<PAGE> 1
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): July 14, 2000
ACCRUE SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 000-26437 94-3238684
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
48634 Milmont Drive
FREMONT, CALIFORNIA 94538-7353
(Address of principal executive offices) (Zip code)
(510) 580-4500
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 14, 2000, Accrue Software, Inc., a Delaware corporation (the
"Company"), acquired specific assets (the "Acquired Assets") of the Infocharger
division of Tantau Software, Inc., a Delaware corporation ("Seller"), including
a high performance Internet data analysis tool, a two-year term license to
certain Tantau technology, and some engineering employees of the Infocharger
division became employees of Accrue in connection with the transaction
(collectively, the "Asset Purchase"). The Infocharger assets were acquired in
exchange for 1,666,667 newly issued shares of Accrue common stock, $0.001 par
value (of which 234,722 shares are subject to the fulfillment by Tantau of
certain post-closing conditions and are held in escrow) and $5,000,000 according
to the terms of the Asset Purchase Agreement dated as of June 30, 2000 (the
"Purchase Agreement") among the Company, Seller and its wholly owned subsidiary,
Tantau Software International, Inc., a Delaware corporation ("Seller Sub"), and
a Software License and Services Agreement between the Company and Seller dated
June 30, 2000, (the "License", and together with the Purchase Agreement, the
"Agreements").
The Acquired Assets were valued based on their current fair market
value. In connection with the Asset Purchase, Seller and Seller Sub agreed that
for one year they shall not compete with the Company in the development,
marketing, sale or license of software products for the purpose of E-Business
Analytics (as defined in the Purchase Agreement). The source of cash funds paid
by the Company under the Agreements is the Company's cash and cash equivalents.
Seller is primarily engaged in the business of providing software for
enterprises to conduct mobile e-commerce. Products developed by Seller include
the Wireless Internet Platform and its associated components. Prior to execution
of the Agreements, there has been no material relationship between Seller or
Seller Sub and the Company or any of Company's officers, directors or
affiliates.
The shares issuable to Seller pursuant to the Asset Purchase will be
issued pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly,
constitute "restricted securities" within the meaning of the Securities Act. The
Company has granted certain registration rights for the shares issued in
connection with the transaction.
Under the terms of the Purchase Agreement and a related Depository
Agreement dated July 14, 2000, 234,722 shares of the Company's Common Stock
issued in connection with the Asset Purchaser will be held in escrow for the
purpose of indemnifying the Company and its affiliates, officers, directors,
employees, representatives and agents against any damages that relate to or
arise from a breach of any of Seller's or Seller Sub's representations and
warranties contained in the Purchase Agreement. Of such shares, 90,278 shares
will be released on the six-month anniversary of the closing date of the
Purchase Agreement: (i) to Seller, if specified former employees of Seller Sub
remain employed by the Company as of such date, or (ii) to the Company, if such
specified employees do not remain employed by the Company as of such date. The
escrow will expire on the earlier of (i) the one-year anniversary
<PAGE> 3
of the closing date of the Purchase Agreement, or (ii) the release by the
depository agent of all the escrowed shares pursuant to the terms of the
Depository Agreement.
For accounting purposes, the Merger will be accounted for as a
"purchase".
The number of shares of the Company's Common Stock to be issued to
Seller was determined by arm's-length negotiations among the parties.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
The balance sheets of InfoCharger (a Business Unit of Tantau Software,
Inc.) as of June 30, 2000 and December 31, 1999 and the results of its
operations and its cash flows for the period from February 11, 1999 (inception)
to December 31, 1999 and the six months ended June 30, 2000 are filed as an
amendment to the initial report filed July 26, 2000.
(b) Unaudited Pro Forma Combined Condensed Financial Statements.
The unaudited pro forma combined condensed balance sheet as of June 30,
2000 and the unaudited pro forma combined condensed statements of operations for
the year ended March 31,2000 and the three months ended June 30, 2000 are filed
as an amendment to the initial report filed July 26, 2000.
-2-
<PAGE> 4
Financial Statements
InfoCharger (a Business Unit of Tantau Software, Inc.)
For the period from February 11, 1999 (inception) through December 31, 1999 and
for the six months ended June 30, 2000 with Report of Independent Auditors
<PAGE> 5
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Financial Statements
For the period from February 11, 1999 (inception) through
December 31, 1999 and for the six months ended June 30, 2000
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................................ 1
Financial Statements
Balance Sheets........................................................................ 2
Statements of Operations.............................................................. 3
Statements of Cash Flows.............................................................. 4
Notes to Financial Statements......................................................... 5
</TABLE>
<PAGE> 6
Report of Independent Auditors
Board of Directors
Tantau Software, Inc.
We have audited the accompanying balance sheets of InfoCharger (a Business Unit
of Tantau Software, Inc.) as of December 31, 1999 and June 30, 2000, and the
related statements of operations and cash flows from February 11, 1999
(inception) to December 31, 1999 and for the six months ended June 30, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of InfoCharger at December 31,
1999 and June 30, 2000, and the results of its operations and its cash flows
from February 11, 1999 (inception) to December 31, 1999 and for the six months
ended June 30, 2000 in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
August 25, 2000
1
<PAGE> 7
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
-------- --------
<S> <C> <C>
ASSETS
Current assets
Accounts receivable $ 27,000 $ 60,000
Prepaid expenses and other current assets 264 639
-------- --------
Total current assets 27,264 60,639
Property and equipment, net 26,682 85,042
Intangible assets, net of accumulated amortization
of $41,739 and $69,068 as of December 31, 1999
and June 30, 2000, respectively 234,533 207,204
Other assets 1,886 1,772
-------- --------
Total assets $290,365 $354,657
======== ========
LIABILITIES AND AFFILIATE INVESTMENT
Current liabilities
Accounts payable and accrued expenses $ 20,680 $ 36,391
Deferred revenue 10,000 45,000
-------- --------
Total current liabilities 30,680 81,391
Affiliate investment 259,685 273,266
-------- --------
Total liabilities and affiliate investment $290,365 $354,657
======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 8
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Statements of Operations
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 11,
1999 (INCEPTION) SIX MONTHS ENDED
TO DECEMBER 31, JUNE 30,
1999 2000
--------- ---------
<S> <C> <C>
Software license revenue $ 13,000 $ 310,000
Service revenue 4,000 75,000
--------- ---------
Total revenue 17,000 385,000
Cost of service revenues 700 10,000
--------- ---------
Gross profit 16,300 375,000
Research and development 485,401 540,196
Selling, general and administrative 132,686 339,894
--------- ---------
Loss from operations (601,787) (505,090)
Interest expense from affiliate -- 13,189
--------- ---------
Loss before provision for income taxes (601,787) (518,279)
Provision for income taxes 14,790 4,575
--------- ---------
Net loss $(616,577) $(522,854)
========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 9
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Statements of Cash Flows
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 11, 1999
(INCEPTION) TO SIX MONTHS ENDED
DECEMBER 31, 1999 JUNE 30, 2000
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(616,577) $(522,854)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 57,098 40,145
Changes in operating assets and liabilities:
Accounts receivable (27,000) (33,000)
Prepaid expenses and other assets (264) (375)
Other assets (1,886) 114
Accounts payable and accrued expenses 20,680 15,711
Deferred revenue 10,000 35,000
--------- ---------
Net cash used for operating activities (557,949) (465,259)
INVESTING ACTIVITIES
Acquisition of intangible assets (276,272) --
Purchases of property and equipment (42,041) (71,176)
--------- ---------
Net cash used in investing activities (318,313) (71,176)
FINANCING ACTIVITIES
Net advances from Tantau 876,262 536,435
--------- ---------
Net cash provided by financing activities 876,262 536,435
Net increase (decrease) in cash and cash -- --
equivalents
--------- ---------
Cash and cash equivalents at beginning of period -- --
Cash and cash equivalents at end of period $ -- $ --
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid to Tantau $ -- $ 13,189
Income taxes paid to Tantau $ 14,790 $ 4,575
</TABLE>
See accompanying notes.
4
<PAGE> 10
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements
June 30, 2000
1. ORGANIZATION
InfoCharger (the "Company") as it is referred to in these financial statements
is the wholly owned data analysis operation of Tantau Software, Inc. ("Tantau")
with locations in California, Texas, Germany, and Scotland. Tantau was
incorporated under the laws of the State of Delaware on February 11, 1999. The
Company provides an embedded data analysis engine for eBusiness applications,
and is designed to manage large volumes of data. The Company operates in one
reportable segment.
Tantau is a global provider of wireless Internet platform and software products
and services. Tantau focuses primarily on end point customers that must transact
real business, in which money changes hands, anytime, anywhere. Tantau's
software is designed to address the fundamental requirements of m-commerce -
mission critical scale, availability, transactional integrity and security.
On March 31, 1999, Tantau purchased certain fixed assets, several existing
Internet infrastructure products, their corresponding customer bases and related
patents, trademarks and technology from the Tandem division of Compaq Computer
Corporation for 1,850,000 shares of stock valued at $1,850,000. Tantau recorded
fixed assets at the estimated fair value at the purchase date, which
approximates net book value, and recorded the remaining assets purchased as
intangible assets. Included in that purchase were the assets and related
technology of the Company. As a result, a portion of those intangible assets
have been allocated to the Company based on the relative fair value of the
Company to the total valuation of Tantau as of Tantau's last funding date. These
intangibles are being amortized on a straight-line basis over a five-year period
as consistent with Tantau.
The Company does not constitute a separate legal entity. The financial
statements of the Company present the operating results and the financial
position of the data analysis operations and do not include the wireless
Internet platform and other software products of Tantau.
The financial statements of the Company have been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in a form 8-K to be filed by Accrue Software, Inc. in
connection with its acquisition of the Company as described in Note 9.
5
<PAGE> 11
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
1. ORGANIZATION (CONTINUED)
These financial statements have been prepared from the historical accounting
records of Tantau and reflect the application of management and allocation
policies adopted by Tantau for various costs and activities, as described in
Note 5. All of the accounting judgments, estimations and allocations in these
financial statements are based on assumptions that Tantau's management believes
are reasonable for purposes of preparing the Company's financial statements.
However, these allocations and estimates are not necessarily indicative of the
costs that would have resulted if the Company had been operated as a separate
entity.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company's revenue consists of license revenues and service and maintenance
revenues. License revenues consist of licensing fees under arrangement, which
provide customers with the right to use the respective products. Revenue from
licenses is recognized when persuasive evidence of an arrangement exists,
delivery of the product has occurred, the fee is fixed and determinable, and
collectibility is probable. Service and maintenance revenues consist of software
maintenance, training and consulting services. Software maintenance revenue is
recognized ratably over the term of the agreement, which is generally one year.
Training and consulting services revenue is recognized as such services are
performed.
CASH
The Company's cash is centralized with Tantau.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the respective assets, generally three to five years.
6
<PAGE> 12
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of any asset to the future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of carrying value or fair value less costs
to sell.
CAPITALIZED SOFTWARE
In accordance with SFAS 86, Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed, the Company capitalizes purchased software
and internal costs of software development beginning when the resulting products
become technologically feasible and ending when the product is available for
general release, subject to net realizable value considerations. The Company has
defined technological feasibility as completion of a working model. No
significant internally developed software costs have met this criteria and,
accordingly, the Company has charged all such costs to research and development
expense.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS 109, Accounting
for Income Taxes. SFAS 109 prescribes the use of the liability method whereby
deferred tax asset and liability account balances are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be recovered.
7
<PAGE> 13
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with SFAS 123,
Accounting for Stock-Based Compensation, which prescribes accounting and
reporting standards for all stock-based compensation plans, including employee
stock options. As allowed by SFAS 123, the Company has elected to account for
its employee stock-based compensation in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees.
CONCENTRATION OF CREDIT RISK
From February 11, 1999 (inception) through December 31, 1999 and for the six
months ended June 30, 2000, the Company had one customer that accounted for 100%
of their gross revenue and accounts receivable.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS 133, as amended by SFAS 137, establishes accounting
and reporting standards for derivative financial instruments and hedging
activities related to those instruments, as well as other hedging activities.
SFAS 133 requires the Company to measure all derivatives at fair value and to
recognize them in the balance sheet as an asset or liability, depending on the
Company's rights or obligations under the applicable derivative contract.
Because the Company does not currently hold any derivative instruments and does
not engage in hedging activities, the Company expects that the adoption of SFAS
133, as amended, will not have a material impact on its consolidated financial
position, results of operations, or cash flows. The Company will be required to
adopt SFAS 133 in fiscal 2001.
8
<PAGE> 14
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. SAB 101 will be effective for the Company beginning in the
fourth quarter of the year ended December 31, 2000. We do not believe that SAB
101 will have a material impact on the financial statements of the Company.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the follow as of December 31, 1999 and June
30, 2000, respectively:
<TABLE>
<CAPTION>
1999 2000
--------- ---------
<S> <C> <C>
Computer equipment $ 40,201 $ 111,487
Furniture and fixtures 1,840 1,728
--------- ---------
42,041 113,215
Accumulated depreciation (15,359) (28,173)
--------- ---------
$ 26,682 $ 85,042
========= =========
</TABLE>
4. TANTAU INVESTMENT
Tantau utilizes a centralized cash management system whereby the Company's cash
requirements are provided directly by Tantau. Similarly, cash generated by the
Company is remitted directly to Tantau. All charges and allocations of costs for
functions and services provided by Tantau, as described in Note 5, are deemed
paid by the Company, in cash, in the period in which the cost is recorded in
these financial statements.
Changes in the Tantau investment were as follows:
<TABLE>
<S> <C>
Balance at February 11, 1999 $ --
Net loss (616,577)
Net advances from Tantau 876,262
---------
Balance at December 31, 1999 259,685
Net loss (522,854)
Net advances from Tantau 536,435
---------
Balance at June 30, 2000 $ 273,266
=========
</TABLE>
9
<PAGE> 15
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS
Transactions with Tantau from February 11, 1999 (inception) through December 31,
1999 and for the six months ended June 30, 2000 were as follows:
<TABLE>
<CAPTION>
1999 2000
------- -------
<S> <C> <C>
Common service costs allocated to the Company:
Salaries $15,749 $15,000
Occupancy expense 3,366 8,762
Equipment costs and supplies 5,695 23,899
Telecom expense 2,102 16,456
Marketing expense 1,935 --
------- -------
$28,847 $64,117
======= =======
</TABLE>
Tantau provides certain common services to the Company which are comprised of
both direct expenses and allocated administrative expenses. The direct expenses
include salaries of Company personnel and other direct expenses related to
developing the business and are separately identified and charged to the Company
based on actual costs incurred. The allocated administrative expenses include
salaries of Tantau personnel and general overhead costs of Tantau which are
allocated to the Company on an established formula based upon utilization of
Tantau's employees. These costs are not necessarily indicative of the costs that
would have been incurred if the Company were operated as a stand-alone business.
6. INCOME TAXES
The Company's taxable loss is included in the consolidated income tax return of
Tantau. The Company's income tax provisions are computed on a separate return
basis and are paid to Tantau.
As of June 30, 2000, the Company has net operating loss carryforwards of
approximately $1,017,000 for federal tax reporting purposes and research and
development credit carryforwards of approximately $35,475. The net operating
loss and research and development credit carryforwards begin to expire in 2019
if not utilized.
10
<PAGE> 16
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1999 and
June 30, 2000 are as follows:
<TABLE>
<CAPTION>
1999 2000
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Fixed assets $ (380) $ (500)
Deferred tax assets:
Deferred revenue 2,500 11,250
Net operating loss and tax credit carryforwards 228,110 411,601
--------- ---------
Total deferred tax assets 230,610 422,851
--------- ---------
Net deferred tax assets 230,230 422,351
Valuation allowance for deferred tax assets (230,230) (422,351)
--------- ---------
Net deferred taxes $ -- $ --
========= =========
</TABLE>
The Company has established a valuation allowance equal to the net deferred tax
assets due to uncertainties regarding the realization of deferred tax assets
based on the Company's lack of earnings history. The valuation allowance
increased by approximately $192,121 during 2000.
Reconciliations of the difference between the statutory federal income tax rates
and the effective income tax rates as a percentage of loss before income taxes
for the periods ended December 31, 1999 and June 30, 2000 are as follows:
<TABLE>
<CAPTION>
1999 2000
------ ------
<S> <C> <C>
U.S. federal statutory rate 34% 34%
State and local taxes, net of federal benefit 3% 3%
Effect of the increase in valuation allowance (37%) (37%)
Foreign income taxes 2% 1%
------ ------
2% 1%
====== ======
</TABLE>
The Company's provision for income taxes relates entirely to income taxes paid
at foreign operations.
11
<PAGE> 17
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
7. LEASES
Future minimum lease payments under noncancelable operating leases for premises
and equipment are as follows:
<TABLE>
<S> <C>
July 1 to December 31, 2000 $10,997
Year ended December 31, 2001 22,584
Year ended December 31, 2002 16,938
-------
$50,519
=======
</TABLE>
Rent expense for the period from February 11, 1999 (inception) through December
31, 1999 and for the six months ended June 30, 2000 was approximately $26,200
and $37,600, respectively.
8. STOCK OPTIONS
Certain employees of the Company participate in Tantau's 1999 Stock Plan (the
"Plan") which allows for the grant of options to purchase shares of common stock
and the issuance of common stock directly to eligible persons. The Plan provides
for the options to be either Incentive Options or Non-Statutory Options and
approves issuance of up to 7,925,000 shares of common stock over the term of the
Plan. The exercise price per share of Incentive Options shall not be less than
100% of the fair market value of the shares of common stock. Vesting is
generally 25% after one year of service and the remaining vests ratably over the
following three years. No option shall have a term exceeding ten years from the
grant date.
The Plan provides the grantee the right to exercise prior to vesting. Options
exercised prior to an employee becoming fully vested in such options are subject
to repurchase by Tantau should the employee be terminated or leave the Company
or Tantau prior to becoming fully vested in such options. At December 31, 1999
and June 30, 2000, 301,250 and 270,937 shares had been exercised by options
which remained unvested and subject to repurchase.
12
<PAGE> 18
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
8. STOCK OPTIONS (CONTINUED)
Pro forma information regarding net loss is required by SFAS 123. The fair value
for options was estimated at the date of grant using a minimum value option
pricing model with the following weighted-average assumptions: weighted-average
risk free interest rate of 6.6%, a dividend yield of 0% and a weighted-average
expected life of the option of five years. The weighted average fair value of
the options granted during 1999 and 2000 was five cents per option. For purposes
of pro forma disclosures, the estimated fair value of options is amortized to
expense over the options' vesting period. The impact on the pro forma results
which follow may not be representative of compensation expense in future years
when the effect of the amortization of multiple awards may be reflected in the
amounts. The Company's pro forma net loss, including the pro forma stock-based
compensation expense related to those employees employed directly by the Company
and an allocation of the compensation expense associated with employees where
salaries were partially allocated to the Company for the periods ended June 30,
2000 and December 31, 1999, is $521,028 and $605,877, respectively.
A summary of the Company's employees participation in Tantau's 1999 Stock Plan
activity and related information for the periods ended December 31, 1999 and
June 30, 2000 follows:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED-
EXERCISE AVERAGE
OPTIONS PRICES EXERCISE PRICE
------- ------ --------------
<S> <C> <C> <C>
Outstanding, February 11, 1999 -- $ -- $ --
Granted 327,250 .10 .10
Exercised (301,250) .10 .10
--------
Outstanding, December 31, 1999 26,000 .10 .10
Granted 112,500 .10 - .62 .24
Exercised (45,000) .10 .10
--------
Outstanding, June 30, 2000 93,500 $.10 - .62 $.14
========
</TABLE>
The weighted-average remaining contractual life of outstanding options is 9.96
years. Options available for grant by Tantau at June 30, 2000 were 2,404,250 and
options exercisable at June 30, 2000 and December 31, 1999 were 26,000 and
93,500, respectively.
13
<PAGE> 19
InfoCharger
(a Business Unit of Tantau Software, Inc.)
Notes to Financial Statements (continued)
9. SUBSEQUENT EVENT (UNAUDITED)
On July 14, 2000 Tantau sold specific assets of the Company to Accrue Software,
Inc. ("Accrue") for 1,666,667 shares of Accrue common stock and $5,000,000 in
cash. The shares will be issued pursuant to an exemption from the registration
requirements of the Securities act of 1933, as amended (the "Securities Act"),
and, accordingly, constitute "restricted securities" within the meaning of the
Securities Act. Accrue has granted Tantau certain registration rights for the
shares issued in connection with the transaction. In connection with the sale,
Tantau and Accrue entered into a two-year license for certain Tantau technology.
Under the terms of the purchase agreement 234,722 shares of the total shares to
be received by Tantau will be held in escrow for the purpose of indemnifying
Accrue and its affiliates, officers, directors, employees, representatives and
agents against any damages that relate to or arise from a breach of any of
Tantau's representations and warranties contained in the Purchase Agreement. Of
such shares, 90,278 shares will be released on the six-month anniversary of the
closing of the transaction if certain specified criteria are met. The remaining
shares held in escrow will be released upon the earlier of the (i) one year
anniversary of the closing of the transaction, or (ii) the release by the
depository agent of all the escrowed shares pursuant to the terms of the
depository agreement.
In order to induce employees of the Company to transfer employment to Accrue,
Tantau has offered these employees bonus payments that will be made in two
installments. The first installment, with a maximum payout of $221,000, will be
due upon their commencement of employment with Accrue and the second
installment, with a maximum payout of $884,000, will be due upon their nine
month employment anniversary with Accrue.
<PAGE> 20
(b) PRO FORMA FINANCIAL INFORMATION
ACCRUE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements for
Accrue Software, Inc. ("Accrue") consist of the unaudited pro forma combined
condensed statement of operations for the year ended March 31, 2000 and the
three months ended June 30, 2000, and the unaudited pro forma combined condensed
balance sheet as of June 30, 2000. These pro forma financial statements give
effect to Accrue's acquisition of InfoCharger (a Business Unit of Tantau
Software, Inc.) ("InfoCharger") in a business combination accounted for as a
purchase, which closed on July 14, 2000. In exchange for the assets and
liabilities of InfoCharger, Accrue issued InfoCharger approximately 1.7 million
shares of its common stock and paid $5.0 million in cash.
Pro forma amounts have been derived by applying pro forma adjustments to the
historical consolidated financial information of Accrue and InfoCharger.
The purchase price of InfoCharger was $59.2 million based upon the average
market price of a share of Accrue common stock in a range four trading days
before the merger was consummated on July 14, 2000, as quoted on the NASDAQ
National Market, and included $5.0 million in cash consideration and $0.2
million of estimated direct acquisition costs. The excess of the purchase price
over the fair value of net assets has been allocated to goodwill and
intangibles.
The unaudited pro forma combined condensed statement of operations combine
Accrue's historical results of operations for the year ended March 31, 2000 with
InfoCharger's historical results of operations for the period from February 11,
1999 (inception) to December 31, 1999 and Accrue's unaudited historical results
of operations for the three months ended June 30, 2000 with InfoCharger's
historical results of operations for the three months ended March 31, 2000 and
have been prepared as if the InfoCharger acquisition occurred on April 1, 1999.
The unaudited pro forma combined condensed balance sheet combines Accrue's
unaudited historical balance sheet at June 30, 2000 and InfoCharger's historical
balance sheet at June 30, 2000.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of what the actual operating results or financial
position would have been for the combined company had the transaction taken
place on April 1, 1999, and do not purport to indicate the results of future
operations.
<PAGE> 21
ACCRUE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
Accrue InfoCharger Pro Forma
as of as of Pro Forma Combined as of
ASSETS June 30, 2000 June 30, 2000 Adjustments June 30, 2000
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 31,971 $ -- $ (5,000)(A) $ 26,971
Accounts receivable, net 8,222 60 -- 8,282
Prepaid expenses and other current assets 350 1 -- 351
--------- --------- --------- ---------
Total current assets 40,543 61 (5,000) 35,604
Property and equipment, net 2,551 85 -- 2,636
Intangibles and goodwill 108,591 207 57,401 (A) 166,199
Other assets, net 81 2 -- 83
--------- --------- --------- ---------
Total assets $ 151,766 $ 355 $ 52,401 $ 204,522
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,118 $ 37 $ -- $ 1,155
Accrued liabilities 3,516 -- 200 (A) 3,716
Accrued liabilities, merger 1,282 -- -- 1,282
Deferred revenue 2,812 45 -- 2,857
Current portion of long term debt 129 -- -- 129
--------- --------- --------- ---------
Total current liabilities 8,857 82 200 9,139
Long term debt, net of current portion 9 -- -- 9
--------- --------- --------- ---------
Total liabilities 8,866 82 200 9,148
--------- --------- --------- ---------
Stockholders' equity
Common stock 27 -- 2 (A) 29
Affiliate investment -- 273 (273)(A) --
Additional paid-in capital 191,695 -- 53,986 (A) 245,681
Notes receivable from stockholders (213) -- -- (213)
Unearned compensation (3,488) -- -- (3,488)
Accumulated deficit (45,121) -- (1,514)(A) (46,635)
--------- --------- --------- ---------
Total stockholders' equity 142,900 273 52,201 195,374
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 151,766 $ 355 $ 52,401 $ 204,522
========= ========= ========= =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements for explanation of Pro Forma acquisition adjustments
<PAGE> 22
ACCRUE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Accrue InfoCharger Combined
for the three for the three for the three
months ended months ended Pro Forma months ended
June 30, 2000 March 31, 2000 Adjustments June 30, 2000
<S> <C> <C> <C> <C>
Net revenue
Software license $ 6,923 $ 10 $ -- $ 6,933
Maintenance and service 2,827 15 -- 2,842
-------- -------- -------- --------
Total revenue 9,750 25 -- 9,775
-------- -------- -------- --------
Cost of revenues
Software license 381 -- -- 381
Maintenance and service 1,439 2 -- 1,441
-------- -------- -------- --------
Total cost of revenue 1,820 2 -- 1,822
-------- -------- -------- --------
Gross profit 7,930 23 -- 7,953
-------- -------- -------- --------
Operating expenses
Research and development 1,936 190 -- 2,126
Sales, general and administrative 5,053 103 -- 5,156
Amortization of intangibles and goodwill 10,859 -- 4,785(B) 15,644
Stock-based compensation expense 749 -- -- 749
-------- -------- -------- --------
Total operating expenses 18,597 293 4,785 23,675
-------- -------- -------- --------
Loss from operations (10,667) (270) (4,785) (15,722)
Other, net 405 (4) -- 401
-------- -------- -------- --------
Net loss $(10,262) $ (274) $ (4,785) $(15,321)
======== ======== ======== ========
Net loss per share, basic and diluted $ (0.40) $ (0.56)
======== ========
Shares used in computing net loss per
share, basic and diluted 25,578 1,667(C) 27,245
======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements for explanation of Pro Forma acquisition adjustments
<PAGE> 23
ACCRUE SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
InfoCharger
Accrue for the period Pro Forma
for the from February 11, 1999 Combined
year ended (inception) to Pro Forma for the year ended
March 31, 2000 December 31, 1999 Adjustments March 31, 2000
<S> <C> <C> <C> <C>
Net revenue
Software license $ 14,681 $ 13 $ -- $ 14,694
Maintenance and service 4,183 4 -- 4,187
-------- -------- -------- --------
Total revenue 18,864 17 -- 18,881
-------- -------- -------- --------
Cost of revenues
Software license 602 -- -- 602
Maintenance and service 2,166 1 -- 2,167
-------- -------- -------- --------
Total cost of revenue 2,768 1 -- 2,769
-------- -------- -------- --------
Gross profit 16,096 16 -- 16,112
-------- -------- -------- --------
Operating expenses
Research and development 4,410 485 -- 4,895
Sales, general and administrative 14,543 133 -- 14,676
Merger costs 3,560 -- -- 3,560
In-process research and development 650 -- -- 650
Amortization of intangibles and goodwill 10,859 -- 19,133(B) 29,992
Stock-based compensation expense 4,344 -- -- 4,344
-------- -------- -------- --------
Total operating expenses 38,366 618 19,133 58,117
-------- -------- -------- --------
Loss from operations (22,270) (602) (19,133) (42,005)
Other, net 1,247 (15) -- 1,232
Interest expense (96) -- -- (96)
-------- -------- -------- --------
Net loss $(21,119) $ (617) $(19,133) $(40,869)
======== ======== ======== ========
Net loss per share, basic and diluted $ (1.33) $ (2.34)
======== ========
Shares used in computing net loss per
share, basic and diluted 15,822 1,667(C) 17,489
======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements for explanation of Pro Forma acquisition adjustments
<PAGE> 24
ACCRUE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND THREE MONTHS ENDED JUNE 30, 2000
1. BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma combined condensed financial statements give effect to
Accrue's acquisition of InfoCharger, in a business combination accounted for as
a purchase, which was consummated on July 14, 2000. At that date, Accrue issued
1,666,667 shares of its common stock and paid $5.0 million in cash for the
assets and liabilities of InfoCharger.
The pro forma financial statements have been prepared on the basis of
assumptions described in the following notes and include the allocation of the
consideration paid for the assets and liabilities of InfoCharger based on
independent third party valuations of their fair value. The actual allocation of
the consideration to be paid may differ from those assumptions reflected in the
pro forma financial statements. Accrue does not expect that the final allocation
of the purchase price will differ materially from the preliminary allocation. In
the opinion of Accrue's management, all adjustments necessary to present fairly
such pro forma financial statements have been made based on the terms and
structure of the InfoCharger acquisition. The unaudited pro forma combined
condensed statement of operations for the year ended March 31, 2000 and the
three months ended June 30, 2000 give effect to this transaction as if it had
taken place on April 1, 1999. The unaudited pro forma combined condensed balance
sheet as of June 30, 2000 gives effect to the transaction as if it had taken
place on June 30, 2000.
The pro forma financial statements are not necessarily indicative of what the
actual financial results would have been had the transaction taken place on
April 1, 1999, and do not purport to indicate the results of future operations.
Below is a table of the estimated acquisition consideration, purchase price
allocation and annual amortization of the intangible assets and goodwill
acquired (in thousands):
<TABLE>
<CAPTION>
Amortization Annual
Period Amortization
<S> <C> <C> <C>
Purchase price allocation:
Tangible net assets acquired $ 273 --
Intangible net assets acquired:
Developed technology 2,349 3 783
In-process research and development 1,514 --
Assembled workforce 331 3 110
Goodwill 54,721 3 18,240
-------
Total $59,188
=======
</TABLE>
<PAGE> 25
Tangible assets of InfoCharger principally include accounts receivable and
property and equipment. Liabilities of InfoCharger assumed principally include
accounts payable and deferred revenue.
To determine the value of the developed technology, the expected future cash
flows attributable to all existing technology was discounted, taking into
account risks related to the characteristics and applications of the developed
technology, existing and future markets, and assessments of the stage of the
technology's life cycle. The analysis resulted in a valuation for developed
technology that had reached technological feasibility and therefore was
capitalizable. The developed technology will be amortized on a straight-line
basis over three years.
The value of $1.5 million allocated to a project identified as in-process
research and development will be charged to expense during the second quarter of
fiscal 2001 but has not been reflected in the Accrue unaudited pro forma
combined condensed statement of operations as it is non-recurring in nature.
The write-off will be necessary because the acquired in-process research and
development has not yet reached technological feasibility and has no future
alternative uses. The product under development may not achieve commercial
viability. The nature of the efforts required to develop the purchased
in-process research and development into a commercially viable product
principally relate to the completion of all planning, designing, prototyping,
verification and testing activities that are necessary to establish that the
product can be produced to meet its designed specifications, including
functions, features, and technical performance requirements.
The value of the purchased in-process research and development was determined by
estimating the projected net cash flows related to the product, including costs
to complete the development of the technology and the future revenue to be
earned upon commercialization of the product. The estimated stage of completion
(expressed as a percentage of completion) for the project was calculated and
then the percentage was applied to the expected net cash flows. The percentage
of completion for the InfoCharger project was 37%. These cash flows were then
discounted back to their net present value at a discount rate of 25%, which is
consistent with industry averages. The projected net cash flows from the
project were based on management's estimates of revenues and operating profits
related to the project.
To determine the revenue attributable to the in-process research technology,
consideration was also given to the contribution of the existing technology
which will be utilized in the development of the in-process technology, referred
to as "core technology". The value allocated to the core technology was
determined by assigning a leverage factor to the estimated projected net cash
flows related to the product under development after analysis of both the
effort and work completed as well as the expected value of the in-process
technology. The projected net cash flows from the products assigned to core
technology using the leverage factor were then discounted back to their net
present value.
<PAGE> 26
The value allocated to the assembled workforce is attributable to the
InfoCharger workforce in place after the acquisition which eliminates the need
to hire new replacement employees. The value was determined by estimating the
cost involved in assembling a new workforce including costs of salaries,
benefits, training and recruiting.
Goodwill is determined based on the residual difference between the amount of
consideration to be paid and the values assigned to identified net tangible and
intangible assets.
2. PRO FORMA NET LOSS PER SHARE
Pro forma basic and diluted net loss per share are based on the weighted average
number of shares of Accrue common stock outstanding during the period and the
number of shares of Accrue common stock to be issued in connection with the
InfoCharger acquisition. The following options have not been included in the
computation of pro forma diluted net loss per share because their effect would
be antidilutive.
<TABLE>
<CAPTION>
Potential Common Securities As of March 31, 2000 As of June 30, 2000
<S> <C> <C>
Antidilutive options, warrant and
shares subject to repurchase not
included in loss per share calculations 5,229 5,238
----- -----
</TABLE>
3. PRO FORMA ADJUSTMENTS
A. To record the issuance of 1.7 million Accrue shares, a cash payment of $5.0
million, elimination of the affiliate investment, and acquisition costs of
$0.2 million in connection with the InfoCharger merger.
The purchase price was allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Goodwill and other intangibles, net $57,401
In-process research and development
charged to retained earnings 1,514
Elimination of InfoCharger equity:
Affiliate investment 273
------
Total purchase price $59,188
======
</TABLE>
B. To record the amortization of acquired intangible assets and goodwill.
C. To reflect the number of Accrue shares exchanged for the affiliate
investment in InfoCharger.
<PAGE> 27
(c) Exhibits.
<TABLE>
<S> <C>
2.1* Form of Asset Purchase Agreement dated as of June 30,
2000, by and between the Company, Seller and Seller Sub.
4.1* Form of Investors' Rights Agreement, dated as of July 14,
2000, by and between the Company and Seller.
10.19* Form of Tantau Software, Inc. Software License and
Services Agreement executed as of June 30, 2000 by and
between Seller and the Company.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>
* Incorporated by reference from Current Report on Form 8-K previously filed by
the Registrant on July 26, 2000 with the Securities and Exchange Commission
via Edgar and dated July 14, 2000.
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ACCRUE SOFTWARE, INC.
Date: September 22, 2000 By: /s/ GREGORY C. WALKER
------------------------------------
Gregory C. Walker
Chief Financial Officer
(Principal Financial and Accounting
Officer)
-3-
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1* Form of Asset Purchase Agreement dated as of June 30, 2000, by and between the
Company, Seller and Seller Sub.
4.1* Form of Investors' Rights Agreement, dated as of July 14, 2000, by and between
the Company and Seller.
10.19* Form of Tantau Software, Inc. Software License and Services Agreement executed
as of June 30, 2000 by and between Seller and the Company.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>
* Incorporated by reference from Current Report on Form 8-K previously filed by
the Registrant on July 26, 2000 with the Securities and Exchange Commission
via Edgar and dated July 14, 2000.
