<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): March 8, 2000
ARIBA, INC.
--------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 7372 77-0439730
- ------------------------------- ---------------- ---------------------
(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation) Number) 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 March 21, 2000, for the event of March 8, 2000.
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 Tradex Technologies, Inc. as of March 31, 1999 and
1998, and the related statements of operations, stockholders' equity
(deficiency), cash flows for the years then ended along with the notes to the
financial statements. Also included are the unaudited balance sheets of
Tradex Technologies, Inc. as of December 31, 1999 and the unaudited
statements of operations and cash flows for the nine months ended December
31, 1999 and 1998.
(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;
<PAGE>
(3) Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the quarter ended December 31, 1999;
(4) Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Information.
(c) EXHIBITS.
2.1* Agreement and Plan of Reorganization, dated as of
December 16, 1999, among Ariba, Inc., Apache Merger
Corp. and Tradex Technologies, Inc.
2.2* Amendment No. 1 to Agreement and Plan of
Reorganization, dated as of January 24, 2000, among
Ariba, Inc., Apache Merger Corporation and Tradex
Technologies, Inc.
23.1 Consent of Ernst & Young LLP
99.1 Financial Statements of Tradex Technologies, Inc.
99.2 Unaudited Pro Forma Condensed Consolidated Financial
Information
*Incorporated by reference to Exhibits 2.1 and 2.2 to the
Registrant's Form 8-K filed March 21, 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: May 16, 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 Reorganization, dated as of December
16, 1999, among Ariba, Inc., Apache Merger Corp. and
Tradex Technologies, Inc.
2.2* Amendment No. 1 to Agreement and Plan of
Reorganization, dated as of January 24, 2000, among
Ariba, Inc., Apache Merger Corporation and Tradex
Technologies, Inc.
23.1 Consent of Ernst & Young LLP
99.1 Financial Statements of Tradex Technologies, Inc.
99.2 Unaudited Pro Forma Condensed Consolidated Financial
Information
</TABLE>
*Incorporated by reference to Exhibits 2.1 and 2.2 to the Registrant's Form
8-K filed March 21, 2000.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Ariba, Inc. on Forms S-8 (Nos. 333-81773, 333-89119, 333-95665 and
333-33544) pertaining to the Ariba, Inc. 1999 Equity Incentive Plan, Ariba
Inc. Employee Stock Purchase Plan, Ariba, Inc. International Employee Stock
Purchase Plan and the Ariba, Inc. 1999 Directors' Stock Option Plan; the
Ariba, Inc. 1996 Stock Plan Shares Acquired Under Written Compensation
Agreements with Certain Named and Unnamed Individuals; the Trading Dynamics
1998 Stock Trading Plan and Trading Dynamics 1999 Stock Plan; and the Tradex
Technologies, Inc. 1997 Employee Stock Option Plan and Tradex Technologies,
Inc. 1999 Employee Stock Option/Stock Issuance Plan, respectively, of our
report dated June 3, 1999 with respect to the financial statements of Tradex
Technologies, Inc. (formerly TRADE'ex Electronic Commerce Systems, Inc.) for
the year ended March 31, 1999.
/s/ Ernst & Young LLP
Tampa, Florida
May 12, 2000
<PAGE>
EXHIBIT 99.1
Financial Statements
Tradex Technologies, Inc.
<PAGE>
Tradex Technologies, Inc.
Financial Statements
<TABLE>
<S> <C>
CONTENTS
Report of Ernst & Young LLP............................................... 1
Report of Pender Newkirk & Company........................................ 2
Financial Statements
Balance Sheets March 31, 1999 and 1998, and December 31, 1999
(unaudited)............................................................... 3
Statements of Operations Years ended March 31, 1999 and 1998 and
nine months ended December 31, 1999 and 1998 (unaudited) ................ 5
Statements of Changes in Stockholders' Equity (Deficiency) Years ended
March 31, 1999 and 1998................................................... 6
Statements of Cash Flows Years ended March 31, 1999 and 1998 and
nine months ended December 31, 1999 and 1998 (unaudited).................. 7
Notes to Financial Statements............................................. 8
</TABLE>
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Tradex Technologies, Inc.
We have audited the accompanying balance sheet of Tradex Technologies, Inc.
(formerly TRADE'ex Electronic Commerce Systems, Inc.) as of March 31, 1999 and
the related statements of operations, changes in stockholders' equity
(deficiency), and cash flows for the year then ended. These financial statements
are the responsibility of the management of the Company. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tradex Technologies, Inc.
(formerly TRADE'ex Electronic Commerce Systems, Inc.) as of March 31, 1999
and the results of its operations and cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Tampa, Florida
June 3, 1999
1
<PAGE>
Independent Auditors' Report
Board of Directors
TRADE'ex Electronic Commerce Systems, Inc.
Tampa, Florida
We have audited the accompanying balance sheet of TRADE'ex Electronic
Commerce Systems, Inc. as of March 31, 1998 and the related statements of
operations, changes in stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the management of
the Company. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TRADE'ex Electronic Commerce
Systems, Inc. as of March 31, 1998 and the results of its operations and cash
flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
June 8, 1998
2
<PAGE>
Tradex Technologies, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
1999 1999 1998
----------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $16,705,320 $ 903,240 $ 65,098
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $314,152 $163,443 and $30,384
at December 31, 1999, and March 31, 1999
and 1998, respectively 1,711,135 813,634 57,692
Other - 188,967 -
Stock subscription receivable - - 2,750,000
Prepaid expenses 163,446 125,768 18,150
Other current assets 40,745 22,160 13,353
----------- ---------- --------------
Total current assets 18,620,646 2,053,769 2,904,293
Property and equipment, net 3,740,271 904,090 254,395
Long-term investments 568,214 - -
----------- ---------- ----------
Total assets $22,929,131 $2,957,859 $3,158,688
=========== ========== ==========
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Accounts payable $ 462,261 $ 657,581 $ 203,151
Accrued expenses 2,058,014 621,810 175,300
Prepaid and deferred income 13,338,643 223,142 -
Notes payable to shareholders 921,333 2,217,750 -
Note payable to bank 750,000 750,000 -
Other current liabilities - 32,750 -
------------- ----------- -----------
Total current liabilities 17,530,251 4,503,033 378,451
Commitments (Note 6)
Series A convertible preferred stock;
$.01 par value; 257,465 shares issued
and outstanding at December 31, 1999,
March 31, 1999 and 1998; liquidation
preference of $2,075,000 at March 31,
1999 and 1998 2,034,824 2,034,824 2,034,824
Series B convertible preferred stock; $.01
par value; 566,658, 549,000 and
399,000 shares issued and outstanding at
December 31, 1999, March 31,1999
and 1998, respectively; liquidation
preference of $5,490,000 and $3,990,000 at
March 31, 1999 and 1998 5,587,228 5,337,228 3,880,699
Series C convertible preferred stock: $.01
par value; 8,284,651 shares issued
and outstanding at December 31, 1999 19,922,561 -- --
------------- ----------- -----------
Total convertible preferred stock 27,544,613 7,372,052 5,915,523
Stockholders' equity (deficiency):
Common stock; $.01 par value; 30,000,000
shares authorized; 5,451,213, 4,593,160 and
4,521,160 shares issued and outstanding at
December 31, 1999, March 31, 1999 and 1998 54,512 45,931 45,211
Additional paid-in capital 528,467 198,880 123,070
Accumulated deficit (22,728,712) (9,162,037) (3,303,567)
------------- ----------- -----------
Total stockholders' equity (deficiency) (22,145,733) (8,917,226) (3,135,286)
------------- ----------- -----------
Total liabilities and stockholders'
equity (deficiency) $ 22,929,131 $ 2,957,859 $3,158,688
============ =========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Tradex Technologies, Inc.
Statements of Operations
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, YEAR ENDED MARCH 31
1999 1998 1999 1998
------------ ------------ ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Revenue:
License fees $ 2,544,110 $ 909,000 $ 909,001 $ 616,000
Service fees 3,269,874 1,003,556 1,766,806 96,457
------------ ----------- ----------- -----------
Total revenue 5,813,984 1,912,556 2,675,807 712,457
Costs and expenses:
Costs of revenue 4,388,841 1,684,225 2,648,173 436,930
Selling, general, and
administrative expenses 14,320,061 3,782,691 5,819,202 1,565,321
----------- ----------- ----------- -----------
Total costs and expenses 18,708,902 5,466,916 8,467,375 2,002,251
Operating loss (12,894,918) (3,554,360) (5,791,568) (1,289,794)
Other income (expense):
Interest income 445,714 76,069 82,412 11,120
Interest expense (187,232) (13,824) (74,333) (8,212)
Loss on investments - - (74,000) (59,590)
----------- ----------- ----------- -----------
Total other income (expense) 258,482 62,245 (65,921) (56,682)
----------- ----------- ----------- -----------
Net loss $(12,636,436) $(3,492,115) $(5,857,489) $(1,346,476)
Preferred dividend (930,239) - - -
----------- ----------- ----------- -----------
Net loss applicable to
common stockholders $(13,566,675) $(3,492,115) $(5,857,489) $(1,346,476)
============ =========== =========== ===========
Basic and diluted
net loss per common
share $ (2.70) $ (0.77) $ (1.29) $ (0.30)
============ =========== =========== ===========
Shares used for basic
and diluted net loss
per common share 5,022,187 4,549,180 4,557,160 4,439,368
============ =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
Tradex Technologies, Inc.
Statements of Changes in Stockholders' Equity (Deficiency)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
------------------------- PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at April 1, 1997 4,357,576 $43,575 $ 119,585 $(1,957,091) $ (1,793,931)
Issuance of common stock 48,000 480 1,020 - 1,500
Exercise of common stock options 115,584 1,156 2,465 - 3,621
Net loss - - - (1,346,476) (1,346,476)
--------------------------------------------------------------------
Balances at March 31, 1998 4,521,160 45,211 123,070 (3,303,567) (3,135,286)
Issuance of protection warrants - - 23,549 - 23,549
Exercise of common stock options 72,000 720 8,280 - 9,000
Issuance of warrants to debt holders - - 43,000 - 43,000
Accretion of Series B convertible
preferred stock - - 981 (981) -
Net loss - - - (5,857,489) (5,857,489)
--------------------------------------------------------------------
Balances at March 31, 1999 4,593,160 $45,931 $ 198,880 $(9,162,037) $(8,917,226)
====================================================================
</TABLE>
6
<PAGE>
Tradex Technologies, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(12,636,436) $ (3,492,115)
Adjustments to reconcile net loss to net cash used by operating activities:
Preferred dividend (930,239) --
Depreciation 833,465 255,432
Provision for bad debts 1,222,366 30,128
Changes in operating assets and liabilities:
Trade accounts receivable (1,930,901) (263,540)
Prepaid expenses and other current assets (56,262) (21,456)
Accounts payable (195,320) 36,108
Accrued expenses 1,182,256 67,766
Prepaid and deferred income and other current liabilities 14,258,032 90,438
------------ ------------
Net cash used by operating activities 1,746,961 (3,297,239)
INVESTING ACTIVITIES
Purchases of property and equipment (3,660,740) (758,131)
Purchase of investments (568,214) --
------------ ------------
Net cash used by investing activities (4,228,954) (758,131)
FINANCING ACTIVITIES
Proceeds from the sale of stock, including the exercise of options 20,501,823 4,237,079
Proceeds from the issuance of notes payable and warrants -- 1,000,000
Payments on debt and notes payable (2,217,750) --
------------ ------------
Net cash provided by financing activities 18,284,073 5,237,079
------------ ------------
Net increase in cash 15,802,080 1,181,709
Cash at beginning of period 903,240 65,098
------------ ------------
Cash at end of period $ 16,705,320 $ 1,246,807
============ ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (5,857,489) $ (1,346,476)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation 374,224 56,793
Provision for bad debts 133,059 30,384
Loss on investments 74,000 59,590
Accretion of discount on notes payable 10,750 --
Stock compensation expense -- 3,067
Changes in operating assets and liabilities:
Trade accounts receivable (889,001) 18,321
Other accounts receivable (188,967) --
Inventories -- 8,445
Prepaid expenses and other current assets (116,425) 35,564
Accounts payable 454,430 140,886
Accrued expenses 446,510 140,235
Prepaid and deferred income and other current liabilities 255,892 --
------------ ------------
Net cash used by operating activities (5,303,017) (853,191)
INVESTING ACTIVITIES
Purchases of property and equipment (1,023,919) (158,778)
Purchase of investments (74,000) (59,590)
------------ ------------
Net cash used by investing activities (1,097,919) (218,368)
FINANCING ACTIVITIES
Proceeds from the sale of stock, including the exercise of options 4,239,078 892,753
Proceeds from the issuance of notes payable and warrants 3,000,000 340,000
Payments on debt and notes payable -- (100,000)
------------ ------------
Net cash provided by financing activities 7,239,078 1,132,753
------------ ------------
Net increase in cash 838,142 61,194
Cash at beginning of year 65,098 3,904
------------ ------------
Cash at end of year $ 903,240 $ 65,098
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND
NONCASH INVESTING AND FINANCING ACTIVITIES
Cash paid during the year for interest $ 30,833 $ 8,212
============ ============
</TABLE>
During fiscal 1998, the Company converted $240,000 of notes payable into 24,000
shares of Series B convertible preferred stock.
SEE ACCOMPANYING NOTES.
7
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements
March 31, 1999
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Tradex Technologies, Inc. (the Company) is engaged in the development,
marketing, licensing and support of enterprise application electronic
commerce software solutions. The Company's software solutions enable its
customers to engage in business-to-business electronic communications and
transactions. In addition, the Company provides a wide range of professional
and business consulting services surrounding the implementation and support
of the enterprise application software.
The Company was incorporated under the laws of the State of Delaware.
Effective May 3, 1999, the Company changed its name from TRADE'ex Electronic
Commerce Systems, Inc. to Tradex Technologies, Inc.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
INTERIM FINANCIAL DATA
The financial statements for the nine months ended December 31, 1999 and 1998
and the related amounts in the Notes to Financial Statements are unaudited,
but in the opinion of management reflect all normal and recurring adjustments
necessary for a fair presentation of the results of those periods. Operating
results for the nine months ended December 31, 1999 are not necessarily an
indication of the results that may be expected for the year ended March 31,
2000.
8
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company has adopted the American Institute of Certified Public Accountants'
Statement of Position 97-2, SOFTWARE REVENUE RECOGNITION (SOP 97-2), as amended
by Statement of Position 98-4, DEFERRAL OF THE EFFECTIVE DATE OF A PROVISION OF
SOP 97-2, and Statement of Position 98-9, MODIFICATION OF SOP 97-2, SOFTWARE
REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS. SOP 97-2, as amended,
generally requires revenue earned on software arrangements involving multiple
elements to be allocated to each element based on the relative fair values of
the elements. Revenue from license fees and from sales of software products is
recognized when persuasive evidence of an arrangement exists, delivery of the
product has occurred, no significant Company obligation with regards to
implementation remains, the fee is fixed or determinable and collectibility is
probable. Service revenue is primarily comprised of revenue from consulting and
the implementation of the Company's software product, maintenance and support,
and training. Service revenues from consulting and implementation are generally
recognized as performed except in circumstances where the consulting and
implementation services represent an essential element to the functionality of
the delivered software product, in which case contract accounting is applied.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over the estimated
useful lives of the respective categories, using the straight-line method.
Office and computer equipment is depreciated over two to five years.
Office furniture and other assets are depreciated over seven years.
Internal use software is amortized generally over three years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful life of the underlying asset.
In accordance with Statement of Financial Accounting Standards No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF, the Company reviews its long-lived assets for impairment when
events or changes in circumstances indicate the carrying value of such assets
may not be recoverable. This review consists of a comparison of the carrying
value of the assets with the assets' expected future undiscounted cash flows,
without
9
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
interest costs. Estimates of expected future cash flows represent management's
best estimate based on reasonable and supportable assumptions and projections.
If the expected future cash flow exceeds the carrying value of the asset, no
impairment indicator is considered present. If the carrying value exceeds the
future cash flow, an impairment indicator would be considered present. Such
impairment, if any, would be measured and recognized using a discounted cash
flow method.
DEFERRED SOFTWARE COSTS
The Company accounts for internally generated software development costs in
accordance with Statement of Financial Accounting Standards No. 86, ACCOUNTING
FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED, OR OTHERWISE MARKETED
(SFAS 86). Initial costs, including program design and testing, are charged to
expense as incurred. Capitalization of computer software development costs
commences upon the establishment of a working model (technological feasibility)
for the product and ends upon product release, whereupon the costs are amortized
over the useful economic life of the product and included in the costs of earned
revenue. The Company has not capitalized any of these costs for the years ended
March 31, 1999 and 1998 due to the amounts being insignificant.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. The amount charged to
operations for the years ended March 31, 1999 and 1998 amounted to approximately
$1,247,000 and $0, respectively.
STOCK-BASED COMPENSATION
The Company accounts for employee stock-based compensations arrangements in
accordance with Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES (APB No. 25), and related Interpretations. Accordingly,
where exercise prices equal or exceed fair market value (as determined by
management), the Company recognizes no compensation expense for its stock option
grants. In cases where exercise prices are less than fair value,
10
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
compensation expense is recognized over the period of performance or vesting
period. Under APB No. 25, the Company incurred approximately $3,000 of
compensation expense during 1998 (none in 1999).
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES, which requires an
asset and liability approach in accounting for income taxes. Deferred income
taxes are recognized for the estimated future tax consequences attributable to
differences between the financial statements' carrying amounts of existing
assets and liabilities and their respective income tax bases. Valuation
allowances are established to reduce net deferred assets, principally related to
net operating loss carryforwards, to net realizable value.
STOCK SPLIT
All common stock share information presented in the accompanying financial
statements and notes has been restated to reflect a stock dividend paid in the
form of an 8-for-1 stock split. The stock dividend was paid to holders of record
on September 21, 1998.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the current
year's presentation.
CHANGE IN ESTIMATE
In 1999, the Company changed the estimated useful life of computer equipment
from five to two years. This change in estimate resulted in additional
depreciation expense of approximately $177,000.
RECENTLY ISSUED ACCOUNTING STANDARDS
On December 3, 1999, the Securities and Exchange Commission (SEC) issued its
views of revenue recognition in Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements." The SAB provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
and will be effective for the Company's fiscal year beginning April 1, 2000.
Management is currently evaluating the impact of this SAB on the financial
statements, but does not at this time anticipate a material impact.
LOSS PER SHARE
The Company has applied the provisions of Financial Accounting Standards No.
128, Earnings Per Share, which establishes standards for computing and
presenting earnings and loss per share. Using this method there were no
dilutive securities in any period presented.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments, consisting primarily of cash,
accounts receivable, and accounts payable approximates carrying value due to
the liquid nature of the instruments. The fair value of short-term borrowings
approximates carrying value based on borrowing rates available to the Company
for borrowings with similar terms and maturities.
11
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
2. PROPERTY AND EQUIPMENT
Property and equipment consists of:
<TABLE>
<CAPTION>
1999 1998
------------------------------------
<S> <C> <C>
Office equipment and furniture $ 131,799 $ 29,793
Computer equipment and software 1,036,690 293,337
Trade show booths 66,062 58,469
Leasehold improvements 170,967 -
------------------------------------
1,405,518 381,599
Less accumulated depreciation (501,428) (127,204)
====================================
$ 904,090 $ 254,395
====================================
</TABLE>
Depreciation expense on property and equipment amounted to $374,224 and $56,793
during the years ended March 31, 1999 and 1998.
3. NOTES PAYABLE
The Company has a bank line of credit in the amount of $750,000 due on January
29, 2000. Interest, at the bank's prime rate plus 1% (8.75% at March 31, 1999),
is payable monthly. The loan is secured by substantially all of the Company's
assets.
In October 1998, the Company issued a $250,000 note payable to a shareholder.
The Company has the option of satisfying the debt in whole or in part by
conversion into Series B convertible preferred stock at a price of $14.16 per
share upon closing a subsequent arm's-length investment in Series C convertible
preferred stock.
In February 1999, the Company issued $2,000,000 12% notes payable (Bridge Notes)
with detachable warrants for approximately 166,000 shares of Series C
convertible preferred stock. The Bridge Notes are payable on June 28, 1999, to
certain preferred shareholders. The warrants are exercisable for a period of ten
years from the date of issuance at a formula exercise price of $2.41. The
proceeds from the Bridge Notes were allocated between the notes payable and the
warrants based on the relative fair value of each instrument. The fair value of
the warrants was estimated at $43,000 and was recorded as additional paid-in
capital. The remainder of the proceeds were allocated to the Bridge Notes. The
Company has accreted into interest expense $10,750 of the resulting discount on
the notes payable as of March 31, 1999.
12
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
4. STOCKHOLDERS' EQUITY
STOCK OPTIONS
On November 11, 1997, and as subsequently amended, the Board of Directors
authorized the establishment of a qualified employee stock option plan whereby
the Company may grant employees stock options to purchase up to 1,440,000 shares
of common stock. The exercise price of each option is equal to the market price
of the Company's common stock on the date of grant, as determined by the Board
of Directors of the Company. Employee stock options generally vest over a
four-year period and expire on the tenth anniversary of their issuance. The
Company has granted 1,030,250 and 416,000 options as of March 31, 1999 and 1998,
respectively, to employees under the plan.
In addition to the plan described above, the Company has granted nonqualified
common stock options to directors under various discrete option agreements. The
Company has granted 225,760 nonqualified options to directors, as of March 31,
1999 and 1998.
The following table sets forth the activity for all common stock options during
the years ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICE
-----------------------------------------
<S> <C> <C>
Outstanding, April 1, 1997 307,088 $0.64
Granted 550,256 0.38
Exercised (115,584) 0.01
Expired (100,000) 1.25
----------------------------------------
Outstanding, March 31, 1998 641,760 0.43
Granted 797,450 0.20
Exercised (72,000) 0.13
Expired (183,200) 0.24
----------------------------------------
Outstanding, March 31, 1999 1,184,010 $0.32
========================================
</TABLE>
13
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
4. STOCKHOLDERS' EQUITY (CONTINUED)
The following table sets forth stock options outstanding at March 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS EXERCISABLE OPTIONS
---------------------------------------- ----------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE REMAINING REMAINING
PRICE NUMBER CONTRACTUAL LIFE NUMBER CONTRACTUAL LIFE
---------------- -------------- ------------------------- -------------- -------------------------
<S> <C> <C> <C> <C>
0.13 638,400 9.03 387,353 9.03
0.25 342,250 9.66 54,297 9.54
0.73 11,200 7.79 11,200 7.79
0.79 69,104 0.75 69,104 0.75
1.25 123,056 2.29 123,056 2.29
-------------- -------------
1,184,010 645,010
============== =============
</TABLE>
The Company applies APB Opinion 25 in accounting for its stock options and
warrants. On an unaudited pro forma basis, had compensation cost been determined
on the basis of fair value pursuant to Statements of Financial Standards of
Accounting No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, net loss would have
been as follows for the years ended:
<TABLE>
<CAPTION>
MARCH 31
1999 1998
------------------------------------
<S> <C> <C>
Net loss, as reported $(5,857,489) $(1,346,479)
Unaudited pro forma net loss (5,864,876) (1,359,429)
</TABLE>
The pro forma effect of applying SFAS No. 123 is not likely to be representative
of the effects on reported net income for future years.
14
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
4. STOCKHOLDERS' EQUITY (CONTINUED)
The weighted average fair value of the options at their grant date during 1999
was $.05. The estimated fair value of each option granted is calculated using
the Black-Scholes option-pricing model. The following summarizes the weighted
average of the assumptions used in the model:
<TABLE>
<CAPTION>
MARCH 31
1999 1998
-----------------------------------
<S> <C> <C>
Risk-free interest rate 5.55% 5.79%
Expected years until exercised 2-4 3-4
Expected dividend yield 0.00 0.00
Estimated fair market value of underlying stock $.13 $.68
</TABLE>
Additionally, not included in the above schedules are 120,000 warrants
associated with the notes payable of the Company issued and converted into
the Series B convertible preferred stock of the Company during the prior
year, contingent and protective warrants associated with the Series B
convertible preferred stock of the Company (as further discussed below),
warrants associated with the 12% notes payable of the Company (as further
discussed in Note 3) and options issued to the investment partners in
TRADE'ex Electronic Commerce (Pacific), Inc. (as further discussed below) to
convert the partners' shares of stock in TRADE'ex Electronic Commerce
(Pacific), Inc. into 296,000 shares of common stock of the Company.
CONVERTIBLE PREFERRED STOCK AND CONTINGENT WARRANTS
The Company has 2,000,000 authorized shares of convertible preferred stock, of
which 257,465 shares have been designated as Series A convertible preferred
stock, 549,000 have been designated as Series B convertible preferred stock and
1,243,535 are undesignated. Each share of convertible preferred stock is
convertible into shares of common stock at a rate computed by multiplying the
number of preferred shares to be converted by the preferred issue price, and
dividing the result by the conversion price then in effect. At March 31, 1999,
the conversion rate was one share of convertible preferred for eight shares of
common stock.
The preferred stockholders are entitled to the same dividend and voting
privileges as the common stockholders, except that the preferred stockholders
are entitled to elect three of the five directors of the Company. However, upon
liquidation of the Company, all preferred stockholders shall be
15
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
4. STOCKHOLDERS' EQUITY (CONTINUED)
entitled to receive the amount of consideration paid by the holders for issuance
of said shares before distribution of assets is made to the holders of any other
capital stock (the Liquidation Preference).
SERIES A CONVERTIBLE PREFERRED STOCK: The Series A convertible preferred stock
is redeemable at the option of the Series A shareholders commencing on June 3,
2003 at a price equal to the original purchase price paid by the Series A
shareholders for the preferred stock. These securities also contain certain
covenants which must be met by the Company. Failure to do so could result in
acceleration of the redemption. The Series A convertible preferred shares are
automatically converted into 2,059,720 shares of common stock upon the closing
of an initial public offering of the Company's common stock or upon the sale or
acquisition of the Company (or substantially all of its assets) for more than
$47,500,000. The owners of the Series A convertible preferred stock have certain
antidilution clauses in the stock purchase agreements.
SERIES B CONVERTIBLE PREFERRED STOCK: The Series B convertible preferred stock
possesses the same general terms and conditions as the Series A and are
convertible into 4,392,000 shares of common stock. In addition, if the Company
has not consummated its first public offering or a conversion event on or before
June 3, 2003, on receipt of a sale request from the stockholders of at least 50
percent of the Series B convertible preferred stock, the Company will take such
action as may be necessary to effect a sale of the Company.
SERIES C CONVERTIBLE PREFERRED STOCK: The Series C convertible preferred
stock possesses the same general terms and conditions as the Series A and are
convertible into an equal number of shares of common stock. Additionally, the
holders of Series C convertible preferred have liquidation preference over
the other classes of convertible preferred stock and are entitled to receive
cumulative dividends at a rate of 8% per annum.
CONTINGENT WARRANTS: Concurrent with the sale of Series B convertible preferred
stock, the Company issued contingent protection warrants to the Series B
convertible preferred shareholders to purchase up to approximately 94,000 shares
of common stock at an exercise price of $.01 per share. The contingent
protection warrants became exercisable upon the exercise of the Put Option,
described below. Due to their contingent nature, no value was ascribed to the
contingent protection warrants on the date of issuance. Upon the exercise of the
Put Option, such contingency was lifted, and the Company recorded the estimated
fair value on the date of issuance ($23,549) as additional paid-in capital. The
protection warrants expire March 31, 2001.
In addition, concurrent with the sale of Series B convertible preferred stock,
the Company issued contingent performance warrants to the Series B convertible
preferred shareholders. The contingent performance warrants would have become
exercisable at a nominal price per common
16
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
4. STOCKHOLDERS' EQUITY (CONTINUED)
share upon the failure of the Company to achieve, among other things, certain
future sales levels. The contingent performance warrants were canceled in May
1999, in connection with the sale of Series C convertible preferred stock,
discussed in Note 7.
PUT OPTION
In April 1998, the Company granted a put option (the Put Option) to a Series A
convertible preferred shareholder and investment partner in a joint venture by
name of TRADE'ex Electronic Commerce (Pacific), Inc. as an inducement to approve
the sale of Series B convertible preferred stock. The Put Option granted the
counterparty the option to put its shares of the investee to the Company in
exchange for 296,000 shares of the Company's common stock. The Company's
investment had been written off in the amounts of $59,500 and $345,121 in the
fiscal years ended March 31, 1998 and 1997, respectively, and the investee
subsequently ceased operations. On March 31, 1999, the counterparty elected to
exercise the Put Option. As a result, the Company recorded an additional loss on
the investee for its fiscal year ended March 31, 1999 in an amount of $74,000.
This amount represented the estimated value of the common stock due to the
counterparty on the date exercised.
5. INCOME TAXES
As of March 31, 1999 and 1998, the Company had temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
their respective income tax bases, as measured by enacted state and federal tax
rates, as follows:
<TABLE>
<CAPTION>
1999 1998
------------------ -------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $ - $ (10,600)
Deferred tax assets:
Net operating loss carryforward 3,135,668 581,400
Loss on investment 180,139 -
Depreciation and amortization 42,576 -
Other 61,504 87,000
------------------ -------------------
Net deferred tax assets 3,419,887 668,400
Less valuation allowance (3,419,887) (657,800)
------------------ -------------------
$ - $ -
================== ===================
</TABLE>
17
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
5. INCOME TAXES (CONTINUED)
As of March 31, 1999, the Company has available approximately $8,300,000 of net
tax operating loss carryforwards that may be available to offset future taxable
income through the year ended 2019.
6. COMMITMENTS
LEASES
The Company leases space utilized for its corporate headquarters and other
satellite offices under noncancelable operating leases expiring during 2000,
2001 and 2002. The Company also leases certain telecommunications and office
equipment and fixtures under noncancelable operating leases expiring during 2001
and 2002.
The following is a schedule by year of the approximate future minimum rental
payments required under these leases:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31
<S> <C>
2000 $380,934
2001 126,616
2002 49,279
-------------------
$556,829
===================
</TABLE>
For the years ended March 31, 1999 and 1998, rent expense under these leases
amounted to $283,639 and $69,190, respectively.
7. SUBSEQUENT EVENT (UNAUDITED)
On March 8, 2000, Ariba, Inc. ("Ariba") and the Company consummated a merger
which merged the Company into a wholly owned subsidiary of Ariba. Pursuant to
the merger agreement, each share of common stock and preferred share
equivalent was exchanged for .68356 shares of Ariba Common Stock. In
addition, each employee stock option was converted into an equivalent number
of Ariba stock options using the same exchange ratio.
18
<PAGE>
Tradex Technologies, Inc.
Notes to Financial Statements (continued)
8. YEAR 2000 MATTERS (UNAUDITED)
The Company is devoting significant resources to minimize the risk of potential
disruption from the Year 2000 (Y2K) problem. This problem is a result of
computer programs having been written using two digits (rather than four) to
define the applicable year and extends to time-sensitive software and to many
operating and control systems that rely on embedded chip systems. Like every
other business enterprise, the Company is at risk from Y2K failures on the part
of its major business counterparts, including suppliers, distributors, licensees
and manufacturers, as well as potential failures in public and private
infrastructure services, including electricity, water, gas, transportation,
communications and financial services.
Based upon its analysis to date, the Company believes that the vast majority of
its products, software and equipment, including all critical and important
systems, will remain up and running after January 1, 2000. Accordingly, the
Company does not currently anticipate that internal systems failures will result
in any material adverse effect to its operations or financial condition.
During 1999, the Company will expand its efforts to ensure that major
third-party business affiliates and public and private providers of
infrastructure services will also be prepared for the year 2000, developing
contingency plans to address any failures on their part to become Y2K compliant.
The nature and focus of the Company's efforts to address the Year 2000 problem
may be revised periodically as interim goals are achieved or new issues are
identified. In addition, it is important to note that the description of the
Company's efforts necessarily involves estimates and projections with respect to
activities required in the future. These estimates and projections are subject
to change as work continues, and such changes may be substantial.
19
<PAGE>
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information gives effect to the acquisitions of TradingDynamics, Inc.
("TradingDynamics") and Tradex Technologies, Inc. ("Tradex") by Ariba, Inc.
("Ariba"). The acquisitions 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 and Tradex have been
combined with the recorded values of the assets and liabilities of Ariba in the
unaudited pro forma condensed consolidated financial information.
The unaudited pro forma condensed consolidated balance sheet as of
December 31, 1999 gives effect to the acquisitions as if they occurred on
December 31, 1999. The Ariba balance sheet information was derived from its
unaudited December 31, 1999 balance sheet. The TradingDynamics and Tradex
balance sheet information was derived from their 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 September 30,
1999 statement of operations was derived from its audited statements of
operations for the year ended September 30, 1999. The information for the
TradingDynamics September 30, 1999 statement of operations was derived from its
audited statements of operations for the year ended September 30, 1999. The
information for the Tradex September 30, 1999 statement of operations was
derived from its unaudited statements of operations for the year ended
September 30, 1999. The information for the Ariba, TradingDynamics and Tradex
December 31, 1999 statements of operations was derived from their unaudited
statements of operations for the three months ended 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, TradingDynamics and Tradex been a combined company
during the specified periods. The unaudited pro forma condensed consolidated
financial information, including the notes thereto, is qualified in their
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, the historical consolidated financial
statements of TradingDynamics included in Ariba's Form 8-K/A filed April 4th
with the Securities and Exchange Commission and the historical consolidated
financial statements of Tradex 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
-------------------------------------------
Tradex
TradingDynamics, Technologies, Pro Forma Pro Forma
Ariba, Inc. Inc. Inc. Adjustments Combined
------------- ------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 42,168 $ 516 $ 16,705 -- $ 59,389
Short-term investments 64,269 -- -- -- 64,269
Restricted cash 400 -- -- -- 400
Accounts receivable 8,820 494 1,711 -- 11,025
Prepaid expenses and other
current assets 6,216 41 204 (1,200)(5) 5,261
----------- ----------- ----------- ----------- -----------
Total current assets 121,873 1,051 18,620 (1,200) 140,344
Property and equipment, net 14,106 234 3,740 -- 18,080
Long-term investments 54,563 -- 568 -- 55,131
Goodwill and other intangibles -- -- -- 2,766,114(2)(4) 2,766,114
Other assets 278 12 -- -- 290
----------- ----------- ----------- ----------- -----------
Total assets $ 190,820 $ 1,297 $ 22,928 $ 2,764,914 $ 2,979,959
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,945 $ 307 $ 462 -- $ 7,714
Accrued compensation and related
liabilities 10,923 95 1,561 236(1)(2) 12,815
Accrued liabilities 8,019 10,669 497 29,921(1) 49,106
Deferred revenue 46,709 395 13,338 (2,668)(4) 57,774
Preferred dividend payable -- -- 921 (921)(6) --
Current portion of long-term debt 732 1,200 750 (1,200)(5) 1,482
----------- ----------- ----------- ----------- -----------
Total current liabilities 73,328 12,666 17,529 25,368 128,891
Long-term debt, net of current portion 656 -- -- -- 656
----------- ----------- ----------- ----------- -----------
Total liabilities 73,984 12,666 17,529 25,368 129,547
----------- ----------- ----------- ----------- -----------
Commitments
Stockholders' equity:
Preferred stock -- 5 91 (96)(3) --
Common stock 368 4 55 24(1)(3) 451
Additional paid-in capital 192,012 20,856 27,982 2,697,405(1)(3) 2,938,255
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) (22,729) 28,290(3)(7) (68,016)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 116,836 (11,369) 5,399 2,739,546 2,850,412
----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity $ 190,820 $ 1,297 $ 22,928 $ 2,764,914 $ 2,979,959
=========== =========== =========== =========== ===========
</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
-------------------------------------------
Tradex
TradingDynamics, Technologies, Pro Forma Pro Forma
Ariba, Inc. Inc. Inc. Adjustments Combined
----------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
License $ 26,768 $ 505 $ 1,853 -- $ 29,126
Maintenance and service 18,604 -- 2,839 -- 21,443
----------- ----------- ----------- ----------- -----------
Total revenues 45,372 505 4,692 -- 50,569
----------- ----------- ----------- ----------- -----------
Cost of revenues:
License 724 34 -- -- 758
Maintenance and service 8,089 -- 3,958 -- 12,047
----------- ----------- ----------- ----------- -----------
Total cost of revenues 8,813 34 3,958 -- 12,805
----------- ----------- ----------- ----------- -----------
Gross profit 36,559 471 734 -- 37,764
----------- ----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 33,859 561 6,052 -- 40,472
Research and development 11,620 2,166 1,279 -- 15,065
General and administrative 7,917 973 2,205 -- 11,095
Amortization of goodwill and other
intangibles -- -- -- 922,038(2) 922,038
Amortization of stock-based compensation 14,584 2,024 -- (2,024)(3) 14,584
----------- ----------- ----------- ----------- -----------
Total operating expenses 67,980 5,724 9,536 920,014 1,003,254
----------- ----------- ----------- ----------- -----------
Loss from operations (31,421) (5,253) (8,802) (920,014) (965,490)
Other income, net 2,219 87 (57) -- 2,249
----------- ----------- ----------- ----------- -----------
Net loss before taxes (29,202) (5,166) (8,859) (920,014) (963,241)
Provision for income taxes 98 -- -- -- 98
----------- ----------- ----------- ----------- -----------
Net loss (29,300) (5,166) (8,859) (920,014) (963,339)
Preferred dividend -- -- (521) 521(6) --
----------- ----------- ----------- ----------- -----------
Net loss applicable to common stockholders $ (29,300) $ (5,166) $ (9,380) $ (919,493) $ (963,339)
=========== =========== =========== =========== ===========
Basic and diluted net loss per share $ (0.42) $ (8.65)
=========== ===========
Shares used in computing basic and diluted
net loss per share 70,064 41,334 111,398
=========== =========== ===========
</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
--------------------------------------------
Tradex
TradingDynamics, Technologies, Pro Forma Pro Forma
Ariba, Inc. Inc. Inc. Adjustments Combined
--------- ----------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
License $ 15,784 $ 229 $ 1,088 -- $ 17,101
Maintenance and service 7,695 -- 1,526 -- 9,221
--------- --------- --------- --------- ---------
Total revenues 23,479 229 2,614 -- 26,322
--------- --------- --------- --------- ---------
Cost of revenues:
License 321 -- -- -- 321
Maintenance and service 3,121 -- 2,151 -- 5,272
--------- --------- --------- --------- ---------
Total cost of revenues 3,442 -- 2,151 -- 5,593
--------- --------- --------- --------- ---------
Gross profit 20,037 229 463 -- 20,729
--------- --------- --------- --------- ---------
Operating expenses:
Sales and marketing 19,774 870 4,586 -- 25,230
Research and development 4,443 840 1,275 -- 6,558
General and administrative 3,421 516 2,544 -- 6,481
Amortization of goodwill and other
intangibles -- -- -- 230,510(2) 230,510
Amortization of stock-based compensation 4,719 3,599 -- (3,599)(3) 4,719
--------- --------- --------- --------- ---------
Total operating expenses 32,357 5,825 8,405 226,911 273,498
--------- --------- --------- --------- ---------
Loss from operations (12,320) (5,596) (7,942) (226,911) (252,769)
Other income, net 2,059 7 191 -- 2,257
--------- --------- --------- --------- ---------
Net loss before taxes (10,261) (5,589) (7,751) (226,911) (250,512)
Provision for income taxes 73 -- -- -- 73
--------- --------- --------- --------- ---------
Net loss (10,334) (5,589) (7,751) (226,911) (250,585)
Preferred dividend -- -- (400) 400(6) --
--------- --------- --------- --------- ---------
Net loss applicable to common stockholders $ (10,334) $ (5,589) $ (8,151) $(226,511) $(250,585)
========= ========= ========= ========= =========
Basic and diluted net loss per share $ (0.07) $ (1.27)
========= =========
Shares used in computing basic and diluted net
loss per share 155,980 41,334 197,314
========= ========= =========
</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 $465.0 million in a transaction accounted for as a purchase. Ariba
exchanged approximately 7,274,656 shares of Ariba common stock with a fair value
of $371.9 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 two days before and
after the announcement. The average value was $51.13. Ariba also assumed all of
the outstanding stock options of TradingDynamics with a fair value of
approximately $91.7 million. The options 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.
Ariba acquired Tradex on March 8, 2000 for a total purchase price of
$2.3 billion in a transaction accounted for as a purchase. Ariba exchanged
approximately 34,059,336 shares of Ariba common stock with a fair value of $2.1
billion for all of the outstanding stock of Tradex. 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 two days before and after the announcement.
The average value was $60.93. Ariba also assumed all of the outstanding stock
options of Tradex with a fair value of approximately $207.5 million. The options
were valued using a black-scholes option pricing model with the inputs of .9572
for volatility, 3 years for expected life, 6.55% for the risk-free interest rate
and a market value of $60.93 as described above. There were also $28.8 million
of direct transaction costs related to the merger.
The acquisitions were 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. Management's best
estimates of the fair values of the assets and liabilities of TradingDynamics
and Tradex have been combined with the recorded values of the assets and
liabilities of Ariba in the unaudited pro forma condensed consolidated financial
information.
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 was 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.
Prior to the consummation of the Ariba and Tradex merger, Tradex
received a private placement of $85.0 million. This amount is not reflected
on the December 31, 1999 Tradex balance sheet because it occurred subsequent
to December 31, 1999. In the final purchase price allocation the private
placement will result in an increase of $85.0 million in the net assets
acquired by Ariba and a reduction of $85.0 million in the goodwill recorded
by Ariba.
PRO FORMA ADJUSTMENTS
(1) a. To reflect the issuance of 7,274,656 shares of Ariba Common Stock
and the assumption of all outstanding options in conjunction with the
TradingDynamics acquisition, for an aggregate purchase price of
approximately $465.0 million, including approximately $1.4 million of
transaction costs.
b. To reflect the issuance of 34,059,336 shares of Ariba Common Stock and
the assumption of all outstanding options in conjunction with the
Tradex acquisition, for an aggregate purchase price of approximately
$2.3 billion, including approximately $28.8 million of transaction
costs.
<PAGE>
(2) To reflect the excess of the purchase price over the fair value of assets
and liabilities acquired in connection with the TradingDynamics and Tradex
acquisitions. The purchase price allocations are 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 assumed 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 acquisitions are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
TRADINGDYNAMICS:
<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 475,422
-----------
Total $ 465,003
===========
</TABLE>
<TABLE>
<CAPTION>
TRADEX:
<S> <C>
Property and equipment $ 3,740
Net assets acquired, excluding property and equipment 2,580
In-process research and development 11,800
Goodwill and other intangibles 2,293,360
-----------
Total $ 2,311,480
===========
</TABLE>
(3) To reflect the elimination of the stockholders' equity accounts of
TradingDynamics and Tradex.
(4) To record a reduction of deferred revenue related to the estimated
calculation of Ariba's obligation to perform future services equal to
the expected costs to provide the services plus a normal profit margin.
(5) To reflect the elimination of Ariba's loan to TradingDynamics.
(6) To reflect the elimination of the preferred dividend payable account of
Tradex.
(7) 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 charges for
in-process technology of approximately $950,000 and $11.8 million for
TradingDynamics and Tradex, respectively, since they are considered
non-recurring charges. The charges 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 periods presented, plus the number of shares issued to consummate the
acquisitions of TradingDynamics and Tradex 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 Tradex. Certain amounts have been reclassified to conform
to Ariba's financial statement presentation.
