Series C preferred stock at $1.25 per share. The warrants expire May 1, 2001.
The Company deemed the fair value of the warrants to be $55,000, which was
recorded as a discount on the notes. The fair value was determined using a
Black-Scholes option pricing model with the following assumptions: a risk-free
interest rate of 6.0%, no dividend yield or volatility factor, and an expected
life of the warrant of five years. This discount was amortized to interest
expense over the term of the notes during 1996. Upon the Company's initial
public offering the warrants were converted into warrants to purchase 410,000
shares of common stock. In fiscal 1999, the Company issued a net of 397,546
shares of common stock upon the exercise of warrants, a portion of which were
exercised pursuant to net exercise provisions, for a total of $212,000.
COMMON STOCK
At December 31, 1999, the Company has reserved the following shares of its
common stock for future issuance:
<TABLE>
<S> <C>
Outstanding stock options................................... 8,206,659
Reserved for future stock option grants..................... 886,200
---------
9,092,859
=========
</TABLE>
On April 29, 1999 the Company completed an initial public offering in which
it sold 6,000,000 shares of Common Stock, including 500,000 shares in connection
with the exercise of the underwriters' over-allotment
F-11
<PAGE> 57
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
option, at $8 per share. The Company received $43.5 million in cash, net of
underwriting discounts, commissions and other offering costs.
STOCK SPLIT
On January 26, 2000, the Board of Directors approved a two-for-one split of
its $.001 par value common stock to be effected in the form of a stock dividend.
The stock split was effected by distribution to each stockholder of record as of
February 18, 2000 of one share of the Company's common stock for each share of
common stock held. All references in the financial statements to number of
shares, per share amounts, stock option data and market prices of the Company's
common stock have been restated for the effect of the stock split.
1993 AND 1996 FLEXIBLE STOCK INCENTIVE PLANS
The Company's 1993 and 1996 Flexible Stock Plans (the "Stock Plans"), in
effect through our initial public offering, authorized the granting of 8,454,500
incentive and nonstatutory common stock options to employees, directors, and
consultants at exercise prices no less than 100% and 85%, respectively, of the
fair market value of the common stock on the grant date, as determined by the
Board of Directors. Options granted are exercisable over a maximum term of ten
years and generally vest over a period of up to four years. In the event
optionholders cease to be employed by the Company, all unvested options are
forfeited and all vested options may be exercised within a 90 day period after
termination; under the restricted portion of the plans, the Company also has the
right to repurchase at the original purchase price any unvested shares if the
holder is no longer employed by the Company. As of December 31, 1999, no
outstanding common shares are subject to such repurchase rights. Options that
are canceled under the 1996 Stock Plan will be available for future grants under
the 1999 Stock Incentive Plan. There were no shares available for option grants
under the 1996 Stock Plan at December 31, 1999.
1999 STOCK INCENTIVE PLAN
The stockholders approved the 1999 Stock Incentive Plan (the "Incentive
Plan") in April 1999 under which 1,300,000 shares have been reserved for
issuance. In addition, any shares not issued under the 1996 Flexible Stock
Incentive Plan will also be available for grant. The number of shares reserved
under the Incentive Plan will automatically increase annually beginning on
January 1, 2000 by the lesser of 8,000,000 shares or 5% of the total amount of
fully diluted shares of common stock outstanding as of such date. Under the
Incentive Plan, eligible employees may purchase stock options, stock
appreciation rights, restricted shares and stock units. The exercise price for
incentive stock options and non-qualified options may not be less than 100% and
85%, respectively, of the fair value of common stock at the option grant date.
Options granted are exercisable over a maximum term of 10 years from the date of
the grant and generally vest over a period of four years. As of December 31,
1999, the Company has 386,200 options available for grant under the Incentive
Plan.
In connection with the acquisition of Influence, as discussed in Note 10,
the Company converted options to purchase shares of Influence common stock into
options to purchase shares of the Company's common stock. The number of shares
of the Company's common stock issuable under each option and the exercise price
for each grant were adjusted by an exchange ratio. The Company assumed the Stock
Incentive Plan ("Influence plan") under which the options had been originally
granted, however, no further options will be granted under the Influence plan.
The converted options continue to be subject to the terms of the Influence plan.
The Influence plan provided for the granting of incentive stock options and
nonstatutory stock options. The exercise price of all options granted prior to
the acquisition were determined by the Influence board of directors and were not
less than the fair market value on the date of the grant. The options generally
expire seven years from the date of the grant and vest over a period of four
years from the date of the grant.
F-12
<PAGE> 58
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1999 NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
The stockholders adopted the 1999 Non-Employee Director Stock Option Plan
(the "Directors Plan") in April 1999 under which 500,000 shares have been
reserved for issuance. Each non-employee joining the Board of Directors
following the completion of the initial public offering will automatically
receive options to purchase 50,000 shares of common stock at an exercise price
per share equal to the fair market value of the common stock. These options are
exercisable over a maximum term of five years and will vest in four equal annual
installments on each yearly anniversary from the date of the grant. In addition,
each non-employee director, who has been a member of the Board for at least six
months prior to each annual stockholders meeting, will automatically receive
options to purchase 10,000 shares of common stock at each such meeting. Each
option will have an exercise price equal to the fair value of the common stock
on the automatic grant date, a maximum term of five years and will vest on the
first anniversary of the grant date. As of December 31, 1999, there have been no
shares issued under the Directors Plan and 500,000 shares are available for
future issuance.
EMPLOYEE STOCK PURCHASE PLAN
The stockholders adopted the Employee Stock Purchase Plan (the "Purchase
Plan") in April 1999 under which 800,000 shares have been reserved for issuance.
The number of shares reserved under the Purchase Plan will automatically
increase beginning on January 1 of each year by the lesser of 3,200,000 shares
or 2% of the total amount of fully diluted common stock shares outstanding on
such date. Under the Purchase Plan, eligible employees may purchase common stock
in an amount not to exceed 10% of the employees' cash compensation. The purchase
price per share will be 85% of the lesser of the common stock fair market value
either at the beginning of a rolling two-year offering period or at the end of
each 6 month purchase period within the two year offering period. As of December
31, 1999, there have been no shares issued under the Purchase Plan and 800,000
shares are available for future issuance.
A summary of the Company's stock option activity is set forth below:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1996........................ 3,171,184 $ .08
Granted............................................... 2,480,286 .35
Exercised............................................. (288,610) .05
Canceled.............................................. (202,700) .19
---------- ------
Outstanding at December 31, 1997........................ 5,160,160 .20
Granted............................................... 3,469,992 2.81
Exercised............................................. (1,163,874) .15
Canceled.............................................. (1,170,588) .95
---------- ------
Outstanding at December 31, 1998........................ 6,295,690 1.47
Granted............................................... 4,167,191 20.97
Exercised............................................. (1,569,396) .80
Canceled.............................................. (686,826) 5.26
---------- ------
Outstanding at December 31, 1999........................ 8,206,659 $11.21
========== ======
Exercisable at December 31, 1999........................ 2,153,202 $ 1.11
========== ======
</TABLE>
F-13
<PAGE> 59
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information concerning currently outstanding
and exercisable options at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF CONTRACTUAL EXERCISE PRICE EXERCISE PRICE
EXERCISE PRICES NUMBER LIFE (YEARS) PER SHARE NUMBER PER SHARE
--------------- --------- ------------ -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$0.01 -- $ 0.15.. 1,350,154 5.85 $ 0.08 1,145,704 $0.07
$0.23 -- $ 2.00.. 1,451,409 7.48 $ 1.44 583,910 $1.40
$2.75 -- $ 3.50.. 1,230,470 8.25 $ 3.19 312,904 $3.17
$3.75 -- $ 5.38.. 1,263,626 9.07 $ 5.15 108,393 $4.47
$5.50 -- $25.38.. 1,248,500 9.36 $10.68 2,291 $9.51
$26.08 -- $37.50.. 1,078,100 9.79 $33.12 -- --
$51.32 -- $53.19.. 584,400 9.97 $51.87 -- --
--------- ---- ------ --------- -----
8,206,659 8.34 $11.21 2,153,202 $1.11
========= ==== ====== ========= =====
</TABLE>
The Company uses the intrinsic value method of accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost is recognized
for any of its stock options when the exercise price of each option equals or
exceeds the fair value of the underlying common stock as of the grant date for
each stock option with respect to the options granted. From inception through
December 1999, the Company recorded deferred stock based compensation of
$3,730,000 for the difference at the grant date between the exercise price and
the deemed fair value of the common stock underlying the options. This amount is
included as a component of stockholders' equity and is being amortized on a
graded vesting method by charges to operations over the vesting period of the
options. Such amortization amounted to approximately $2,000, $98,000 and
$742,000 for the years ended December 31, 1997, 1998 and 1999, respectively.
Pro Forma Effect of Stock-based Compensation
Pro forma information regarding results of operations and net loss per
share is required by FASB Statement No. 123, "Accounting for Stock-Based
Compensation," which also requires that the information be determined as if the
Company had accounted for its employee stock options under the fair value method
of FASB 123. For all grants that were granted prior to the Company's initial
public offering in April 1999, the fair value of these options was estimated at
the date of the grant using a Black-Scholes option pricing model with the
following weighed average assumptions: a risk-free interest rate of 5.5%, 5.0%
and 6.0% for 1999, 1998 and 1997, respectively, no dividend yield or volatility
factors of the expected market price of the Company's common stock and a
weighted average expected life of the option of 5 years. The fair value for the
options granted subsequent to the Company's initial public offering was
estimated at the date of grant using a Black-Scholes option pricing model using
the following weighted-average assumptions: a risk-free interest rate of 5.5%,
no dividend yield, volatility factor of the expected market price of the
Company's common stock of 100% and a weighted average expected life of the
option of five years.
The option valuation models are developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected life of the options. Because the
Company's employee stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-14
<PAGE> 60
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Had compensation cost for the Company's stock-based compensation plans been
determined using the fair value at the grant dates for awards under those plans
calculated using the minimum value method of FASB 123, the Company's net loss
and basic and diluted net loss per share would have been increased to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Pro forma net loss (in thousands)..................... $(8,046) $(9,637) $(9,989)
======= ======= =======
Pro forma basic and diluted net loss per share........ $ (1.19) $ (1.26) $ (0.45)
======= ======= =======
</TABLE>
The weighted average fair value of options granted, which is the value
assigned to the options under FASB 123, was $0.06, $0.43, and $18.16 for options
granted during the years ended December 31, 1997, 1998 and 1999, respectively.
The pro forma impact of options on the net loss for the years ended
December 31, 1997, 1998 and 1999 is not representative of the effects on net
loss for future years, as future years will include the effects of additional
years of stock option grants.
5. NOTES RECEIVABLE FROM STOCKHOLDERS
During 1995, certain officers of the Company purchased a total of 800,000
shares of the Company's common stock in exchange for promissory notes. The notes
bear interest at 7.12% per annum, with interest and principal payable on May 5,
2000. The notes are secured by the common shares purchased by these officers.
6. NOTES PAYABLE TO STOCKHOLDERS
In 1997 and 1998, the Company issued promissory notes to stockholders in
exchange for cash advances and payment for services. These notes bear interest
at the bank's prime interest rate (8.5% at December 31, 1999) plus 2% per annum,
with a maximum rate of 10% per annum. Principal and accrued interest on these
notes at December 31, 1998 and 1999 was $3.1 million and $3.4 million,
respectively. The principal and accrued interest on these notes was repaid in
February 2000.
7. INCOME TAXES
The federal, state and foreign income tax provision for the year ended
December 31, 1999 is summarized as follows (in thousands):
<TABLE>
<S> <C>
Current:
Federal................................................... $100
State..................................................... 185
Foreign................................................... 539
----
$824
====
</TABLE>
Due to operating losses and the inability to recognize the benefits
therefrom, there is no income tax provision for 1997 and 1998.
Influence elected to be taxed as an S-corporation under Subchapter S of the
Internal Revenue Code through December 15, 1999. Consequently, Influence's
stockholders were taxed on their proportionate share of the taxable income and
no provision for income taxes has been provided in the statement of operations
for
F-15
<PAGE> 61
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the period beginning January 1, 1999 through December 15, 1999 and for the years
ended December 31, 1998 and 1997. Influence's S-corporation status was
terminated on December 15, 1999 when it was acquired by the Company.
A reconciliation of the provision computed at the statutory federal income
tax rate to the income tax provision is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision computed at statutory rate......... $(2,367) $(3,250) $(235)
Federal alternative minimum taxes....................... -- -- 100
State taxes............................................. -- -- 185
Foreign income tax...................................... -- -- 539
Valuation allowance..................................... 2,367 3,250 235
------- ------- -----
$ -- $ -- $ 824
======= ======= =====
</TABLE>
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 3,400 $ 6,788
Tax credit carryforwards.................................. 700 1,530
Deferred revenue.......................................... 1,100 1,653
Reserves and accrued costs and expenses not currently
deductible............................................. 2,400 2,576
Other..................................................... 200 --
------- --------
Total deferred tax assets................................... 7,800 12,547
Valuation allowance......................................... (7,800) (12,547)
------- --------
Net deferred tax assets..................................... $ -- $ --
======= ========
</TABLE>
FASB 109 provides for the recognition of deferred tax assets if realization
of such assets is more likely than not. Based upon the weight of available
evidence, which includes the Company's historical operating performance and the
reported cumulative net losses in all prior years, the Company has provided a
full valuation allowance against its net deferred tax assets. The valuation
allowance increased by $3,360,000 and $4,747,000 during the years ended December
31, 1998 and 1999, respectively.
As of December 31, 1999, approximately $4,600,000 of the valuation
allowance reflected above relates to the tax benefits of stock option deductions
which will be credited to equity when realized.
At December 31, 1999, the Company had net operating loss carryforwards for
federal and state tax purposes of approximately $18,800,000 and $4,400,000,
respectively. The Company also had federal and state research and development
tax credit carryforwards of approximately $1,072,000 and $692,000, respectively.
The net operating loss and tax credit carryforwards will expire at various dates
beginning in 2000, if not utilized.
Utilization of net operating loss and tax credit carryforwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code and similar state
F-16
<PAGE> 62
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
provisions. The annual limitation may result in the expiration of the net
operating loss and credit carryforwards before utilization.
8. PROFIT SHARING PLAN
The Company has a profit sharing plan and trust under Section 401(k) of the
Internal Revenue Code which covers substantially all employees. Eligible
employees may contribute amounts to the plan via payroll withholdings, subject
to certain limitations. Contributions by the Company are at the discretion of
the Board of Directors. No discretionary contributions have been made by the
Company to date.
9. MAJOR CUSTOMERS AND REVENUES BY GEOGRAPHIC AREA
Revenue was derived from customers in the following geographic areas:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
North America......................................... $11,916 $26,713 $51,180
Europe................................................ 825 3,633 11,055
Other................................................. -- -- 144
------- ------- -------
$12,741 $30,346 $62,379
======= ======= =======
</TABLE>
10. BUSINESS COMBINATION
In December 1999, the Company acquired Influence, a developer of analytic
applications for eBusiness. The merger was accounted for using the
pooling-of-interests method of accounting and as such the Company's historical
financial results for all dates and periods prior to the merger have been
restated to reflect the merger. In connection with the acquisition, the Company
issued 1,299,084 shares of its common stock to Influence's shareholders in
exchange for all of the outstanding common stock. All outstanding options to
purchase Influence's capital stock were converted into options to purchase
287,052 shares of Informatica common stock. In connection with the business
combination, the Company incurred merger related costs of approximately
$2,082,000, which consisted primarily of fees for investment banking, legal and
accounting services incurred in conjunction with the merger. Of this amount,
$310,000 was paid before December 31, 1999. The balance of $1,772,000 is
included in current liabilities on the consolidated balance sheet.
F-17
<PAGE> 63
INFORMATICA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following information represents revenue and net loss of the separate
companies for the periods preceding the business combination:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
------------------ SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Informatica...................................... $12,186 $28,895 $39,522
Influence........................................ 555 1,451 2,292
------- ------- -------
Combined........................................... $12,741 $30,346 $41,814
======= ======= =======
Net income (loss):
Informatica...................................... $(6,764) $(7,915) $ 9
Influence........................................ (1,254) (1,370) (492)
------- ------- -------
Combined........................................... $(8,018) $(9,285) $ (483)
======= ======= =======
</TABLE>
11. SUBSEQUENT EVENTS (UNAUDITED)
On February 11, 2000, the Company signed a definitive agreement to acquire
Delphi Solutions AG, a distributor of Informatica products in Switzerland. The
agreement is structured as a share purchase and will be accounted for as a
purchase transaction. The purchase price includes payments associated with 1999
revenues and projections for 2000 revenues, and the first payment of
approximately $3.6 million was paid in February 2000.
On February 22, 2000, the Company entered into two lease agreements for new
corporate headquarters in Redwood City, California. The facility is under
construction and is expected to be completed in June 2001. The lease expires
twelve years after occupancy. As part of these leases, the Company agreed to
provide letters of credit totaling $12.0 million as a security deposit for the
first year's lease payments until certain financial covenants are met.
Effective as of August 31, 2000, we acquired Zimba, a privately held
provider of applications that provide mobile professionals with real-time access
to corporate and external information through wireless devices, voice
recognition technology and the Internet. Under the terms of the definitive
agreement, we acquired Zimba in a stock-for-stock merger transaction valued at
approximately $26 million. The merger will be accounted for as a purchase
transaction and is intended to qualify as a tax-free exchange of shares under
IRS regulations.
F-18
<PAGE> 64
INFORMATICA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
------------ --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 57,521 $ 31,831
Restricted cash........................................... -- 8,116
Accounts receivable, net of allowances of $2,027 and
$1,977, respectively................................... 8,119 18,141
Prepaid expenses and other current assets................. 1,272 2,376
-------- --------
Total current assets................................... 66,912 60,464
Restricted cash, less current portion....................... -- 12,166
Property and equipment, net................................. 1,482 3,871
Goodwill and other intangible assets, net................... -- 34,415
Other assets................................................ 129 1,272
-------- --------
Total assets........................................... $ 68,523 $112,188
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 7,999 $ 14,598
Accrued compensation and related expenses................. 6,264 6,089
Income taxes payable...................................... 813 1,608
Current portion of capital lease obligations.............. 150 142
Current portion of notes payable to stockholders.......... 2,075 --
Deferred revenue.......................................... 9,660 15,324
-------- --------
Total current liabilities.............................. 26,961 37,761
Capital lease obligations, less current portion............. 66 42
Notes payable to stockholders, less current portion......... 1,372 --
Stockholders' equity........................................ 40,124 74,385
-------- --------
Total liabilities and stockholders' equity............. $ 68,523 $112,188
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE> 65
INFORMATICA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1999 2000 1999 2000
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
License........................................... $ 9,181 $21,733 $16,528 $38,569
Service........................................... 4,851 12,172 8,484 21,269
------- ------- ------- -------
Total revenues................................. 14,032 33,905 25,012 59,838
Cost of revenues:
License........................................... 111 359 253 793
Service........................................... 2,365 6,586 4,241 11,207
------- ------- ------- -------
Total cost of revenues......................... 2,476 6,945 4,494 12,000
------- ------- ------- -------
Gross profit........................................ 11,556 26,960 20,518 47,838
Operating expenses:
Research and development.......................... 2,880 5,788 5,233 9,876
Sales and marketing............................... 7,383 16,667 13,916 30,101
General and administrative........................ 1,099 2,358 2,033 4,311
Amortization of stock-based compensation.......... 162 130 287 529
Amortization of goodwill and other intangible
assets......................................... -- 3,798 -- 4,172
Purchased in-process research and development..... -- 2,199 -- 2,199
------- ------- ------- -------
Total operating expenses....................... 11,524 30,940 21,469 51,188
------- ------- ------- -------
Income (loss) from operations....................... 32 (3,980) (951) (3,350)
Interest income, net................................ 226 421 184 722
------- ------- ------- -------
Income (loss) before income taxes................... 258 (3,559) (767) (2,628)
Income tax provision................................ 150 642 300 875
------- ------- ------- -------
Net income (loss)................................... $ 108 $(4,201) $(1,067) $(3,503)
======= ======= ======= =======
Net income (loss) per share:
Basic............................................. $ 0.00 $ (0.12) $ (0.07) $ (0.10)
======= ======= ======= =======
Diluted........................................... $ 0.00 $ (0.12) $ (0.07) $ (0.10)
======= ======= ======= =======
Shares used in calculation of net income (loss) per
share:
Basic............................................. 23,894 34,212 16,132 33,517
======= ======= ======= =======
Diluted........................................... 29,787 34,212 16,132 33,517
======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE> 66
INFORMATICA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1999 2000
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(1,067) $(3,503)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 199 440
Other receivable allowances............................... 145 40
Amortization of stock-based compensation.................. 287 529
Amortization of goodwill and other intangible assets...... -- 4,172
Purchased in-process research and development............. -- 2,199
Interest expense related to notes payable................. 138 125
Changes in operating assets and liabilities:
Accounts receivable..................................... (1,275) (10,072)
Prepaid expenses and other current assets............... 12 (1,086)
Other assets............................................ 30 (1,143)
Accounts payable and accrued liabilities................ 1,122 38
Accrued compensation and related expenses............... 824 (175)
Income taxes payable.................................... -- 616
Deferred revenue........................................ 2,681 5,545
------- -------
Net cash provided by (used in) operating activities... 3,096 (2,275)
------- -------
INVESTING ACTIVITIES
Purchase of property and equipment, net..................... (633) (2,747)
Acquisition, net of cash acquired........................... -- (2,309)
Allocation to restricted cash............................... -- (20,282)
------- -------
Net cash used in investing activities....................... (633) (25,338)
------- -------
FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of payments for
repurchases............................................... 386 5,724
Proceeds from initial public offering, net.................. 43,481 --
Proceeds from notes payable to stockholders................. 537 --
Payments on notes payable to stockholders................... (806) (3,572)
Payments on capital lease obligations....................... (174) (32)
Proceeds from notes receivable from stockholders............ -- 40
------- -------
Net cash provided by financing activities................... 43,424 2,160
------- -------
Effect of foreign currency translation on cash and cash
equivalents............................................... (77) (237)
------- -------
Increase (decrease) in cash and cash equivalents............ 45,810 (25,690)
Cash and cash equivalents at beginning of period............ 7,167 57,521
------- -------
Cash and cash equivalents at end of period.................. $52,977 $31,831
======= =======
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest.................................................. $ 18 $ 217
======= =======
Income taxes.............................................. $ -- $ 97
======= =======
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Conversion of preferred stock to common stock............. $17,586 $ --
======= =======
Deferred stock-based compensation related to common stock
options granted......................................... $ 968 $ 1,194
======= =======
Common stock issued in connection with asset
acquisition............................................. $ -- $31,708
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
F-21
<PAGE> 67
INFORMATICA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. However, certain information or
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed, or
omitted, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the statements include all adjustments
necessary (which are of a normal and recurring nature) for the fair presentation
of the results of the interim periods presented. These financial statements
should be read in conjunction with our audited consolidated financial statements
for the years ended December 31, 1998 and 1999.
2. INTERIM FINANCIAL INFORMATION
The interim financial information as of June 30, 2000 and for the six
months ended June 30, 1999 and 2000 is unaudited but includes all adjustments,
consisting only of normal recurring adjustments, that the Company considers
necessary for a fair presentation of its consolidated financial position at that
date and its consolidated results of operations and cash flows for those
periods. Operating results for the six months ended June 30, 2000 are not
necessarily indicative of results that may be expected for any future periods.
3. REVENUE RECOGNITION
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." SAB
101 provides guidance with respect to the recognition, presentation and
disclosure of revenue in financial statements of all public registrants. The
Company has not fully assessed the impact of the adoption of SAB 101 and has not
determined the effect, if any, that it will have on the Company's reported
revenues or results of operations in future periods.
The Company generates revenues through two sources, software licenses and
services. The Company's license revenues are generated from licensing the
Company's products directly to end users and indirectly through resellers and
original equipment manufacturers. Service revenues are generated from
maintenance contracts and training and consulting services performed for
customers that license the Company's products directly and indirectly through
resellers.
License revenues are recognized when a noncancelable license agreement has
been signed, the product has been shipped, the fees are fixed and determinable,
collectibility is probable and vendor-specific objective evidence exists to
allocate the total fee to elements of the arrangement. Vendor-specific objective
evidence is based on the price charged when an element is sold separately. In
the case of an element not sold separately, the price is established by
authorized management. For our Informatica Application Products we recognize the
bundled license and support revenue ratably over the support period. Our support
for the Informatica Application Products for the first year is never sold
separately and in consideration of the complexities and timeliness of the
implementation, the customer is entitled to receive services which are different
than the standard annual support services. If an acceptance period is required,
revenue is recognized upon customer acceptance or the expiration of the
acceptance period. The Company also enters into reseller arrangements that
typically provide for sublicense fees based on a percentage of list price. For
direct sales, revenue is recognized upon shipment to the end user and when
collectibility is probable. For sales through resellers, revenue is recognized
upon shipment to the end user and when collectibility is probable or upon cash
collections based on credit history with the reseller. The Company's agreements
with its customers and resellers do not contain product return rights.
Revenues from services, which consist of fees for ongoing support and
product updates, are recognized ratably over the term of the contract, typically
one year. Consulting revenues are primarily related to
F-22
<PAGE> 68
INFORMATICA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
implementation services and product enhancements performed on a
time-and-materials basis under separate service arrangements related to the
installation of the Company's software products. Training revenues are generated
from classes offered both on-site and at customer locations. Revenues from
consulting and training services are recognized as the services are performed.
When a contract includes both license and service elements, the license fee is
recognized on delivery of the software, provided services do not include
significant customization or modification of the base product, and the payment
terms for licenses are not dependent on additional acceptance criteria.
Deferred revenue includes deferred license and maintenance revenue and
prepaid training and consulting fees. Deferred license revenue amounts do not
include items which are both deferred and unbilled. The Company's practice is to
net such deferred items against the related receivables balances.
4. STOCK SPLIT
On January 26, 2000, the Board of Directors approved a two-for-one split of
its $.001 par value common stock to be effected in the form of a stock dividend.
The stock split was effected by distribution of one share of the Company's
common stock for each share of common stock held to each stockholder of record
as of February 18, 2000. All references in the financial statements to number of
shares, per share amounts and stock option data of the Company's common stock
have been restated for the effect of the stock split.
5. INITIAL PUBLIC OFFERING
On April 29, 1999, the Company completed an initial public offering and
issued 6,000,000 shares of its common stock, including 500,000 shares in
connection with the exercise of the underwriters' over-allotment option, at a
price of $8.00 per share. The Company received $43.5 million in cash, net of
underwriting discounts, commissions and other offering costs. As of the closing
date of the offering, all of the preferred stock outstanding was converted into
an aggregate of 15,880,000 shares of common stock.
6. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
share reflects the potential dilution of securities by adding other common stock
equivalents, including stock options, warrants and convertible preferred stock,
to the weighted average number of common shares outstanding during the period,
if dilutive. Potentially dilutive securities have been excluded from the
computation of diluted net loss per share for the three months ended June 30,
2000, and for the six months ended June 30, 2000 and 1999, as their inclusion
would be antidilutive.
F-23
<PAGE> 69
INFORMATICA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The calculation of basic and diluted net income (loss) per share is as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1999 2000 1999 2000
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss)........................... $ 108 $(4,201) $(1,067) $(3,503)
======= ======= ======= =======
Weighted average shares of common stock
outstanding used in calculation of net
income (loss) per share:
Basic..................................... 23,894 34,212 16,132 33,517
Effect of dilutive securities:
Common stock equivalents............... 5,893 0 0 0
------- ------- ------- -------
Diluted................................ 29,787 34,212 16,132 33,517
======= ======= ======= =======
Net income (loss) per share:
Basic..................................... $ 0.00 $ (0.12) $ (0.07) $ (0.10)
======= ======= ======= =======
Diluted................................... $ 0.00 $ (0.12) $ (0.07) $ (0.10)
======= ======= ======= =======
</TABLE>
If the Company had reported net income for the three months ended June 30,
2000, and for the six months ended June 30, 1999 and 2000, the calculation of
diluted earnings per share would have included the shares used in the
computation of basic net loss per share as well as an additional 4,681,000,
5,329,000 and 5,502,000 common equivalent shares related to the outstanding
options and warrants not included in the calculations above, respectively
(determined using the treasury stock method).
7. COMPREHENSIVE INCOME (LOSS)
The following is a calculation of comprehensive income (loss), in
thousands:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1999 2000 1999 2000
------ --------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss)............................. $108 $(4,201) $(1,067) $(3,503)
Other comprehensive loss:
Foreign currency translation adjustment..... (42) (90) (77) (237)
---- ------- ------- -------
Comprehensive income (loss)................... $ 66 $(4,291) $(1,144) $(3,740)
==== ======= ======= =======
</TABLE>
8. INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the use of the liability method in accounting for income taxes. Under
this method, deferred tax assets and liabilities are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. Valuation allowances are established, when necessary, to reduce the
deferred tax assets to the amounts expected to be realized.
F-24
<PAGE> 70
INFORMATICA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
9. BUSINESS COMBINATION
In February 2000, the Company acquired Delphi Solutions AG, a distributor
of Informatica products in Switzerland. The agreement was structured as a share
purchase and accounted for as a purchase transaction. The estimated purchase
price includes payments associated with 1999 revenues and projections for 2000
revenues. The first payment of approximately $3.6 million was paid in February
2000, and the estimated second payment of approximately $5.6 million is payable
in January 2001. The purchase price of the transaction was allocated to the
acquired assets and liabilities based on their estimated fair values as of the
date of the acquisition. Amounts allocated to intangible assets are being
amortized on a straight-line basis over a two-year period. Amortization expense
of $1.1 million and $1.5 million was recorded for the three and six months ended
June 30, 2000, respectively. As part of this agreement, the Company is holding a
certificate of deposit for $8.1 million as security for the second payment. This
certificate of deposit has been reclassified to restricted cash on the Company's
balance sheet.
Pro forma results of operations have not been presented since the effects
of the acquisition were not material to the Company's consolidated financial
position, results of operations or cash flows for the periods presented.
10. ASSET ACQUISITION
In April 2000, the Company announced a strategic alliance with
PricewaterhouseCoopers ("PricewaterhouseCoopers") to jointly develop, sell and
support end-to-end analytic solutions for the business-to-business e-commerce
market worldwide. In connection with the agreement, PricewaterhouseCoopers
received 409,138 shares of the Company's common stock in exchange for
transferring ownership of certain intellectual property rights and personnel to
the Company.
The total purchase price, including related expenses, was approximately
$31.8 million, of which $5.0 million was allocated to various intangible assets
including acquired workforce and consultants, and $24.6 million was allocated to
core technology and goodwill. Goodwill and other intangible assets are being
amortized on a straight-line basis over two years for the acquired workforce and
consultants and over three years for the core technology and goodwill. At June
30, 2000, accumulated amortization related to goodwill and other intangible
assets and amortization expense for the three months ended June 30, 2000 totaled
$2.7 million.
Purchased in-process research and development of $2.2 million was expensed
in the second quarter of 2000 because the in-process technology had not reached
technological feasibility and had no alternative uses. The value of the
purchased in-process research and development was computed using a discounted
cash flow analysis based on management's estimates of future revenues, cost of
revenues and operating expenses related to the products and technologies
acquired from PricewaterhouseCoopers.
11. COMMITMENTS
In February 2000, the Company entered into two lease agreements for new
corporate headquarters in Redwood City, California. The facility is under
construction and expected to be completed in June 2001. The lease expires twelve
years after occupancy. As part of these agreements, in April 2000, the Company
purchased certificates of deposit totaling $12.2 million as a security deposit
for one year's lease payments until certain financial covenants are met. These
certificates of deposit have been reclassified as restricted cash on the
Company's balance sheet.
F-25
<PAGE> 71
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Zimba
We have audited the accompanying balance sheets of Zimba (a development
stage company) as of December 31, 1998 and 1999, and the related statements of
operations, shareholders' equity and cash flows for the year ended December 31,
1999 and for the periods from June 24, 1998 (inception) through December 31,
1998 and 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 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 Zimba at December 31, 1998
and 1999, and the results of its operations and its cash flows for the year
ended December 31, 1999 and for the periods from June 24, 1998 (inception)
through December 31, 1998 and 1999, in conformity with auditing standards
generally accepted in the United States
The accompanying financial statements have been prepared assuming that
Zimba will continue as a going concern. As more fully described in Note 1 to the
financial statements, the Company has incurred operating losses since its
inception which raises substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that may
result from the outcome of this uncertainty.
Palo Alto, California
August 26, 2000
F-26
<PAGE> 72
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------ -----------
1998 1999 2000
--------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 37,081 $ 46,796 $ 715,602
Restricted cash.................................... -- 10,000 10,000
Prepaid expenses and other current assets.......... 16,759 7,413 14,314
--------- ----------- -----------
Total current assets................................. 53,840 64,209 739,916
Furniture and equipment, net......................... 65,734 177,661 307,326
Deposits and other assets............................ 2,940 27,630 33,734
--------- ----------- -----------
Total assets......................................... $ 122,514 $ 269,500 $ 1,080,976
========= =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities........... $ 23,682 $ 221,618 $ 371,734
Accrued compensation and related benefits.......... 26,435 192,947 369,477
Convertible notes payable to stockholders.......... 65,000 325,000 --
Note payable to stockholder........................ 9,143 -- --
Current portion of capital lease obligations....... 10,549 48,002 25,901
--------- ----------- -----------
Total current liabilities............................ 134,809 787,567 767,112
Capital lease obligations, less current portion...... 26,438 42,436 78,607
Commitments
Shareholders' equity:
Series A convertible preferred stock, no par value;
4,375,000 shares designated; none outstanding at
December 31, 1998; 4,374,996 issued and
outstanding at December 31, 1999 and June 30,
2000; aggregate liquidation preference of
$629,999........................................ -- 621,100 621,100
Series B convertible preferred stock, no par value;
12,000,000 shares designated; none outstanding
at December 31, 1998 and December 31, 1999;
6,005,391 shares issued and outstanding at June
30, 2000; aggregate liquidation preference of
$2,101,887...................................... -- -- 2,087,366
Common stock, no par value; 40,000,000 shares
authorized; 17,100,000, 13,038,750 and
13,520,375 shares issued and outstanding at
December 31, 1998, 1999 and June 30, 2000,
respectively.................................... 61,560 403,352 1,313,145
Deferred stock compensation........................ -- (249,886) (629,336)
Deficit accumulated during the development stage... (100,293) (1,335,069) (3,157,018)
--------- ----------- -----------
Total shareholders' equity........................... (38,733) (560,503) 235,257
--------- ----------- -----------
Total liabilities and shareholders' equity........... $ 122,514 $ 269,500 $ 1,080,976
========= =========== ===========
</TABLE>
See accompanying notes.
F-27
<PAGE> 73
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JUNE 24, 1998 JUNE 24, 1998
(INCEPTION) (INCEPTION) SIX MONTHS ENDED
THROUGH YEAR ENDED THROUGH JUNE 30,
DECEMBER 31, DECEMBER 31, DECEMBER 31, -----------------------
1998 1999 1999 1999 2000
------------- ------------ ------------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Costs and expenses:
Product development......... $ 64,514 $ 765,715 $ 830,229 $ 232,071 $ 867,310
Sales and marketing......... 22,890 215,783 238,673 58,487 255,948
General and administrative
expenses................. 14,580 165,188 179,768 52,749 182,625
Amortization of deferred
stock compensation....... -- 73,088 73,088 19,513 516,647
--------- ----------- ----------- --------- -----------
Total costs and expenses and
loss from operations........ 101,984 1,219,774 1,321,758 362,820 1,822,530
Other income (expense)........ 1,691 (15,002) (13,311) (4,285) 581
--------- ----------- ----------- --------- -----------
Net loss...................... $(100,293) $(1,234,776) $(1,335,069) $(367,105) $(1,821,949)
========= =========== =========== ========= ===========
</TABLE>
See accompanying notes.
F-28
<PAGE> 74
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
Statements of Shareholders' Equity
For the period from June 24, 1998 (inception) through June 30, 2000
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK DEFERRED
----------------------- ----------------------- STOCK-BASED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT COMPENSATION DEFICIT TOTAL
---------- ---------- ---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock at
$0.0036 per share to
founders....................... -- $ -- 17,100,000 $ 61,560 $ -- $ -- $ 61,560
Net loss and comprehensive
loss........................... -- -- -- -- -- (100,293) (100,293)
---------- ---------- ---------- ---------- --------- ----------- -----------
Balance at December 31, 1998....... -- -- 17,100,000 61,560 -- (100,293) (38,733)
Issuance of Series A preferred
stock in exchange for
conversion of notes payable.... 451,388 65,000 -- -- -- -- 65,000
Issuance of Series A preferred
stock, net of issuance costs... 3,923,608 556,100 -- -- -- -- 556,100
Repurchase of common stock....... -- -- (4,061,250) (14,621) -- -- (14,621)
Deferred stock compensation...... -- -- -- 322,974 (322,974) -- --
Issuance of warrant in connection
with consulting services....... -- -- -- 33,439 -- -- 33,439
Amortization of deferred stock
compensation................... -- -- -- -- 73,088 -- 73,088
Net loss and comprehensive
loss........................... -- -- -- -- -- (1,234,776) (1,234,776)
---------- ---------- ---------- ---------- --------- ----------- -----------
Balance at December 31, 1999....... 4,374,996 621,100 13,038,750 403,352 (249,886) (1,335,069) (560,503)
Exercise of stock options
(unaudited).................... -- -- 481,625 13,696 -- -- 13,696
Issuance of Series B preferred
stock in exchange for
conversion of notes payable
(unaudited).................... 2,456,946 859,931 -- -- -- -- 859,931
Issuance of Series B preferred
stock, net of issuance costs
(unaudited).................... 3,548,445 1,227,435 -- -- -- -- 1,227,435
Deferred stock compensation
(unaudited).................... -- -- -- 896,097 (896,097) -- --
Amortization of deferred stock
compensation (unaudited)....... -- -- -- -- 516,647 -- 516,647
Net loss and comprehensive loss
(unaudited).................... -- -- -- -- -- (1,821,949) (1,821,949)
---------- ---------- ---------- ---------- --------- ----------- -----------
Balance at June 30, 2000
(unaudited)...................... 10,380,387 $2,708,466 13,520,375 $1,313,145 $(629,336) $(3,157,018) $ 235,257
========== ========== ========== ========== ========= =========== ===========
</TABLE>
See accompanying notes.
F-29
<PAGE> 75
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JUNE 24, 1998 JUNE 24, 1998 SIX MONTHS ENDED
(INCEPTION) YEAR ENDED (INCEPTION) JUNE 30,
THROUGH DECEMBER 31, DECEMBER 31, THROUGH DECEMBER 31, -----------------------
1998 1999 1999 1999 2000
-------------------- ------------ -------------------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................. $(100,293) $(1,234,776) $(1,335,069) $(367,105) $(1,821,949)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............ 4,535 49,338 53,873 14,490 40,187
Amortization of deferred stock
compensation........................... -- 73,088 73,088 19,513 516,647
Issuance of warrant in connection with
consulting services.................... -- 33,439 33,439 -- --
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets................................. (16,759) 9,346 (7,413) (3,466) (6,901)
Deposits and other assets................ (2,940) (24,690) (27,630) (4,250) (6,104)
Accounts payable and accrued
liabilities............................ 23,682 197,936 221,618 94,632 150,116
Accrued compensation and related
benefits............................... 26,435 166,512 192,947 66,916 176,530
--------- ----------- ----------- --------- -----------
Net cash used in operating activities..... (65,340) (729,807) (795,147) (179,270) (951,474)
INVESTING ACTIVITIES
Allocation to restricted cash............. -- (10,000) (10,000) -- --
Purchase of furniture and equipment....... (33,282) (97,264) (130,546) (74,913) (129,881)
--------- ----------- ----------- --------- -----------
Net cash used in investing activities..... (33,282) (107,264) (140,546) (74,913) (129,881)
FINANCING ACTIVITIES
Principal payments on capital lease
obligations.............................. -- (10,550) (10,550) (5,488) (25,901)
Proceeds from issuance of preferred stock,
net...................................... -- 556,100 556,100 479,400 1,227,435
Proceeds from issuance of common stock,
net...................................... 61,560 -- 61,560 -- 13,696
Repurchase of common stock................ -- (14,621) (14,621) -- --
Proceeds from issuance of note payable to
stockholder.............................. 9,143 20,000 29,143 20,000 --
Repayment of note payable to
stockholder.............................. -- (29,143) (29,143) -- --
Proceeds from issuance of convertible
notes to stockholders.................... 65,000 325,000 390,000 -- 534,931
--------- ----------- ----------- --------- -----------
Net cash provided by financing
activities............................... 135,703 846,786 982,489 493,912 1,750,161
--------- ----------- ----------- --------- -----------
Change in cash and cash equivalents....... 37,081 9,715 46,796 239,729 668,806
Cash and cash equivalents at beginning of
period................................... -- 37,081 -- 37,081 46,796
--------- ----------- ----------- --------- -----------
Cash and cash equivalents at end of
period................................... $ 37,081 $ 46,796 $ 46,796 $ 276,810 $ 715,602
========= =========== =========== ========= ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Furniture and equipment purchased under
capital lease obligation................. $ 36,987 $ 64,000 $ 100,988 $ 3,301 $ 39,971
========= =========== =========== ========= ===========
Issuance of preferred stock in exchange
for convertible notes payable............ $ -- $ 65,000 $ 65,000 $ 65,000 $ 859,931
========= =========== =========== ========= ===========
Issuance of warrant in connection with
consulting services...................... $ -- $ 33,438 $ 33,438 $ -- $ --
========= =========== =========== ========= ===========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest................................. $ 1,468 $ 19,299 $ 20,767 $ 3,181 $ 8,262
========= =========== =========== ========= ===========
</TABLE>
See accompanying notes.
F-30
<PAGE> 76
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 2000 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 2000 IS UNAUDITED)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
The Company was founded in California on June 24, 1998 (inception), as
GeoMastix LLC ("GeoMastix"). GeoMastix was incorporated in California on October
14, 1999, and on July 10, 1999, changed its name to Zimba (the "Company").
From inception through December 31, 1999, the Company has been in the
development stage, devoting substantially all of its efforts to research and
development of its technologies, acquisition of facilities and equipment and
raising capital. The Company is developing an application designed to provide
mobile professionals real-time access to corporate and external information via
wireless devices, voice recognition and the web. No revenues have been realized
through December 31, 1999.
BASIS OF PRESENTATION
The Company has incurred operating losses to date and has an accumulated
deficit of $1,335,069 at December 31, 1999. The Company's activities have been
primarily financed through private placements of equity securities and capital
lease financing. The Company may need to raise additional capital through the
issuance of debt or equity securities to fund its operations. This financing may
not be available on terms satisfactory to the Company, if at all.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimated
INTERIM FINANCIAL INFORMATION
The interim financial information as of June 30, 2000 and for the six
months ended June 30, 1999 and 2000 is unaudited but includes all adjustments,
consisting only of normal recurring adjustments, that the Company considers
necessary for a fair presentation of its consolidated financial position at that
date and its consolidated results of operations and cash flows for those
periods. Operating results for the six months ended June 30, 2000 are not
necessarily indicative of results that may be expected for any future periods.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid money market
investments with insignificant interest rate risk and original maturities from
the date of purchase of three months or less. Cash and cash equivalents are
stated at cost, which approximates their fair value.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of three years. Equipment under capital leases are amortized over
the shorter of the estimated useful life on the life of the lease.
F-31
<PAGE> 77
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 2000 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 2000 IS UNAUDITED) -- (CONTINUED)
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Employee Stock
Issued to Employees" ("APB 25") and, accordingly, recognizes no compensation for
the stock option grants to employees. The effect of applying the fair value
method under FASB 123 to the Company's stock options would result in pro forma
net losses that are not materially different from the historical amounts
reported.
SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs in accordance with SFAS
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." The Company expenses all software development costs prior
to the Company's products attaining technological feasibility. Upon the
Company's products attaining technological feasibility, all development costs
will be capitalized until the general release of the product to customers. As of
December 31, 1999, the Company's product has not yet reached technological
feasibility. Accordingly, the Company has expensed all development costs to
date.
INCOME TAXES
The Company uses the liability method to account for income taxes as
required SFAS No. 109, "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities. Deferred tax assets
and liabilities are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
COMPREHENSIVE LOSS
There is no difference in the Company's historical net losses as reported
and the comprehensive net losses for all periods presented.
2. FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1999 1998
-------- -------
<S> <C> <C>
Computer equipment and software............................. $216,325 $55,060
Furniture and fixtures...................................... 15,209 15,209
Less accumulated depreciation and amortization.............. (53,873) (4,535)
-------- -------
$177,661 $65,734
======== =======
</TABLE>
Depreciation and amortization expense on furniture and equipment was
approximately $4,535, $49,338 and $53,873 during the period from inception
through December 31, 1998, the year ended December 31, 1999 and period from
inception through December 31, 1999, respectively.
F-32
<PAGE> 78
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 2000 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 2000 IS UNAUDITED) -- (CONTINUED)
3. COMMITMENTS
The Company leases its facility under a month-to-month operating lease.
Capital lease obligations represent the present value of future rental payments
under capital lease agreements for equipment. The original cost of equipment
under capital leases was $112,200 and $37,410 at December 31, 1999 and 1998,
respectively. Accumulated depreciation related to such leased assets was $23,664
and $2,078 as of December 31, 1999 and 1998, respectively. Future minimum
payments under capital leases are as follows:
<TABLE>
<S> <C>
Year ending December 31,
2000................................................... $59,142
2001................................................... 48,547
2002................................................... 13,818
-------
121,507
Less amount representing interest........................... 31,069
-------
Present value of net minimum capital lease payments......... 90,438
Less current portion........................................ 48,002
-------
Long-term capital lease obligations......................... $42,436
=======
</TABLE>
Rent expense under operating lease arrangements for the period from
inception to December 31, 1998, the year ended December 31, 1999 and the period
from inception to December 31, 1999 totaled $4,511, $21,811 and $26,322,
respectively.
4. CONVERTIBLE NOTES PAYABLE
In October and November 1998, the Company issued convertible notes payable
to certain investors in exchange for $65,000 in cash. The notes bore interest of
5% per year and were convertible into shares of Series A preferred stock, at the
option of the payees and upon the sale of such shares by the Company. However,
no interest was payable by the Company in the event of conversion. The notes
payable were converted into 451,388 shares of Series A preferred stock in June
1999.
From October to December 1999, the Company issued convertible notes payable
to certain investors in exchange for $325,000 in cash. The notes bore interest
of 18% per year and were convertible into shares of Series B preferred stock at
$0.35 per share at the option of the payees and upon the sale of such shares by
the Company. The notes payable and accrued interest thereon were converted into
2,456,946 shares of the Company's Series B convertible preferred stock in
connection with the Company's sale of the preferred stock in May 2000.
5. SHAREHOLDERS' EQUITY
COMMON STOCK
Common Stock Issued to Founders
In November 1998, the Company issued 17,100,000 shares of common stock to
its founders at $0.0036 per share, which the Company determined to be the fair
value of the common stock upon the formation of the company. These common shares
are subject to repurchase rights which allow the Company to repurchase the
shares at $0.0036 per share in the event of termination of employment, and which
expire ratably over 4 years.
F-33
<PAGE> 79
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 2000 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 2000 IS UNAUDITED) -- (CONTINUED)
The unvested shares fully and automatically vest in the event of a merger in
which the Company is not the surviving corporation or the sale of substantially
all of the Company's assets or stock. At December 31, 1999, 13,038,750 shares
were subject to such repurchase rights.
CONVERTIBLE PREFERRED STOCK
Under the Company's Articles of Incorporation, preferred stock is issuable
in series and the Board of Directors is authorized to determine the rights,
preferences, and terms of each series.
Dividends
The holders of Series A and Series B preferred stock, are entitled to
receive dividends at the rates of $0.0075 and $0.025 per annum on each
outstanding share of Series A and Series B preferred stock, respectively (as
adjusted for any stock dividends, combinations or splits with respect to such
shares). Dividends are payable in preference and priority to any payment of any
dividend on common stock of the Company. Such dividends are payable only when,
as and if declared by the Board of Directors, but only out of funds that are
legally available, and are noncumulative. No dividends have been declared or
paid through December 31, 1999.
Conversion
Each share of preferred stock, at the option of the holder, is convertible
into fully paid and nonassessable shares of common stock at the conversion rate.
The conversion rate of the Series A and Series B preferred stock is 1:1 subject
to antidilution adjustments. Additionally, conversion is automatic upon the
closing of a qualified public offering of common stock with gross proceeds of at
least $7,500,000.
Voting
The holder of each share of preferred stock is entitled to the number of
votes equal to the number of shares of common stock into which each share of
preferred stock can be converted.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of preferred stock are entitled to
receive, prior and in preference to any distribution of the assets of the
Company to the holders of common stock, by reason of their ownership, an amount
equal to the sum of $0.144 for each share of Series A preferred stock and $0.35
for each share of Series B preferred stock plus any declared but unpaid
dividends with respect to such shares. The remaining assets, if any, are to be
distributed ratably to the holders of common and preferred stock on an
as-if-converted to common stock basis until the holders of Series A and Series B
preferred stock have received an amount equal to twice the original Series A and
Series B conversion price per share, at which time the remaining assets legally
available for distribution will be paid on a pro rata basis to the holders of
common stock. If, upon the occurrence of a liquidation event, the assets and
funds distributed among the holders of the preferred stock are insufficient to
permit the payment to holders of the full preferential amount, then all assets
and funds of the Company legally available for distribution are to be
distributed ratably among the holders of Series A and Series B preferred stock
ratably, in proportion to the preferential amount each such holder is otherwise
entitled to receive.
F-34
<PAGE> 80
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 2000 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 2000 IS UNAUDITED) -- (CONTINUED)
STOCK OPTIONS
Under the Company's 1999 Stock Option Plan (the "Plan"), 6,390,000 shares
of common stock have been reserved for the issuance of incentive stock options
("ISOs") or non statutory stock options ("NSOs") to eligible participants. The
ISOs may be granted at a price per share not less than the fair market value at
the date of grant. However, options granted to a 10% shareholder will have an
exercise price of not less than 110% of the fair market value at the date of the
grant. The NSOs may be granted at a price per share not less than 85 percent of
the fair market value at the date of grant. Options granted to-date are
immediately exercisable, and unvested shares are subject to repurchase by the
Company at the original issuance price. Options and unvested shares granted
generally vest over a period of up to 4 years, with a maximum term of 10 years.
Upon termination of an option holder, the Company has the right to repurchase at
the original purchase price any issued and unvested shares of common stock. As
of December 31, 1999, no outstanding shares of common stock are subject to such
repurchase rights.
A summary of option activity under the Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
---------------------------
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- --------------
<S> <C> <C>
Outstanding as of December 31, 1998 -- $ --
Granted................................................... 1,581,000 $0.02
Cancelled................................................. (471,250) 0.02
--------- -----
Outstanding as of December 31, 1999......................... 1,109,750 0.02
Granted................................................... 1,625,000 0.04
Exercised................................................. (481,625) 0.03
Cancelled................................................. (280,000) 0.04
--------- -----
Outstanding as of June 30, 2000............................. 1,973,125 $0.03
========= =====
</TABLE>
As of December 31, 1999, options to purchase 5,280,250 shares of common
stock were available for future grant under the plan.
From January to June 2000, the Company granted options to purchase an
aggregate 175,000 shares of common stock at exercise prices from $0.04 to $0.08
per share, that were outside of the option plan. As of June 30, 1999, all of
these options were outstanding.
The following table summarizes outstanding and exercisable stock options as
of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
-------------------------------------------
WEIGHTED-
AVERAGE WEIGHTED-
REMAINING AVERAGE
NUMBER OF CONTRACTUAL EXERCISE PRICE
PRICE SHARES LIFE (YEARS) PER SHARE
----- --------- ------------ --------------
<S> <C> <C> <C>
$0.01.......................................... 618,750 9.66 $0.01
$0.04.......................................... 491,000 9.04 0.04
--------- ----
1,109,750 9.66
========= ====
</TABLE>
F-35
<PAGE> 81
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 2000 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 2000 IS UNAUDITED) -- (CONTINUED)
The weighted average fair value at grant date of options granted to
employees during the year ended December 31, 1999 and the period from inception
through December 31, 1999 was $0.09.
SHARES RESERVED FOR FUTURE ISSUANCE
As of December 31, 1999, the Company has reserved 11,043,645 shares of
common stock for future issuance as follows:
<TABLE>
<S> <C>
Stock option plan........................................... 6,390,000
Common stock warrants....................................... 278,649
Series A convertible preferred stock........................ 4,374,996
----------
11,043,645
==========
</TABLE>
DEFERRED STOCK COMPENSATION
The Company recorded deferred stock compensation of $322,974 and $467,013
during the year ended December 31, 1999 and the six months ended June 30, 2000,
respectively, representing the difference between the exercise price and the
deemed fair value for financial accounting purposes of the Company's common
stock on the date the stock options were granted. This amount is being amortized
by charges to operations over the vesting periods of the individual stock
options using a graded vesting method. Such amortization amounted to
approximately $73,088 for the year ended December 31, 1999 and the period from
inception to December 31, 1999, and $177,427 for the six months ended June 30,
2000.
The Company also recorded deferred stock compensation of $429,084 during
the six months ended June 30, 2000, relating to the issuance of consultant
options.
This amount was computed using the Black-Scholes option valuation model.
Unvested shares will be remeasured at each measurement date, as they are
variable awards, and the related amortization will be charged to operations over
the vesting periods of the individual stock options. Such amortization amounted
to $339,220 for the six months ended June 30, 2000.
COMMON STOCK WARRANTS
In July 1999, in connection with a consulting agreement, the Company issued
a warrant to purchase 278,649 shares of common stock at an exercise price of
$0.144 per share. The warrant is exercisable at any time until one year after an
initial public offering of the Company's common stock, or a merger with
acquisition by a public Company. The fair value of the warrant in the amount of
$33,438, was calculated using a Black-Scholes model with the following
assumptions: expected volatility of 100%, expected dividend yield of 0%,
expected life of 1 year and risk free interest rate of 5.5%, and has been
charged to operations in the year ended December 31, 1999. The warrant has not
been exercised or cancelled through December 31, 1999.
6. INCOME TAXES
No provision for income taxes was required for the periods from June 24,
1998 (inception) through June, 1999 because the Company was either an LLC or
S-corporation. As a result of this status, the shareholders of the Company
included the Company's income or loss in their federal and state income tax
returns.
No provision for income taxes was recorded for the period from June 1999 to
December 1999 as the Company has incurred operating losses.
F-36
<PAGE> 82
ZIMBA
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 2000 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 2000 IS UNAUDITED) -- (CONTINUED)
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 had deferred
tax assets of approximately $366,000 and $1,000 at December 31, 1999 and 1998,
respectively. Realization of the deferred tax assets is dependent upon future
earnings, if any, the timing and amount of which are uncertain. Accordingly, the
net deferred tax assets have been fully offset by a valuation allowance. The
valuation allowance increased by $365,000 during the year ended December 31,
1999. Deferred tax assets relate primarily to net operating loss carryforwards.
As of December 31, 1999, the Company had net operating loss carryforwards
for federal and state income tax purposes each of approximately $787,000. The
net operating loss carryforwards expire in the years 2004 through 2019, if not
utilized.
Utilization of the Company's net operating loss carryforwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code, as amended, and similar state
provisions. Such an annual limitation could result in the expiration of the net
operating loss carryforwards before utilization.
7. SUBSEQUENT EVENTS (UNAUDITED)
In August 2000, the Company was acquired by Informatica Corporation, a
public company that provides e-business analytic solutions. No adjustments have
been made to the accompanying financial statements for the effects of the
potential merger or recorded financial position on the results of operations.
F-37
<PAGE> 83
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The selected unaudited pro forma condensed combined financial information
for the Company set forth below gives effect to the acquisition of Zimba. The
historical financial information set forth below has been derived from, and is
qualified by reference to, the consolidated financial information of Informatica
and Zimba and should be read in conjunction with those financial statements and
the notes thereto included elsewhere herein. The selected unaudited pro forma
condensed combined balance sheet as of June 30, 2000 set forth below gives
effect to the acquisition of Zimba as if it occurred on that date. The selected
unaudited pro forma condensed combined statements of operations data for the
year ended December 31, 1999 and the six months ended June 30, 2000 set forth
below give effect to the acquisition as if it occurred on the first day of each
of those periods under the purchase method of accounting. The selected unaudited
pro forma condensed combined financial information reflects certain adjustments,
including adjustments to reflect the amortization of goodwill and other
intangible assets resulting from the acquisition. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the audited historical
financial statements of Informatica and Zimba. The selected unaudited pro forma
condensed combined financial information does not purport to represent what the
consolidated results of operations or financial condition of the Company would
actually have been if the Zimba acquisition had in fact occurred on such dates
or the future consolidated results of operations or financial condition of the
Company.
F-38
<PAGE> 84
INFORMATICA CORPORATION
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------- ----------------------
BUSINESS
COMBINATION
INFORMATICA ZIMBA COMBINED ADJUSTMENTS COMBINED
----------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 31,831 $ 716 $ 32,547 $ -- $ 32,547
Restricted cash.................. 8,116 10 8,126 -- 8,126
Accounts receivable, net......... 18,141 -- 18,141 -- 18,141
Prepaid expenses and other
current assets................ 2,376 14 2,390 -- 2,390
-------- ------- -------- ------- --------
Total current assets.......... 60,464 740 61,204 -- 61,204
Restricted cash, less current
portion.......................... 12,166 -- 12,166 -- 12,166
Property and equipment, net........ 3,871 307 4,178 -- 4,178
Goodwill and other intangible
assets........................... 34,415 -- 34,415(1)(3) 19,750 54,165
Other assets....................... 1,272 34 1,306 -- 1,306
-------- ------- -------- ------- --------
Total assets.................. $112,188 $ 1,081 $113,269 $19,750 $133,019
======== ======= ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities................... $ 14,598 $ 372 $ 14,970(3) $ 302 $ 15,272
Accrued compensation and related
benefits...................... 6,089 369 6,458 -- 6,458
Income taxes payable............. 1,608 -- 1,608 -- 1,608
Current portion of capital lease
obligations................... 142 26 168 -- 168
Deferred revenue................. 15,324 -- 15,324 -- 15,324
-------- ------- -------- ------- --------
Total current liabilities..... 37,761 767 38,528 302 38,830
Capital lease obligations, less
current portion.................. 42 79 121 -- 121
Stockholders' equity:
Convertible preferred stock...... -- 2,708 2,708(1)(5) (2,708) --
Common stock..................... 105,685 1,313 106,998(1)(3)(5) 23,487 130,485
Deferred stock-based
compensation.................. (3,592) (629) (4,221)(5) 629 (3,592)
Accumulated deficit.............. (27,387) (3,157) (30,544)(1)(5) (1,960) (32,504)
Accumulated other comprehensive
income........................ (321) -- (321) -- (321)
-------- ------- -------- ------- --------
Total stockholders' equity.... 74,385 235 74,620 19,448 94,068
-------- ------- -------- ------- --------
Total liabilities and
stockholders' equity........ $112,188 $ 1,081 $113,269 $19,750 $133,019
======== ======= ======== ======= ========
</TABLE>
See accompanying notes to selected unaudited pro forma condensed combined
financial information.
F-39
<PAGE> 85
INFORMATICA CORPORATION
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------- ----------------------
BUSINESS
COMBINATION
INFORMATICA ZIMBA COMBINED ADJUSTMENTS COMBINED
----------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
License................................ $41,184 $ -- $41,184 $ -- $41,184
Services............................... 21,195 -- 21,195 -- 21,195
------- ------- ------- ------- -------
Total revenues...................... 62,379 -- 62,379 -- 62,379
Costs of revenues:
License................................ 686 -- 686 $ -- 686
Services............................... 10,310 -- 10,310 -- 10,310
------- ------- ------- ------- -------
Total cost of revenues.............. 10,996 -- 10,996 -- 10,996
------- ------- ------- ------- -------
Gross profit........................... 51,383 -- 51,383 51,383
Operating expenses:
Research and development............... 11,843 766 12,609 -- 12,609
Sales and marketing.................... 33,613 216 33,829 -- 33,829
General and administrative............. 5,012 165 5,177 -- 5,177
Merger-related costs................... 2,082 -- 2,082 -- 2,082
Amortization of stock-based
compensation........................ 742 73 815 -- 815
Amortization of goodwill and other
intangible assets................... -- -- --(2) 6,648 6,648
------- ------- ------- ------- -------
Total operating expenses............ 53,292 1,220 54,512 6,648 61,160
Income (loss) from operations............ (1,909) (1,220) (3,129) (6,648) (9,777)
Interest income (expense), net........... 1,238 (15) 1,223 1,223
------- ------- ------- ------- -------
Loss before income taxes................. (671) $(1,235) $(1,906) $(6,648) $(8,554)
Income tax provision..................... 824 -- 824 -- 824
------- ------- ------- ------- -------
Net loss................................. $(1,495) (1,235) (2,730) (6,648) (9,378)
======= ======= ======= ======= =======
Basic and diluted net loss per
share(4)............................... $ (0.06) $ (0.39)
======= =======
Number of shares used in calculation of
net loss per share(4).................. 23,783 253 24,036
======= ======= =======
</TABLE>
See accompanying notes to selected unaudited pro forma condensed combined
financial information.
F-40
<PAGE> 86
INFORMATICA CORPORATION
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------- ----------------------
BUSINESS
COMBINATION
INFORMATICA ZIMBA COMBINED ADJUSTMENTS COMBINED
----------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues
License.................................. $38,569 $ -- $ 38,569 $ -- $38,569
Services................................. 21,269 -- 21,269 -- 21,269
------- ------- -------- ------- -------
Total revenues......................... 59,838 -- 59,838 -- 59,838
Cost of revenues:
License.................................. 793 -- 793 -- 793
Service.................................. 11,207 -- 11,207 -- 11,207
------- ------- -------- ------- -------
Total cost of revenues................. 12,000 -- 12,000 -- 12,000
------- ------- -------- ------- -------
Gross profit............................... 47,838 -- 47,838 47,838
Operating expenses:
Research and Development................. 9,876 867 10,743 -- 10,743
Sales and marketing...................... 30,101 256 30,357 -- 30,357
General and administrative............... 4,311 183 4,494 -- 4,494
Amortization of stock-based
compensation........................... 529 517 1,046 -- 1,046
Amortization of goodwill and other
intangible assets...................... 4,172 -- 4,172 -- 4,172
Purchased in-process research and
development............................ 2,199 -- 2,199(2) 3,324 5,523
------- ------- -------- ------- -------
Total operating expenses............... 51,188 1,823 53,011 3,324 56,335
------- ------- -------- ------- -------
Loss from operations....................... (3,350) (1,823) (5,173) (3,324) (8,497)
Interest income (expense), net............. 722 1 723 -- 723
------- ------- -------- ------- -------
Loss before income taxes................... $(2,628) $(1,822) $ (4,450) $(3,324) $(7,774)
======= ======= ======== ======= =======
Income tax provision....................... 875 -- 875 -- 875
------- ------- -------- ------- -------
Net loss................................... (3,503) (1,822) (5,325) (3,324) (8,649)
======= ======= ======== ======= =======
Basic and diluted net loss per share(3).... $ (0.10) $ (0.26)
======= =======
Number of shares used in calculation of net
loss per share(3)........................ 33,517 253 33,770
======= ======= =======
</TABLE>
See accompanying notes to selected unaudited pro forma condensed combined
financial information.
F-41
<PAGE> 87
NOTES TO SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
Informatica acquired Zimba on August 31, 2000 in a transaction accounted
for as a purchase. The total purchase cost was approximately $26 million
consisting of 253,329 shares of Informatica common stock, (with a fair value of
approximately $23.8 million,) the assumption of outstanding stock options with a
fair value of approximately $1 million, assumed liabilities of approximately
$0.9 million and transaction costs of approximately $0.3 million.
Pro forma adjustments for the unaudited pro forma condensed combined
balance sheet as of June 30, 2000 and statements of operations for the year
ended December 31, 1999 and the six months ended June 30, 2000 are as follows:
1. To reflect the preliminary allocation of the purchase cost.
The total estimated purchase price for the acquisition has been allocated
on a preliminary basis to assets and liabilities based on management's best
estimates of their fair value with the excess costs over the net assets
acquired allocated to goodwill. The preliminary allocation has resulted in
a charge for purchased in-process research and development estimated to be
$5.1 million and estimated goodwill and identified intangible assets of
$19.8 million which are being amortized over two to three years.
2. To reflect amortization of goodwill and other intangible assets resulting
from the acquisition.
The pro forma condensed combined statements of operations for the year
ended December 31, 1999 and the six months ended June 30, 2000 does not
include the purchased research and development related charge of
approximately $5.1 million since it is considered a non-recurring charge.
3. To reflect the acquisition of all of the outstanding stock of Zimba.
4. Basic and diluted net loss per share has been adjusted to reflect the
issuance of 253,329 shares of Informatica common stock, as if these shares
had been outstanding for the entire period. Dilutive options and warrants
are excluded from the computation as their effect is antidilutive.
5. To reflect the elimination of the historical stockholder's equity accounts
of Zimba.
F-42
<PAGE> 88
[INFORMATICA CORPORATION LOGO]
