<PAGE>
Exhibit 99.1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
TransLink Software, Inc.:
We have audited the accompanying balance sheets of TransLink, Inc. (the
"Company") as of December 31, 1998 and 1999 and the related statements of
operations, shareholders' equity, and cash flows for the years then ended. 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 of America. 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, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1998 and 1999,
and the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
April 10, 2000
<PAGE>
TRANSLINK SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
ASSETS 1998 1999
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................... $ 234,548 $ 713,705
Accounts receivable..................................................... 31,500 1,326
Prepaid expenses and other current assets............................... 1,983 36,680
----------- -----------
Total current assets........................................... 268,031 751,711
Property and equipment, net............................................... 169,304 196,272
Other assets.............................................................. 35,455 54,349
----------- -----------
Total assets.............................................................. $ 472,790 $ 1,002,332
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 20,240 $ 29,280
Accrued liabilities..................................................... 7,514 42,064
Deferred revenue........................................................ - 264,386
----------- -----------
Total current liabilities...................................... 27,754 335,730
----------- -----------
Deferred rent............................................................. 8,942 9,693
Commitments (Note 6)
Shareholders' equity:
Series A convertible preferred stock, par value $1.00, 1,500,000
shares authorized; shares issued and outstanding: none in 1998
and 1,500,000 in 1999 (liquidation preference of $1,500,000).......... - 1,500,000
Common stock, no par value, 100,000,000 shares authorized; shares
issued and outstanding: 12,310,449 in 1998 and 1999.................... 1,877,408 2,574,621
Notes receivable from shareholders...................................... (28,000) (28,000)
Deferred stock compensation............................................. - (270,602)
Accumulated deficit..................................................... (1,413,314) (3,119,110)
----------- -----------
Total shareholders' equity..................................... 436,094 656,909
----------- -----------
Total liabilities and shareholders' equity................................ $ 472,790 $ 1,002,332
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
TRANSLINK SOFTWARE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1998 1999
---- ----
<S> <C> <C>
Revenues:
License..................................................... $ 177,208 $ 119,625
Service..................................................... 46,443 73,176
---------- -----------
Total revenues..................................... 223,651 192,801
Costs and expenses:
License cost of revenues.................................... 23,149 12,734
Service cost of revenues.................................... 26,300 40,800
Sales and marketing......................................... 361,177 363,305
Research and development.................................... 542,643 679,940
General and administrative.................................. 218,844 375,550
Stock compensation*......................................... - 42,409
---------- -----------
Total costs and expenses........................... 1,172,113 1,514,738
Loss from operations.......................................... (948,462) (1,321,937)
Other income (expense):
Interest income and other, net.............................. 12,620 32,681
Interest expense............................................ - (416,540)
---------- -----------
Total other income (expense), net.................. 12,620 (383,859)
---------- -----------
Net loss...................................................... $ (935,842) $(1,705,796)
========== ===========
*Stock compensation:
Cost of revenues............................................ $ - $ 274
Sales and marketing......................................... - 1,714
Research and development.................................... - 3,598
General and administrative.................................. - 36,823
---------- -----------
Total.............................................. $ - $ 42,409
========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
TRANSLINK SOFTWARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Preferred Stock Common Stock
------------------------ -----------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1998................. - $ - 12,020,193 $1,587,152
Issuance of common stock.................. 290,256 290,256
Repayments of note receivable.............
Net loss..................................
--------- ---------- ---------- ----------
BALANCES, December 31, 1998............... - - 12,310,449 1,877,408
Issuance of Series A preferred stock...... 1,500,000 1,500,000
Issuance of warrants...................... 384,202
Deferred compensation..................... 313,011
Amortization of deferred compensation.....
Net loss..................................
--------- ---------- ---------- ----------
BALANCES, December 31, 1999............... 1,500,000 $1,500,000 12,310,449 $2,574,621
========= ========== ========== ==========
<CAPTION>
Notes
Receivable Total
Preferred Stock From Accumulated Shareholders'
Compensation Shareholders Deficit Equity
------------ ------------ ------- ------
<S> <C> <C> <C> <C>
BALANCES, January 1, 1998................. $ - $ (721,938) $ (477,472) $ 387,742
Issuance of common stock.................. 290,256
Repayments of note receivable............. 693,938 693,938
Net loss.................................. (935,842) (935,842)
---------- ------------ ------------ -----------
BALANCES, December 31, 1998............... - (28,000) (1,413,314) 436,094
Issuance of Series A preferred stock...... 1,500,000
Issuance of warrants...................... 384,202
Deferred compensation..................... (313,011) -
Amortization of deferred compensation..... 42,409 42,409
Net loss.................................. (1,705,796) (1,705,796)
---------- ------------ ------------ -----------
BALANCES, December 31, 1999 .............. $ (270,602) $ (28,000) $ (3,119,110) $ 656,909
========== ============ ============ ===========
</TABLE>
See notes to financial statements.
<PAGE>
TRANSLINK SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------------------
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................... $(935,842) $(1,705,796)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................................................ 34,870 51,304
Loss on disposal of property and equipment........................................... - 5,440
Noncash interest expense............................................................. - 384,202
Amortization of deferred compensation................................................ - 42,409
Changes in assets and liabilities:
Accounts receivable................................................................ (31,500) 30,174
Prepaid expenses and other current assets.......................................... 12,182 (34,697)
Accounts payable................................................................... (11,688) 9,040
Accrued liabilities and deferred rent.............................................. 9,163 35,301
Deferred revenues.................................................................. - 264,386
--------- -----------
Net cash used in operating activities......................................... (922,815) (918,237)
--------- -----------
Cash flows from investing activities:
Purchases of property and equipment.................................................... (71,290) (84,152)
Proceeds from disposal of property and equipment....................................... - 440
Other assets........................................................................... 1,943 (18,894)
--------- -----------
Net cash used in investing activities......................................... (69,347) (102,606)
--------- -----------
Cash flows from financing activities:
Repayment of note receivable from shareholders......................................... 693,938 -
Proceeds from sale of convertible preferred stock, net................................. - 1,500,000
Proceeds from sale of common stock..................................................... 290,256 -
Proceeds from notes payable............................................................ - 450,000
Repayment of notes payable............................................................. - (450,000)
--------- -----------
Net cash provided by financing activities..................................... 984,194 1,500,000
--------- -----------
Net increase (decrease) in cash and cash equivalents..................................... (7,968) 479,157
Cash and cash equivalents - beginning of year............................................ 242,516 234,548
--------- -----------
Cash and cash equivalents - end of year.................................................. $ 234,548 $ 713,705
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid for interest - 32,338
========= ===========
</TABLE>
See notes to financial statements.
<PAGE>
TRANSLINK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1999
1. Summary of Significant Accounting Policies
Organization - TransLink Software, Inc. (the Company), was incorporated in
Washington in February 1997. The Company is a provider of high performance
mainframe integration solutions.
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,
liabilities, and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Concentration of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of
cash and cash equivalents and accounts receivable. The Company's cash and
cash equivalents consist of checking and savings accounts with one
financial institution. The Company sells its products to companies within
the United States. The Company does not require collateral or other
security to support accounts receivable. To reduce credit risk, management
performs ongoing evaluations of its customers' financial condition.
Cash Equivalents - The Company considers all highly liquid debt instruments
purchased with a remaining maturity of three months or less to be cash
equivalents.
Property and Equipment - Property and equipment are stated at cost and
depreciated using the straight-line method over estimated useful lives of
approximately three to seven years. Leasehold improvements are amortized
over the shorter of the lease term or their useful lives.
Long-Lived Assets - The Company evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. 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.
Software Development Costs -Costs for the development of new software
products and substantial enhancements to existing software products are
expensed as incurred until technological feasibility has been established,
at which time any additional development costs would be capitalized in
accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
Computer Software To Be Sold, Leased, or Otherwise Marketed. Because the
Company believes its current process for developing software is essentially
completed concurrently with the establishment of technological feasibility,
no costs have been capitalized to date.
Notes Receivable from Shareholders - The notes receivable from shareholders
were issued in exchange for common stock, bear interest at 9% per annum and
are due in monthly installments through February 2004.
Income Taxes - The Company accounts for income taxes under an asset and
liability approach. Deferred income taxes reflect the impact of temporary
differences between assets and liabilities recognized for financial
reporting purposes and such amounts recognized for income tax reporting
purposes, and net operating loss carryforwards measured by applying
currently enacted tax laws. Valuation allowances are provided when
necessary to reduce deferred tax assets to an amount that is more likely
than not to be realized.
<PAGE>
TRANSLINK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1998 and 1999
Certain Significant Risks and Uncertainties - The Company operates in the
software industry, and accordingly, can be affected by a variety of
factors. For example, management of the Company believes that changes in
any of the following areas could have a significant negative effect on the
Company in terms of its future financial position, results of operations or
cash flows; ability to obtain additional financing; fundamental changes in
the technology underlying software products; market acceptance of the
Company's products under development; development of sales channels; loss
of significant customers; litigation or other claims against the Company;
the hiring, training and retention of key employees; successful and timely
completion of product development efforts; and new product introductions by
competitors.
Revenue Recognition - The Company's revenue recognition policy is
consistent with Statement of Position (SOP) 97-2, as amended. License
revenues are comprised of fees for the Company's software products. Revenue
from license fees is recognized when an agreement has been signed, delivery
of the product has occurred, no significant Company obligations remain, the
fee is fixed or determinable and collectibility is probable. If the fee due
from the customer is not fixed or determinable, revenue is recognized as
payments become due from the customer. If collectibility is not considered
probable, revenue is recognized when the fee is collected. Revenue on
arrangements with customers who are not ultimate users (primarily
resellers) is not recognized until the product is delivered to the end
user.
Service revenues are comprised of revenue from support arrangements,
consulting fees and training. Support arrangements provide technical
support and the right to unspecified upgrades on an if-and-when-available
basis. Revenue from support arrangements is recognized on a straight-line
basis as service revenue over the life of the related agreement. Consulting
and training revenue is recognized when provided to the customer. Customer
advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue.
Research and Development- Research and development expenses are charged to
operations as incurred. Such expenses include costs associated with the
design and development of new products and costs related to the Company's
internally developed software systems. To date, these costs which meet the
capitalization criteria of SOP 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use have not been significant.
Stock Compensation - The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to
Employees.
The Company accounts for equity instruments issued to nonemployees in
accordance with the provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, and Emerging Issues Task Force (EITF) Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services, which
requires that the fair value of such instruments be recognized as an
expense over the period in which the related services are received.
Comprehensive Loss -SFAS No. 130, Reporting Comprehensive Income requires
that an enterprise report, by major components and as a single total, the
change in its net assets during the period from nonowner sources. For the
years ended December 31, 1998 and 1999, comprehensive loss was equal to net
loss.
Recently Issued Accounting Standard - In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement requires companies to
record derivatives on
<PAGE>
TRANSLINK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1998 and 1999
the balance sheet as assets or liabilities, measured at fair value. Gains
or losses resulting from changes in the values of those derivatives would
be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. SFAS No. 133 will be effective for the
Company's fiscal year ending December 31, 2001. The Company believes that
this statement will not have a significant impact on the Company's
financial position, results of operations or cash flows.
2. Property and Equipment
Property and equipment at December 31 consist of (in thousands):
1998 1999
---- ----
Equipment and furniture........................ $ 50,978 $ 58,726
Computers and software......................... 164,980 239,102
Leasehold improvements......................... 5,004 -
-------- ---------
Total.......................................... 220,962 297,828
Accumulated depreciation and amortization...... (51,658) (101,556)
-------- ---------
Property and equipment, net.................... $169,304 $ 196,272
======== =========
3. Accrued Liabilities
Accrued liabilities at December 31 consist of (in thousands):
1998 1999
---- ----
Accrued compensation and related benefits...... $3,032 $ 7,806
Deferred rent.................................. 4,482 8,942
Other.......................................... - 25,316
------ -------
Total.......................................... $7,514 $42,064
====== =======
4. Notes Payable
In February 1999, the Company issued notes payable to various shareholders
for a total of $423,774 for working capital purposes. In May 1999, the
Company issued a note payable to an individual for a total of $26,226. The
entire principal balance and accrued interest of $482,338 was repaid during
1999.
In consideration for these financing arrangements, the Company issued
warrants to purchase 450,000 shares of common stock at $0.25 per share. As
described in Note 5, the estimated fair value of such warrants of $384,202
was recorded as additional interest expense in 1999.
5. Shareholders' Equity
Convertible Preferred Stock
The significant terms of the convertible preferred stock are as follows:
<PAGE>
TRANSLINK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1998 and 1999
. Each share is convertible into one share of common stock (subject to
adjustments for events of dilution) and has no voting rights.
. If and when declared by the Board of Directors, the holders of Series
A convertible preferred stock are entitled to receive the payment of
dividends if a dividend is declared on common shares on the same per
share basis.
. Holders of Series A convertible preferred stock have a liquidation
preference of $1.00 per share, plus any declared but unpaid dividends.
Common Stock
At December 31, 1999, the Company has reserved shares of common stock for
issuance as follows:
<TABLE>
<S> <C>
Conversion of preferred stock............................................ 1,500,000
Issuance under stock option plan......................................... 940,000
Exercise of common stock warrants........................................ 950,000
---------
3,390,000
=========
</TABLE>
Stock Option Plan
Under the Company's 1997 Stock Option Plan (the Plan), the Board of
Directors is authorized to grant to employees, officers, directors and
consultants up to 940,000 shares of common stock at prices not less than
the fair market value at date of grant for incentive stock options and not
less than 85% of fair market value for nonstatutory options as determined
by the Board of Directors. These options generally expire ten years from
the date of grant and become exercisable ratably over a four-year period.
Option activity under the Plan is as follows:
<TABLE>
<CAPTION>
Weighted
Number Average
of Exercise
Shares Price
------ -----
<S> <C> <C>
Outstanding, January 1, 1998 (100,000 shares exercisable at
a weighted average exercise price of $2.63 per share)..................... 460,000 $0.83
Granted (weighted average fair value of $0.12 per share).................... 250,000 0.58
Canceled.................................................................... (135,000) 0.35
-------- -----
Outstanding, December 31, 1998 (156,500 shares exercisable
at a weighted average exercise price of $1.79 per share).................. 575,000 0.83
Granted (weighted average fair value of $1.76 per share).................... 197,000 1.00
Canceled.................................................................... (50,000) 0.35
-------- -----
Outstanding, December 31, 1999.............................................. 722,000 $0.91
======== =====
</TABLE>
<PAGE>
TRANSLINK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1998 and 1999
Information regarding stock option grants during the years ended December
31, 1998 and 1999 is summarized as follows:
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1998 December 31, 1999
----------------- -----------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Fair Exercise Fair
Shares Price Value Shares Price Value
--------------- ------------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Exercise price equals
market price 250,000 $0.58 $0.12 113,000 $1.00 $0.46
Exercise price is less
then market price - - - 84,000 $1.00 $3.50
</TABLE>
At December 31, 1999, 218,000 shares were available for future grant under
the Option Plan.
Additional information regarding options outstanding as of December 31,
1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------- -------------------------------------
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Life Exercise Number Exercise
Price Outstanding (Years) Price Exercisable Price
----- ----------- ------ ----- ----------- ------
<S> <C> <C> <C> <C> <C>
$ 0.27 102,000 7.29 $0.27 63,750 $0.27
$ 0.35 190,000 8.05 0.35 83,375 0.35
$ 0.75 95,000 8.38 0.75 35,625 0.75
$ 1.00 227,000 9.42 1.00 47,500 1.00
$ 2.63 100,000 7.17 2.63 100,000 2.63
------- -------
$0.27-$2.63 722,000 8.29 $0.91 330,250 $1.16
======= =======
</TABLE>
Stock Compensation
During the last half of 1999, the Company issued 84,000 common stock
options to employees at an exercise price of $1.00 per share, which were at
prices less than the fair value of its common stock. The fair value of the
common stock was $4.29 per share. Accordingly, the Company recorded
approximately $276,360 as the value of such options in 1999. Stock
compensation of $5,758 was amortized to expense in fiscal 1999, and at
December 31, 1999, the Company had $270,602 in deferred stock compensation
related to such options.
During 1999, the Company issued nonstatutory common stock options to
consultants to purchase 40,000 shares of common stock which were all
outstanding at December 31, 1999. Accordingly, the Company recognized the
fair value of $36,651 as stock compensation expense in 1999 as the options
were fully vested at the date of grant. The fair values of these options
were determined at the date of vesting using the methods specified by SFAS
123 with the following weighted average assumptions during 1999: expected
life, ten years; risk free
<PAGE>
TRANSLINK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1998 and 1999
interest rate, 6.0%; volatility, 100%; and no dividends during the expected
term. Forfeitures are recognized as they occur.
Additional Stock Plan Information
As discussed in Note 1, the Company accounts for its stock-based awards
using the intrinsic value method in accordance with APB No. 25, Accounting
for Stock Issued to Employees, and its related interpretations.
Accordingly, no compensation expense has been recognized in the financial
statements for employee stock arrangements granted at fair market value.
SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), requires
the disclosure of pro forma net income or loss had the Company adopted the
fair value method. Under SFAS 123, the fair value of stock-based awards to
employees is calculated through the use of option pricing models, even
though such models were developed to estimate the fair value of freely
tradable, fully transferable options without vesting restrictions, which
significantly differ from the Company's stock option awards. These models
also require subjective assumptions, including expected time to exercise,
which greatly affect the calculated values. The Company's calculations were
made using the minimum value method with the following weighted average
assumptions: expected life, five years in 1998 and 1999; risk-free interest
rate, 6% in 1998 and 1999; and no dividends during the expected term. The
Company's calculations are based on a single option valuation approach, and
forfeitures are recognized as they occur. If the computed fair values of
the awards had been amortized to expense over the vesting period of the
awards under the fair value method as required under SFAS No. 123, pro
forma net loss would approximately $943,000 and $1,724,000 for 1998 and
1999, respectively.
Common Stock Warrants
In 1997, the Company issued warrants to an investor, in connection with the
issuance of common stock, to purchase 500,000 shares of common stock at an
exercise price of $0.35 per share. These warrants are immediately
exercisable and expire in September 2000. No warrants had been exercised as
of December 31, 1999.
In 1999, the Company issued warrants, in connection with certain debt
obligations (see Note 4), to purchase 450,000 shares of common stock at an
exercise price of $0.25 per share. These warrants are immediately
exercisable and expire in February through May 2002. No warrants had been
exercised as of December 31, 1999. The estimated fair value of such
warrants of $384,202 was recorded as additional interest expense in the
accompanying statement of operations for 1999.
<PAGE>
TRANSLINK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1998 and 1999
6. Lease Commitments
The Company leases its principal facilities under a noncancelable operating
lease expiring in February 2004. Future minimum rental payments under
operating leases are as follows:
Year Ending
December 31,
------------
2000.................................................... $ 204,000
2001.................................................... 230,000
2002.................................................... 242,000
2003.................................................... 242,000
2004.................................................... 40,000
---------
$ 958,000
=========
Rent expense was approximately $59,000 and $68,000 and for 1998 and 1999.
7. Income Taxes
Due to the Company's loss position, there was no provision for federal
income taxes for 1998 and 1999.
Significant components of the Company's net deferred tax assets for federal
income taxes at December 31 consist of:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................................... $ 482,000 $ 1,046,000
Accruals and reserves recognized in different periods................ - 33,000
--------- -----------
Total deferred tax assets.............................................. 482,000 1,079,000
Deferred tax liabilities -
Excess tax depreciation over book.................................... (10,000) (13,000)
--------- -----------
472,000 1,066,000
Valuation allowance.................................................... (472,000) (1,066,000)
--------- -----------
Net deferred tax asset................................................. $ - $ -
========= ===========
</TABLE>
Due to the uncertainty surrounding the realization of benefits of its
favorable tax attributes in future tax returns, as of December 31, 1998 and
1999, the Company has fully reserved its net deferred tax assets of
approximately $472,000 and $1,066,000, respectively.
For all periods presented, the Company's effective rate differs from the
expected benefit at the federal statutory tax rate due primarily to state
taxes offset by a valuation allowance against deferred tax assets.
At December 31, 1999, the Company has federal net operating loss
carryforwards of approximately $2,988,000, expiring through 2019.
<PAGE>
TRANSLINK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1998 and 1999
The extent to which the loss carryforwards can be used to offset future
taxable income and tax liabilities, respectively, may be limited, depending
on the extent of ownership changes within any three-year period.
8. Employee Benefit Plan
The Company sponsors a 401(k) Saving and Retirement Plan (the Plan) for all
employees who meet certain eligibility requirements. Participants may
contribute, on a pre-tax basis, between 1% and 15% of their annual
compensation, but not to exceed a maximum contribution amount pursuant to
Section 401(k) of the Internal Revenue Code. The Company is not required to
contribute, nor has it contributed, to the Plan for any of the periods
presented.
9. Subsequent Events
In April 2000, the Company was acquired by Active Software, Inc. (Active),
a developer of software products for businesses that allow users to
integrate incompatible software applications across their extended
enterprise of customers, suppliers and partners. Active issued 796,363
shares of common stock, options to purchase 43,041 shares of common stock,
and paid approximately $4.5 million in cash in exchange for all capital
stock of the Company.
* * * * *
