<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 4, 1999
------------------------------
TIBCO SOFTWARE INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-26579 77-0449727
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
3165 Porter Drive, Palo Alto, CA 94304
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 846-5000
----------------------------
________________________________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
This Form 8-K/A is filed as an amendment to the current report on Form
8-K filed by TIBCO Software Inc. ("TIBCO") on November 19, 1999 in
connection with the Company's acquisition of substantially all of the assets
of InConcert, Inc., a subsidiary of Xerox Corporation.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
------------------------------------
On November 4, 1999 (the "Closing Date"), pursuant to three separate
agreements, each an Asset Purchase Agreement dated as of September 30, 1999
(together, the "Agreements") by and among TIBCO, InConcert, Inc., a Delaware
corporation ("InConcert"), and Xerox Corporation, a New York corporation
("Xerox"), TIBCO acquired substantially all of the assets of InConcert, a
subsidiary of Xerox, for $34 million in cash. TIBCO is a leading provider of
real-time infrastructure software for the internet and enterprise that enables
businesses to dynamically link internal operations, business partners and
customer channels. InConcert is a developer of business integration solutions
for telecommunications companies. TIBCO intends to utilize the assets acquired
through the purchase, including any physical assets so acquired, in its ongoing
business.
The consideration paid by TIBCO for the assets of InConcert acquired under
the Agreements was determined pursuant to arms length negotiations and took into
account various factors concerning the valuation of the business of InConcert.
A portion of TIBCO's working capital was used for the purchase of the assets of
InConcert.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
(a) Financial Statements of InConcert, Inc.
---------------------------------------
The following Audited Financial Statements of InConcert, Inc. are
filed herewith on the pages listed below:
<TABLE>
<S> <C>
Report of Independent Accountants............................................... F-1
Balance Sheets.................................................................. F-2
Statement of Operations........................................................ F-3
Statement of Stockholders' Equity (Deficit)..................................... F-4
Statement of Cash Flows......................................................... F-5
Notes to Financial Statements................................................... F-6
</TABLE>
(b) Pro Forma Financial Information
-------------------------------
The following required Unaudited Pro Forma Combined Financial
Information of TIBCO and InConcert Inc. is filed herewith on the pages
listed below:
<TABLE>
<S>
OVERVIEW <C>
Unaudited Pro Forma Combined Balance Sheet..................................... F-14
Unaudited Pro Forma Combined Statements of Operations.......................... F-17
</TABLE>
(c) Exhibits
--------
2.1 Asset Purchase Agreement, dated as of September 30, 1999,
among TIBCO Software Inc., InConcert, Inc., and Xerox
Corporation providing for the transfer of the U.S. Assets (as
defined therein) of InConcert (the schedules to such agreement
are not filed herewith and are listed on the last page of
Exhibit 2.1).*
2.2 Asset Purchase Agreement, dated as of September 30, 1999,
among TIBCO Software Inc., InConcert, Inc., and Xerox
Corporation providing for the transfer of the U.K. Assets (as
defined therein) of InConcert (the schedules to such agreement
are not filed herewith and are listed on the last page of
Exhibit 2.2).*
2.3 Asset Purchase Agreement, dated as of September 30, 1999,
among TIBCO Software Inc., InConcert, Inc., and Xerox
Corporation providing for the transfer of the German Assets
(as defined therein) of InConcert (the schedules to such
agreement are not filed herewith and are listed on the last
page of Exhibit 2.3).*
- --------------
* Previously filed
-2-
<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.
Dated: December 29, 1999 TIBCO SOFTWARE INC.
/s/ Paul G. Hansen
------------------
Paul G. Hansen
Executive Vice President, Finance
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
-3-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of InConcert, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' equity (deficit) and cash flows present fairly, in
all material respects, the financial position of InConcert, Inc. at December
31, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States. 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 of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
F-1
<PAGE>
INCONCERT, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
September 30, -------------------------
1999 1998 1997
------------- ------------ -----------
<S> <C> <C> <C>
ASSETS (unaudited)
Current assets:
Accounts receivable, net of allow-
ances of $937,955, $12,418 and
$182,242, respectively............ $ 2,702,450 $ 2,678,409 $ 954,206
Related party accounts receivable.. 73,708 146,257 412,570
Prepaid expenses and other current
assets............................ 134,209 121,094 134,804
------------ ------------ -----------
Total current assets.............. 2,910,367 2,945,760 1,501,580
Property and equipment, net......... 456,354 573,272 568,918
------------ ------------ -----------
$ 3,366,721 $ 3,519,032 $ 2,070,498
============ ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current Liabilities:
Accounts payable................... $ 308,381 $ 338,323 $ 136,542
Accrued liabilities................ 902,728 1,369,768 1,786,359
Deferred revenue................... 857,376 899,322 736,237
Due to parent...................... 6,036,962 7,542,201 3,339,415
------------ ------------ -----------
Total current liabilities......... 8,105,447 10,149,614 5,998,553
Long-term deferred revenue.......... 82,206 -- --
------------ ------------ -----------
Total liabilities................. 8,187,653 10,149,614 5,998,553
------------ ------------ -----------
Commitments (Note 6)
Stockholders' equity (deficit):
Convertible Preferred Stock,
24,000,000 shares authorized,
$0.001 par value:
Series A, 16,000,000 shares
designated, issued and outstanding
(liquidation preference of
$23,500,000)...................... 16,000 16,000 16,000
Series B, 2,273,362, 2,273,362 and
0 shares designated, issued and
outstanding (liquidation
preference of $3,339,000) at
September 30, 1999 and December
31, 1998 and 1997, respectively... 2,273 2,273 --
Series C, 5,940,578, 0 and 0 shares
designated, issued and outstanding
(liquidation preference of
$7,542,000) at September 30, 1999
and December 31, 1998 and 1997,
respectively...................... 5,941 -- --
Common Stock, par value $0.001;
30,000,000 shares authorized;
225,448, 176,778, and 5,999 shares
issued and 27,432, 17,169 and
1,000 outstanding at September 30,
1999 and December 31, 1998 and
1997, respectively................ 225 177 6
Treasury Stock, at cost; 198,016,
159,609 and 4,999 shares at
September 30, 1999, and December
31, 1998 and 1997, respectively... (75,576) (60,268) (600)
Additional paid-in capital......... 15,538,766 7,998,687 4,657,833
Accumulated other comprehensive
income............................ 11,000 49,000 18,982
Accumulated deficit................ (20,319,561) (14,636,451) (8,620,276)
------------ ------------ -----------
Total stockholders' equity
(deficit)........................ (4,820,932) (6,630,582) (3,928,055)
------------ ------------ -----------
$ 3,366,721 $ 3,519,032 $ 2,070,498
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
INCONCERT, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
------------------------ ------------------------
1999 1998 1998 1997
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
License revenue:
Non-related parties....... $ 3,948,157 $ 1,524,525 $ 4,827,175 $ 5,025,801
Related parties........... 669,203 732,548 1,047,654 729,210
----------- ----------- ----------- -----------
Total license revenue.... 4,617,360 2,257,073 5,874,829 5,755,011
----------- ----------- ----------- -----------
Maintenance and service
revenue:
Non-related parties....... 3,213,039 1,892,773 2,721,255 2,186,597
Related parties........... 40,367 115,964 152,449 89,416
----------- ----------- ----------- -----------
Total maintenance and
service revenue......... 3,253,406 2,008,737 2,873,704 2,276,013
----------- ----------- ----------- -----------
Total revenue............ 7,870,766 4,265,810 8,748,533 8,031,024
----------- ----------- ----------- -----------
Cost of revenue:
License................... 245,227 295,483 528,228 441,426
Maintenance and service... 2,303,452 1,192,025 1,772,539 1,896,301
----------- ----------- ----------- -----------
Total cost of revenue.... 2,548,679 1,487,508 2,300,767 2,337,727
----------- ----------- ----------- -----------
Gross profit............... 5,322,087 2,778,302 6,447,766 5,693,297
----------- ----------- ----------- -----------
Operating expenses:
Research and development.. 2,262,000 2,136,771 2,892,020 3,223,737
Sales and marketing....... 5,969,759 4,730,723 7,012,745 6,649,527
General and
administrative........... 2,773,165 2,037,133 2,555,404 4,440,309
----------- ----------- ----------- -----------
Total operating
expenses................ 11,004,924 8,904,627 12,460,169 14,313,573
----------- ----------- ----------- -----------
Loss from operations....... (5,682,837) (6,126,325) (6,012,403) (8,620,276)
Other income (expense)..... (273) 88 (3,772) --
----------- ----------- ----------- -----------
Net loss................... $(5,683,110) $(6,126,237) $(6,016,175) $(8,620,276)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
INCONCERT, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Convertible Preferred Stock
----------------------------------------------------
Treasury
Series A Series B Series C Common Stock Stock Stock Additional
------------------ ---------------- ---------------- -------------- ---------------- Subscription Paid-in
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Receivable Capital
---------- ------- --------- ------ --------- ------ ------- ------ ------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 1,
1997............ 16,000,000 $16,000 -- $ -- -- $ -- 1,000 $ 1 -- $ -- $(4,673,788) $ 4,657,788
Translation
adjustment...... -- -- -- -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- -- -- --
Comprehensive
loss............
Transfer of
assets from
parent.......... -- -- -- -- -- -- -- -- -- -- 4,673,788 --
Stock options
exercised, net
of shares
repurchased..... -- -- -- -- -- -- 4,999 5 4,999 (600) -- 45
---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- -----------
Balance at
December 31,
1997............ 16,000,000 16,000 -- -- -- -- 5,999 6 4,999 (600) -- 4,657,833
---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- -----------
Translation
adjustment...... -- -- -- -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- -- -- --
Comprehensive
loss............
Issuance of
Series B
Preferred
Stock........... -- -- 2,273,362 2,273 -- -- -- -- -- -- -- 3,337,142
Stock options
exercised, net
of shares
repurchased..... -- -- -- -- -- -- 170,779 171 154,610 (59,668) -- 3,712
---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- -----------
Balance at
December 31,
1998............ 16,000,000 16,000 2,273,362 2,273 -- -- 176,778 177 159,609 (60,268) -- 7,998,687
---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- -----------
Translation
adjustment
(unaudited)..... -- -- -- -- -- -- -- -- -- -- -- --
Net loss
(unaudited)..... -- -- -- -- -- -- -- -- -- -- -- --
Comprehensive
loss
(unaudited).....
Issuance of
Series C
Preferred Stock
(unaudited)..... -- -- -- -- 5,940,578 5,941 -- -- -- -- -- 7,536,260
Stock options
exercised, net
of shares
repurchased
(unaudited)..... -- -- -- -- -- -- 48,710 48 38,407 (15,308) -- 3,819
---------- ------- --------- ------ --------- ------ ------- ---- ------- -------- ----------- -----------
Balance at
September 30,
1999
(unaudited)..... 16,000,000 $16,000 2,273,362 $2,273 5,940,578 $5,941 225,488 $225 198,016 $(75,576) $ -- $15,538,766
========== ======= ========= ====== ========= ====== ======= ==== ======= ======== =========== ===========
<CAPTION>
Other Accumu- Total
Comprehensive lated Stockholders'
income (Loss) Deficit Equity (Deficit)
------------- ------------- ----------------
<S> <C> <C> <C>
Balance as of
January 1,
1997............ $ -- $ -- $ 1
----------------
Translation
adjustment...... 18,982 -- 18,982
Net loss........ -- (8,620,276) (8,620,276)
----------------
Comprehensive
loss............ (8,601,294)
Transfer of
assets from
parent.......... -- -- 4,673,788
Stock options
exercised, net
of shares
repurchased..... -- -- (550)
------------- ------------- ----------------
Balance at
December 31,
1997............ 18,982 (8,620,276) (3,928,055)
------------- ------------- ----------------
Translation
adjustment...... 30,018 -- 30,018
Net loss........ -- (6,016,175) (6,016,175)
----------------
Comprehensive
loss............ (5,986,157)
Issuance of
Series B
Preferred
Stock........... -- -- 3,339,415
Stock options
exercised, net
of shares
repurchased..... -- -- (55,785)
------------- ------------- ----------------
Balance at
December 31,
1998............ 49,000 (14,636,451) (6,630,582)
------------- ------------- ----------------
Translation
adjustment
(unaudited)..... (38,000) -- (38,000)
Net loss
(unaudited)..... -- (5,683,110) (5,683,110)
----------------
Comprehensive
loss
(unaudited)..... (5,721,110)
Issuance of
Series C
Preferred Stock
(unaudited)..... -- -- 7,542,201
Stock options
exercised, net
of shares
repurchased
(unaudited)..... -- -- (11,441)
------------- ------------- ----------------
Balance at
September 30,
1999
(unaudited)..... $ 11,000 $(20,319,561) $(4,820,932)
============= ============= ================
</TABLE>
F-4
<PAGE>
INCONCERT, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------------ ------------------------
1999 1998 1998 1997
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.................. $(5,683,110) $(6,126,237) $(6,016,175) $(8,620,276)
Adjustment to reconcile
net loss to net cash used
for operating activities:
Depreciation and
amortization............ 249,629 281,571 359,498 498,588
Provision for bad debt... (925,537) (169,824) (169,824) (182,242)
Changes in assets and
liabilities:
Accounts receivable..... 974,045 (814,004) (1,288,066) (1,184,534)
Prepaid expenses and
other assets........... (13,115) 126,289 13,710 (134,804)
Accounts payable........ (29,942) 230,367 201,781 136,542
Accrued liabilities..... (467,040) (668,005) (416,591) 1,786,359
Deferred revenue........ 40,260 816,246 163,085 736,237
----------- ----------- ----------- -----------
Net cash used for
operating activities.. (5,854,810) (6,323,597) (7,152,582) (6,964,130)
----------- ----------- ----------- -----------
Cash flows from investing
activities--
Purchases of property and
equipment................ (132,711) (249,890) (363,852) (1,067,506)
----------- ----------- ----------- -----------
Cash flows from financing
activities:
Borrowings from parent.... 6,036,962 6,524,746 7,542,201 3,339,416
Proceeds from issuance of
Preferred Stock.......... -- -- -- 4,673,788
Proceeds from issuance of
Common Stock............. 3,867 252 3,883 50
Repurchase of Common
Stock.................... (15,308) (220) (59,668) (600)
----------- ----------- ----------- -----------
Net cash provided by
financing activities.. 6,025,521 6,524,778 7,486,416 8,012,654
----------- ----------- ----------- -----------
Effect of exchange rate
changes on cash........... (38,000) 48,709 30,018 18,982
----------- ----------- ----------- -----------
Net change in cash and cash
equivalents............... -- -- -- --
Cash and cash equivalents
at beginning of period.... -- -- -- --
----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period.......... $ -- $ -- $ -- $ --
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
INCONCERT, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
InConcert, Inc. (the "Company") is a provider of enterprise-class software
systems. The Company designs, develops, markets, and supports its product,
InConcert, an object oriented client/server application software product family
designed to solve process centric mission critical business problems for large
multinational organizations.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company was first established as a product line within Xerox
Corporation's Xsoft division in 1990. On July 1, 1996, the Company incorporated
under the laws of the State of Delaware as a wholly-owned subsidiary of Xerox.
See Note 4.
On September 30, 1999, the Company entered into an Asset Purchase Agreement to
sell substantially all of the net assets of the Company to TIBCO Software Inc.
for $34 million in cash. The Company expects to close the transaction during the
fourth quarter of fiscal 1999. The transaction will be accounted for as a
purchase acquisition; however, the financial statements presented in this report
do not reflect purchase accounting.
Unaudited Interim Results
The accompanying interim financial statements as of September 30, 1999, and
for the nine months ended September 30, 1999 and 1998, are unaudited. The
unaudited interim financial statements have been prepared on the same basis as
the annual financial statements and, in the opinion of management, reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position, results of operations and cash
flows as of September 30, 1999 and for the nine months ended September 30, 1999
and 1998. The financial information disclosed in these notes to financial
statements related to these periods are unaudited. The results for the nine
months ended September 30, 1999 are not necessarily indicative of the results
to be expected for the year ending December 31, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the report period. Actual
results could differ from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration
of credit risk consist of accounts receivable. The Company's accounts
receivable is derived from revenue earned from customers located primarily in
the United States and Europe. The Company performs ongoing credit evaluations
of its customers' financial condition and generally requires no collateral from
its customers. The Company maintains an allowance for doubtful accounts
receivable based upon the
F-6
<PAGE>
INCONCERT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued)
expected collectibility of accounts receivable. The following table summarized
revenue from customers in excess of 10% of the total revenue:
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended Year Ended
-------------- December 31, December 31,
1999 1998 1998 1997
------ ------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
WorldCom................................ 18% N/A N/A 17%
Bell South.............................. 10% N/A 15% N/A
Toshiba................................. N/A N/A 12% N/A
</TABLE>
Capitalized Software Development Costs
Research and development costs for internally developed software products and
enhancements to existing software products are expensed when incurred until
technological feasibility is established. Thereafter, software costs are
capitalized until the product is available for general released to customer. To
date, the period between achieving technological feasibility and the general
availability of such software has been short, and software development costs
qualifying for capitalization have been insignificant. Accordingly, no costs
have been capitalized.
Property and Equipment
Property and equipment are stated at cost. Depreciation is generally computed
using the straight-line method over the estimated useful lives of the assets as
follows:
<TABLE>
<S> <C>
Furniture and
fixtures..... 10-15 years
Equipment..... 3-5 years
Leasehold
improvements.. Shorter of the lease term or the estimated useful life
</TABLE>
Revenue Recognition
Software license revenue is recognized when all of the following criteria
have been met: there is an executed license agreement, software has been
shipped to the customer, no significant vendor obligations remain, the license
fee is fixed and payable within twelve months and collection is deemed
probable. Maintenance revenue is recognized ratably over the term of the
maintenance contract, typically twelve months. Service revenues, generally
training and consulting, are recognized as services are performed.
Stock-Based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock issued to Employees," ("APB No. 25") and complies with
the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation."
Comprehensive Income
Effective December 31, 1997, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. Foreign currency translation is
currently the only item in comprehensive income.
F-7
<PAGE>
INCONCERT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued)
Recent Accounting Pronouncements
In June 1988, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000 and establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
The Company does not expect that the adoption of SFAS No. 133 will have a
material impact on its financial statements.
3. BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
December 31,
September 30, ------------------------
1999 1998 1997
------------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Accounts receivable:
Accounts receivable.................. $ 1,471,705 $ 2,152,527 $ 832,679
Unbilled receivables................. 2,168,700 538,300 303,769
----------- ----------- -----------
3,640,405 2,690,827 1,136,448
Less: Allowance for doubtful accounts
and returns.......................... (937,955) (12,418) (182,242)
----------- ----------- -----------
$ 2,702,450 $ 2,678,409 $ 954,206
=========== =========== ===========
Property and equipment, net:
Equipment............................ $ 2,458,157 $ 2,325,988 $ 2,468,535
Furniture and fixtures............... 71,168 57,105 47,569
Leasehold improvements............... 48,046 48,046 29,739
Construction in progress............. 1,830 15,166 6,766
----------- ----------- -----------
2,579,201 2,446,305 2,552,609
Less: accumulated depreciation and
amortization......................... (2,122,847) (1,873,033) (1,983,691)
----------- ----------- -----------
$ 456,354 $ 573,272 $ 568,918
=========== =========== ===========
Accrued liabilities:
Compensation and employee related.... 308,743 677,213 943,206
Other operating expenses............. 593,985 692,555 843,153
----------- ----------- -----------
$ 902,728 $ 1,369,768 $ 1,786,359
=========== =========== ===========
</TABLE>
4. RELATED PARTY TRANSACTIONS
The Company has significant transactions with Xerox Corporation, including
licensing arrangements, development contracts and shared functions and
services. Related party revenue is related to the Company licensing its
software product to Xerox Corporation for sub-licensing to Xerox's end-users.
The cost of revenue to related parties has not been separately stated because
it is impracticable to do so. The following is a summary of the transactions
for the periods indicated:
Service Agreement
The Company and Xerox Corporation had a service agreement under which Xerox
provided certain administrative services, human resource and employee benefits
administration, expenditure
F-8
<PAGE>
INCONCERT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. RELATED PARTY TRANSACTIONS--(Continued)
processing, and treasury functions. Xerox Corporation charged the Company for
these services on a basis that reflected the Company's share of such costs,
including a fixed fee that was negotiated annually. Management believed this
allocation method was reasonable based upon the Company's use of such services.
The service fee included in general and administrative expenses on the
Statement of Operations was $180,000, $117,000, $157,480 and $212,000 for the
nine months ended September 30, 1999 and 1998 and for the year ended December
31, 1998 and 1997, respectively.
Secured Lending Agreement
The Company and Xerox Corporation entered into a secured lending agreement
where Xerox Corporation extended short-term loans to the Company. This was
administered through maintaining a "sweep" bank account. Xerox Corporation
advanced money or deducted excess funds directly out of the Company's bank
account. In effect, the Company maintained a "zero balance" bank account. No
interest was charged or paid on the balance of the outstanding loans or net
credit. The parties could have agreed to convert all or part of the outstanding
loans to equity or another form of lending. Net amount loaned to the Company
for the nine months ended September 30, 1999 and the years ended December 31,
1998 and 1997 were $6,036,962, $7,542,201 and $3,339,415, respectively. During
the nine months ended September 30, 1999 and for the year ended December 31,
1998, the Company converted $7,542,201 and $3,339,415, respectively, into
Series B and C preferred stock.
5. INCOME TAXES
Xerox files a consolidated tax return which includes the results of the
Company. Under the terms of the Tax Sharing Agreement, the Company will pay to
Xerox amounts determined as if the Company paid taxes as a separate entity.
During 1999, 1998 and 1997, the Company incurred an operating loss for both
financial and tax reporting purposes. Under the Company's agreement with Xerox,
the Company would be reimbursed for its previous tax net operating losses
utilized by Xerox in its consolidated return, in future periods when the
Company generated taxable income. The Company has not generated taxable income
through the date of the acquisition, therefore no deferred tax asset has been
recorded. There are no other significant deferred tax assets or liabilities.
See Note 8.
6. COMMITMENTS
The Company leases office space under a non-cancelable operating lease with
an expiration date of June 2003. Rental expense was approximately $349,000,
$318,000, $435,000 and $344,000 for the nine months ended September 30, 1999
and 1998 and for the years ended December 31, 1998 and 1997, respectively.
Future minimum lease payments under the non-cancelable operating lease, as of
December 31, 1998, are as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 465,140
2000.............................................................. 465,140
2001.............................................................. 465,140
2002.............................................................. 465,140
2003.............................................................. 116,285
----------
$1,976,845
==========
</TABLE>
F-9
<PAGE>
INCONCERT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. STOCKHOLDERS' EQUITY
As of November 27, 1996, the Company's Articles of Incorporation authorized
the Company to issue 24,000,000 shares of Preferred Stock at $0.001 par value
and 30,000,000 shares of Common Stock at $0.001 par value.
Preferred Stock
Effective as of January 1, 1997, the Company's initial capital structure was
established by issuing 16.0 million shares of Series A Convertible Preferred
Stock ("Series A") and 1,000 shares of Common Stock to Xerox.
In April 1998, the Company issued 2,273,362 shares of Series B Convertible
Preferred Stock ("Series B") at $1.46875 per share for net proceeds of
$3,339,000. In May 1999, the Company issued 5,940,578 share of Series C
Convertible Preferred Stock ("Series C") at $1.2696 per share for net proceeds
of $7,542,000.
The holders of the outstanding Preferred Stock have various rights and
preferences as follows:
Voting Rights. The holders of Series A, Series B and Series C have the right
to one vote for each share of Common Stock into which such shares of Preferred
Stock could be converted.
Dividend Rights. The holders of Series A, Series B and Series C are entitled
to receive noncumulative dividends at the per share annual rate of $0.1175
payable when and if declared by the board of directors. The holders of
Preferred Stock will also be entitled to participate in dividends on Common
Stock, when and if declared by the board of directors, based on the number of
shares of Common Stock held on an as-converted basis. No dividends on Preferred
Stock or Common Stock have been declared by the board from inception through
September 30, 1999.
Liquidation Preference. In the event of any liquidation, dissolution, or
winding-up of the Company, including a merger, acquisition or sale of assets
where the beneficial owners of the Company's Common Stock and Preferred Stock
own less than 50% of the resulting voting power of the surviving entity, the
holders of Series A, Series B and Series C are entitled to receive an amount of
$1.46875, $1.46875 and $1.2696 per share, respectively, plus any declared but
unpaid dividends prior to and in preference to any distribution to the holders
of Common Stock.
If the assets and funds distributed to the holders of Preferred Stock are
insufficient to permit the payment to the holders of the full preferential
amount mentioned above, then the entire assets of the Company legally available
for distribution shall be distributed ratably among the holders of Preferred
Stock.
Any assets remaining after the payment of all preferential amounts to the
holders of Preferred Stock, will be shared ratably by the holders of the
Preferred Stock and common stockholders.
Conversion. Each share of Preferred Stock is convertible, at the option of
the holder, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing the applicable original issue price for such
series of Preferred Stock. The initial Conversion Price per share for shares of
Preferred Stock is the Original Issue Price. The Conversion Prices for the
Preferred Stock is subject to adjustment.
F-10
<PAGE>
INCONCERT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. STOCKHOLDERS' EQUITY--(Continued)
Each share of Preferred Stock will automatically be converted into shares of
Common Stock at the applicable Conversion Price at the time in effect for such
series of Preferred Stock immediately upon the earlier of the following two
events: (a) upon the consummation of the sale of the Company's Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, the public offering price of which is not
less than $5.00 per share with aggregate gross proceeds to the Corporation in
excess of $10.0 million, or (b) the date upon such conversion is approved by
holders of a majority of the shares of Preferred Stock.
Common Stock
Voting Rights. The holders of each shares of Common Stock has the right to
one vote, and is entitled to notice of any stockholders' meeting in accordance
with the Bylaws of the Company, and is entitled to vote upon such matters and
in such manner as may be provided by law.
Dividend Rights. Subject to the prior rights of holders of all classes of
stock at the time outstanding having prior rights as to dividends, the holders
of the Common Stock shall be entitled to receive, when and as declared by the
Board, out of any assets of the Company legally available therefore, such
dividends as may be declared from time to time by the Board.
Liquidation Rights. Upon liquidation, dissolution, or winding-up of the
Company, the assets of the Company are distributed as described above for
Preferred Stock liquidation rights.
Stock Option Plan
During 1996, the Company adopted the 1996 Stock Option Plan (the "Plan"). The
purpose of the Plan is to enable the Company to obtain and retain the services
of the types of employees, consultants, officers and directors who will
contribute to the Company's long range success and to provide incentives which
are linked directly to increases in share value which will inure to the benefit
of all shareholders of the Company. The total number of shares which may be
issued under the Plan is 4,568,340 shares. The Plan is administered by the
Board of Directors or the Committee. The administrator is responsible for
determining the term of each option, the option exercise price, the medium of
payment, the number of shares for which each option is granted and the vesting
rate at which each option is exercisable. To date, options awarded generally
vest ratably over five years and expire upon the earlier of ten years from the
date of grant or 90 days from employee termination.
F-11
<PAGE>
INCONCERT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. STOCKHOLDERS' EQUITY--(Continued)
The activity under the 1996 Plan, is summarized as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
------------------- -------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year...... 2,125,306 $0.04 274,700 $0.01
Granted............................... 682,500 0.26 2,036,505 0.04
Exercised............................. (170,779) 0.02 (4,999) 0.01
Canceled.............................. (438,859) 0.04 (180,900) 0.08
--------- ---------
Outstanding at end of year............ 2,198,168 0.11 2,125,306 0.04
========= =========
Options vested at end of year......... 1,170,946 669,302
========= =========
Weighted average fair value of options
granted during the year.............. $ 0.17 $ 0.03
========= =========
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
--------------------------------------------
Weighted
Average Weighted
Number of Remaining Average
Options Contractual Exercise Options
Range of exercise prices Outstanding Life Price Exercisable
------------------------ ----------- ----------- -------- -----------
<S> <C> <C> <C> <C>
$0.01......................... 1,136,169 8.3 years $0.01 757,446
0.12......................... 709,499 8.6 years 0.12 354,750
0.39......................... 352,500 9.5 years 0.39 58,750
--------- --------- ----- ---------
$0.01-$0.39................... 2,198,168 8.8 years $0.11 1,170,946
========= ========= ===== =========
</TABLE>
F-12
<PAGE>
INCONCERT, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. STOCKHOLDERS' EQUITY--(Continued)
Pro Forma Information
This information is required to illustrate the financial results of
operations as if the Company accounted for its grants to employee stock options
under the fair value method of SFAS No. 123. The fair value of the Company's
options granted was estimated at the date of grant using a Black-Scholes option
pricing model. The Company calculated the value of each option grant on the
date of grant with the following assumptions:
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended Year Ended
-------------- December 31, December 31,
1999 1998 1998 1997
------ ------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Risk free interest rates........... 5.4% 5.5% 5.5% 6.3%
Expected lives (in years).......... 6.0 6.0 6.0 6.0
Dividend yield..................... 0.0% 0.0% 0.0% 0.0%
Expected volatility................ 70.0% 70.0% 70.0% 70.0%
</TABLE>
For purposes of pro forma disclosures, the estimated value of the option is
amortized over the options' vesting period. The compensation cost associated
with the Company's stock-based compensation plans, as if the fair value based
method described in SFAS No. 123 had been adopted, would have resulted in a pro
forma loss of $5,789,049, $6,149,930, $6,047,766 and $8,627,173 for the nine
months ended September 30, 1999 and 1998 and for the years ended December 31,
1998 and 1997, respectively.
F-13
<PAGE>
TIBCO SOFTWARE INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
OVERVIEW
On November 4, 1999, TIBCO Software Inc. ("TIBCO" or the "Company") acquired
substantially all of the assets of InConcert, Inc. ("InConcert"), a wholly-owned
subsidiary of Xerox, in a transaction to be accounted for as a purchase business
combination. TIBCO paid $34 million in cash and reimbursed Xerox approximately
$1.3 million for severance costs related to said merger. The Company also
anticipates incurring approximately $0.3 million in acquisition related
expenses, which consist primarily of financial advisory, accounting and legal
fees.
The total acquisition price of $35.6 million was allocated to the assets
acquired, including tangible and intangible assets and liabilities assumed
based upon the fair value of such assets and liabilities on the date of the
acquisition. The total estimated purchase cost of the acquisition has been
allocated on a preliminary basis to assets and liabilities based on management
estimates of their fair value and a preliminary independent appraisal of
certain intangible assets with the excess costs over the net assets acquired
allocated to goodwill. This allocation is subject to change pending a final
analysis of the total purchase cost and fair value of the assets acquired and
liabilities assumed. The aggregate purchase price has been allocated as follows
(in thousands):
<TABLE>
<S> <C>
Net assets received.................................................. 1,216
In-process technology................................................ 2,800
Existing technology.................................................. 14,000
Workforce in place................................................... 3,100
Customer base........................................................ 2,900
Trademark............................................................ 1,200
Operating leases..................................................... 947
Goodwill............................................................. 9,394
-------
$35,557
=======
</TABLE>
The net tangible assets consist primarily of accounts receivable, property
and equipment, accounts payable, accrued liabilities, and deferred revenue.
InConcert's net tangible assets received as of September 30, 1999 were used for
purposes of calculating the pro forma adjustments as they approximate their
fair value as such date. Because the in-process technology had not reached the
stage of technological feasibility at the acquisition date and had no
alternative future use, the amount was immediately charged to operations. The
amount allocated to existing technology, workforce in place, customer base, and
trademark is being amortized over their estimated useful lives of five years.
The purchase price in excess of identified tangible and intangible assets is
allocated as goodwill, which is also being amortized over five years.
The accompanying unaudited pro forma combined balance sheet gives effect to
the combination of TIBCO and InConcert as if such transaction occurred on August
31, 1999. The unaudited pro forma combined balance sheet combines the unaudited
consolidated balance sheet of TIBCO as of August 31, 1999 and the unaudited
balance sheet of InConcert as of September 30, 1999.
The accompanying unaudited pro forma combined statement of operations
presents the results of operations of TIBCO for the year ended November 30,
1998 and the nine-month period ended August 31, 1999 combined with the
statement of operations of InConcert for the year ended
F-14
<PAGE>
December 31, 1998 and the nine-month period ended September 30, 1999. The
unaudited pro forma combined statement of operations gives effect to this
acquisition as if it had occurred as of December 1, 1997.
The unaudited pro forma condensed combined information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the transaction had
been consummated at the dates indicated, nor is it necessarily indicative of
future operating results or the financial position of the combined companies.
F-15
<PAGE>
TIBCO SOFTWARE INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
TIBCO InConcert
---------- -------------
As of As of Pro Forma
August 31, September 30, -------------------------
1999 1999 Adjustments Combined
---------- ------------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............. $ 16,344 $ -- $ -- $ 16,344
Short term investments... 110,326 -- (34,000)(A) 76,326
Accounts receivable,
net..................... 23,203 2,776 -- 25,979
Due from related
parties................. 2,799 -- -- 2,799
Other current assets..... 2,966 134 -- 3,100
-------- -------- ------- --------
Total current assets.... 155,638 2,910 (34,000) 124,548
Property and equipment,
net...................... 9,893 457 -- 10,350
Intangible assets......... -- -- 30,594 (B) 30,594
Other assets.............. 797 -- 947 (C) 1,744
-------- -------- ------- --------
$166,328 $ 3,367 $(2,459) $167,236
======== ======== ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable......... $ 5,535 $ 308 $ -- $ 5,843
Accrued expenses and
other liabilities....... 14,157 903 1,557 (D) 16,617
Deferred revenue......... 5,972 940 -- 6,912
-------- -------- ------- --------
Total current
liabilities............ 25,664 2,151 1,557 29,372
Due to parent............ -- 6,037 (6,037)(E) --
-------- -------- ------- --------
Total liabilities....... 25,664 8,188 (4,480) 29,372
-------- -------- ------- --------
Stockholders' equity
(deficit):
Convertible Preferred
Stock................... -- 24 (24)(E) --
Common Stock............. 60 1 (1)(E) 60
Treasury Stock........... -- (76) 76 (E) --
Additional paid-in
capital................. 181,053 15,539 (15,539)(E) 181,053
Unearned stock
compensation............ (9,881) -- -- (9,881)
Accumulated other
comprehensive gain
(loss).................. (66) 11 (11)(E) (66)
Accumulated deficit...... (30,502) (20,320) 17,520 (E)(F) (33,302)
-------- -------- ------- --------
Total stockholders'
equity (deficit)....... 140,664 (4,821) 2,021 137,864
-------- -------- ------- --------
$166,328 $ 3,367 $(2,459) $167,236
======== ======== ======= ========
</TABLE>
F-16
<PAGE>
TIBCO SOFTWARE INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
TIBCO InConcert
---------- -------------
Nine Months Ended Pro Forma
------------------------ ----------------------
August 31, September 30,
1999 1999 Adjustments Combined
---------- ------------- ----------- --------
<S> <C> <C> <C> <C>
Revenue....................... $ 63,107 $ 7,871 $ -- $ 70,978
Cost of revenue............... 25,978 2,549 -- 28,527
-------- ------- ------- --------
Gross profit.................. 37,129 5,322 -- 42,451
-------- ------- ------- --------
Operating expenses:
Sales and marketing......... 21,022 5,970 -- 26,992
Research and development.... 18,943 2,262 -- 21,205
General and administrative.. 5,291 2,773 -- 8,064
Amortization of stock
compensation............... 5,429 -- -- 5,429
Amortization of goodwill and
acquired intangibles....... -- -- 4,590 (G) 4,590
-------- ------- ------- --------
Total Operating Expenses.. 50,685 11,005 4,590 66,280
-------- ------- ------- --------
Loss from operations.......... (13,556) (5,683) (4,590) (23,829)
Interest income/(expense),
net.......................... 668 -- (2,136)(H) (1,468)
-------- ------- ------- --------
Net loss...................... $(12,888) $(5,683) $(6,726) $(25,297)
======== ======= ======= ========
Net loss per share:
Basic and diluted........... $ (0.49) $ (0.95)
======== ========
Weighted average shares..... 26,511 26,511
======== ========
</TABLE>
F-17
<PAGE>
TIBCO SOFTWARE INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
TIBCO InConcert
------------ ------------
Year Ended Pro Forma
------------------------- ----------------------
November 30, December 31,
1998 1998 Adjustments Combined
------------ ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenue...................... $ 52,757 $ 8,749 $ -- $ 61,506
Cost of revenue.............. 27,682 2,301 -- 29,983
-------- ------- ------- --------
Gross profit................. 25,075 6,448 -- 31,523
-------- ------- ------- --------
Operating expenses:
Sales and marketing........ 15,242 7,013 -- 22,255
Research and development... 14,787 2,892 -- 17,679
General and
administrative............ 4,025 2,555 -- 6,580
Amortization of stock
compensation.............. 5,064 -- -- 5,064
Amortization of goodwill
and acquired intangibles.. -- -- 6,120 (G) 6,120
-------- ------- ------- --------
Total operating
expenses................ 39,118 12,460 6,120 57,698
-------- ------- ------- --------
Loss from operations......... (14,043) (6,012) (6,120) (26,175)
Interest income/(expense),
net......................... 1,092 (4) (2,848)(H) (1,760)
-------- ------- ------- --------
Net loss..................... $(12,951) $(6,016) $(8,968) $(27,935)
======== ======= ======= ========
Net loss per share:
Basic and diluted.......... $ (0.28) $ (0.59)
======== ========
Weighted average shares.... 47,002 47,002
======== ========
</TABLE>
F-18
<PAGE>
The following adjustments were applied to TIBCO's historical financial
statements and those of InConcert to arrive at the pro forma combined financial
information:
(A) To reflect cash payment of $34.0 million for the acquistion of InConcert.
(B) To record the allocation of the purchase price of InConcert as described in
the overview.
(C) To record the write-up of InConcert operating leases to fair market value.
(D) To reflect anticipated acquisition related expenses of approximately $1.6
million.
(E) To eliminate InConcert's historical equity accounts and amount due to
parent.
(F) The in-process research and development charge related to the acquisition
has been reflected in the balance sheet as if the transaction occurred on
August 31, 1999 and has been excluded from the statements of operations.
(G) To record amortization of goodwill and acquired intangibles related to the
acquisition of InConcert as if the transaction occurred on December 1,
1997. Goodwill and acquired intangibles of approximately $30.6 million are
being amortized on a straight-line basis over five years.
(H) To record the impact on interest income (expense) as if the transaction and
related $35.6 million cash payments occurred on December 1, 1997.
F-19
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description of Document
------ -----------------------
2.1 Asset Purchase Agreement, dated as of September 30, 1999,
among TIBCO Software Inc., InConcert, Inc., and Xerox
Corporation providing for the transfer of the U.S. Assets (as
defined therein) of InConcert (the schedules to such agreement
are not filed herewith and are listed on the last page of
Exhibit 2.1).*
2.2 Asset Purchase Agreement, dated as of September 30, 1999,
among TIBCO Software Inc., InConcert, Inc., and Xerox
Corporation providing for the transfer of the U.K. Assets (as
defined therein) of InConcert (the schedules to such agreement
are not filed herewith and are listed on the last page of
Exhibit 2.2).*
2.3 Asset Purchase Agreement, dated as of September 30, 1999,
among TIBCO Software Inc., InConcert, Inc., and Xerox
Corporation providing for the transfer of the German Assets
(as defined therein) of InConcert (the schedules to such
agreement are not filed herewith and are listed on the last
page of Exhibit 2.3).*
- --------------
* Previously filed
-4-
