<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
_____________________
Pursuant to Section 13or 15(d) of Securities Exchange of 1934
Date of Report (Date of earliest event reported): September 5, 2000
TIBCO SOFTWARE INC.
(Exact name of registrant as specified in its charter)
Delaware 000-26579 77-0289509
(State or other jurisdiction of (Commission File (I.R.S. Employer
Incorporation or organization) Number) Identification No.)
3165 Porter Drive, Palo Alto, CA 94304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 846-1000
Exhibit Index located on Page 5.
<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 September 19, 2000.
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On September 5, 2000 (the "Effective Date"), Cardinal Acquisition
Corporation ("Merger Sub"), a Delaware corporation and wholly owned subsidiary
of TIBCO, a Delaware corporation, merged with and into Extensibility, Inc.
("Extensibility"), a Delaware corporation, pursuant to that certain Agreement
and Plan of Reorganization by and among TIBCO, Merger Sub, Extensibility and
certain other parties, dated August 2, 2000 (the "Merger" pursuant to the
"Merger Agreement"). On the Effective Date, each outstanding share of common
stock, $0.001 par value, of Extensibility was converted into the right to
receive 0.1037 of a share of common stock, $0.001 par value, of TIBCO (the
"Exchange Ratio"). As a result of the Merger, Extensibility became a wholly
owned subsidiary of TIBCO. In connection with the Merger, TIBCO issued up to a
maximum aggregate of 936,367 shares of its common stock in exchange for all of
the outstanding capital stock and options of Extensibility. The parties intend
for the Merger to be treated as a tax-free reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended, and as a "purchase" for
accounting purposes.
TIBCO is a leading provider of real-time infrastructure software for the
internet and enterprises that enables businesses to dynamically link internal
operations, business partners and customer channels. Extensibility was a
provider of enabling technologies for XML-based application infrastructures. XML
(Extensible Mark-Up Language) is a software language that allows the efficient
management and exchange of information through the use of schemas, which are
computer "vocabularies" that enable users to exchange and process information.
Extensibility's products and services give customers the ability to create,
convert, manage, and process XML schemas, a component of the infrastructure of
e-business. Pursuant to the Merger Agreement, as of the Effective Date the name
of Extensibility was changed to TIBCO Extensibility Inc.
The Exchange Ratio for the Merger was determined pursuant to arms length
negotiations and took into account various factors concerning the valuation of
the business of Extensibility.
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, pro forma financial information and exhibits
are filed as part of this report.
(a) Financial statements of business acquired:
<TABLE>
<S> <C>
Report of Independent Accountants...................................................... F-1
Balance Sheets as of December 31, 1998, December 31, 1999 and
June 30, 2000 (unaudited)............................................................. F-2
Statements of Operations for the period from inception to December 31, 1998,
and for the year ended December 31, 1999 and for the six months ended
June 30, 2000 (unaudited)............................................................. F-3
Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit
for the period from inception to December 31, 1998, and for the year ended
December 31, 1999 and for the six months ended June 30, 2000 (unaudited).............. F-4
Statements of Cash Flows for the period from inception to December 31, 1998,
and for the year ended December 31, 1999 and for the six months ended
June 30, 2000 (unaudited)............................................................. F-5
Notes to Financial Statements for the period from inception to December 31, 1998
and for the year ended December 31, 1999 and for the six months ended
June 30, 2000 (unaudited)............................................................. F-6
</TABLE>
1
<PAGE>
(b) Pro forma financial information required:
<TABLE>
<S> <C>
TIBCO Software Inc. Unaudited Pro Forma Condensed Combined Statement
of Operations for the year ended November 30, 1999.................................... F-12
TIBCO Software Inc. Unaudited Pro Forma Condensed Combined Statement
of Operations for the nine months ended August 31, 2000............................... F-13
TIBCO Software Inc. Unaudited Pro Forma Condensed Combined Balance Sheet
as of August 31, 2000................................................................. F-14
</TABLE>
(c) Exhibits
Number Description
2.1 Agreement and Plan of Reorganization, dated as of August 2, 2000, by
and among TIBCO Software Inc., Cardinal Acquisition Corporation,
Extensibility, Inc. and certain other parties.*
_______
*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: November 17, 2000 TIBCO Software Inc.
By: /s/ Paul G. Hansen
----------------------------
Name: Paul G. Hansen
Title: Executive Vice President, Finance,
Chief Financial Officer and Secretary
3
<PAGE>
EXHIBIT INDEX
-------------
Number Description
------ -----------
2.2 Agreement and Plan of Reorganization dated as of August 2 2000,
by and among TIBCO Software Inc., Cardinal Acquisition
Corporation Extensibility, Inc. and certain other parties.*
____________
* Previously filed
5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Extensibility, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' deficit and redeemable convertible preferred
stock and of cash flows present fairly, in all material respects, the financial
position of Extensibility, Inc. at December 31, 1999 and December 31, 1998, and
the results of their operations and their cash flows for the year ended December
31, 1999 and for the period from inception to December 31, 1998, 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
San Jose, California
November 16, 2000
F-1
<PAGE>
Extensibility, Inc.
Balance Sheets
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31, June 30,
----------------------
1998 1999 2000
---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................................... $ 8 $ 1,233 $ 516
Accounts receivable, (net of allowance of $0 in 1999 and 51 156
$4 in 2000, respectively)...................................................... --
Prepaid expenses.................................................................. -- 14 24
---------------------- ----------
Total current assets......................................................... 8 1,298 696
Furniture and Equipment:
Computer equipment and software................................................... 4 102 220
Furniture and fixtures............................................................ 1 71 171
Leasehold improvements............................................................ -- 18 53
---------------------- ----------
5 191 444
Less accumulated depreciation and amortization.................................... (1) (7) (44)
Furniture and equipment, net...................................................... 4 184 400
Deposit and other................................................................... -- 7 20
---------------------- ----------
$ 12 $ 1,489 $ 1,116
====================== ==========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses............................................. $ 5 $ 272 $ 321
Notes payable to stockholders..................................................... 16 -- --
Notes payable to bank............................................................. -- -- 596
Deferred revenue.................................................................. -- 184 407
---------------------- ----------
Total current liabilities.................................................... 21 456 1,324
Commitments (Note 4)
Series A redeemable, convertible preferred stock, par value $.01, 2,200 shares
Authorized,1,700 issued and outstanding (aggregate liquidation
preference of $1,700 at December 31, 1999) and 1,700 shares
issued and outstanding at June 30, 2000........................................ -- 1,705 1,880
Stockholders' deficit:
Common stock, par value $0.01 par value; authorized 10,000; 63 63
5,808 and 6,313 and outstanding at December 31, 1998 and
December 31,1999 respectively............................................... 8
Additional paid-in capital........................................................ -- 50 209
Unearned compensation............................................................. -- (32) (127)
Accumulated deficit............................................................... (17) (753) (2,233)
---------------------- ----------
Total stockholders' deficit.................................................. (9) (672) (2,088)
---------------------- ----------
$ 12 $ 1,489 $ 1,116
====================== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Extensibility, Inc.
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Period From
Inception to Year Ended For the six
December 31, December 31, months ended
1998 1999 June 30, 2000
------------- ------------ -------------
(Unaudited)
<S> <C> <C> <C>
Revenue:
License and product revenue........................................ $ -- $ 43 $ 312
Services........................................................... -- 16 32
------------- ------------ -------------
Total revenue........................................................ -- 59 344
Operating expenses:
Sales and marketing................................................ 4 137 321
General and administrative......................................... 13 358 805
Research and development........................................... -- 193 532
------------- ------------ -------------
Total operating expenses............................................. 17 688 1,658
------------- ------------ -------------
Loss from operations................................................. (17) (629) (1,314)
Other income(expense):
Interest expense................................................... -- (1) (7)
Interest income.................................................... -- 7 16
------------- ============ =============
Net loss............................................................. $ (17) $ (623) $ (1,305)
============= ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Extensibility, Inc.
Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit
(in thousands, except per share data)
<TABLE>
<CAPTION>
Redeemable Convertible Series A Common Stock
Preferred Stock
---------------------------------------------------------
Shares Amount Shares Amount
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Issuance of common stock....................................... -- $ -- 5,808 $ 8
Net loss....................................................... -- -- -- --
-------- -------- --------- ---------
Balance at December 31, 1998................................... -- -- 5,808 8
Stock dividend................................................. -- -- 505 0
Issuance of common stock....................................... -- -- -- 55
Issuance of preferred stock (net of issuance costs of $53)..... 1,700 1,647 -- --
Accretion of redemption value.................................. -- 58 -- --
Unearned compensation.......................................... -- -- -- --
Amortization of unearned compensation.......................... -- -- -- --
Net loss....................................................... -- -- -- --
-------- -------- --------- ---------
Balance at December 31, 1999................................... 1,700 1,705 6,313 63
Accretion of redemption value (Unaudited)...................... -- 175 -- --
Unearned compensation (Unaudited)............................. -- -- -- --
Amortization of unearned compensation (Unaudited).............. -- -- -- --
Issuance of warrants (Unaudited) -- -- -- --
Net loss (Unaudited)........................................... -- -- -- --
-------- -------- --------- ---------
Balance at June 30, 2000 (Unaudited)........................... 1,700 $ 1,880 6,313 $ 63
======== ======== ========= ==========
<CAPTION>
Additional Unearned Accumulated Stockholders'
Paid-in Compensation Deficit Deficit
--------- ------------- --------- ------------
<S> <C> <C> <C> <C>
Issuance of common stock....................................... $ -- $ -- $ -- $ 8
Net loss....................................................... -- -- (17) (17)
-------- -------- --------- ---------
Balance at December 31, 1998................................... -- -- (17) (9)
Issuance of common stock....................................... -- -- -- --
Stock dividend................................................. -- -- (55) --
Issuance of preferred stock (net of issuance costs of $53)..... -- -- -- --
Accretion of redemption value.................................. -- -- (58) (58)
Unearned compensation.......................................... 50 (50) -- --
Amortization of unearned compensation.......................... -- 18 -- 18
Net loss....................................................... -- -- (623) (623)
-------- -------- --------- ---------
Balance at December 31, 1999................................... 50 (32) (753) (672)
Accretion of redemption value (Unaudited)...................... -- -- (175) (175)
Unearned compensation (Unaudited)............................. 113 (113) -- --
Amortization of unearned compensation (Unaudited).............. -- 18 -- 18
Issuance of warrants (Unaudited) 46 -- -- 46
Net loss (Unaudited)........................................... -- -- (1,305) (1,305)
-------- -------- --------- ---------
Balance at June 30, 2000 (Unaudited)........................... $ 209 $ (127) $ (2,233) $ (2,088)
======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Extensibility, Inc.
Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Period from Six Months
Inception to Year Ended Ended
December 31, December 31, June 30,
1998 1999 2000
-------------- -------------- -------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................................... $ (17) $ (623) $(1,305)
Adjustments to reconcile net loss to net cash provided by (used for)
operating activities:
Depreciation and amortization............................................ 1 6 37
Amortization of unearned compensation.................................... - 18 18
Changes in assets and liabilities:
Accounts receivable.................................................... - (51) (105)
Prepaid expenses....................................................... - (14) (10)
Deposits and other assets.............................................. - (7) (13)
Accounts payable and accrued expenses.................................. 5 267 49
Deferred revenue....................................................... - 184 223
-------------- -------------- -------------
Net cash used for operating activities............................ (11) (220) (1,106)
-------------- -------------- -------------
Cash flows from investing activities:
Purchases of furniture and equipment..................................... (5) (186) (253)
-------------- -------------- -------------
Net cash used for investing activities............................ (5) (186) (253)
-------------- -------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock...................................... 8 - 46
Proceeds from issuance of preferred stock, net of issuance costs............ - 1,647 -
Proceeds from notes payable to bank......................................... - - 596
Proceeds from notes payable to stockholders................................. 16 - -
Repayment of notes payable to stockholders.................................. - (16) -
-------------- -------------- -------------
Net cash provided by financing activities......................... 24 1,631 642
-------------- -------------- -------------
Net change in cash and cash equivalents..................................... 8 1,225 (717)
Cash and cash equivalents at beginning of period............................. 0 8 1,233
-------------- -------------- -------------
Cash and cash equivalents at end of period................................... $ 8 $1,233 $ 516
============== ============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
Extensibility, Inc.
Notes to Financial Statements
1. THE COMPANY
Extensibility, Inc., (the "Company") was incorporated on October 28, 1998
under the laws of the State of Delaware. Extensibility provides comprehensive
e-business solutions for the creation, conversion, and management of XML-based
application infrastructures.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared on the historical
basis of the Company and do not give effect to the Company's acquisition by
TIBCO Software Inc. in a stock for stock transaction for approximately $102
million in total consideration.
Interim Financial Information
The financial information as of June 30, 2000 and for the six months ended June
30, 2000, is unaudited but includes all adjustments, consisting only of normal
recurring adjustments, that management considers necessary for a fair
presentation of the Company's operating results and cash flows for these
periods. Results for the six months ended June 30, 2000 are not necessarily
indicative of results to be expected for the full fiscal year of 2000 or for any
future period.
Stock Splits
In May and November 1999, the Company effected stock splits whereby
additional shares of common stock were issued for each common share outstanding
at those dates. As the par value of the common stock was not reduced in
conjunction with the stock splits, the stock splits have been accounted for as a
deemed stock dividend. All share and per share information included in these
financial statements have been retroactively adjusted to reflect these splits.
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 reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid, short-term investments with
original maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents, and accounts
receivable. Cash and cash equivalents are deposited with financial institutions
that management believes are creditworthy.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. Revenues
and accounts receivable from significant customers, those representing 10% or
more of total revenues for the year ended December 31, 1999, are summarized as
follows:
F-6
<PAGE>
<TABLE>
<CAPTION>
Accounts
Revenue Receivable
----------- ------------
<S> <C> <C>
Customer A......................................... 8% 59%
Customer B......................................... 25% 24%
</TABLE>
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is provided using the straight-line method over estimated useful lives
ranging generally from five to seven years.
Revenue Recognition
The Company follows the provisions of AICPA Statement of Position 97-2,
"Software Revenue Recognition", as amended by AICPA Statement of Position 98-9
"Modification of SOP No. 97-2 Software Revenue Recognition with Respect to
Certain Transactions."
License revenue consists principally of revenue earned under software
license agreements. License revenue is generally recognized when a signed
contract or other persuasive evidence of an arrangement exists, the software has
been shipped or electronically delivered, the license fee is fixed or
determinable, and collection of the resulting receivable is probable. Revenue
from subscription license agreements, which include software, rights to future
products and maintenance, is recognized ratably over the term of the
subscription period. When contracts contain multiple elements wherein vendor
specific objective evidence exists for all undeliverable elements, the Company
accounts for the delivered elements in accordance with the "Residual Method"
prescribed by SOP 98-9. Any maintenance revenue included in these arrangements
is recognized ratably over the term of the arrangement. Revenue on shipments to
resellers, which is generally subject to certain rights of return and price
protection, is recognized when the products are sold by the resellers to the
end-user customer. All the Company's contracts to date include rights to future
products and maintenance and have been accounted for ratably over the
subscription period.
Service revenue consists primarily of revenue received for performing
product development, implementation of system solutions, on-site support,
consulting and training. Service revenue is generally recognized as the services
are performed.
Maintenance revenue consists of fees for providing software updates and
technical support for software products (post-contract support or "PCS").
Maintenance revenue is recognized ratably over the term of the agreement.
Payments received in advance of services performed are recorded as deferred
revenue. Allowances for estimated future returns and discounts are provided for
upon recognition of revenue.
Advertising Expenses
The Company expenses advertising costs as incurred. The amount expensed
during the year ended December 31, 1999, and December 31, 1998, was $16,122 and
$0, respectively.
3. INCOME TAXES
Prior to November 1999, the Company was organized as an S-Corporation under
the Internal Revenue Code. Thus the stockholders reported all taxable income or
loss on their respective income tax returns. Therefore, the accompanying
statement of operations does not include any provision for income taxes for the
period during which the Company was an S-Corporation.
F-7
<PAGE>
Subsequent to the recapitalization of the Company in November 1999, the
Company operates under the provisions of Subchapter C of the Internal Revenue
Code. The Company accounts for income taxes using the liability method. The
Company has incurred losses to date so no income tax benefits have been
recognized.
At December 31, 1999, the Company has federal net operating loss
carryforwards of approximately $200,000 that expire beginning in the year 2019.
Also, the Company has state tax losses of $200,000 that expire beginning in
2004. Deferred tax assets of approximately $80,000 relating primarily to
differences between book and tax treatment of net operating losses were fully
reserved as of December 31, 1999. The Tax Reform Act of 1986 contains provisions
that limit the ability to utilize net operating loss carryforwards in the case
of certain events including significant changes in ownership interests.
4. COMMITMENTS
The Company leases office space and equipment under non-cancelable
operating leases with various expiration dates through 2005. Rental expense was
approximately $4,051 and $0 for the years ended December 31, 1999 and 1998,
respectively. Future minimum lease payments under non-cancelable operating
leases are as follows:
2000................................................. $ 186,531
2001................................................. 238,758
2002................................................. 238,758
2003................................................. 238,758
2004................................................. 234,707
Thereafter........................................... 52,226
----------
$1,189,738
==========
5. STOCKHOLDER'S EQUITY
Preferred Stock
The Company has authorized 2,200,000 shares of preferred stock, all of
which are designated as redeemable, convertible Series A Preferred.
Conversion
The Series A Preferred Stock is convertible at the option of the holder
into fully paid and nonassessable shares of Common Stock on a one-for-one basis,
subject to adjustment. Additionally, each share of Series A Preferred Stock will
automatically convert into Common Stock upon the closing of a public offering of
the Company's Common Stock with proceeds of $25 million or more and a price per
share of not less than $10.
F-8
<PAGE>
Voting
Each holder of Series A Preferred Stock is entitled to the number of votes
equal to the number of whole shares of Common Stock into which the preferred
shares are convertible.
Dividends
The Company is restricted from paying dividends on shares of Common Stock
unless equivalent dividends for such year have been declared and paid on the
Series A Preferred Stock.
Liquidation
Upon liquidation, dissolution, or winding up of the Company, holders of the
Series A Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets to holders of Common Stock, an amount
equal to $1.00 per share (as adjusted for any combinations, consolidations,
stock distribution or stock dividends), plus all or any accrued but unpaid
dividends. If the assets and funds of the Corporation are insufficient to pay to
holders of Series A Preferred the full amount due, assets and funds shall be
distributed ratably among the holders of Series A Preferred based upon number of
shares held.
However, if the amount to be distributed to the Company's stockholders,
assuming full exercise or conversion of all outstanding securities exercisable
for or convertible into Common Stock (and assuming no distribution of any
applicable preference amount), as a result of such liquidating event would equal
or exceed $7.00 per share, subject to appropriate adjustment in the event of any
stock split, stock dividend, combination or other similar recapitalization
affecting such shares, then the holders of the Series A Preferred Stock shall
not be entitled to receive the Series A preference amount and shall receive
instead only their ratable share of the Corporation's assets as if such shares
had been converted voluntarily into common stock at the then applicable
conversion rate immediately prior to such liquidating event.
Right of First Participation
Each holder of Series A Preferred Stock shall have a right of first refusal
to purchase up to its pro rata share of all new securities (except as outlined
in the stock purchase agreements) which the Corporation may propose to sell or
issue. This right expires upon the closing of a qualified public offering.
Redemption Option
On each of October 31, 2004, October 31, 2005, and October 31, 2006, at the
option of the holders of at least fifty percent (50%) of the shares of the
Series A Preferred Stock outstanding as of October 1, 2004, the Corporation
shall redeem one third of the Series A Preferred shares outstanding at a price
equal to $2.00 per share, plus any accrued and unpaid dividends.
Restricted Common Stock
During 1999, the Board of Directors of the Company approved a restricted
common stock plan for employees of the Company. Under the plan, 505,000 shares
of restricted stock were issued during the year. The shares vest over a 19-
month period, starting on the date of issuance. As of December 31, 1999,
186,000 shares were vested. The remaining shares are subject to vesting over
the next year. The Company recorded unearned compensation of $50,000 in 1999
representing the difference between the deemed fair market value of the shares
and the exercise price. This amount will be recognized ratably over the vesting
period.
F-9
<PAGE>
Common Stock Reserved for Future Issuance
At December 31, 1999, the Company had reserved a total of 2,888,000 of its
authorized 10,000,000 shares of common stock for future issuance as follows:
For conversion of Series A Preferred.......................... 1,700,000
Possible issuance under future stock option plans............. 1,188,000
6. NOTES PAYABLE TO BANK
In May 2000, the Company entered into an agreement with a bank to establish
a line of credit which enabled the Company to borrow up to $750,000 for the
acquisition of fixed assets and for working capital purposes through November
2000 and May 2001, respectively, and bear interest at the bank's prime rate plus
0.50% and 0.75%, respectively.
All borrowings under the line of credit are collateralized by substantially
all of the Company's assets. In connection with the new agreement, the Company
was required to pay a commitment fee of $2,000 and issued the bank a warrant to
purchase 20,000 shares of the Company's Series A Preferred Stock at $1.00 per
share, subject to certain antidilutive adjustments. The warrant is exercisable
for a period of five years. The Company recorded the fair value of the warrant
as additional paid-in capital and debt discount. The discount will be amortized
to interest expense over the term of the Agreement.
7. STOCK OPTION PLAN
During January 2000, the Company approved a stock option plan (the "2000
Stock Plan") which authorized the granting of stock options for up to 1,188,000
shares of the Company's common stock. For the six months ended June 30, 2000,
the Company granted 536,000 and 495,000 options to certain employees with an
exercise price of $0.10 and $0.30 per share, respectively.
8. DEFERRED COMPENSATION
During June 2000, stock options were granted with an exercise price which
was below the estimated fair market value of the common stock at the date of
grant due to the Company's pending acquisition by TIBCO Software Inc. Deferred
compensation of $113,000 was recorded in accordance with Accounting Principles
Board Opinion No. 25 (APB 25), and will be amortized over the related vesting
period.
F-10
<PAGE>
ITEM 7 (b) - UNAUDITED PRO FORMA FINANCIAL INFORMATION
On September 5, 2000, TIBCO Software Inc. ("TIBCO") completed its merger
with Extensibility, Inc. ("Extensibility") pursuant to the terms of an Agreement
and Plan of Merger and Reorganization (the "Merger Agreement") dated August 2,
2000. The merger was structured as a tax-free exchange of stock and will be
accounted for under the purchase method of accounting.
The unaudited pro forma condensed combined financial statements reflect the
conversion of Extensibility common stock into 0.1037 shares of TIBCO common
stock. The total fair market value of the consideration issued was approximately
$102 million which comprises approximately $60 million related to the issuance
of 571,424 shares of TIBCO common stock at an average market price per share of
TIBCO common stock of $104.75, approximately $40 million related to the
assumption of Extensibility stock options and issuance of restricted stock and
$2.3 million in merger related costs. The average market price per share was
based on the average closing price for a period of four days that includes the
September 5, 2000 closing date of the merger and the three days beforehand. The
Company issued 258,434 shares of restricted stock as part of the consideration
in connection with the acquisition. The value of the restricted stock issued
will be accounted for as stock compensation.
The following unaudited pro forma condensed combined financial statements
give effect to the acquisition of Extensibility and the acquisition of InConcert
Inc. which was consummated on November 4, 1999 as if the acquisitions occurred
on December 1, 1998. The unaudited pro forma balance sheet is based on the
individual balance sheets of TIBCO and Extensibility included herein or
incorporated herein by reference and has been prepared to reflect the
acquisition of Extensibility by TIBCO. The unaudited pro forma statement of
operations for the year ended November 30, 1999 is based on the individual
statements of operations of TIBCO, Extensibility and InConcert included herein
or incorporated herein by reference and combines the results of operations of
TIBCO for the twelve months ended November 30, 1999, the results of InConcert
for the period from January 1, 1999 through the date of its acquisition by TIBCO
and the results of Extensibility (acquired by TIBCO as of September 5, 2000) for
the twelve months ended December 31, 1999. The unaudited pro forma statement of
operations for the nine months ended August 31, 2000 is based on the individual
statements of operations of TIBCO and Extensibility included herein or
incorporated by reference and combines the results of TIBCO for the nine month
period ended August 31, 2000 and the results of Extensibility for the nine month
period ended June 30, 2000. The pro forma information does not purport to be
indicative of the results that would have occurred had the merger actually been
in effect for these periods, or of results which may occur in the future. The
unaudited pro forma condensed combined financial statements should be read in
conjunction with the historical consolidated financial statements of TIBCO and
Extensibility including the notes thereto, included herein or incorporated
herein by reference.
F-11
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TIBCO Extensibility
------------ -------------
Year Ended InConcert Pro Forma
---------------------------- ------------ ----------------------------
Period from
January 1,
1999 to
November 30, December 31, November 4, Adjustments
1999 1999 1999 (Note 2) Combined
------------ ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenue:
License revenue...................................... $ 56,916 $ 43 $ 8,295 $ 65,254
Service and maintenance revenue...................... 39,524 16 -- 39,540
------------ ------------ ----------- ------------ ----------
Total revenue.................................... 96,440 59 8,295 104,794
Cost of revenue........................................ 36,612 -- 2,654 39,266
------------ ------------ ----------- ------------ ----------
Gross profit........................................... 59,828 59 5,641 65,528
------------ ------------ ----------- ------------ ----------
Operating expenses:
Research and development............................. 27,478 193 2,622 30,293
Sales and marketing.................................. 33,130 137 6,920 40,187
General and administrative........................... 8,229 358 3,214 11,801
Amortization of stock-based compensation............. 9,252 -- -- 23,257 (d) 32,509
Acquired in-process research and development......... 2,800 -- -- 2,800
Amortization of goodwill and acquired intangibles.... 521 -- -- 22,117 (a) 22,638
------------ ------------ ----------- ------------ ----------
Total operating expenses......................... 81,410 688 12,756 45,374 140,228
------------ ------------ ----------- ------------ ----------
Loss from operations................................... (21,582) (629) (7,115) (45,374) (74,700)
Other income (expense), net............................ 2,101 6 -- (1,778) (b) 329
------------ ------------ ----------- ------------ ----------
Net loss............................................... $(19,481) $(623) $(7,115) (47,152) $(74,371)
============ ============ =========== ============ ==========
Net loss per share:
Basic and diluted.................................... $ (0.19) $ (0.71)
============ ==========
Weighted average common shares outstanding........... 104,112 104,683
============ ==========
</TABLE>
F-12
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TIBCO Extensibility
------------ ---------------
For the nine months ended Pro Forma
------------------------------- --------------------------------
August 31, June 30, Adjustments
2000 2000 (Note 2) Combined
------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue:
License revenue....................................... $113,555 $ 328 (19) (c) $113,864
Service and maintenance revenue....................... 49,668 35 49,703
------------- --------------- ------------- ------------
Total revenue..................................... 163,223 363 (19) 163,567
Cost of revenue........................................... 43,700 -- 43,700
------------- --------------- ------------- ------------
Gross profit.............................................. 119,523 363 (19) 119,867
------------- --------------- ------------- ------------
Operating expenses:
Research and development.............................. 38,840 651 39,491
Sales and marketing................................... 61,550 389 61,939
General and administrative............................ 11,390 1,028 12,418
Amortization of stock-based compensation.............. 27,543 -- 7,290 (d) 34,833
Acquired in-process research and development.......... -- -- --
Amortization of goodwill and acquired intangibles..... 4,686 -- 12,293 (a) 16,979
------------- --------------- ------------- ------------
Total operating expenses.......................... 144,009 2,068 19,583 165,660
------------- --------------- ------------- ------------
Loss from operations...................................... (24,486) (1,705) (19,602) (45,793)
Other income (expense), net............................... 18,341 15 18,356
------------- --------------- ------------- ------------
Net loss.................................................. $ (6,145) $(1,690) (19,602) $(27,437)
============= =============== ============= ============
Net loss per share:
Basic and diluted..................................... $ ( 0.03) $ (0.15)
============= ============
Weighted average common shares outstanding............ 182,136 182,707
============= ============
</TABLE>
F-13
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
TIBCO Extensibility Pro Forma
---------- --------------- ---------------------------------
As of As of
August 31, June 30, Adjustments
2000 2000 (Note 2) Combined
------------ --------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $218,440 $ 516 $218,956
Short-term investments.................................... 386,578 156 386,734
Accounts receivable, net.................................. 65,630 -- 65,630
Accounts receivable from related parties, net............. 5,920 -- 5,920
Other current assets...................................... 9,384 24 9,408
------------ --------------- ------------
Total current assets................................. 685,952 696 686,648
Property and equipment, net................................. 20,895 400 21,295
Other assets................................................ 19,778 20 19,798
Goodwill and acquired intangibles, net...................... 25,992 -- 64,907 (f) 90,899
------------ --------------- ------------- ------------
$752,617 $ 1,116 $ 64,907 $818,640
============ =============== ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 5,658 $ 321 $ 2,312 (e) $ 8,291
Accrued liabilities....................................... 55,855 -- 55,855
Notes payable............................................. -- 596 596
Deferred revenue.......................................... 26,499 407 (337) (g) 26,569
------------ --------------- ------------- ------------
Total current liabilities............................ 88,012 1,324 1,975 91,311
Preferred stock........................................... -- 1,880 (1,880) (h)
Stockholders' equity:
Common stock and additional paid in capital............... 702,917 272 99,617 (e)(h) 802,806
Unearned stock-based compensation........................ (7,409) (127) (34,778) (i) (42,314)
Accumulated other comprehensive loss...................... 12,337 -- 12,337
Accumulated deficit....................................... (43,240) (2,233) (27) (h)(j) (45,500)
------------ --------------- ------------- ------------
Total stockholders' equity........................... 664,605 (2,088) 64,812 727,329
------------ --------------- ------------- ------------
$752,617 $ 1,116 $ 64,907 $818,640
============ =============== ============= ============
</TABLE>
F-14
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
On a combined basis, all transactions between TIBCO and Extensibility have
been eliminated in the pro forma information.
NOTE 2. PRO FORMA ADJUSTMENTS
The pro forma information including the allocation of the purchase price is
based on management's estimates and valuation of the intangible assets acquired.
The pro forma financial statements have not been adjusted to reflect any cost
savings or operating synergies that may be realized as a result of the merger.
The total fair market value of the consideration is approximately $102
million which consists of the allocated purchase price of $67 million, as shown
below, as well as $35 million in stock compensation related to unvested stock
options that were assumed as well as restricted stock that was granted as part
of the acquisition. The unrestricted stock to be issued reflects issuance of
571,424 shares of TIBCO common stock and an average market price per share of
TIBCO common stock of $104.75. The average market price per share was based on
the average closing price for a period of four days that includes the September
5, 2000 closing date of the merger and the three days beforehand. The Company
also issued 258,434 shares of restricted stock as part of the consideration in
connection with the acquisition. The value of the restricted stock issued will
be accounted for as stock compensation.
Following is a table of the total purchase price, purchase price allocation
and annual amortization of the intangible assets acquired (in thousands):
Purchase Price
Value of securities issued........................... $59,856,664
Assumption of options of Extensibility.............. 5,127,421
Direct transaction costs and expenses................ 2,312,000
-----------
Total purchase price.................................. $67,296,085
===========
<TABLE>
<CAPTION>
Annual
Purchase Price Allocation: Life Amortization
<S> <C> <C> <C>
Net assets of Extensibility.......................... $ (208,000) --
Fair value adjustments: --
Deferred revenue................................. 337,000 --
-----------
129,000 --
Intangible assets acquired:
Customer base...................................... 2,060,000 4 years $ 515,000
Developed technology............................... 2,830,000 5 years 566,000
Trademark.......................................... 250,000 4 years 62,500
Assembled workforce................................ 1,140,000 2 years 570,000
Non Compete........................................ 80,000 2 years 40,000
----------- ------------
Total intangibles (excluding goodwill)........ 6,360,000 1,753,500
In process research and development................ 2,260,000 --
Goodwill........................................... 58,547,085 4 years 14,636,771
----------- ------------
Total purchase price allocation............... $67,296,085 $16,390,271
=========== ============
</TABLE>
F-15
<PAGE>
The tangible net liabilities acquired represent the historical net
liabilities of Extensibility as of June 30, 2000 of $208,000. As required under
purchase accounting, the assets and liabilities of Extensibility have been
adjusted to fair value.
A customer base represents established relationships with businesses that
repeatedly order from a company. The income approach was used to estimate the
value of the Extensibility's' customer base by determining the present value of
future cash flows generated by existing customers. Key assumptions used in the
calculation included 80% of revenue for existing products coming from existing
customers for the remainder of 2000, 50% in 2001, 40% in 2002 and 25% in 2003,
40% of revenue for new products coming from existing customers for the remainder
of 2000, 70% in 2001 and 20% in 2002, a discount rate of 35% and estimates of
revenue growth, cost of sales, operating expenses and tax rate provided by
management of Extensibility. The customer base is being amortized on a straight-
line basis over its estimated useful life of four years.
The trademark was valued by applying a trademark royalty rate of 0.5% to
forecasted revenue, and then the net cash flow expected from these amounts was
discounted at a rate of 35% to arrive at an estimated fair market value. The
trademark is being amortized on a straight-line basis over its estimated useful
life of four years.
The value of the assembled workforce was derived by estimating the costs to
replace the existing employees, including recruiting and hiring costs for each
category of employee. The value of the assembled workforce is being amortized on
a straight-line basis over its estimated useful life of two years.
A portion of the purchase price has been allocated to developed technology
and in-process research and development (IPRD). Developed technology and IPRD
were identified and valued through extensive interviews, analysis of data
provided by Extensibility concerning development projects, their stage of
development, the time and resources needed to complete them, if applicable,
their expected income generating ability and associated risks. The income
approach, which includes an analysis of the cash flows, and risks associated
with achieving such cash flows, was the primary technique utilized in valuing
the developed technology and IPRD.
Where development projects had reached technological feasibility, they were
classified as developed technology and the value assigned to developed
technology was capitalized. The developed technology is being amortized on a
straight-line basis over its estimated useful life of five years.
Where the development projects had not reached technological feasibility
and had no future alternative uses, they were classified as IPRD, which will be
expensed upon the consummation of the merger. The value was determined by
estimating the expected cash flows from the projects once commercially viable,
discounting the net cash flows back to their present value and then applying a
percentage of completion to the calculated value as defined below.
- Net cash flows. The net cash flows from the identified projects are based on
estimates of revenue, cost of sales, research and development costs, selling,
general and administrative costs and income taxes from those projects. These
estimates are based on the assumptions mentioned below. The research and
development costs included in the model reflect costs to sustain projects, but
exclude costs to bring in-process projects to technological feasibility.
The estimated revenue is based on projections of Extensibility for each in-
process project. These projections are based on its estimates of market size
and growth, expected trends in technology and the nature and expected timing
of new product introductions by Extensibility and its competitors.
Projected gross margins and operating expenses approximate Extensibility's
recent historical levels.
- Discount rate. Discounting the net cash flows back to their present value is
based on the industry weighted average cost of capital ("WACC"). The industry
WACC is approximately 28%. The discount rate used in discounting the net cash
flows from IPR&D is 40%. This discount rate is higher than the industry WACC
due to inherent uncertainties surrounding the successful development of the
IPR&D, market acceptance of the technology, the useful life of such technology
and the uncertainty of technological advances which could potentially impact
the estimates described above.
F-16
<PAGE>
- Percentage of completion. The percentage of completion for each project was
determined using costs incurred to date on each project as compared to the
remaining research and development to be completed to bring each project to
technological feasibility. The percentage of completion varied by individual
project ranging from 10% to 80%.
If the projects discussed above are not successfully developed, the sales and
profitability of the combined company may be adversely affected in future
periods.
Based on the finalization of the valuation, and purchase price allocation,
finalization of the integration plans and other factors, the pro forma
adjustments may change from those presented in these pro forma combined
financial statements. A change in the value assigned to long-term tangible and
intangible assets and liabilities could result in a reallocation of the purchase
price and a change in the pro forma adjustments. The statement of operations
effect of these changes will depend on the nature and amount of the assets or
liabilities adjusted.
(a) To record amortization of goodwill and acquired intangibles related to
the acquisitions of InConcert and Extensibility as if the transactions
occurred on December 1, 1998. Goodwill and acquired intangibles of
approximately $64.9 million are being amortized on a straight-line basis
over a period of two to five years.
(b) To record the impact on interest income (expense) as if the acquisition
of InConcert and related $35.6 million cash payments occurred on December
1, 1998 .
(c) To eliminate intercompany revenue.
(d) To record stock compensation expense as a result of restricted stock
issued and unvested stock options assumed in connection the acquisition of
Extensibility.
(e) To record the components of the purchase price - $59.9 million in
unrestricted stock, $5.1 million related to the assumption of options of
Extensibility and $2.3 million in estimated transaction expenses. TIBCO
common stock was issued in exchange for outstanding shared of
Extensibility. TIBCO options, with a weighted average exercise price of
$1.89, were issued in exchange for outstanding Extensibility options.
(f) To record $64.9 million in intangible assets which are comprised of
$6.4 million of non-goodwill intangibles (see table in Note 2) and $58.5
million in goodwill.
(g) To record the fair value adjustment related to deferred revenue.
(h) To eliminate Extensibility's historical equity accounts.
(i) To record the deferred stock compensation related to the issuance of
restricted stock and the assumption of unvested stock options as part of
the purchase consideration.
(j) 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, 2000 and has been excluded from the statements of
operations
NOTE 3. PRO FORMA EARNINGS PER COMMON SHARE
Basic and diluted pro forma earnings per common share is calculated based
on the issuance of 571,424 shares of TIBCO common stock in the merger. Options
and shares subject to repurchase outstanding during 1999 and the nine months
ended August 31, 2000 were not included in the computation of diluted EPS
because inclusion of such options and warrants would have been antidilutive.
F-17
