<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): January 20, 2000
ARIBA, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 7372 77-0439730
- ---------------------------- ----------------------- ---------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification Number)
1565 Charleston Road
Mountain View, California 94043
(650) 930-6200
- --------------------------------------------------------------------------------
(Addresses, including zip code, and telephone numbers, including area code, of
principal executive offices)
The undersigned Registrant hereby amends the following item of its Current
Report on Form 8-K filed January 25, 2000, for the event of January 20, 2000.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Included herein as Exhibit 99.1 to this Current Report on Form 8-K/A
are the balance sheets of TradingDynamics, Inc. as of September 30, 1999 and
1998, and the related statements of operations, shareholders' equity and cash
flows for the years then ended.
(b) PRO FORMA FINANCIAL INFORMATION.
The following documents appear as exhibit 99.2 to this Current Report
on Form 8-K/A:
(1) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1999;
(2) Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended September 30, 1999;
(3) Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the quarter ended December 31, 1999;
(4) Notes to Unaudited Pro Forma Condensed Consolidated
Financial Information.
(c) EXHIBITS.
2.1* Agreement and Plan of Merger, dated as of November
15, 1999, among Ariba, Inc., Blue Merger Corp. and
TradingDynamics, Inc.
99.1 Audited Financial Statements of TradingDynamics, Inc.
99.2 Unaudited Pro Forma Condensed Consolidated Financial
Information
*Incorporated by reference to Exhibit 2.1 to the Registrant's
Form 8-K filed January 25, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARIBA, INC.
DATE: April 4, 2000 By: /s/ Edward P. Kinsey
--------------------------
Edward P. Kinsey
Chief Financial Officer, Executive
Vice-President-Finance and Administration and
Secretary (Principal Financial and
Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
2.1* Agreement and Plan of Merger, dated as of November 15, 1999,
among Ariba, Inc., Blue Merger Corp. and TradingDynamics, Inc.
99.1 Audited Financial Statements of TradingDynamics, Inc.
99.2 Unaudited Pro Forma Condensed Consolidated Financial
Information
</TABLE>
*Incorporated by reference to Exhibit 2.1 to the Registrant's Form 8-K filed
January 25, 2000.
<PAGE>
Exhibit 99.1
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Financial Statements
September 30, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Independent Auditors' Report 1
Balance Sheets 2
Statements of Operations 3
Statements of Shareholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TradingDynamics, Inc.:
We have audited the accompanying balance sheets of TradingDynamics, Inc. (a
company in the development stage) as of September 30, 1999 and 1998, and the
related statements of operations, shareholders' equity, and cash flows for the
years ended September 30, 1999 and 1998 and for the period from August 27, 1997
(inception) to September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 TradingDynamics, Inc. (a
company in the development stage) as of September 30, 1999 and 1998, and the
results of its operations and its cash flows for the years ended September 30,
1999 and 1998 and for the period from August 27, 1997 (inception) to September
30, 1999, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
January 24, 2000
San Francisco, California
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Balance Sheets
September 30, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,054,588 179,228
Accounts receivable 200 --
Prepaid expenses and other 48,550 23,606
------------ -----------
Total current assets 1,103,338 202,834
Property and equipment, net 392,375 46,027
Other assets 11,360 8,736
------------ -----------
Total assets $ 1,507,073 257,597
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ -- 40,000
Accounts payable 248,738 35,087
Other accrued liabilities 67,723 49,175
------------ -----------
Total current liabilities 316,461 124,262
Convertible long-term debt -- 510,000
------------ -----------
Total liabilities 316,461 634,262
------------ -----------
Commitments
Shareholders' equity (deficit):
Series A convertible preferred stock, $0.001 par value;
4,902,000 shares authorized;
issued and outstanding 4,902 --
Common stock $0.001 par value; 10,000,000 shares authorized;
3,765,700 and 2,365,000 shares issued and outstanding 3,766 2,365
Additional paid-in capital 20,717,587 (2,489)
Deferred stock-based compensation (13,923,588) --
Notes receivable from shareholders (69,170) --
Deficit accumulated during the development stage (5,542,885) (376,541)
------------ -----------
Total shareholders' equity (deficit) 1,190,612 (376,665)
------------ -----------
Total liabilities and shareholders' equity $ 1,507,073 257,597
============ ===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Statements of Operations
<TABLE>
<CAPTION>
AUGUST 27, 1997
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999
--------------- -------------- ---------------
<S> <C> <C> <C>
Revenues $ 505,296 -- 505,296
Cost of revenues 34,322 -- 34,322
--------------- -------------- ---------------
Gross profit 470,974 -- 470,974
Engineering, research and development 4,189,893 271,459 4,461,352
Sales and marketing 561,334 20,121 581,455
General and administrative 972,905 78,324 1,051,229
--------------- -------------- ---------------
Total operating expenses 5,724,132 369,904 6,094,036
--------------- -------------- ---------------
Loss from operations (5,253,158) (369,904) (5,623,062)
Interest income 89,384 2,500 91,884
Interest expense (2,570) (9,137) (11,707)
--------------- -------------- ---------------
Net loss $ (5,166,344) (376,541) (5,542,885)
=============== ============== ===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Statements of Shareholders' Equity
Years ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE
PREFERRED STOCK COMMON STOCK
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance as of September 30, 1997 -- $ -- -- $ --
Issuance of common stock, at $0.001
per share in December 1997 for
intellectual property -- -- 1,666,666 1,667
Issuance of common stock, at $0.001
per share in May 1998 for cash -- -- 333,334 333
Common stock issuance costs -- -- -- --
Issuance of common stock upon
exercise of stock options -- -- 360,000 360
Issuance of common stock, at $0.01
per share in July 1998 for services -- -- 5,000 5
Net loss for the year -- -- -- --
--------------- --------------- --------------- ---------------
Balance as of September 30, 1998 -- -- 2,365,000 2,365
Issuance of Series A convertible
preferred stock at an average of
$0.73 per share in November
1998 from conversion of debt 702,000 702 -- --
Issuance of Series A convertible
preferred stock at $1.00 per share
in November and December 1998
for cash, net of issuance costs
of $25,201 4,200,000 4,200 -- --
Issuance of common stock, at $0.01
per share in December 1998
for services -- -- 1,000 1
Issuance of common stock upon
exercise of stock options -- -- 1,399,700 1,400
Deferred compensation related to
stock options -- -- -- --
Amortization of stock-based
compensation -- -- -- --
Net loss for the year -- -- -- --
--------------- --------------- --------------- ---------------
Balance as of September 30, 1999 4,902,000 $ 4,902 3,765,700 $ 3,766
=============== =============== =============== ===============
<CAPTION>
TOTAL
DEFERRED NOTES RECEIVABLE DEFICIT ACCUMULATED SHAREHOLDER'S
ADDITIONAL STOCK-BASED FROM DURING THE EQUITY
PAID-IN CAPITAL COMPENSATION SHAREHOLDERS DEVELOPMENT STAGE (DEFICIT)
--------------- -------------- ---------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Balance as of September 30, 1997 -- -- -- -- --
Issuance of common stock, at $0.001
per share in December 1997 for
intellectual property -- -- -- -- 1,667
Issuance of common stock, at $0.001
per share in May 1998 for cash -- -- -- -- 333
Common stock issuance costs (2,534) -- -- -- (2,534)
Issuance of common stock upon
exercise of stock options -- -- -- -- 360
Issuance of common stock, at $0.01
per share in July 1998 for services 45 -- -- -- 50
Net loss for the year -- -- -- (376,541) (376,541)
--------------- -------------- ---------------- ------------------- -------------
Balance as of September 30, 1998 (2,489) -- -- (376,541) (376,665)
Issuance of Series A convertible
preferred stock at an average of
$0.73 per share in November
1998 from conversion of debt 509,298 -- -- -- 510,000
Issuance of Series A convertible
preferred stock at $1.00 per share
in November and December 1998
for cash, net of issuance costs
of $25,201 4,170,599 -- -- -- 4,174,799
Issuance of common stock, at $0.01
per share in December 1998
for services 9 -- -- -- 10
Issuance of common stock upon
exercise of stock options 92,520 -- (69,170) -- 24,750
Deferred compensation related to
stock options 15,947,650 (15,947,650) -- -- --
Amortization of stock-based
compensation -- 2,024,062 -- -- 2,024,062
Net loss for the year -- -- -- (5,166,344) (5,166,344)
--------------- -------------- ---------------- ------------------- -------------
Balance as of September 30, 1999 20,717,587 (13,923,588) (69,170) (5,542,885) 1,190,612
=============== ============== ================ =================== =============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Statements of Cash Flows
<TABLE>
<CAPTION>
AUGUST 27, 1997
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999
---------------- --------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (5,166,344) (376,541) (5,542,885)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 49,575 3,498 53,073
Loss on fixed assets disposal 4,370 -- 4,370
Stock issued for intellectual property and services 10 (484) (474)
Deferred compensation adjustment 2,024,062 -- 2,024,062
Changes in operating assets and liabilities:
Accounts receivable (200) -- (200)
Prepaid expenses and other (24,944) (23,606) (48,550)
Other assets (2,624) (8,736) (11,360)
Accounts payable 213,651 35,087 248,738
Other accrued liabilities 18,548 49,175 67,723
-------------- -------------- --------------
Net cash used in operations (2,883,896) (321,607) (3,205,503)
-------------- -------------- --------------
Cash flows used in investing activities - purchases of property
and equipment (400,293) (49,525) (449,818)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from issuance of debt -- 550,000 550,000
Repayment of debt (40,000) -- (40,000)
Proceeds from sale of common stock, net 24,750 360 25,110
Proceeds from sale of Series A convertible preferred
stock, net 4,174,799 -- 4,174,799
-------------- -------------- --------------
Net cash provided by financing activities 4,159,549 550,360 4,709,909
-------------- -------------- --------------
Net increase in cash and cash equivalents 875,360 179,228 1,054,588
Cash and cash equivalents at beginning of year 179,228 -- --
-------------- -------------- --------------
Cash and cash equivalents at end of year $ 1,054,588 179,228 1,054,588
============== ============== ==============
Supplemental disclosures of cash flow information:
Interest paid during the period $ 1,991 966 2,957
============== ============== ==============
Noncash financing activities:
Notes receivable from shareholders for the purchase
of common stock 69,170 -- 69,170
Conversion of debt to Series A convertible preferred
stock $ 510,000 -- 510,000
============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
TradingDynamics, Inc. (the Company) was incorporated in the State of
California on August 27, 1997 for the purpose of developing configurable
business-to-business trading applications for deploying Internet
exchanges and auctions. The Company expects to operate in one business
segment. Since inception, the Company has devoted substantially all of
its efforts to developing products, raising capital and recruiting
personnel. The Company has had no product revenue as of September 30,
1999; its only revenues have been derived from a development contract
with a single customer in the United States. Accordingly, under Statement
of Financial Accounting Standards (SFAS) No. 7, the Company is classified
as a company in the development stage.
The Company's financial statements are prepared and presented on a basis
assuming it will continue as a going concern. As of September 30, 1999,
the Company had an accumulated deficit of approximately $5.5 million and
incurred a net loss of approximately $5.2 million for the year ended
September 30, 1999. Management's planned expenditures for the year ending
September 30, 2000 exceed current cash and cash equivalents. The Company
will need to obtain additional funds to continue its research and
development activities and to fund operating expenses. In January 2000,
the Company consummated an agreement with Ariba, Inc. for the sale of all
the Company's Common Stock and Series A Convertible Preferred Stock in
exchange for shares of Ariba, Inc. Ariba, Inc. is committed to providing
the Company with the funding it requires to continue its operations at
least through December 31, 2000.
(a) ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(b) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents. Carrying value approximates fair value due to short
maturities. As of September 30, 1999 and 1998, cash equivalents
consist of money market funds.
(c) FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash
investments. The Company places its cash with high-credit, quality
financial institutions and has an investment policy that limits
cash investments to short-term, low-risk investments.
6
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
(d) RISKS AND UNCERTAINTIES
The Company is subject to a number of risks including the
development and marketing of unproven software products, the need
to maintain adequate financing, competition from competitors with
greater financial resources and dependence on key personnel. The
Internet is characterized by rapid technological developments,
frequent product introductions, evolving industry standards,
changes in customer requirements and short product life cycles.
Significant technological changes or the emergence of competitive
products with new capabilities could adversely affect the
Company's operating results.
(e) CAPITALIZED SOFTWARE
In accordance with SFAS No. 86, ACCOUNTING FOR THE COSTS OF
COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED, all
costs incurred to establish the technological feasibility of
computer software products are expensed as research and
development costs. The Company determines technological
feasibility based on coding and testing in accordance with
detailed program designs. Costs incurred subsequent to the
establishment of technological feasibility and prior to the
general availability of the product to customers will be
capitalized, if significant. To date, no software development
costs have been capitalized since the Company is in the
development stage and technological feasibility has not been
established.
(f) MAJOR CUSTOMERS AND REVENUE RECOGNITION
Substantially all revenues recorded by the Company from inception
to date are from a Consulting Services Agreement (the Agreement).
Under terms of the Agreement, the Company provided the design,
implementation, training and support for a software product. The
project was completed during the year ended September 30, 1999.
(g) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets, generally three to five years.
(h) STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation in
accordance with the provisions of Accounting Principles Board
Opinion (APB) No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,
and complies with the disclosure provisions of SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION. Expense associated with
stock-based compensation is being amortized on an accelerated
basis over the vesting period of the individual award consistent
with the method described in Financial Accounting Standards Board
(FASB) Interpretation No. 28, ACCOUNTING FOR STOCK APPRECIATION
RIGHTS OR OTHER VARIABLE STOCK OPTION OR AWARD PLANS.
7
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
(i) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998 and June 1999, the FASB issued SFAS Nos. 133 and 137,
respectively, both titled ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. SFAS No. 137 amended the effective date of
SFAS No. 133 to the first quarter of fiscal years beginning June
15, 2000. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS
No. 133 requires that all derivatives be recognized at fair value
in the statements of financial position, and that the
corresponding gains or losses be reported either in the statement
of operations or as a component of comprehensive income, depending
on the type of hedging relationship that exists. Because the
Company does not hold any derivative instruments and does not
engage in hedging activities, the adoption of SFAS No. 133 is not
expected to have any material impact on the Company's financial
position, results of operations or cash flows.
In March 1998, the Accounting Standards Executive Committee
(AcSEC) issued SOP 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. SOP 98-1 is
effective for financial statements for fiscal years beginning
after December 15, 1998. SOP 98-1 establishes the accounting for
costs of software products developed or purchased for internal
use, including when such costs should be capitalized. The adoption
of SOP 98-1 is not expected to have any material impact on the
Company's financial position, results of operations or cash flows.
In April 1998, the AcSEC issued SOP 98-5, REPORTING ON THE COSTS
OF START-UP ACTIVITIES. Under SOP 98-5, the cost of start-up
activities should be expensed as incurred. SOP 98-5 must be
adopted for financial statements for fiscal years beginning after
December 15, 1998. The adoption of SOP 98-5 is not expected to
have any material impact on the Company's financial position,
results of operations or cash flows.
(2) FINANCIAL STATEMENT COMPONENTS
Property and equipment:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------
1999 1998
------------------ --------------
<S> <C> <C>
Computer equipment $ 392,088 38,578
Furniture and fixtures 43,748 6,500
Leasehold improvements 8,392 4,447
------------------ --------------
444,228 49,525
Less accumulated depreciation and amortization (51,853) (3,498)
------------------ --------------
$ 392,375 46,027
================== ==============
</TABLE>
8
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
Other accrued liabilities:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------
1999 1998
------------ --------------
<S> <C> <C>
Marketing expenses $ -- 15,326
Consulting expenses and other -- 21,712
Professional fees 11,800 3,000
Accrued compensation 44,216 --
Accrued interest 11,707 9,137
------------ --------------
$ 67,723 49,175
============ ==============
</TABLE>
(3) BORROWINGS
As of September 30, 1998, the Company had a $40,000 bank loan outstanding
that was used to provide operating capital. The bank loan was repaid in
March 1999.
During fiscal 1998, the Company issued two notes for cash in the amounts
of $300,000 and $210,000. Both notes were convertible into shares of
Series A Convertible Preferred Stock or payable in cash no later than
January 15, 2000 and August 5, 1999, respectively.
The $300,000 note bore interest at a rate of 5.51% and the $210,000 note
bore interest at a rate of 5.48%.
In accordance with the conversion formulas included in the notes and in
conjunction with the sale of Series A Convertible Preferred Stock in
November 1998 (note 4), the $300,000 note was converted into 450,000
shares of Series A Convertible Preferred Stock and the $210,000 note was
converted into 252,000 shares of Series A Convertible Preferred Stock.
(4) CONVERTIBLE PREFERRED STOCK
As of September 30, 1999, the Company was authorized to issue up to
4,902,000 shares of preferred stock, issuable in series with the rights
and preferences of each designated series to be determined by the
Company's Board of Directors.
In November 1998, the Company issued 4,200,000 shares of Series A
Convertible Preferred Stock at $1.00 per share. Concurrently, the holders
of the Company's convertible notes, which totaled $510,000, exercised
their rights to convert the notes into 702,000 shares of Series A
Convertible Preferred Stock at an equivalent average price of $0.73 per
share in accordance with terms of the note agreements (note 3). Rights,
restrictions and preferences of Series A Convertible Preferred Stock are
as follows:
9
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
(a) CONVERSION
Each share of Series A Convertible Preferred Stock is convertible,
at the option of the holder, into one share of Common Stock,
subject to adjustment for certain dilutive issuances, splits or
combinations. Each share of Series A Convertible Preferred Stock
automatically converts into the number of shares of Common Stock
into which such shares are convertible at the then effective
conversion ratio upon: (1) approval of not less than 66% of the
total number of Series A shares then outstanding or (2) the
closing of a public offering of Common Stock with gross proceeds
of at least $15,000,000.
(b) VOTING
Each holder of Series A Convertible Preferred Stock is entitled to
a number of votes equal to the number of shares of Common Stock
into which the shares of Series A Convertible Preferred Stock
could be converted.
(c) DIVIDENDS
Holders of Series A Convertible Preferred Stock, together with
holders of Common Stock, are not entitled to any dividends prior
to January 1, 2001.
(d) LIQUIDATION
In the event of any liquidation, dissolution or winding up of the
Company, the holders of the Series A Convertible Preferred Stock
will be entitled to receive, prior and in preference to any
distribution to the holders of the Common Stock, an amount per
share equal to $1.00, plus an amount equal to all declared but
unpaid dividends on such shares. Any amounts remaining after such
distribution will be distributed ratably among the holders of
Common Stock and Series A Convertible Preferred Stock in
proportion to the number of shares of Common Stock held by them or
issuable upon the conversion of the Series A Convertible Preferred
Stock held by them and based on the total number of shares of
Common Stock outstanding, or issuable upon conversion of the
outstanding Series A Preferred Stock until the holders of the
Series A Preferred Stock have received an amount for each share of
Series A Preferred Stock held by them which, when added to the
amount of $1.00 mentioned above, equals $2.50 per share.
Thereafter, all assets and funds of the Company that remain
legally available for distribution to shareholders by reason of
their ownership of stock of the Company will be distributed
ratably among the holders of Common Stock.
(5) COMMON STOCK AND WARRANTS
The Company's founders were issued 2,000,000 shares of Common Stock in
1997 and 1998 at $0.001 per share. From inception through September 30,
1999, a total of 1,759,700 shares of Common Stock were issued under the
1998 Stock Option Plan (note 6), of which 1,224,493 and 183,333 shares
were nonvested and subject to repurchase rights in favor of the Company
as of September 30, 1999 and 1998, respectively. 6,000 additional shares
were issued to employees for services in 1999 and 1998.
In June 1998, in connection with a bank borrowing arrangement, the
Company issued warrants to purchase 6,667 shares of Series A Convertible
Preferred Stock at a price of $0.60 per share. The warrants are
exercisable until June 1, 2003, at which date they expire if not
exercised. The fair value of the warrants is not significant.
10
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
As of September 30, 1999, the Company has reserved shares of Common Stock
for future issuance as follows:
<TABLE>
<S> <C>
Conversion of Series A Convertible Preferred Stock $ 4,902,000
Exercise of stock options 2,790,300
Exercise of warrants 6,667
--------------
7,698,967
==============
</TABLE>
(6) 1998 STOCK OPTION PLAN
The 1998 Stock Option Plan (the Plan) was adopted by the Board of
Directors in May 1998 and authorizes the granting of incentive and
nonstatutory common stock options to employees, directors and
consultants. Incentive stock options granted are at prices not less than
the fair value, while nonstatutory options granted are at exercise prices
no less than 85% of the fair market value of the Common Stock on the
grant date, as determined by the Board of Directors.
Options generally vest 25% after one year of service and thereafter
ratably over 36 months of service and have a life of up to ten years. The
Plan allows for the exercise of unvested options. Shares of Common Stock
issued to employees upon exercise of unvested options are subject to
repurchase rights in favor of the Company at the original exercise price.
The Company's ability to repurchase these shares expires at a rate
consistent with the vesting schedule of each option.
The Company initially reserved 2,250,000 shares of Common Stock for
issuance upon adoption of the Plan and increased the number of authorized
shares for issuance under the Plan in 1999 by 2,300,000 shares.
11
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
Option activity under the Plan for the period from inception through
September 30, 1999 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------------
SHARES
AVAILABLE FOR NUMBER OPTION WEIGHTED-AVERAGE
GRANT OF SHARES PRICE RANGE EXERCISE PRICE
-------------- ------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Balance as of September 30, 1997 -- -- $ -- --
Authorized 2,250,000 -- -- --
Granted (1,596,500) 1,596,500 0.001 - 0.067 0.033
Exercised -- (360,000) 0.001 0.001
-------------- -------------
Balance as of September 30, 1998 653,500 1,236,500 0.001 - 0.067 0.042
Additional shares authorized 2,300,000 -- -- --
Granted (1,618,450) 1,618,450 0.100 0.100
Exercised -- (1,399,700) 0.010 - 0.100 0.069
Cancelled 164,500 (164,500) 0.010 - 0.100 0.096
-------------- -------------
Balance as of September 30, 1999 1,499,550 1,290,750 $ 0.01 - 0.100 0.078
============== ==============
</TABLE>
The following table summarizes information about stock options
outstanding as of September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE AS OF
OUTSTANDING OPTIONS AS OF SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------------------------------------------------------ ---------------------------------
WEIGHTED-AVERAGE
REMAINING
RANGE CONTRACTUAL NUMBER WEIGHTED-AVERAGE
OF EXERCISE PRICES NUMBER OUTSTANDING LIFE OUTSTANDING EXERCISE PRICE
------------------ ------------------ ----------------- ----------- ------------------
<S> <C> <C> <C> <C>
$ 0.010 309,000 8.81 years 88,903 $ 0.010
0.100 981,750 9.55 years -- --
------------------ ------------- ---------- ----------------
1,290,750 9.37 years 88,903 0.010
</TABLE>
12
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company uses the intrinsic value method of accounting for employee
stock-based compensation. Accordingly, no compensation cost is recognized
for any of its stock options granted to employees when the exercise price
is equal to or greater than the fair value of the underlying Common Stock
as of the grant date of each stock option. In conjunction with the offer
to purchase the Company's Common Stock by Ariba, Inc., the Company
recorded deferred stock-based compensation totaling $15,947,650 for stock
options granted between March and September 1999 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 being amortized in
accordance with FASB Interpretation No. 28 over the vesting period of the
individual options which is generally four years. Accordingly,
compensation expense in the amount of $2,024,062, all of which has been
recorded as research and development expense, was recorded for the year
ended September 30, 1999.
In accordance with SFAS No. 123, the Company has elected to continue to
apply APB Opinion 25 in accounting for the Plan. Had compensation cost
for the Plan been determined based on the fair value of options at their
grant dates, as prescribed by SFAS No. 123, the Company's pro forma net
loss for the years ended September 30, 1999 and 1998, and the period from
inception through September 30, 1999 would not have been significantly
different than that reported.
For the purposes of the above noted SFAS 123 pro forma disclosures, the
fair value of each option grant was estimated on the date of grant using
the minimum value method with the following assumptions used for grants
from inception to September 30, 1999 and the years ended September 30,
1999 and 1998: risk-free interest rate of 5.09%; expected dividends of
0%; expected life of 3.5 years; and expected volatility of 0.0%.
(7) INCOME TAXES
The Company incurred no income tax expense for the years ended September
30, 1999 and 1998.
The 1999 income tax expense differed from the amount computed by applying
the U.S. federal income tax rate of 34% to pretax income as a result of
the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Computed "expected" tax benefits $ (1,756,285) (127,752)
Current year net operating losses and temporary
differences for which no tax benefit is recognized 1,066,313 127,599
Other 689,972 153
--------------- ---------------
$ -- --
=============== ===============
</TABLE>
13
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
The types of temporary differences that give rise to significant portions
of the Company's deferred tax assets and liabilities as of September 30,
1999 and 1998 are set out below:
<TABLE>
<CAPTION>
1999 1998
---------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,388,000 144,000
Research and development credit carryforwards 169,000 35,000
Other 6,000 1,000
---------------- -----------------
Total gross deferred tax assets 1,563,000 180,000
Valuation allowance (1,563,000) (180,000)
---------------- -----------------
Net deferred tax assets $ -- --
================ =================
</TABLE>
Based on a number of factors, including the lack of history of profits,
the fact that the Company competes in a developing market that is
characterized by rapidly changing technology and the lack of carryback
capacity to realize these assets, management believes that there is
sufficient uncertainty regarding the realization of deferred tax assets
such that a full valuation allowance has been provided. The net valuation
allowance increased by $1,383,000 during the year ended September 30,
1999.
As of September 30, 1999, the Company had approximately $3.5 million of
federal and California net operating loss carryforwards available to
offset future income which expire in varying amounts through fiscal 2019
and 2006, respectively.
The Company had approximately $95,000 of federal research and development
credit carryforwards available which expire in varying amounts through
fiscal 2019. The Company had approximately $73,000 of California research
and development credit carryforwards available which can be carried
forward indefinitely.
Under the Tax Reform Act of 1986 and the California Conformity Act of
1987, the amount of and benefit from net operating loss carryforwards and
credits may be impaired or limited in certain circumstances. Events which
cause limitations in the amount of net operating losses and credits that
the Company may utilize in any one year include, but are not limited to,
a cumulative ownership change of more than 50%, as defined, over a
three-year period. The annual limitation may result in the expiration of
net operating losses and credits before utilization.
(8) COMMITMENTS
The Company leases its principal facility in Mountain View, California
under a noncancelable operating lease which expires in February 2000.
Future minimum lease payments under this operating lease as of September
30, 1999 are $39,000 for fiscal 2000. Total rent expense was $13,600 and
$28,100 for the year ended September 30, 1999 and 1998, respectively.
14
<PAGE>
TRADINGDYNAMICS, INC.
(A Company in the Development Stage)
Notes to Financial Statements
September 30, 1999 and 1998
(9) SUBSEQUENT EVENTS
On November 15, 1999, the Company signed a definitive agreement to be
acquired by Ariba, Inc. The transaction has been structured as a
tax-free, stock-for-stock merger, and will be accounted for as a purchase
transaction by Ariba, Inc. Under the terms of the agreement, 2,074,151
shares of Common Stock of Ariba, Inc. (subject to adjustment as described
below) will be exchanged at the closing date for all of the issued and
outstanding Common Stock and Series A Convertible Preferred Stock and
Common Stock issuable upon exercise of warrants and Company stock
options. The number of shares of Common Stock offered by Ariba, Inc. will
be increased if the net assets of the Company, as defined, exceed $2.2
million at the date of closing and will be decreased if net assets, as
defined, are less than $2.2 million. All Company stock options
outstanding at the closing of the acquisition will be assumed by Ariba,
Inc. with the same terms and conditions that currently exist, except that
the shares subject to option will be for Ariba, Inc. Common Stock
adjusted by an exchange ratio. The transaction was consummated January
20, 2000.
On November 15, 1999, Ariba, Inc. entered into a loan agreement with the
Company to advance the Company up to $2,000,000 at an interest rate of
8%. All amounts advanced to the Company are due March 31, 2000. As of
January 2000, the Company has drawn the full $2,000,000.
15
<PAGE>
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information gives effect to the acquisition of TradingDynamics, Inc.
("TradingDynamics") by Ariba, Inc. ("Ariba"). The acquisition will be
accounted for under the purchase method of accounting in accordance with APB
Opinion No. 16. Under the purchase method of accounting, the purchase price
is allocated to the assets acquired and liabilities assumed based on their
estimated fair values. Estimates of the fair values of the assets and
liabilities of TradingDynamics have been combined with the recorded values of
the assets and liabilities of Ariba in the unaudited pro forma condensed
consolidated financial information. The purchase price allocation for
TradingDynamics is preliminary and is unaudited.
The unaudited pro forma condensed consolidated balance sheet as of
December 31, 1999 gives effect to the TradingDynamics acquisition as if it
occurred on December 31, 1999. The Ariba balance sheet information was
derived from its unaudited December 31, 1999 balance sheet. The
TradingDynamics balance sheet information was derived from its unaudited
December 31, 1999 balance sheet. The unaudited pro forma condensed
consolidated statements of operations give pro forma effect to the
acquisition as if the transaction was consummated as of October 1, 1998. The
information for the Ariba and TradingDynamics September 30, 1999 statements
of operations was derived from their audited statements of operations for the
period ending September 30, 1999. The information for the Ariba and
TradingDynamics December 31, 1999 statements of operations was derived from
their unaudited statements of operations for the period ending December 31,
1999.
The unaudited pro forma condensed consolidated financial information
has been prepared by Company management for illustrative purposes only and is
not necessarily indicative of the condensed consolidated financial position
or results of operations in future periods or the results that actually would
have been realized had Ariba and TradingDynamics been a combined company
during the specified periods. The unaudited pro forma condensed consolidated
financial information, including the notes thereto, is qualified in its
entirety by reference to, and should be read in conjunction with, the
historical consolidated financial statements of Ariba included in its Form
10-K and Form 10-Q filed December 23, 1999 and February 14th, 2000,
respectively, with the Securities and Exchange Commission, and the historical
consolidated financial statements of TradingDynamics included as exhibit 99.1
in this Form 8-K/A.
<PAGE>
ARIBA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical
--------------------------------
TradingDynamics, Pro Forma Pro Forma
Ariba, Inc. Inc. Adjustments Combined
-------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $42,168 $516 - $ 42,684
Short-term investments 64,269 - - 64,269
Restricted cash 400 - - 400
Accounts receivable 8,820 494 - 9,314
Prepaid expenses and other current assets 6,216 41 (1,200)(4) 5,057
--------- --------- ---------- ----------
Total current assets 121,873 1,051 (1,200) 121,724
Property and equipment, net 14,106 234 - 14,340
Long-term investments 54,563 - - 54,563
Goodwill and other intangibles - - 469,277 (2) 469,277
Other assets 278 12 - 290
--------- --------- ---------- ----------
Total assets $190,820 $1,297 $468,077 $660,194
--------- --------- ---------- ----------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $6,945 $307 - $ 7,252
Accrued compensation and related liabilities 10,923 95 - 11,018
Accrued liabilities 8,019 10,669 1,400 (1) (2) 20,088
Deferred revenue 46,709 395 - 47,104
Current portion of long-term debt 732 1,200 (1,200)(4) 732
--------- --------- ---------- ----------
Total current liabilities 73,328 12,666 200 86,194
Long-term debt, net of current portion 656 - - 656
--------- --------- ---------- ----------
Total liabilities 73,984 12,666 200 86,850
--------- --------- ---------- ----------
Commitments
Stockholders' equity:
Preferred stock - 5 (5)(3) -
Common stock 368 4 10 (1) (3) 382
Additional paid-in capital 192,012 20,856 436,588 (1) (3) 649,456
Deferred stock-based compensation (19,674) (13,923) 13,923 (3) (19,674)
Accumulated other comprehensive loss (604) - - (604)
Accumulated deficit (55,266) (18,311) 17,361 (3) (5) (56,216)
--------- --------- ---------- ----------
Total stockholders' equity 116,836 (11,369) 467,877 573,344
--------- --------- ---------- ----------
Total liabilities and stockholders' equity $190,820 $1,297 $468,077 $660,194
========= ========= ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
<PAGE>
ARIBA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical
----------------------------
TradingDynamics, Pro Forma Pro Forma
Ariba, Inc. Inc. Adjustments Combined
----------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Revenues:
License $ 26,768 $ 505 -- $ 27,273
Maintenance and service 18,604 -- -- 18,604
----------- ----------- ----------- -----------
Total revenues 45,372 505 -- 45,877
----------- ----------- ----------- -----------
Cost of revenues:
License 724 34 -- 758
Maintenance and service 8,089 -- -- 8,089
----------- ----------- ----------- -----------
Total cost of revenues 8,813 34 -- 8,847
----------- ----------- ----------- -----------
Gross profit 36,559 471 -- 37,030
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 33,859 561 -- 34,420
Research and development 11,620 2,166 -- 13,786
General and administrative 7,917 973 -- 8,890
Amortization of goodwill and other
intangibles -- -- 156,426 (2) 156,426
Amortization of stock-based compensation 14,584 2,024 (2,024)(3) 14,584
----------- ----------- ----------- -----------
Total operating expenses 67,980 5,724 154,402 228,106
----------- ----------- ----------- -----------
Loss from operations (31,421) (5,253) (154,402) (191,076)
Other income, net 2,219 87 -- 2,306
----------- ----------- ----------- -----------
Net loss before taxes (29,202) (5,166) (154,402) (188,770)
Provision for income taxes 98 -- -- 98
----------- ----------- ----------- -----------
Net loss $ (29,300) $ (5,166) $ (154,402) $ (188,868)
----------- ----------- ----------- -----------
Basic and diluted net loss per share $ (0.42) $ (2.45)
----------- -----------
Shares used in computing basic and diluted net
loss per share 70,064 7,171 77,235
----------- ----------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
<PAGE>
ARIBA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical
----------------------------------
TradingDynamics, Pro Forma Pro Forma
Ariba, Inc. Inc. Adjustments Combined
---------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
License $ 15,784 $ 229 -- $ 16,013
Maintenance and service 7,695 -- -- 7,695
------------- ------------- ----------- ------------
Total revenues 23,479 229 -- 23,708
------------- ------------- ----------- ------------
Cost of revenues:
License 321 -- -- 321
Maintenance and service 3,121 -- -- 3,121
------------- ------------- ----------- ------------
Total cost of revenues 3,442 -- -- 3,442
------------- ------------- ----------- ------------
Gross profit 20,037 229 -- 20,266
------------- ------------- ----------- ------------
Operating expenses:
Sales and marketing 19,774 870 -- 20,644
Research and development 4,443 840 -- 5,283
General and administrative 3,421 516 -- 3,937
Amortization of goodwill and other
intangibles -- -- 39,107 (2) 39,107
Amortization of stock-based compensation 4,719 3,599 (3,599)(3) 4,719
------------- ------------- ----------- ------------
Total operating expenses 32,357 5,825 35,508 73,690
------------- ------------- ----------- ------------
Loss from operations (12,320) (5,596) (35,508) (53,424)
Other income, net 2,059 7 -- 2,066
------------- ------------- ----------- ------------
Net loss before taxes (10,261) (5,589) (35,508) 51,358
Provision for income taxes 73 -- -- 73
------------- ------------- ----------- ------------
Net loss $ (10,334) $ (5,589) $ (35,508) $ (51,431)
============= ============= =========== ============
Basic and diluted net loss per share $ (0.07) $ (0.32)
============= ============
Shares used in computing basic and diluted net
loss per share 155,980 7,171 163,151
============= =========== ============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
Ariba acquired TradingDynamics on January 20, 2000 for a total
purchase price of $458.9 million in a transaction accounted for as a
purchase. Ariba exchanged approximately 7,171,000 shares of Ariba common
stock with a fair value of $366.6 million for all of the outstanding stock of
TradingDynamics. The common stock was valued using Ariba's average stock
price on the date the merger agreement was announced including the prices of
the stock 2 days before and after the announcement. The average value was
$51.13. Ariba also assumed all of the outstanding stock options and warrants
of TradingDynamics with a fair value of approximately $90.9 million. The
options and warrants were valued using a black-scholes option pricing model
with the inputs of .9572 for volatility, 3 years for expected life, 6.53% for
the risk-free interest rate and a market value of $51.13 as described above.
There were also $1.4 million of direct transaction costs related to the
merger.
The acquisition will be accounted for under the purchase method of
accounting in accordance with APB Opinion No. 16. Under the purchase method
of accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values. Preliminary
estimates based on management's best estimates of the fair values of the
assets and liabilities of TradingDynamics have been combined with the
recorded values of the assets and liabilities of Ariba in the unaudited pro
forma condensed consolidated financial information. These allocations are
subject to change pending a final analysis of the value of the assets
acquired and liabilities assumed.
On March 2, 2000, the Board of Directors authorized a two-for-one
stock split of the Company's common stock, to be effected in the form of a
stock dividend. The stock split will be effected by distribution to each
stockholder of record as of March 20, 2000 of one share of the Company's
common stock for each share of common stock held. All of the pro forma
condensed consolidated financial information presented herein has been
adjusted to give effect to the stock split.
PRO FORMA ADJUSTMENTS
(1) To reflect the issuance of 7,171,000 shares of Ariba Common Stock and
the assumption of all outstanding options and warrants in conjunction
with the TradingDynamics acquisition, for an aggregate purchase price of
approximately $458.9 million, including approximately $1.4 million of
transaction costs.
(2) To reflect the excess of the purchase price over the fair value of assets
and liabilities acquired in connection with the TradingDynamics
acquisition. The purchase price allocation is based on management's
estimates of the fair values of the tangible assets, intangible assets and
technology which has not reached technological feasibility and therefore
has no alternative future use. The book value of tangible assets and
liabilities acquired are presently believed to approximate fair value.
The goodwill and other intangible assets will be amortized on a
straight-line basis over three years. The total purchase price paid for
the acquisition is summarized as follows (in thousands):
<PAGE>
<TABLE>
<S> <C>
Property and equipment $234
Net liabilities acquired, excluding property
and equipment (11,603)
In-process research and development 950
Goodwill and other intangibles 469,277
----------
Total $458,858
==========
</TABLE>
(3) To reflect the elimination of the stockholders' equity accounts of
TradingDynamics.
(4) To reflect the elimination of Ariba's loan to TradingDynamics.
(5) Ariba will record an immediate write-off of in-process technology at
the consummation of the acquisition. The unaudited pro forma condensed
consolidated statements of operations do not include the charge for
in-process technology of approximately $950,000 since it is considered
a non-recurring charge. The charge will be taken by Ariba in the three
months ended March 31, 2000.
PRO FORMA NET LOSS PER SHARE
The unaudited pro forma combined net loss per share is based upon
the weighted average number of vested outstanding shares of common stock of
Ariba during the period presented, plus the number of shares issued to
consummate the acquisition of TradingDynamics as if the acquisition occurred
at the beginning of the period presented.
CONFORMING AND RECLASSIFICATION ADJUSTMENTS
There were no material adjustments required to conform the
accounting policies of Ariba and TradingDynamics. Certain amounts have been
reclassified to conform to Ariba's financial statement presentation.
SUBSEQUENT EVENT
On March 8, 2000, Ariba consummated a merger with Tradex
Technologies, Inc., a leading provider of solutions for Net Markets. This
merger will be accounted for as a purchase transaction. An 8-K/A with the
required financial information for this merger will be filed at a later date.
