<PAGE>
As filed with the Securities and Exchange Commission on November 8, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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HAHT COMMERCE, INC.
(Exact name of registrant as specified in its charter)
Delaware 7372 56-1929876
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
-----------
400 Newton Road
Raleigh, North Carolina 27615
(919) 786-5100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-----------
Rowland Archer
Chairman
HAHT Commerce, Inc.
400 Newton Road
Raleigh, North Carolina 27615
(919) 786-5100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------
Please send copies to:
Donald R. Reynolds, Esq. John White, Esq.
Wyrick Robbins Yates & Ponton LLP Cravath, Swaine & Moore
4101 Lake Boone Trail, Suite 300 825 Eighth Avenue
Raleigh, North Carolina 27607 New York, New York 10019
(919) 781-4000 (212) 474-1000
Fax (919) 781-4865 Fax (212) 474-3700
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed
Maximum
Aggregate Amount of
Offering Registration
Title of Each Class of Securities to be Registered Price(2) Fee(3)
-------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par value per share(1).......... $75,000,000 $19,800
-------------------------------------------------------------------------------
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</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as
amended, the number of shares being registered and the proposed maximum
offering price per share are not included in this table.
(2) Estimated solely for purposes of calculating the registration fee.
(3) Calculated pursuant to Rule 457(a) based on an estimate of the maximum
aggregate offering price.
-----------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the Securities and Exchange Commission +
+declares our registration statement effective. This prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 2000
PROSPECTUS
Shares
[LOGO OF HAHT COMMERCE]
HAHT Commerce, Inc.
Common Stock
$ per share
--------
We are selling shares of our common stock. We have granted the
underwriters an option to purchase up to additional shares of our common
stock to cover over-allotments.
This is the initial public offering of our common stock. We currently expect
the initial public offering price to be between $ and $ per share. We
have applied to have our common stock included for quotation on the Nasdaq
National Market under the symbol "HAHT."
--------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
--------
<TABLE>
<CAPTION>
Per Share Total
----------- -----------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to HAHT Commerce, Inc., before expenses $ $
</TABLE>
The underwriters expect to deliver the shares to purchasers on or about ,
2001.
--------
Salomon Smith Barney
CIBC World Markets
U.S. Bancorp Piper Jaffray
, 2001
<PAGE>
DESCRIPTION OF GRAPHICS
The front of the gatefold will be a blue background and contain the HAHT
Commerce logo and stylized pictures of a globe and human figures. There is text
in the right top corner: "Enterprise Digital Marketplaces for transactions and
communications with business customers."
INSIDE GATEFOLD PAGES
(A drawing that illustrates an enterprise digital marketplace. A "Large Chemical
Producer", is represented as a picture of a factory, which is positioned to the
left of a cloud which represents the "Internet". Four cylinders represent the
chemical producer's business software systems, "Mainframe", "Fulfillment
Software", "Enterprise Resource Planning System" and "Customer Relationship
Management Software". Lines from the chemical producer's factory connect to
pictures to the right of the "Internet", which includes sales representatives,
customer service representatives, business customers, distributors and
resellers.)
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of our common stock in any state where the offer is not
permitted. You should not assume that the information provided by this
prospectus is accurate as of any date other than the date on the front of this
prospectus.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................... 1
Risk Factors............................................................... 6
Forward-Looking Statements................................................. 15
Use of Proceeds............................................................ 16
Dividend Policy............................................................ 16
Capitalization............................................................. 17
Dilution................................................................... 18
Selected Consolidated Financial Data....................................... 19
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................ 21
Business................................................................... 31
Management................................................................. 48
Certain Relationships and Related Transactions............................. 56
Principal Stockholders..................................................... 60
Description of Capital Stock............................................... 63
Shares Eligible for Future Sale............................................ 66
U.S. Tax Consequences to Non-U.S. Holders.................................. 67
Underwriting............................................................... 70
Legal Matters.............................................................. 72
Experts.................................................................... 72
Where You Can Find More Information........................................ 72
Index to Financial Statements.............................................. F-1
</TABLE>
Until , 2001, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY
Before deciding to invest in our common stock, you should read this entire
prospectus, including "Risk Factors" and our financial statements and the notes
to those statements included elsewhere in this prospectus.
HAHT Commerce, Inc.
We offer a suite of software applications that enable companies to use the
Internet to conduct business with their distributors, resellers and other
business customers in an environment that we call an enterprise digital
marketplace. Companies use enterprise digital marketplaces to manage their
transactions and communications with business customers, from marketing and
order placement to account tracking and post-sales support, over the Internet.
Our software applications integrate with a company's existing business software
systems and facilitate the real-time exchange of information between a company
and its business customers. We believe that this collaboration allows companies
to execute successful business-to-business e-commerce strategies, which result
in superior operational efficiencies, higher levels of service and reduced
transaction costs for companies and their customers. We believe that by
delivering these benefits, enterprise digital marketplaces help companies
differentiate themselves from their competitors and increase customer loyalty.
Our HAHT Commerce e-Scenario software applications, which run on our
HAHTsite application server, can extend to the Internet virtually any existing
business software system, including enterprise resource planning systems, or
ERP systems, customer relationship management applications, databases and
mainframe systems. We believe our packaged applications that can rapidly
integrate with ERP systems developed by SAP and J.D. Edwards, and our expertise
with these systems, give us a competitive advantage. We can deploy our software
applications individually or as a comprehensive suite, and can customize them
to meet a customer's specific needs. Our software supports numerous computer
standards and languages, including XML and Java. In addition, because our
software uses a centralized server-based architecture, known as thin-client
architecture, it can be accessed by almost any browser-based device, including
mobile devices. In addition, our software platform can support tens of
thousands of concurrent users without diminishing system performance and can be
managed and upgraded from a single location.
We sell our software primarily to large companies with complex channels of
distribution across multiple industries, including chemicals, consumer packaged
goods and high technology. Since 1996, we have sold HAHTsite products, which
include an application server and software development platform, to
approximately 700 customers. In February 1999, we announced the commercial
availability of the first application in our HAHT Commerce e-Scenario product
family, a suite of business-to-business software applications that enables our
customers to implement enterprise digital marketplaces. To date, we have sold
e-Scenario applications to 36 customers. Our top ten e-Scenario customers,
based on total revenue invoiced through October 31, 2000, are Celanese, Geneva
Steel, Mine Safety Appliances, Minolta, Occidental Chemical, Orica
International Management, Pennzoil-Quaker State, Scientific-Atlanta, Sigma-
Aldrich and Solutia, Inc.
We license our software applications to business customers through our
direct sales force and through co-selling and co-marketing arrangements with
systems integrators. We have relationships with a number of systems
integrators, including Clarkston, Deloitte Consulting, KPMG, marchFIRST and
PSINet, which assist in our sales and marketing efforts and provide
implementation services to our customers.
<PAGE>
Our Opportunity
Companies view the Internet as an important distribution channel that can
complement and strengthen their existing sales and marketing strategies. To use
the Internet to effectively communicate with business customers, companies need
software systems that are flexible, scalable and secure, and can manage a broad
range of business interactions. In addition, companies want to preserve their
large investments in existing business software systems and allow their
business customers to access the information stored in these systems. For these
reasons, we believe that there is significant demand for packaged software
applications that facilitate e-commerce. According to IDC, the worldwide market
for these applications will grow from $1.8 billion in 1999 to $23.0 billion in
2004, representing a five-year compounded annual growth rate of 66.5%. We
believe packaged software applications accelerate time to market, significantly
reduce costs and limit the diversion of management and technical resources. Of
the packaged software applications currently available, however, few can
provide the functionality, scalability and real-time integration with ERP and
other business software systems needed to implement a successful business-to-
business e-commerce strategy.
The HAHT Advantage
Our products and services enable companies to create enterprise digital
marketplaces to conduct business and share information with their business
customers and the employees that interact with them. Our competitive advantages
include:
. real-time integration capability with virtually any business software
system, including packaged integration capability with ERP systems
developed by SAP and J.D. Edwards;
. a suite of applications that addresses the needs of our customers in
each phase of the business-to-business sales process;
. expertise in Internet software development, ERP systems and key vertical
markets;
. rapid deployment capabilities;
. flexibility to customize our software to accommodate our customers'
specific needs; and
. software architecture that delivers enterprise-class performance, which
is characterized by high levels of scalability, security, functionality
and reliability.
Our Strategy
Our objective is to be a leading provider of Internet-based software
applications that enable companies to create and manage enterprise digital
marketplaces. Key aspects of our strategy include:
. maintain our product leadership;
. focus our marketing efforts on companies using ERP systems developed by
SAP and J.D. Edwards;
. expand our strategic relationships with systems integrators;
. cross-sell within our large customer base;
. build our expertise across large vertical markets; and
. increase our international presence.
2
<PAGE>
Our Products and Services
We sell a suite of software products, as well as related services, including
implementation, customization, training and ongoing support. Our product suite
can be summarized as follows:
<TABLE>
<C> <S>
HAHT Commerce e-Scenarios Suite of applications that delivers the key
functionality of the enterprise digital
marketplace--HAHT Shop, HAHT Track, HAHT
Catalog, HAHT Market, HAHT Service and HAHT
Insight, which is under development
HAHT Commerce Links Connects companies' business software systems
directly to those of their business customers
to automate the exchange of information
HAHT Mobile Access to and use of our software applications
over wireless devices
HAHTsite Application server and development platform on
which our software applications operate
</TABLE>
------------
We were originally incorporated as HAHT Software, Inc. in North Carolina in
1995. We reincorporated in Delaware as HAHT Commerce, Inc. in June 2000. Our
principal executive offices are located at 400 Newton Road, Raleigh, North
Carolina 27615 and our telephone number is (919) 786-5100.
3
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered.............. shares
Common stock to be outstanding
after this offering.............. shares
Use of proceeds................... We intend to use the net proceeds from this
offering for the expansion of our sales and
marketing efforts, the continued
development of our products, the repayment
of indebtedness and general corporate
purposes.
Proposed Nasdaq National Market
symbol........................... HAHT
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on the number of shares of common stock outstanding as of October 31,
2000. Except as otherwise indicated, all information in this prospectus:
. reflects a -for- reverse stock split of all of our outstanding common
stock immediately prior to completion of this offering;
. reflects the automatic conversion of all outstanding shares of our
preferred stock into 55,283,040 shares of common stock upon the
completion of this offering;
. reflects the exercise of warrants to purchase 248,022 shares of common
stock at an exercise price of $0.929 per share, which will expire if not
exercised prior to the completion of this offering;
. excludes shares of common stock issuable upon the exercise of
outstanding warrants that will not expire upon completion of this
offering, at a weighted average exercise price of $ per share,
assuming an initial public offering price of $ per share, which is the
mid-point of the range shown on the cover of this prospectus;
. excludes 9,267,660 shares of common stock issuable upon the exercise of
stock options outstanding under our 1995 Stock Award Plan as of October
31, 2000, at a weighted average exercise price of $0.43 per share;
. excludes 4,789,390 additional shares of common stock reserved for
issuance under our 1995 Stock Award Plan;
. excludes shares of common stock reserved for issuance under our 2000
Employee Stock Purchase Plan; and
. assumes there is no exercise of the underwriters' over-allotment option.
4
<PAGE>
Summary Consolidated Financial Data
You should read the summary financial data presented below together with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section and our financial statements and notes to those statements
included elsewhere in this prospectus. The statement of operations data
presented below for the fiscal years ended April 30, 1998, 1999 and 2000 have
been derived from our audited financial statements, included elsewhere in this
prospectus. The statement of operations data for the three months ended July
31, 1999 and 2000 and the balance sheet data as of July 31, 2000 have been
derived from our unaudited financial statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Three Months
Year Ended April 30, Ended July 31,
-------------------------- ----------------
1998 1999 2000 1999 2000
------- ------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 4,089 $ 7,441 $ 10,718 $ 3,271 $ 3,892
Gross profit............ 2,882 4,746 5,697 1,605 2,282
Operating loss.......... (4,426) (6,474) (13,722) (2,405) (4,654)
Net loss................ (4,302) (6,153) (13,770) (2,393) (4,454)
Net loss attributable to
common stockholders.... (4,302) (6,153) (13,794) (2,393) (4,526)
Net loss per common
share--
basic and diluted...... $ (0.44) $ (0.62) $ (1.36) $ (0.24) $ (0.42)
Weighted average common
shares outstanding--
basic and diluted...... 9,873 9,887 10,173 9,962 10,668
Pro forma net loss per
common share--
basic and diluted...... $ (0.30) $ (0.07)
Pro forma weighted
average common shares
outstanding--
basic and diluted...... 45,179 65,951
</TABLE>
The following table presents a summary of our balance sheet as of July 31,
2000:
. on an actual basis;
. on a pro forma basis, which adjusts the actual amounts to reflect the
automatic conversion of all outstanding shares of our preferred stock
into a total of 55,283,040 shares of common stock upon the completion of
this offering and the receipt of approximately $230,412 in proceeds from
the exercise of warrants to purchase 248,022 shares of common stock,
which will expire if not exercised prior to completion of this offering;
and
. on a pro forma as adjusted basis, which adjusts the pro forma amounts to
reflect the sale of shares of common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
the estimated underwriting discount and offering expenses, and the
repayment of $ of indebtedness with the proceeds of this offering.
<TABLE>
<CAPTION>
As of July 31, 2000
--------------------------------
Pro Forma As
Actual Pro Forma Adjusted
-------- --------- ------------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................... $ 12,372 $12,603
Working capital.............................. 8,257 8,487
Total assets................................. 18,050 18,281
Total indebtedness and capital lease
obligations................................. 32 32
Mandatorily redeemable preferred stock....... 44,884 --
Total stockholders' equity (deficit)......... (34,837) 10,277
</TABLE>
5
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and all other information in this
prospectus before making an investment decision.
Risks Related to our Business
Because our limited operating history makes it difficult to forecast our
revenues, our future financial performance might disappoint investors and
result in a decline in our stock price.
We were incorporated in July 1995 and began selling our HAHTsite application
server and development platform in July 1996. In late 1998, we began to shift
our business focus to our suite of HAHT Commerce e-Scenario applications, which
run on our platform. We announced the commercial availability of our first
e-Scenario application in February 1999. Because our limited operating history
and this change in our business make it difficult to forecast our revenues
accurately, our future financial performance might disappoint investors and
cause our stock price to decline. We base our current and future expense levels
on our operating plans, anticipated business opportunities and estimates of
future revenues. Sales and operating results are difficult to forecast,
however, because they generally depend on the size and timing of the orders we
receive. If we are unable to adjust our spending in a timely manner to
compensate for any unexpected shortfall in revenues, our operating results will
suffer.
We have a history of losses and negative cash flow and we might fail to
become or remain profitable in the future.
We have incurred substantial net losses in every fiscal period since we
began our operations. Our failure to achieve profitability could impair our
ability to pursue business opportunities and finance our operations in the
future. Even if we do achieve profitability, we might not be able to sustain or
increase profitability on a quarterly or annual basis. We incurred net losses
of $4.3 million, $6.2 million and $13.8 million in the fiscal years ended April
30, 1998, 1999 and 2000, and incurred net losses of $4.5 million for the
quarter ended July 31, 2000. As a result of accumulated operating losses, we
had an accumulated deficit of $36.3 million as of July 31, 2000. Following this
offering, we intend to expend significant financial and management resources on
expanding our sales and marketing efforts. We also expect to significantly
increase spending on the development and deployment of new HAHT Commerce e-
Scenario applications and other products and services. As a result, we expect
to incur substantial operating losses and to experience negative cash flow from
operations for the foreseeable future.
Our operating results are volatile and difficult to predict, and if they
fall below analysts' or investors' expectations, our stock price could decline.
Our annual and quarterly operating results have fluctuated in the past and
might fluctuate significantly in the future due to a variety of factors, many
of which are outside of our control. If our quarterly revenue or operating
results fall below the expectations of securities analysts or investors, the
price of our common stock could fall significantly. For the last five quarters,
our quarterly revenue varied from $2.0 million to $3.9 million. Because our
operating results are volatile and difficult to predict, we believe that
quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance. Factors that might harm our business or
cause our operating results to fluctuate include:
. the timing, amount and recognition of license and service revenue from
customers;
. our ability to attract and retain customers;
. the announcement of new products by our competitors;
. the number, timing and significance of our product enhancements and new
product announcements;
. fluctuations in the length of our sales cycle;
6
<PAGE>
. our failure to increase international sales on a consistent basis;
. seasonal buying trends in the software industry; and
. economic conditions and other trends specific to the Internet and the
business software industry.
We have experienced fluctuations from some of these factors in the past. For
example, the introduction of mySAP.com in May 1999 impacted our customers'
purchasing decisions and caused our quarterly revenue to decline. In addition,
corporate spending on our software applications has traditionally been higher
late in the calendar year and lower in the summer months.
If we experience delays in implementing our products, we might have to defer
revenue recognition, which could cause our quarterly results to fall below
anticipated levels.
When we perform the implementation services for our software products, we
recognize software license revenue using the percentage-of-completion method.
We recognize revenue from these software licenses incrementally over the
implementation period. If we experience delays in implementing our products or
have trouble satisfying contract terms required for revenue recognition, we
will not be able to recognize revenue when anticipated. We would, however,
incur marketing and other expenses, causing our quarterly results to fluctuate
and fall below anticipated levels. This could cause our stock price to decline.
We have experienced difficulties and delays in completing implementations of
our products in the past, primarily due to problems related to the integration
of our products with our customers' other software programs. These difficulties
and delays can cause delays in the recognition of related revenues, cause
customers to reject our products, or lead to the delay or cancellation of
future orders for our products.
If we are unable to expand market acceptance of our HAHT Commerce e-Scenario
product family, our competitive position and operating results could suffer.
We currently expect to derive a significant portion of our future revenues
from sales of our HAHT Commerce e-Scenario products. If we are unable to
continue to develop market acceptance of these products, we might not be able
to generate sufficient revenue to cover our expenses and our competitive
position might be harmed. To date, we have sold e-Scenario products to 36
customers, 12 of which have purchased a suite of three or more products. In
addition, although we recently introduced packaged integration capabilities
with ERP systems developed by J.D. Edwards, we have not yet sold any e-Scenario
products to users of these systems. If we are unsuccessful in expanding sales
of our e-Scenario products, our revenue and future prospects will suffer.
If we do not hire and retain qualified employees, we will not be able to
expand our business and our competitive position will be harmed.
Our future success depends on our ability to attract, retain and motivate
highly skilled employees. If we do not attract new personnel or retain and
motivate our current personnel, our business will be adversely affected. We
have experienced in the past, and might experience in the future, difficulty in
recruiting qualified personnel. There is significant competition for qualified
employees in the software industry, particularly for experienced technical and
sales personnel. Competition is especially intense in the Research Triangle
Park area of North Carolina, where our principal offices are located, due to
low unemployment and an expanding number of technology companies. As a result,
we expect to continue to incur increased salary, benefit and recruiting
expenses as our business expands.
We face significant competition from providers of ERP systems and other
technology companies, and if we are unable to compete effectively, our revenues
and operating results could suffer.
The market for software that facilitates business-to-business e-commerce is
highly competitive. If we are unable to compete effectively with current or
future competitors, our revenues and operating results could be harmed. Many of
our current and potential competitors have longer operating histories and
substantially greater financial, technical, marketing, distribution and other
resources than we do. As a result, they might be able to
7
<PAGE>
respond more quickly than we can to new or changing opportunities,
technologies, standards or customer requirements.
We face direct competition from application software companies, including
Art Technology Group, Broadvision, Click Commerce, Intershop and Ironside
Technologies. We face indirect competition from traditional business system
software companies that develop applications to extend the functionality of
their systems to the Internet, such as SAP, Oracle and J.D. Edwards. We also
indirectly compete with software companies that specialize in integrating
business software systems and Internet applications, including BEA Systems and
WebMethods. In addition, our potential customers often consider either
developing e-commerce solutions internally, or hiring firms such as IBM to
create custom solutions, instead of purchasing packaged software applications.
We expect that additional competitors will enter the market. This
competition could result in increased pricing pressures, reduced margins, or
the failure of our products to achieve or maintain market acceptance. In
addition, the emergence of new industry standards might adversely affect our
competitive position.
If we are unable to enhance our existing products and to develop new
products, our competitive position might be harmed.
Because of the emerging nature of the market for products that connect
business software systems to the Internet, we must continually improve the
performance, features and reliability of our products. Our failure to rapidly
develop and introduce new products and enhancements in response to competitive
offerings and changing customer needs could adversely affect our competitive
position and cause us to lose sales. For example, we plan to introduce various
new software applications during the first six months of calendar 2001. If we
experience delays in introducing these products, our competitive position and
operating results might be harmed.
Failure to expand our relationships with systems integrators could impede
acceptance of our products and harm our ability to increase our revenues.
We rely on systems integrators to recommend, install and support our
products. To increase our revenues and market penetration, we intend to further
develop and expand our relationships with systems integrators. If we are unable
to expand these relationships, we might not be able to attract new customers
and increase our revenues. In addition, without these third parties, we would
have to provide implementation and consulting services to a larger number of
our customers, which would divert resources from other areas of our business.
We anticipate that systems integrators will provide an increasing amount of
implementation services for our products in the future. Because these
relationships are not exclusive, these firms may elect to market competing
products more actively than our products, which could negatively impact sales
of our products and damage our reputation.
If systems integrators do not successfully implement our products, our
reputation could be harmed and our future prospects might suffer.
If our systems integrators fail to implement our products successfully, our
reputation with existing and potential customers could be harmed. In addition,
if we are forced to implement these products ourselves, we might not have the
resources to complete the implementations on schedule. As a result, we could
experience delays in recognizing the related license revenue. Because we only
have limited contractual rights with the systems integrators we rely on to
promote and implement our products, we have little control over the amount and
timing of resources that these firms devote to our products.
8
<PAGE>
The length and uncertainty of our sales cycle might cause fluctuations in
our revenues.
Because we offer complex products in a relatively new industry, we must
provide a significant level of education to our prospective customers about the
use and benefits of our products. In addition, our products involve a
significant investment decision by prospective customers, many of which engage
in extensive internal reviews before making a purchase decision. The length and
uncertainty of our sales cycle, which averages approximately 100 days, makes it
difficult to predict the timing of our sales. Delays in sales can cause
significant fluctuations in our quarterly revenues and operating results.
Our business is expanding rapidly, and our failure to manage this growth
could disrupt our business and operations.
Our business has grown rapidly in recent periods, placing a significant
strain on all of our resources. For example, the number of our employees
increased from 106 on April 30, 1999 to 178 on September 30, 2000. Our failure
to manage recent or future expansion successfully could adversely affect the
quality of our products and services, our ability to retain customers and key
personnel, and our operating results and financial condition. We expect to
continue to grow rapidly for the foreseeable future. To help manage future
growth effectively, we must maintain and enhance our financial and operational
systems, procedures and controls. We must also continue to maintain close
coordination among our technical, finance, sales and marketing groups. If we
are unsuccessful in these efforts, our business and operations could be
adversely affected.
The loss of key management personnel or our failure to attract and retain
other highly qualified executives could disrupt our operations and result in a
loss of revenues.
We are substantially dependent on the performance and continued services of
members of our senior management. Competition for qualified management is
intense, and the failure to retain and attract key employees could interrupt
our business and result in a loss of revenues. In addition, because we do not
have long-term employment agreements with any members of our senior management,
these employees could leave our company for any reason at any time. Further, we
do not have key person life insurance policies for any of our key personnel.
Our products might contain defects, which could expose us to liability and
cause us to lose sales.
Software products as complex as ours might contain undetected defects that
result in product failures. The occurrence of defects could result in:
. a loss or delay in revenue;
. loss of market share;
. diversion of development resources; or
. injury to our reputation with systems integrators and current and
potential customers.
Many of the applications that we develop and deploy are critical to the
operations of our customers' businesses. As a result, any failures in these
applications could result in product liability claims for substantial damages
against us. Although we attempt to contractually limit our liability and
maintain general liability insurance, these measures might not continue to be
available or be adequate to protect us from liability.
If the protection of our intellectual property is inadequate, our business
and competitive position could suffer.
Our success significantly depends on our ability to develop and maintain our
proprietary software technology. If the steps we have taken to protect our
intellectual property rights are not adequate or third parties infringe upon or
misappropriate our proprietary rights, our competitive position and financial
results could suffer. We do not have patents for any of our products. To
protect our intellectual property, we rely primarily on a combination of
license and confidentiality agreements, trademarks, copyrights and trade
secrets. Despite the
9
<PAGE>
precautions we have taken to protect our intellectual property rights, it might
be possible for unauthorized third parties to copy, reverse engineer or obtain
and use information that we regard as proprietary. This is especially true for
our HAHT Commerce e-Scenario products and related applications, which are
shipped as source code to facilitate rapid implementation by our customers and
partners. Provisions in our license agreements with our customers protecting
against unauthorized use, copying, transfer and disclosure of our product
information might be unenforceable under the laws of specific jurisdictions and
foreign countries. The laws of some foreign countries do not protect
proprietary rights to the same extent as the laws of the United States.
We have licensed in the past, and expect that we might license in the
future, some of our proprietary rights, such as trademarks or copyrighted
material, to third parties. These licensees might take actions that decrease
the value of our proprietary rights or harm our reputation.
Claims by third parties that we infringe their intellectual property could
be costly and could impair our business.
Third parties might assert claims against us or our customers alleging that
our software infringes their intellectual property rights. Defending against
these claims, whether they are with or without merit, could lead to costly
litigation, diversion of technical and management personnel or product shipment
delays. If there is a successful claim of product infringement against us, we
might have to develop non-infringing technology or enter into new royalty or
licensing agreements. If we are unable to develop non-infringing technology or
to license the infringed or similar technology on terms acceptable to us, our
business would be impaired. Because we generally indemnify our customers
against claims that our software infringes upon the intellectual property of
others, we could also incur substantial costs in defending our customers
against these claims.
We also might be subject to claims of intellectual property infringement
resulting from technology that we license from third parties. Although we are
generally indemnified if this technology infringes upon the proprietary rights
of others, this indemnification is limited in some cases and might not be
available for all types of intellectual property claims. Even if we receive
broad indemnification protection, these third parties might not have the
resources necessary to fully indemnify us upon an infringement claim.
If we are unable to access third-party technology, the quality of our
products might suffer and our business could be harmed.
Our software products rely on technology from third parties. For example, we
sell packaged applications for ERP systems from SAP and J.D. Edwards, and we
have an agreement with a third-party vendor under which we license business
intelligence software that we incorporate into some of our HAHT Commerce e-
Scenario applications. If we lose access to this technology, we might
experience delays in introducing new products and enhancements and the quality
of our products might suffer. Any delays in introducing products or decreases
in quality could adversely affect our business and reputation. Because Internet
technology is rapidly evolving and we plan to expand our strategic technology
relationships, we believe that we will increasingly rely on technology from
third-party vendors. Technology from these vendors might not be available to us
on commercially reasonable terms, if at all. In addition, we license most of
this technology on a non-exclusive basis. As a result, our competitors may
license technology that would enable them to develop products that are directly
competitive with our products.
If our international expansion is not successful, our operating results
might suffer.
Our current business plan includes expanding our presence internationally,
particularly in Europe and Asia. We have limited experience in marketing our
products and services, particularly our HAHT Commerce e-Scenario applications,
outside of the United States. Our failure to successfully manage our
international expansion could lead to delays in sales and delivery of our
products, unanticipated costs, and the diversion of management attention and
resources from our U.S. operations. The success of our international expansion
is subject to various risks, including:
10
<PAGE>
. technical problems integrating our products with the varying business
software systems used in foreign countries;
. difficulties translating our software products and support materials
into foreign languages;
. difficulties and costs of staffing and managing foreign operations due
to distance, as well as language and cultural differences;
. the impact of general economic and political conditions outside of the
United States;
. greater difficulty in collecting accounts receivable;
. currency exchange fluctuations; and
. unexpected changes in regulatory requirements and potentially adverse
tax consequences.
In addition, to successfully expand international sales, we must expand our
international operations, recruit additional international sales and support
personnel, and develop relationships with international systems integrators,
distributors and resellers. We cannot predict whether the international
expansion of our business will be successful.
Difficulties and financial burdens associated with future acquisitions could
harm our business and financial results.
We might consider acquiring complementary businesses and technologies in the
future. We do not have significant acquisition experience and would therefore
have to devote substantial management time and resources in order to identify
acquisition opportunities. In addition, if we are unable to integrate any
acquired businesses, technologies or products into our operations, we could
experience disruption in our ongoing business and incur increased expenses. If
we do make an acquisition, we could incur substantial debt or issue equity
securities, which would dilute our current stockholders' percentage ownership.
We might also assume contingent liabilities or incur significant accounting
charges.
Risks Related to Our Industry
If business-to-business e-commerce software applications are not widely
adopted, our revenue will decline and our business could fail.
Our success depends substantially upon an increase in the use of the
Internet for e-commerce and the widespread adoption of business-to-business e-
commerce software applications that extend business software systems to the
Internet. If these markets fail to grow or grow at a slower rate than we
currently anticipate, we could have difficulty selling our products and our
revenues could decline. The success of business-to-business e-commerce software
applications will be impaired if the Internet infrastructure is unable to
support the demands placed on it by continued growth. In addition, critical
issues concerning the commercial use of the Internet, such as reliability,
cost, accessibility and quality of service, remain unresolved and might
negatively affect the growth of Internet use or the attractiveness of commerce
and business communication over the Internet.
Increased security risks of business-to-business e-commerce might deter
future use of our software products and services or expose us to costly
litigation.
A fundamental requirement of business-to-business e-commerce is the secure
transmission of confidential information. As a result, security breaches could
significantly harm our reputation and expose us to a risk of litigation.
Advances in computer capabilities, new discoveries in the field of cryptography
or other developments might result in a compromise or a breach of the security
features contained in our software or our customers' computer systems. Anyone
able to circumvent these security measures could misappropriate confidential
customer information or cause interruptions in our customers' operations. If
our customers are required to incur additional costs to protect against
security breaches or to alleviate problems caused by breaches, the demand for
our software products and services might be reduced. In addition, our insurance
policies might not be adequate to reimburse us for losses caused by these
security breaches or resulting service disruptions.
11
<PAGE>
Our competitors might bring claims against us if we hire their former
employees, which could cause us to incur substantial costs.
Companies in the software industry whose employees accept positions with
competitors frequently claim that those employees and competitors have
breached, or encouraged the breach of, noncompetition and nondisclosure
agreements. Competitors have threatened claims against us in the past, and they
might threaten or pursue claims against us in the future as we hire additional
qualified personnel. We could incur substantial costs in defending against any
of these claims, regardless of their merit.
Internet-related laws could adversely affect our business.
Regulation of the Internet is largely unsettled. The adoption of laws,
regulations or taxes that increase the costs or administrative burdens of doing
business over the Internet could lead potential customers to seek alternative
means of transacting business. These laws, regulations or taxes could impair
the demand for our software products and services, which would cause our
revenue to decline.
Risks Related to Our Offering
You will suffer immediate and substantial dilution and might not receive the
full amount of your investment if we are liquidated.
Our earlier investors paid substantially less for their shares than the
initial public offering price. As a result, the initial public offering price
per share will significantly exceed the net tangible book value per share of
our common stock. You will experience immediate dilution of $ in the pro
forma as adjusted net tangible book value per share of our common stock at an
initial public offering price of $ per share. You will also experience
additional dilution when outstanding options and warrants are exercised.
Because the net tangible book value of your shares will be diluted immediately
following this offering, if we are liquidated, you might not receive the full
amount of your investment.
Our stock price might be volatile, which could lead to losses by investors.
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest will lead to the
development of a trading market for our common stock or how liquid that market
might become. The initial public offering price for the shares was determined
by negotiations between us and the representatives of the underwriters and
might not be indicative of prices that will prevail in the trading market.
Technology stocks, particularly those that are Internet-related, have
experienced extreme price and volume fluctuations in recent years. As a result,
the trading price and volume of our common stock could be subject to wide
fluctuations, which could lead to losses by investors.
We might in the future be the subject of securities class action litigation,
which could be costly and time-consuming to defend.
In the past, securities class action litigation has been brought against
companies following declines in the price of their common stock. We might be
the subject of similar litigation in the future. Securities litigation could
result in substantial costs and a diversion of our management's attention and
resources, which could materially harm our business and our stock price.
We have broad discretion over the use of the net proceeds of this offering,
and might use these proceeds in ways with which you do not agree or which prove
to be ineffective.
Except for the repayment of outstanding debt, we have not committed the net
proceeds of this offering to any specific purposes. We will therefore have
significant flexibility in applying the net proceeds of this offering, and
might use these proceeds in ways with which you disagree. We might use a
portion of the net proceeds to acquire or invest in businesses, products and
technologies. If we do not apply the funds we receive effectively, our
accumulated deficit will increase and we could lose significant business
opportunities.
12
<PAGE>
If our actual capital requirements vary significantly from our current
financial projections and we are unable to obtain additional financing, we
might be unable to sustain our business.
We expect that our existing capital resources, combined with the net
proceeds of this offering, will be sufficient to meet our cash requirements for
the foreseeable future. Our capital requirements depend upon several factors
that are difficult to predict, including:
. our ability to expand our customer base;
. the level of our operating expenditures, particularly for sales and
marketing;
. the costs of offering additional products;
. the costs of expanding our international presence; and
. the acquisition of complementary businesses and technologies.
If our capital requirements vary materially from those currently planned, we
might require additional financing sooner than anticipated. If we cannot obtain
sufficient additional capital on terms acceptable to us, we might be unable to
continue to market, develop and enhance our products, take advantage of future
opportunities or respond to competitive pressures.
If we raise additional capital by issuing equity securities, the percentage
ownership of our existing stockholders will decline and our stockholders could
experience dilution in net book value per share. In addition, these equity
securities might have rights, preferences or privileges senior to those of the
holders of our common stock. Any debt financing, if available, could involve
covenants limiting or restricting our operations or future opportunities.
Provisions in Delaware law and in our charter and bylaws might make a
takeover more difficult and lower the value of our common stock.
Provisions in Delaware corporate law and our certificate of incorporation
and bylaws, such as provisions allowing us to issue preferred stock, might make
it difficult and expensive for a third party to pursue a tender offer, change
in control or takeover attempt that our management opposes. As a result, public
stockholders who want to participate in this type of transaction might not have
an opportunity to do so. Any delay or prevention of a change in control or
change in management could cause the market price of our common stock to
decline. For more information about specific anti-takeover provisions that
apply to us, see "Description of Capital Stock."
Concentration of ownership among our existing officers, directors and
principal stockholders might prevent other stockholders from influencing
significant corporate decisions and cause our stock price to decline.
After this offering, our officers, directors and stockholders owning at
least 5% of our stock will together control approximately % of our outstanding
common stock. If these officers, directors and principal stockholders act
together, they will be able to exert a significant degree of influence over our
management and affairs and over matters requiring stockholder approval,
including the election of directors and approval of mergers or other business
combination transactions. The interests of this concentration of ownership
might not always coincide with our interests or the interests of our other
stockholders. For example, officers, directors and principal stockholders,
acting together, could delay or prevent a change in control of our company
favored by our other stockholders. As a result, this concentration of ownership
could depress our stock price.
Future sales of common stock by our existing stockholders could cause the
market price of our common stock to decline.
Sales of a substantial number of shares of our common stock in the public
market following this offering, or the perception among investors that these
sales might occur, could cause the market price of our common
13
<PAGE>
stock to decline. The number of shares of common stock available for sale in
the public market is limited by restrictions under federal securities law and
lock-up agreements that our stockholders have entered into with the
underwriters and with us. These lock-up agreements restrict our stockholders
from selling, pledging or otherwise disposing of their shares for a period of
180 days after the date of the final prospectus relating to this offering
without the prior written consent of Salomon Smith Barney Inc. After this
offering, shares owned by our current stockholders and holders of options and
warrants to purchase our common stock, assuming the exercise of all options and
warrants, are expected to constitute approximately % of our total outstanding
common stock, or approximately % if the underwriters exercise their over-
allotment option in full. Following the expiration of the 180-day lock-up
period to which substantially all of these shares are subject, these shares
might be sold in the public market.
We are party to a registration rights agreement which grants some of our
stockholders the right to demand that we register with the SEC the common stock
they acquired from us in private placements. The registration of this stock
would allow these shareholders to sell the stock publicly without any
limitations on the manner or amount of sale. This registration rights agreement
covers an aggregate of 54,283,040 shares of our common stock. If these
stockholders exercise their registration rights in whole or in part following
the 180-day lock-up period described above, a substantial number of shares of
our common stock could be sold at once and the market price of our common stock
could fall.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the federal securities laws that relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as might, will, should, expect, plan,
anticipate, believe, estimate, predict, intend, potential or continue or the
negative of these terms or other comparable terminology. These statements are
only predictions. In evaluating these statements, you should consider various
factors, including the risks described above and in other sections of this
prospectus. These factors might cause our actual results to differ materially
from any forward-looking statements. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
15
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from this offering will be approximately
$ , based upon an assumed initial public offering price of $ per share,
after deducting the estimated underwriting discount and offering expenses
payable by us. If the underwriters exercise their over-allotment option in
full, we estimate that the net proceeds will be $ million. We intend to use
the net proceeds from this offering for the expansion of our sales and
marketing efforts, the continued development of our products, the repayment of
all outstanding principal and accrued interest on notes issued to Silicon
Valley Bank and Sand Hill Capital II, L.P. and for general corporate purposes.
As of October 31, 2000, our outstanding balance under these notes was
$4.0 million, all of which we expect to repay with the proceeds from this
offering. The Silicon Valley Bank note matures in August 2001, and it bears
interest at the prime rate as declared by Silicon Valley Bank plus 2%. This
interest rate changes each time Silicon Valley Bank changes its prime rate. The
Sand Hill Capital II, L.P. note matures at the earlier of August 31, 2001 or 30
days after the completion of this offering, and it bears interest at the prime
rate, as published in the Western Edition of The Wall Street Journal, plus 3%.
This interest rate will be adjusted each day there is a change in this prime
rate.
The amounts and timing of our actual expenditures will depend on numerous
factors, including the status of our product development and commercialization
efforts, the amount of cash generated by our operations, and the nature of our
sales and marketing activities. We might also use a portion of the proceeds for
an acquisition of, or investment in, companies, technologies or assets that
complement our business. However, we have no current understandings,
commitments or agreements to enter into any potential acquisitions or
investments. Other than to retire debt as discussed above, we have not
determined the amounts we plan to spend on any of the items listed above or the
timing of these expenditures. As a result, our management will have broad
discretion to allocate the net proceeds from this offering. Pending application
of the net proceeds as described above, we intend to invest the net proceeds of
this offering in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock. We currently
anticipate that we will retain earnings to support operations and to finance
the growth and development of our business and do not anticipate paying cash
dividends for the foreseeable future.
16
<PAGE>
CAPITALIZATION
The following table sets forth our cash position, short term obligations and
capitalization as of July 31, 2000:
. on an actual basis;
. on a pro forma basis, which adjusts the actual amounts to reflect the
automatic conversion of all outstanding shares of our preferred stock
into 55,283,040 shares of common stock upon the completion of this
offering and the receipt of approximately $230,412 in proceeds from the
exercise of warrants to purchase 248,022 shares of common stock, which
will expire if not exercised prior to completion of this offering; and
. on a pro forma as adjusted basis, which adjusts the pro forma amounts to
reflect the sale of shares of common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
the estimated underwriting discount and offering expenses payable by us,
and the repayment of $ of indebtedness with the proceeds from this
offering.
The outstanding share information excludes 9,237,657 shares of common stock
issuable upon the exercise of stock options outstanding as of July 31, 2000
under our 1995 Stock Award Plan, 125,000 shares of common stock issuable upon
the exercise of warrants outstanding as of July 31, 2000 and an aggregate of
4,905,143 shares reserved for future stock option grants and purchases under
our 1995 Stock Award Plan as of July 31, 2000. See "Management--Employee
Benefit Plans" and note 9 to our financial statements.
You should read this information together with our financial statements and
the notes to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of July 31, 2000
-------------------------------
Pro Pro Forma
Actual Forma as Adjusted
-------- -------- -----------
(in thousands)
<S> <C> <C> <C>
Cash and cash equivalents................... $ 12,372 $ 12,603
======== ========
Debt and capital lease obligations, current
portion.................................... $ 15 $ 15
======== ========
Debt and capital lease obligations, less
current portion............................ $ 17 $ 17
Mandatorily redeemable Series B, C, C-1, D
and E preferred stock, $0.001 par value;
61,955,940 shares authorized, 54,283,040
issued and outstanding on an actual basis;
no shares authorized, issued or outstanding
on a pro forma and pro forma as adjusted
basis...................................... 44,884 --
Stockholders' equity (deficit):
Series A preferred stock, $0.001 par
value; 1,000,000 shares authorized,
issued and outstanding on an actual
basis; no shares authorized, issued or
outstanding on a pro forma and pro forma
as adjusted basis........................ 1 --
Common stock, $0.001 par value; 84,000,000
shares authorized, 10,736,979 shares
issued and outstanding on an actual
basis; 84,000,000 shares authorized,
66,268,041 shares issued and outstanding
on a pro forma basis; shares
authorized, shares issued and
outstanding on a pro forma as adjusted
basis.................................... 11 66
Additional paid-in capital................ 1,590 46,650
Deferred compensation..................... (182) (182)
Accumulated other comprehensive loss...... (3) (3)
Accumulated deficit....................... (36,254) (36,254)
-------- --------
Total stockholders' equity (deficit).... (34,837) 10,277
-------- --------
Total capitalization.................. $ 10,064 $ 10,294
======== ========
</TABLE>
17
<PAGE>
DILUTION
Dilution per share to new investors represents the difference between the
initial public offering price of our common stock and the net tangible book
value per share of our common stock immediately after this offering. We have
calculated the net tangible book value per share by subtracting our total
liabilities from our total tangible assets, and dividing the difference by the
aggregate number of common shares outstanding. As of October 31, 2000, our net
tangible book value was $ million, or $ per share of common stock. Our
pro forma net tangible book value gives effect to:
. the automatic conversion of all outstanding shares of our preferred
stock into a total of 55,283,040 shares of common stock upon completion
of this offering, and
. the exercise of warrants to purchase 248,022 shares of common stock at
an exercise price of $0.929, which will expire if not exercised prior to
completion of this offering.
Our pro forma net tangible book value as of October 31, 2000 was $
million, or $ per share. After giving effect to the pro forma sale of shares
of common stock in this offering at an assumed initial public offering price of
$ per share, and after deducting the estimated underwriting discount and
commissions and offering expenses payable by us, our as adjusted net tangible
book value as of October 31, 2000 would have been $ million, or $ per
share. This represents an immediate increase in net tangible book value of $
per share to our existing stockholders and an immediate dilution in net
tangible book value of $ per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share....................... $
Pro forma net tangible book value per share as of October 31, 2000.. $
Increase in pro forma net tangible book value per share attributable
to new investors................................................... $
----
Pro forma as adjusted net tangible book value per share after this
offering.............................................................
Dilution per share to new investors...................................
$
====
</TABLE>
The following summarizes on a pro forma as adjusted basis, as of October 31,
2000, the number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid to us by existing
stockholders, and by new investors purchasing shares of common stock in this
offering, before deducting the estimated underwriting discount and commissions
and offering expenses payable by us:
<TABLE>
<CAPTION>
Shares Total Average
Purchased Consideration Price
-------------- -------------- Per
Number Percent Amount Percent Share
------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. % $ % $
Mandatory exercise of warrants........ % $ % $
New investors......................... % $ % $
---- ------ ----- ------ -----
Total............................... 100.0% $ 100.0%
</TABLE>
The tables above assume no exercise of stock options outstanding as of
October 31, 2000 under our 1995 Stock Award Plan, to purchase 9,267,660 shares
of common stock with a weighted average exercise price of $0.43 per share. To
the extent these unexercised options are exercised, investors in this offering
will experience further dilution. The tables above reflect the exercise of
warrants to purchase 248,022 shares of common stock, at an exercise price of
$0.929 per share, which will expire if not exercised prior to the completion of
this offering.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The statement of operations data presented below for the fiscal years ended
April 30, 1998, 1999 and 2000, and the balance sheet data as of April 30, 1999
and 2000, have been derived from our audited financial statements included
elsewhere in this prospectus. The statement of operations data for the three
months ended July 31, 1999 and July 31, 2000 and the balance sheet data as of
July 31, 2000 have been derived from our unaudited financial statements
included elsewhere in this prospectus. In our opinion, these unaudited interim
financial statements include all adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of financial position, results
of operations and cash flows. The balance sheet data as of April 30, 1996, 1997
and 1998 and the statement of operation data for the fiscal years ended April
30, 1996 and 1997 have been derived from our audited financial statements which
are not included in this prospectus.
We calculated the pro forma net loss per common share and weighted average
common share data assuming conversion of all Series A preferred stock and
Series B, C, C-1, D and E mandatorily redeemable preferred stock, which
converts automatically upon the completion of an initial public offering into
55,283,040 shares of common stock at May 1, 1999 or the date of issuance, if
later. Therefore, we excluded the accretion of mandatorily redeemable preferred
stock of $23,919 and $71,904 for the year ended April 30, 2000 and for the
three-month period ended July 31, 2000, respectively, from the calculation of
pro forma net loss per common share. You should read the data presented below
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and notes to
those statements appearing elsewhere in this prospectus.
19
<PAGE>
<TABLE>
<CAPTION>
Three Months
Year Ended April 30, Ended July 31,
-------------------------------------------- ----------------
1996 1997 1998 1999 2000 1999 2000
------- ------- ------- ------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Software............... $ -- $ 908 $ 2,787 $ 3,968 $ 4,000 $ 1,166 $ 1,487
Services............... -- 214 1,302 3,473 6,718 2,105 2,405
------- ------- ------- ------- -------- ------- -------
Total revenues......... -- 1,122 4,089 7,441 10,718 3,271 3,892
Cost of revenues:
Software............... -- 253 312 326 474 163 178
Services............... -- 281 895 2,369 4,547 1,503 1,432
------- ------- ------- ------- -------- ------- -------
Total cost of
revenues.............. -- 534 1,207 2,695 5,021 1,666 1,610
------- ------- ------- ------- -------- ------- -------
Gross profit........... -- 588 2,882 4,746 5,697 1,605 2,282
Operating expenses:
Sales and marketing.... 568 3,950 3,888 6,176 12,324 2,604 4,131
Research and
development........... 512 1,796 1,967 3,018 4,097 810 1,927
General and
administrative........ 267 1,231 1,453 2,026 2,998 596 878
------- ------- ------- ------- -------- ------- -------
Total operating
expenses.............. 1,347 6,977 7,308 11,220 19,419 4,010 6,936
------- ------- ------- ------- -------- ------- -------
Operating loss......... (1,347) (6,389) (4,426) (6,474) (13,722) (2,405) (4,654)
Interest income......... 12 166 248 404 284 49 216
Interest expense........ (2) (16) (104) (83) (332) (37) (16)
Provision for income
taxes.................. -- -- (20) -- -- -- --
------- ------- ------- ------- -------- ------- -------
Net loss............... (1,337) (6,239) (4,302) (6,153) (13,770) (2,393) (4,454)
Accretion of mandatorily
redeemable preferred
shares................. -- -- -- -- (24) -- (72)
------- ------- ------- ------- -------- ------- -------
Net loss attributable to
common stockholders.... $(1,337) $(6,239) $(4,302) $(6,153) $(13,794) $(2,393) $(4,526)
======= ======= ======= ======= ======== ======= =======
Net loss per common
share--basic and
diluted................ $ (0.17) $ (0.63) $ (0.44) $ (0.62) $ (1.36) $ (0.24) $ (0.42)
======= ======= ======= ======= ======== ======= =======
Weighted average common
shares outstanding--
basic and diluted...... 8,077 9,872 9,873 9,887 10,173 9,962 10,668
======= ======= ======= ======= ======== ======= =======
Pro forma net loss per
common share--basic and
diluted................ $ (0.30) $ (0.07)
======== =======
Pro forma weighted
average common shares
outstanding--basic and
diluted................ 45,179 65,951
======== =======
</TABLE>
<TABLE>
<CAPTION>
As of April 30, As of
--------------------------------------------- July 31,
1996 1997 1998 1999 2000 2000
------ ------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents
and short-term
investments............ $5,906 $ 541 $ 10,503 $ 5,405 $ 16,117 $ 12,372
Working capital
(deficit).............. 5,872 (33) 9,589 3,282 13,022 8,257
Total assets............ 6,076 1,833 12,385 8,078 20,859 18,050
Total indebtedness and
capital lease
obligations............ 22 764 947 1,151 53 32
Mandatorily redeemable
preferred stock........ 6,669 6,669 20,952 20,952 44,812 44,884
Total stockholders'
deficit................ (652) (6,720) (10,908) (16,961) (30,405) (34,837)
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes appearing elsewhere in this prospectus. This
discussion contains forward-looking statements which involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of factors,
including, but not limited to, those set forth under "Risk Factors" and
elsewhere in this prospectus.
Overview
From our incorporation in 1995 through July 1996, we were primarily engaged
in conducting research and developing our HAHTsite application server and
development platform. In July 1996, we began selling this platform, which
enables our customers to build e-commerce applications that integrate with
their existing business software systems. As the market for business-to-
business e-commerce began to grow, we shifted our focus and strategy from
selling tools used to develop e-commerce applications to selling the packaged
e-commerce software applications themselves. These packaged applications
integrate with our customers' business software systems and extend those
systems to the Internet. In February 1999, we announced the commercial
availability of the first business-to-business software application in our HAHT
Commerce e-Scenario product family. We now offer a comprehensive suite of
business-to-business software applications, including our HAHT Commerce
e-Scenario, HAHT Commerce Links and HAHT Mobile products, as well as our
HAHTsite application server and development platform.
We sell our products and services primarily through our direct sales force
and through our relationships with systems integrators. For the fiscal year
ended April 30, 2000, HAHT Commerce e-Scenario software revenues represented
43.2% of our total software revenues and the average price of invoiced software
applications per new e-Scenario customer was approximately $150,000. For the
three months ended July 31, 2000, our e-Scenario software revenues represented
79.8% of our total software revenues and the average price of invoiced software
applications per new e-Scenario customer was approximately $270,000. This
growth in the average price of invoiced software applications per new
e-Scenario customer has resulted primarily from our introduction of additional
applications, and we expect the average price of invoiced software applications
per new e-Scenario customer to continue to increase.
Sources of Revenues
Since inception, we have generated revenues primarily from the sale of
licenses of our software products and related services, including
implementation, customization, training and ongoing support. We derive our
software license revenues primarily from sales of our e-Scenario applications
and our application server and development platform. New e-Scenario customers
typically purchase licenses for one or more applications and for our HAHTsite
application server, which is necessary to run our software applications. Our
software licenses allow customers to run our HAHT Commerce e-Scenario
applications for a pre-determined number of users or servers. Software license
revenues accounted for 37.3% of our total revenues in the fiscal year ended
April 30, 2000 and for 38.2% of our total revenues for the three months ended
July 31, 2000.
We also generate software revenues from our HAHT Links products. Currently,
we offer HAHT Links under both license and subscription pricing models, but we
have not yet generated significant revenues from these products.
Our services revenues include revenues we receive for performing
implementation, customization, training and ongoing support services. We
provide these services primarily through our e-Solutions Group and our
technical support personnel. Customers that license our e-Scenario applications
and our application server and development platform generally purchase a
renewable 12-month support and maintenance contract, under which we provide
software upgrades and technical support. To date, all of our HAHT Commerce e-
Scenario application customers have purchased the initial support and
maintenance contract and all have renewed their
21
<PAGE>
contracts upon expiration. Services revenues accounted for 62.7% of our total
revenues in the fiscal year ended April 30, 2000 and for 61.8% of our total
revenues for the three months ended July 31, 2000. We expect third-party
systems integrators will perform an increasing amount of implementation and
customization services for our customers. As a result, we expect services
revenues to decrease as a percentage of our total revenues.
Sales to customers outside North America accounted for approximately 6.1% of
our total revenues for the fiscal year ended April 30, 2000 and 5.6% of our
total revenues for the three months ended July 31, 2000. We expect this
percentage to increase as we continue our efforts to expand international
sales, particularly in Europe and Asia. To the extent that we generate revenues
in currencies other than the U.S. dollar, our revenues will be affected by
currency fluctuations.
For the fiscal years ended April 30, 1998 and 1999, one customer accounted
for 21.5% and 28.3%, respectively, of our total revenues. Although no single
customer accounted for more than 10.0% of our total revenues for the fiscal
year ended April 30, 2000, one customer accounted for 11.4% of our total
revenues for the three months ended July 31, 2000.
Revenue Recognition
Our HAHT Commerce e-Scenario applications typically require implementation
and customization services, and we provide these services for most of our
customers. When we provide the services to implement and customize our
software, we recognize software license fees in accordance with the percentage-
of-completion method of accounting incrementally over the implementation
period. Software implementation and customization varies depending on customer
needs and specifications. The length of the implementation period averages
three to six months.
When a customer or an experienced systems integrator provides the services
to implement and customize our software, we recognize software revenues when we
invoice and deliver the product. When we sell only our application server and
development platform without any related services, we also recognize software
revenues upon invoicing and delivery.
We sell renewable subscriptions for our HAHT Links products, under which we
recognize revenues monthly over the term of the contract. We have offered
subscription pricing to a limited number of e-Scenario customers, but we have
not yet sold e-Scenario products on this basis.
We recognize training, implementation and customization services revenues as
these services are performed. We recognize software support and maintenance
revenues over the term of the contract, which is usually 12 months.
We often invoice and receive payments for our products and services before
we recognize the related revenues. We record these amounts on our balance sheet
as deferred revenues until we recognize the revenues.
Cost of Revenues
Cost of software revenues includes costs of media and materials that we use
to deliver our products, manuals, packaging materials, royalties paid to third-
party vendors for licensed technology and shipping costs. We expect that
economies of scale will favorably impact our cost of software revenues.
However, this favorable impact will be offset to the extent we increasingly
license technology from third-party vendors. As a result, we expect cost of
software revenues as a percentage of related revenues to remain relatively
constant.
Cost of services revenues consists primarily of costs for service personnel
and subcontractors. We expect cost of services revenues and services gross
margins to vary with customer demand for our HAHT Commerce
22
<PAGE>
e-Scenario applications, customer implementation schedules, labor costs and our
ability to recruit, effectively deploy and retain key personnel.
Operating Expenses
Our operating expenses are classified into three categories: sales and
marketing, research and development and general and administrative.
Amortization of deferred stock compensation is allocated within these
categories.
Sales and marketing expenses consist primarily of personnel costs, sales
commissions and costs associated with marketing programs. We expect that our
sales and marketing expenses will increase as we continue to hire additional
sales personnel and applications engineers to expand our sales and marketing
programs.
Research and development expenses consist primarily of personnel costs,
subcontractors and other costs associated with the development of new products,
the enhancement of existing products, quality assurance and testing. We expect
research and product development expenses to continue to increase as we hire
additional personnel. To date, we have expensed research and development costs
in the period incurred.
General and administrative expenses consist primarily of costs for
executive, financial, legal, accounting and information systems personnel. We
expect continued increases in general and administrative expenses associated
with becoming a publicly traded company.
23
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, selected
operating data as a percentage of total revenues, unless otherwise stated:
<TABLE>
<CAPTION>
Three Months
Year Ended April 30, Ended July 31,
------------------------ ---------------
1998 1999 2000 1999 2000
------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Revenues:
Software......................... 68.1% 53.3% 37.3% 35.6% 38.2%
Services......................... 31.9% 46.7% 62.7% 64.4% 61.8%
------- ------ ------- ------ -------
Total revenues................. 100.0% 100.0% 100.0% 100.0% 100.0%
------- ------ ------- ------ -------
Cost of revenues as a percentage of
related revenues:
Software......................... 11.2% 8.2% 11.9% 14.0% 12.0%
Services......................... 68.7% 68.2% 67.7% 71.4% 59.5%
------- ------ ------- ------ -------
Total cost of revenues......... 29.5% 36.2% 46.8% 50.9% 41.4%
------- ------ ------- ------ -------
Gross profit................... 70.5% 63.8% 53.2% 49.1% 58.6%
------- ------ ------- ------ -------
Operating expenses:
Sales and marketing.............. 95.1% 83.0% 115.0% 79.6% 106.1%
Research and development......... 48.1% 40.6% 38.2% 24.8% 49.5%
General and administrative....... 35.5% 27.2% 28.0% 18.2% 22.6%
------- ------ ------- ------ -------
Total operating expenses....... 178.7% 150.8% 181.2% 122.6% 178.2%
------- ------ ------- ------ -------
Operating loss................. (108.2%) (87.0%) (128%) (73.5%) (119.6%)
Interest income.................... 6.1% 5.4% 2.6% 1.5% 5.6%
Interest expense................... (2.6%) (1.1%) (3.1%) (1.2%) (0.4%)
------- ------ ------- ------ -------
Loss before income taxes....... (104.7%) (82.7%) (128.5%) (73.2%) (114.4%)
Provision for income taxes......... 0.5% 0.0% 0.0% 0.0% 0.0%
------- ------ ------- ------ -------
Net loss....................... (105.2%) (82.7%) (128.5%) (73.2%) (114.4%)
======= ====== ======= ====== =======
</TABLE>
Three months ended July 31, 1999 and 2000
Revenues
Software revenues increased $0.3 million, or 27.5%, from $1.2 million for
the three months ended July 31, 1999 to $1.5 million for the three months ended
July 31, 2000. This increase primarily resulted from increased licenses of our
HAHT Commerce e-Scenario applications, the commercial availability of which we
announced in February 1999. Our e-Scenario software revenues increased $0.7
million, or 135.3%, from $0.5 million for the three months ended July 31, 1999
to $1.2 million for the three months ended July 31, 2000. Software revenues
represented 35.6% of total revenues for the three months ended July 31, 1999
and 38.2% of total revenues for the three months ended July 31, 2000.
Services revenues increased $0.3 million, or 14.3%, from $2.1 million for
the three months ended July 31, 1999 to $2.4 million for the three months ended
July 31, 2000. This increase primarily resulted from increased consulting and
training services associated with the implementation and customization of our
e-Scenario applications. Services revenues represented 64.4% of total revenues
for the three months ended July 31, 1999 and 61.8% of total revenues for the
three months ended July 31, 2000.
Cost of Revenues
Cost of software revenues remained relatively constant in absolute terms at
$0.2 million in each of the three-month periods. Because of increased revenues,
cost of software revenues as a percentage of related
24
<PAGE>
revenues decreased from 14.0% for the three months ended July 31, 1999 to 12.0%
for the three months ended July 31, 2000.
Cost of services revenues decreased $0.1 million, or 4.7%, from $1.5 million
for the three months ended July 31, 1999 to $1.4 million for the three months
ended July 31, 2000. This decrease was primarily attributable to reduced
subcontractor costs and increased utilization of existing consulting services
personnel. As a result of this decrease in cost of services revenues and the
increase in services revenues, cost of services revenues as a percentage of
related revenues decreased from 71.4% for the three months ended July 31, 1999
to 59.5% for the three months ended July 31, 2000.
Total cost of revenues decreased $0.1 million, or 3.4%, from $1.7 million
for the three months ended July 31, 1999 to $1.6 million for the three months
ended July 31, 2000. Total cost of revenues as a percentage of total revenues
decreased from 50.9% for the three months ended July 31, 1999 to 41.4% for the
three months ended July 31, 2000. This decrease was primarily because services
revenues, which have lower margins than software revenues, represented a
smaller percentage of total revenues in the 2000 period than in the 1999
period.
Operating Expenses
Sales and marketing expenses increased $1.5 million, or 58.6%, from $2.6
million for the three months ended July 31, 1999 to $4.1 million for the three
months ended July 31, 2000. This increase was primarily due to additional sales
and marketing personnel and an increase in marketing programs related to our
HAHT Commerce e-Scenario applications.
Research and development expenses increased $1.1 million, or 137.9%, from
$0.8 million for the three months ended July 31, 1999 to $1.9 million for the
three months ended July 31, 2000. This increase was primarily due to an
increase in research and development personnel associated with the development
of our e-Scenario applications.
General and administrative expenses increased $0.3 million, or 47.3%, from
$0.6 million for the three months ended July 31, 1999 to $0.9 million for the
three months ended July 31, 2000. This increase was primarily due to increased
personnel and other operating expenses to support the growth of our business.
Net interest income increased from $12,000 for the three months ended July
31, 1999 to $0.2 million for the three months ended July 31, 2000. This
increase was primarily due to short-term interest earned on cash.
Fiscal years ended April 30, 1999 and 2000
Revenues
Software revenues remained relatively constant at $4.0 million for the
fiscal years ended April 30, 1999 and 2000, largely due to the transition to
our e-Scenario product groups. HAHT Commerce e-Scenario software revenues
increased from $0.1 million in the fiscal year ended April 30, 1999 to $1.7
million in the fiscal year ended April 30, 2000. The fiscal year ended April
30, 2000 was the first full fiscal year in which we sold our e-Scenario
applications. Software revenues from our application server and development
platform decreased from $3.9 million for the fiscal year ended April 30, 1999
to $2.3 million for the fiscal year ended April 30, 2000. We believe that
during fiscal 2000, the market for our products was negatively impacted by Year
2000 concerns. Many of our potential customers used an increased portion of
their information technology resources and budgets to address Year 2000
compliance issues. We also believe that SAP's May 1999 announcement of its
mySAP.com products adversely affected our software revenues because potential
customers delayed their e-commerce software purchasing decisions to evaluate
mySAP.com.
Services revenues increased $3.2 million, or 93.4%, from $3.5 million for
the fiscal year ended April 30, 1999 to $6.7 million for the fiscal year ended
April 30, 2000. This increase was primarily due to increased
25
<PAGE>
services associated with implementing and supporting our e-Scenario
applications. In general, our e-Scenario applications generate more services
revenues than our application server and development platform products. As a
result of the product transition and other factors affecting software revenues,
services revenues as a percentage of total revenues increased.
Cost of Revenues
Cost of software revenues increased $0.2 million, or 45.8%, from $0.3
million for the fiscal year ended April 30, 1999 to $0.5 million for the fiscal
year ended April 30, 2000. Cost of software revenues as a percentage of related
revenues increased from 8.2% for the fiscal year ended April 30, 1999 to 11.9%
for the fiscal year ended April 30, 2000. This increase was primarily due to
the transition to our HAHT Commerce e-Scenario software products, which include
third-party technology for which we pay royalties.
Cost of services revenues increased $2.2 million, or 91.9%, from $2.3
million for the fiscal year ended April 30, 1999 to $4.5 million for the fiscal
year ended April 30, 2000. This increase was primarily due to increased costs
for service personnel and subcontractors. Cost of services revenues as a
percentage of related revenues decreased slightly from 68.2% for the fiscal
year ended April 30, 1999 to 67.7% for the fiscal year ended April 30, 2000.
Total cost of revenues increased $2.3 million, or 86.3%, from $2.7 million
for the fiscal year ended April 30, 1999 to $5.0 million for the fiscal year
ended April 30, 2000. Total cost of revenues as a percentage of total revenues
increased from 36.2% in fiscal 1999 to 46.8% in fiscal 2000, primarily because
services revenues, which have lower margins than software revenues, represented
a greater percentage of total revenue in fiscal 2000 than in fiscal 1999. In
addition, services revenues from several large HAHTsite application server and
development platform projects initiated during fiscal 1999 and completed in
fiscal 2000 had lower margins than the services revenues typically derived from
our e-Scenario applications.
Operating Expenses
Sales and marketing expenses increased $6.1 million, or 99.6%, from $6.2
million for the fiscal year ended April 30, 1999 to $12.3 million for the
fiscal year ended April 30, 2000. This increase was primarily due to additional
sales and marketing personnel and an expansion of our marketing programs,
particularly in connection with the marketing of our HAHT Commerce e-Scenario
applications, which we introduced late in fiscal 1999.
Research and development expenses increased $1.1 million, or 35.7%, from
$3.0 million for the fiscal year ended April 30, 1999 to $4.1 million for the
fiscal year ended April 30, 2000. This increase was primarily due to increases
in research and development costs for personnel and subcontractors.
General and administrative expenses increased $1.0 million, or 48.0%, from
$2.0 million in the fiscal year ended April 30, 1999 to $3.0 million for the
fiscal year ended April 30, 2000. This increase was primarily due to increased
personnel and other operating expenses to support the growth of our business.
Net interest income of $0.3 million for the fiscal year ended April 30, 1999
changed to a net expense of $49,000 for the fiscal year ended April 30, 2000.
This change was primarily due to borrowing costs associated with the debt
financing completed in September 1999.
Fiscal years ended April 30, 1998 and 1999
Revenues
Software revenues increased $1.2 million, or 42.4%, from $2.8 million for
the fiscal year ended April 30, 1998 to $4.0 million for fiscal year ended
April 30, 1999. This increase was primarily due to increased licenses for our
application server and development platform. Although we invoiced customers for
purchases of our HAHT Commerce e-Scenario applications during the fiscal year
ended April 30, 1999, we only recognized a small amount of software license
revenues from these transactions during this period. We recorded the remaining
amount invoiced as deferred revenues.
26
<PAGE>
Services revenues increased $2.2 million, or 166.7%, from $1.3 million for
the fiscal year ended April 30, 1998 to $3.5 million for the fiscal year ended
April 30, 1999. This increase was primarily due to increased consulting and
training services associated with the implementation and customization of our
application server and development platform sold earlier in the fiscal year.
These services included support to system integrators using this platform to
create custom e-commerce solutions. We recognize services revenues associated
with the implementation and customization of our e-Scenario applications over
the implementation period. Although we introduced our HAHT Commerce e-Scenarios
in the fiscal year ended April 30, 1999, because a majority of these
transactions were initiated late in the fiscal year, we recognized only a small
amount of related service revenues during this period.
Cost of Revenues
Cost of software revenues was relatively constant at $0.3 million in each of
the fiscal years ended April 30, 1998 and 1999. Because of increased revenues
in fiscal year ended April 30, 1999 as compared to the fiscal year ended April
30, 1998, cost of software revenues as a percentage of related revenues
decreased from 11.2% for fiscal 1998 to 8.2% for fiscal 1999.
Cost of services revenues increased $1.5 million, or 164.7%, from $0.9
million for the fiscal year ended April 30, 1998 to $2.4 million in the fiscal
year ended April 30, 1999. This increase was due to increased personnel and
subcontractor expenses associated with delivering our services. Cost of
services revenues as a percentage of related revenues decreased slightly from
68.7% for the fiscal year ended April 30, 1998 to 68.2% for the fiscal year
ended April 30, 1999.
Total cost of revenues increased $1.5 million, or 123.1%, from $1.2 million
for the fiscal year ended April 30, 1998 to $2.7 million for the fiscal year
ended April 30, 1999. Total cost of revenues as a percentage of total revenues
increased from 29.5% in fiscal 1998 to 36.2% in fiscal 1999, primarily because
services revenues, which have lower margins than software revenues, represented
a greater percentage of total revenues in fiscal 1999 than in fiscal 1998.
Operating Expenses
Sales and marketing expenses increased $2.3 million, or 58.8%, from $3.9
million for the fiscal year ended April 30, 1998 to $6.2 million for the fiscal
year ended April 30, 1999. This increase was primarily due to additional sales
and marketing personnel and an expansion of our marketing programs,
particularly in connection with the commercial introduction of our e-Scenario
applications.
Research and development expenses increased $1.1 million, or 53.4%, from
$1.9 million for the fiscal year ended April 30, 1998 to $3.0 million for the
fiscal year ended April 30, 1999. This increase was primarily due to increases
in research and development personnel associated with the development of our e-
Scenario software applications.
General and administrative expenses increased $0.5 million, or 39.5%, from
$1.5 million in the fiscal year ended April 30, 1998 to $2.0 million for the
fiscal year ended April 30, 1999. This increase was primarily due to increased
personnel and other operating expenses to support the growth of our business.
Net interest income increased from $0.1 million for the fiscal year ended
April 30, 1998 to $0.3 million for the fiscal year ended April 30, 1999. This
increase was primarily due to short-term interest earned on cash resulting from
our private placement of preferred stock in fiscal 1998.
Quarterly Results of Operations
The following table presents our unaudited consolidated quarterly statement
of operations data for the fiscal year ended April 30, 2000 and the fiscal
quarter ended July 31, 2000, as well as the percentage of our total revenues
represented by each item, unless otherwise stated. We derived this information
from our
27
<PAGE>
unaudited financial statements. In our opinion, we have prepared this unaudited
information on the same basis as our audited financial statements, and it
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information for the fiscal quarters
presented. The operating results for any fiscal quarter are not necessarily
indicative of results for any future period.
CONSOLIDATED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
For the Quarters Ended
--------------------------------------------------
July July
31, October 31, January 31, April 30, 31,
1999 1999 2000 2000 2000
------- ----------- ----------- --------- -------
(in thousands, except percentages)
<S> <C> <C> <C> <C> <C>
Revenues:
Software................ $ 1,166 $ 911 $ 819 $ 1,104 $ 1,487
Services................ 2,105 1,737 1,144 1,732 2,405
------- ------- ------- ------- -------
Total revenues........ 3,271 2,648 1,963 2,836 3,892
------- ------- ------- ------- -------
Cost of revenues:
Software................ 163 98 118 95 178
Services................ 1,503 1,036 968 1,040 1,432
------- ------- ------- ------- -------
Total cost of
revenues............. 1,666 1,134 1,086 1,135 1,610
------- ------- ------- ------- -------
Gross profit.......... 1,605 1,514 877 1,701 2,282
------- ------- ------- ------- -------
Operating expenses:
Sales and marketing..... 2,604 3,227 3,286 3,208 4,131
Research and
development............ 810 768 740 1,779 1,927
General and
administrative......... 596 609 689 1,103 878
------- ------- ------- ------- -------
Total operating
expenses............. 4,010 4,604 4,715 6,090 6,936
------- ------- ------- ------- -------
Operating loss........ (2,405) (3,090) (3,838) (4,389) (4,654)
------- ------- ------- ------- -------
Interest income........... 49 32 21 181 216
Interest expense.......... (37) (204) (67) (23) (16)
------- ------- ------- ------- -------
Net loss.............. $(2,393) $(3,262) $(3,884) $(4,231) $(4,454)
======= ======= ======= ======= =======
As a percentage of
revenues:
Revenues:
Software................ 35.6% 34.4% 41.7% 38.9% 38.2%
Services................ 64.4% 65.6% 58.3% 61.1% 61.8%
------- ------- ------- ------- -------
Total revenues........ 100.0% 100.0% 100.0% 100.0% 100.0%
------- ------- ------- ------- -------
Cost of revenues as a
percentage of related
revenues:
Software................ 14.0% 10.7% 14.5% 8.6% 12.0%
Services................ 71.4% 59.6% 84.6% 60.0% 59.5%
------- ------- ------- ------- -------
Total cost of
revenues............. 50.9% 42.8% 55.3% 40.0% 41.4%
------- ------- ------- ------- -------
Gross profit.......... 49.1% 57.2% 44.7% 60.0% 58.6%
------- ------- ------- ------- -------
Operating expenses:
Sales and marketing..... 79.6% 121.8% 167.3% 113.1% 106.1%
Research and
development............ 24.8% 29.0% 37.7% 62.7% 49.5%
General and
administrative......... 18.2% 23.0% 35.1% 38.9% 22.6%
------- ------- ------- ------- -------
Total operating
expenses............. 122.6% 173.8% 240.1% 214.7% 178.2%
------- ------- ------- ------- -------
Operating loss........ (73.5%) (116.6%) (195.4%) (154.7%) (119.6%)
------- ------- ------- ------- -------
Interest income........... 1.5% 1.2% 1.0% 6.3% 5.6%
Interest expense.......... (1.1%) (7.7%) (3.4%) (0.8%) (0.4%)
------- ------- ------- ------- -------
Net loss.............. (73.1%) (123.1%) (197.8%) (149.2%) (114.4%)
======= ======= ======= ======= =======
</TABLE>
28
<PAGE>
Revenues
Our business transition to selling packaged e-commerce applications began in
late 1998 and had a significant effect on our software and services revenues
through the quarter ended January 31, 2000. During this transition period, we
focused our sales efforts on developing our new business, including recruiting
and training sales personnel and expanding our marketing programs. In May 1999,
SAP announced its mySAP.com products. We believe that many potential customers
delayed e-commerce software purchases to evaluate mySAP.com. In addition, Year
2000 issues decreased demand for our products as companies devoted significant
information technology resources to dealing with these issues. We believe that
the decrease in our software and services revenues in the quarters ended
October 31, 1999 and January 31, 2000 primarily resulted from our business
transition, the announcement of mySAP.com and Year 2000 issues.
Cost of Revenues
Our cost of revenues as a percentage of total revenues has remained
relatively constant over the last five quarters, except for the quarter ended
January 31, 2000. In that quarter, our gross profit was adversely affected by
lower software and services revenues due to our business transition, the
announcement of mySAP.com and Year 2000 projects. In addition, during this same
period, decreased utilization of our technical consultants resulted in higher
cost of services revenues as a percentage of total revenues.
Operating Expenses
Our operating expenses have increased in each of the five quarters ended
July 31, 2000. This increase is primarily due to increased staffing in all
areas to support increased sales and marketing and research and development
efforts. Our total number of employees increased from 122 on July 31, 1999 to
173 on July 31, 2000. In addition, sales and marketing expenses increased due
to higher costs for marketing programs.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through
private placements of preferred stock and, to a lesser extent, borrowings from
financial institutions. As of July 31, 2000, we had cash and cash equivalents
of $12.4 million.
We have a revolving line of credit with Silicon Valley Bank of up to $4.0
million, with a borrowing limit based on a percentage of our accounts
receivable, that matures in August 2001. This line of credit is secured by
substantially all our assets and incurs interest at the prime rate plus two
percent. As of October 31, 2000, we had not borrowed against this line of
credit. We also have a revolving credit line with Sand Hill Capital of up to
$7.0 million that matures at the earlier of August 31, 2001 or completion of
this offering. We can extend the credit line for an additional 30 days. This
line of credit is secured by our intellectual property assets and bears
interest at the prime rate plus three percent. As of October 31, 2000, $4.0
million was outstanding under the Sand Hill revolving line of credit.
Net cash used in operating activities was $4.3 million for the fiscal year
ended April 30, 1998, $4.9 million for the fiscal year ended April 30, 1999,
$11.5 million for the fiscal year ended April 30, 2000 and $3.4 million for the
three months ended July 31, 2000. Net cash used in operating activities in each
period reflects net losses, and higher accounts receivable, prepaid expenses
and other assets. These negative cash flows were partially offset by increases
in accounts payable, accrued expenses and deferred revenues, all as a result of
the growth of our business.
Net cash used in investing activities was $3.2 million for the fiscal year
ended April 30, 1998 and $1.9 million in the fiscal year ended April 30, 2000.
Investing activities provided net cash of $1.8 million in fiscal 1999 and $1.7
million in the three months ended July 31, 2000. These amounts primarily
reflect the timing of purchases and maturities of short-term investments.
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Net cash provided by financing activities was $14.5 million in the fiscal
year ended April 30, 1998, $0.2 million in the fiscal year ended April 30,
1999, $22.9 million in the fiscal year ended April 30, 2000 and $9,000 in the
three months ended July 31, 2000. The cash provided by financing activities in
fiscal 1998 and 2000 was primarily the result of private placements of
preferred stock.
Capital expenditures, including capital leases, were $0.2 million in the
fiscal year ended April 30, 1998, $0.4 million in the fiscal year ended April
30, 1999, $0.7 million in the fiscal year ended April 30, 2000 and $0.2 million
in the three months ended July 31, 2000. Our current business strategy and
operating needs do not require significant capital expenditures or capital
leases.
We expect to experience a significant increase in our operating expenses for
the foreseeable future in order to execute our business plan. In addition, we
might use cash to fund acquisitions or investments in complementary businesses
or technologies. We believe that our existing cash and cash equivalents,
together with the net proceeds of this offering, will be sufficient to meet our
working capital requirements for the foreseeable future.
Qualitative and Quantitative Disclosures About Market Risk
We develop products in the United States and sell them worldwide. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Because we price our sales in U.S. dollars and translate them into local
currency amounts, a strengthening of the dollar could make our products less
competitive in foreign markets. Interest income and expense are sensitive to
changes in U.S. interest rates, particularly because we invest in short-term
instruments and our long-term debt and available lines of credit calculate
interest payments at variable rates. Based on the nature and current levels of
our investments and debt, however, we have concluded that we do not have
material market risk exposure.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
established accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts, and for hedging
activities. In July 1999, the Financial Accounting Standards Board issued SFAS
No. 137, "Accounting with Derivative Instruments and Hedging Activities
Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137
deferred the effective date of SFAS No. 133 until the first fiscal quarter of
the first fiscal year beginning after June 15, 2000. To date, we have not
engaged in hedging activities or invested in derivative instruments and
accordingly, we do not believe the implementation of SFAS No. 133 will have an
effect on our financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements." SAB 101 provides specific guidance as to
the recognition of revenue related to up-front non-refundable fees and services
charges received in connection with a contractual arrangement. We recognize
revenue in accordance with this pronouncement.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation--An Interpretation of APB
Opinion No. 25." This Interpretation clarifies the definition of an employee
for the purposes of applying APB Opinion No. 25, "Accounting for Stock Issued
to Employees," the criteria for determining whether a plan qualifies as a non-
compensatory plan, the accounting consequences of various modifications to the
terms of a previously fixed stock option or award, and the accounting for an
exchange of stock compensation awards in a business combination. This
Interpretation is generally effective July 1, 2000. The adoption of FIN 44 in
the three months ended July 31, 2000 did not have a material impact on our
financial position or results of operation.
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BUSINESS
Overview
We offer a suite of software applications that enable companies to use the
Internet to conduct business with their distributors, resellers and other
business customers in an environment that we call an enterprise digital
marketplace. Companies use enterprise digital marketplaces to manage their
business transactions and communications, which we believe differentiates them
from their competitors and increases customer loyalty. Our software
applications can integrate with virtually any business software system and
facilitate the real-time exchange of information between companies and their
business customers over the Internet. We believe our ability to provide a
comprehensive suite of packaged applications that can rapidly integrate with
systems developed by SAP and J.D. Edwards, as well as our expertise with these
systems, give us a competitive advantage.
We sell our software primarily to large companies with complex channels of
distribution across multiple industries, including chemicals, consumer packaged
goods and high technology. We license our software applications to business
customers through our direct sales force and through co-selling and co-
marketing arrangements with systems integrators. Since 1996, we have sold
HAHTsite products, which include our application server and software
development platform, to approximately 700 customers. In February 1999, we
announced the commercial availability of the first HAHT Commerce e-Scenario
software application, and to date we have sold e-Scenario applications to 36
customers.
Industry Background
Growth and Evolution of Business-to-Business E-Commerce
The Internet has emerged as a global medium for communication and commerce,
enabling individuals and businesses to conduct business electronically. AMR
Research, Inc. predicts that the amount of Internet-based commerce between
companies, or business-to-business e-commerce, will increase from $215 billion
in 1999 to $5.7 trillion by 2004, representing a five-year compounded annual
growth rate of 93%. Furthermore, AMR Research estimates that the dollar amount
of Internet-based business-to-business commerce as a percentage of total
business-to-business commerce will increase from 1.4% in 1999 to 29% by 2004.
Customer demand is driving the growth of business-to-business e-commerce.
Businesses want online sales processes that are efficient and flexible and
provide access to a broad range of products and services. This demand, combined
with the success of early adopters and competition from online e-commerce
exchanges, has heightened the need for companies to migrate their business
relationships to the Internet. Businesses now view the Internet as an important
channel that can complement their existing sales and distribution strategies.
One of the first business-to-business Internet models was the online e-
commerce exchange. Business-to-business exchanges have generally had a buyer
focus, providing buyers a means of comparing products and pricing from multiple
suppliers. This buyer focus can lead to significant price competition at the
expense of personalized marketing, customer service and support. As a result,
companies looking to strengthen their relationships with business customers and
differentiate their products on factors other than price have not been well
served by these exchanges. Although software has been developed to provide
personalization and customer management over the Internet, it has been designed
with a business-to-consumer focus rather than a business-to-business focus. The
nature of the relationship between a company and the consumers of its products
is significantly different than the complex relationships between a supplier
and its large distributors, resellers and other business customers. Businesses
selling to businesses need to provide accurate, up-to-date product availability
and shipment information because their business customers are often making
commitments to their own customers based on this information.
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For these reasons, many of the existing ways for a company to sell its
products through the Internet are inadequate. Companies are looking for better
ways to use the Internet to communicate with business customers, to market and
sell their products, to provide customer service and support, and ultimately to
increase customer loyalty.
Prevalence of Enterprise Resource Planning Systems
Over the past two decades, companies worldwide have made significant
investments in business software systems that centralize information processing
and improve coordination among various internal departments. Enterprise
resource planning systems, or ERP systems, offer extensive functionality and
are therefore one of the most common types of systems. Companies invest
significant resources in ERP systems, typically spending millions of dollars to
license and implement the software and to train employees. Once implemented,
these systems become fundamental to a company's operations by coordinating
various functions, such as accounting, manufacturing, sales order management
and customer service. Companies also store critical information in these
systems and design elaborate business rules within them. For example, a company
can create business rules within its ERP system to determine pricing based on
various considerations, including contract terms and purchase volumes.
Although ERP systems improve efficiencies within a company, they do little
to manage a company's interactions with its external constituents, such as its
distributors, resellers and other business customers. In addition, because most
ERP systems were developed prior to the commercial emergence of the Internet,
they were not designed to facilitate e-commerce.
ERP systems have been developed by many different vendors, including SAP,
Oracle, PeopleSoft, Baan and J.D. Edwards. We believe SAP is the largest global
provider of ERP systems. According to SAP, it has a customer base of over
12,000 companies, including a majority of the Fortune 500, with installations
in more than 100 countries.
Limitations of Existing Business-to-Business E-Commerce Solutions
Companies want e-commerce solutions that preserve the functionality of their
existing business software systems and make the information stored in these
systems available to their distributors, resellers and other business
customers. Many companies consider developing solutions internally, or hiring
systems integration firms to create custom solutions. However, these solutions
are typically expensive and entail lengthy implementation periods. In addition,
they are often unable to scale with the growth of a business and frequently
lack the flexibility to add functionality as the business's requirements
evolve.
The costs and limitations of custom solutions have led to the emergence of
packaged software applications that provide specific business-to-business e-
commerce functions. We believe that by using packaged applications, a company
can accelerate its time to market, significantly reduce its costs and limit the
diversion of its management and technical resources. Because many of these
packaged software applications address only discrete aspects of a company's
relationships with its business customers, companies often need to combine
products from numerous vendors in order to achieve a comprehensive e-commerce
solution. Because of this limitation, many businesses are seeking a single
vendor that can address all of their business transactions and communications
with a single software suite.
We believe that one of the most significant challenges faced by software
vendors is the integration of e-commerce applications with ERP systems to
enable the real-time exchange of information. Many companies that want to
achieve this integration have hired software vendors that focus on enterprise
application integration, or EAI, techniques. EAI solutions are often expensive,
and the vendors that implement them frequently cannot provide a full suite of
applications and lack the experience to tailor their applications to the needs
of specific vertical markets. Furthermore, although a number of software
application vendors claim to provide integration capabilities with ERP systems,
many of these vendors utilize a batch process to update
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information. In a batch process, information flowing in and out of an ERP
system is temporarily stored in an intermediate database that is updated only
on an intermittent basis, which can lead to outdated and inaccurate data. In
addition, software applications with integration capabilities often do not
present information from business software systems in a suitable format. For
example, although these applications might be able to disseminate product
information from an ERP system to the Internet, the information is often spread
across multiple computer screens or in various formats, and is therefore
difficult to access, understand and use without training.
Our Opportunity
As a result of the growth of e-commerce, the prevalence of ERP systems and
the limitations of existing business-to-business e-commerce solutions, we
believe there is significant demand for packaged software applications that
facilitate business-to-business e-commerce. According to IDC, the worldwide
market for Internet-based applications that facilitate e-commerce will grow
from $1.8 billion in 1999 to $23.0 billion in 2004, representing a five-year
compounded annual growth rate of 66.4%. We believe that companies will continue
to seek cost-effective business-to-business Internet software solutions capable
of:
. differentiating a company's product and service offerings and building
customer loyalty;
. managing the full spectrum of e-commerce interactions with distributors,
resellers and customers;
. integrating with existing business software systems and preserving
investments in these systems;
. providing packaged functionality to expedite implementation and
accelerate time to market;
. providing the flexibility to customize the look and feel of a company's
e-commerce site and accommodate a company's specific business processes
and channel relationships; and
. providing enterprise-class functionality, including a secure, scalable
and flexible platform that can accommodate future growth and
technological changes.
The HAHT Solution
Our software applications enable companies to create enterprise digital
marketplaces that manage all aspects of their Internet-based transactions and
communications with business customers and the employees that interact with
them. These marketplaces combine the pervasiveness of the Internet with the
extensive functionality and critical business data of an ERP system. With an
enterprise digital marketplace, companies can personalize their service by
analyzing their customers' preferences and offering specific products and
services tailored to those preferences. The enterprise digital marketplace also
creates efficiencies, which include lower transaction costs, shortened
procurement times and reduced inventory levels. We believe the result is that
companies can differentiate themselves from their competitors and can compete
effectively online based on factors other than price.
For example, as illustrated below, an enterprise digital marketplace can
enable the real-time exchange of critical product and order information between
a large chemical producer and buyers of its products, such as a plastics
manufacturer and a chemical distributor, as well as the chemical producer's
internal marketing department and sales force.
An Enterprise Digital Marketplace
A drawing that illustrates the following: "Our Customer", a "Large Chemical
Producer", is represented as a picture of a factory to the left of the
"Internet," which is represented by a cloud. To the right of the "Internet" are
lines connecting to pictures of a "Large Plastics Company", containing the
words "Purchasing chemicals to use in its products"; a "Large Chemical
Distributor", containing the words "Reselling chemicals to home products
companies"; a "Chemical Producer's Salesforce", containing the words "Checking
pricing,
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availability and order status"; and a "Chemical Producer's Marketing Dept.",
containing the words "Reviewing order history and conducting targeted marketing
campaigns.")
The HAHT Advantage
We have a number of competitive advantages that we believe will allow us to
continue to capitalize on the opportunities available in the market for
business-to-business Internet software and address the needs of our customers.
These competitive advantages include:
Packaged Integration Capabilities with ERP Systems Provided by SAP and J.D.
Edwards
We believe we have a competitive advantage because our packaged software can
rapidly integrate with ERP systems provided by SAP and J.D. Edwards. Our
software developers and technical staff have significant experience developing
software solutions for these systems. In contrast with applications offered by
other software vendors, our software applications provide packaged integration
that enables the real-time exchange of information over the Internet and the
presentation of this information in an understandable and effective format.
Because our software can support virtually any ERP, database or mainframe
system, our customers can preserve their investments in these systems.
Comprehensive Suite of Applications
Our suite of applications addresses the comprehensive needs of our
customers. By using our suite of applications to create an enterprise digital
marketplace, a company can manage its entire sales process, including product
marketing, selection and configuration, order entry and tracking, data analysis
and post-sales support, over the Internet. Our HAHT Commerce e-Scenarios can be
implemented as a full suite to provide a complete end-to-end solution, or as
individual applications to meet a company's specific needs. With our HAHT Shop
application, companies can enable their business customers to find, select,
configure and purchase products. With our HAHT Service application, companies
can enable their business customers to check account status and place and track
service requests. In addition, with our HAHT Links products, companies can
connect their business software systems directly to those of their business
customers to automate the exchange of information and reduce the need for human
intervention. Because all of our applications run on our HAHTsite application
server, they share data and work together more seamlessly than a similar
collection of discrete applications from several vendors. We believe this
common platform approach results in superior performance and functionality.
Technical and Vertical Market Expertise
As of September 30, 2000, we had 87 consulting, development and support
professionals with experience in Internet applications and ERP technologies. We
believe that the strength of our technical team and their expertise with ERP
systems, including those offered by SAP and J.D. Edwards, has enabled us to
rapidly introduce new products and product enhancements. Our software engineers
are actively involved in software installations and ongoing customer service
and support. We take a customer-driven approach to product development in order
to align our development efforts with our customers' business needs and system
requirements.
In addition, we have extensive experience in the chemicals, consumer
packaged goods and high technology vertical markets. We have professionals
dedicated to servicing companies within each of these key vertical markets and
keeping informed of market trends. Our familiarity with these markets allows us
to identify potential customers and tailor our products to meet specific market
needs.
Packaged Software Applications with Rapid Deployment
We believe that our packaged software applications can be deployed faster
than many other Internet-enabling software solutions. We typically complete the
customization and implementation of our packaged
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software in three to six months. We believe our ability to rapidly deploy our
software increases our customers' return on investment and limits the diversion
of their management and technical resources. In addition, we can make business
information from companies' ERP systems available over the Internet within as
little time as one day. We believe this ability to demonstrate real-time
integration with a potential customer's ERP system during the sales process
provides us with a significant advantage in attracting and winning business.
Flexibility to Satisfy Customer Requirements
Through our HAHTsite Scenario Workbench and development platform, we can
customize our software to satisfy a company's specific needs. For example, we
can personalize the look and feel of a company's e-commerce site and provide
access to specific information and functionality from its ERP system. We can
also provide customer-oriented functionality that was not previously available
in its ERP system, such as access to approval forms or material safety data
sheets. In addition, our applications can operate in different languages and
can support various user interfaces. Our HAHTsite Scenario Workbench includes
technology that simplifies, speeds and reduces errors in the process of
building and customizing applications.
In addition, our software platform enables a company to connect and
communicate with its business customers and the employees who interact with
them over a wide range of connection types and access devices. For example, a
company can communicate with its business customers through a browser-based
HTML connection or with its field personnel over wireless devices using a WML
connection. In addition, our HAHT Links applications enable XML connections to
business customers that use Ariba or Commerce One procurement software, either
directly or indirectly through online e-commerce exchanges.
Enterprise Class Functionality Through Scalable and Flexible Software
Architecture
Companies use our HAHT Commerce e-Scenario applications for business-to-
business transactions, where enterprise-class performance, scalability,
functionality and security are critical. Our software delivers enterprise-class
performance primarily as a result of its centralized server-based architecture,
commonly known as thin-client architecture. With thin-client architecture, the
software and processing power reside on a central server rather than on an end-
user's computer. As a result, the system can be accessed by almost any browser-
based device, including mobile phones. In addition, our software platform can
support tens of thousands of concurrent users without diminishing system
performance.
Our software has the flexibility to be used with a variety of different
computer systems and network configurations. Our HAHTside application server
supports numerous widely adopted communication and computer standards,
including XML, Java (J2EE), WML, HDML and HTML. In addition, our application
server runs on major operating systems, including Microsoft Windows NT, Linux,
Sun Solaris, Hewlett Packard, HP-UX and IBM's AIX. This compatibility enables
us to continuously adapt, maintain and customize our software as technology
evolves.
Our Strategy
Our objective is to be a leading global provider of Internet-based software
applications that enable companies to create and manage enterprise digital
marketplaces. Key aspects of our strategy include:
Maintain our Product Leadership
Since we announced the commercial availability of our first HAHT Commerce e-
Scenario application in February 1999, we have continued to enhance our
software suite by releasing additional applications and upgrades. We believe we
have established a product leadership position and that our software
applications meet and often exceed the requirements of our business customers.
We intend to maintain this position by continuing to enhance our software suite
through the introduction of new applications and upgrades. For example:
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. In February 2000, we introduced the HAHT Commerce Links software
application to enable companies to connect their business software
systems with those of their business customers, either directly or
through online e-commerce exchanges. By the first half of calendar 2001,
we plan to expand the capabilities of our HAHT Links application to
enable connections to additional e-commerce exchanges and versions of
XML.
. We offer customized wireless capabilities that facilitate real-time
mobile access to information such as order status, inventory and
customized pricing. We are in the process of completing our first
implementation of HAHT Mobile, a packaged service that will permit the
deployment of our HAHT Commerce e-Scenario applications across mobile
devices.
. We are currently working with customers to complete the development of
HAHT Insight, a software application that will allow a business to
analyze the effectiveness of its e-commerce strategy.
Focus Our Marketing Efforts on Companies Using ERP Systems Developed by SAP
and J.D. Edwards
Although our products can integrate with virtually any ERP, database or
mainframe system, we are focusing our sales and marketing efforts on businesses
with ERP systems provided by SAP and J.D. Edwards. We believe that our HAHT
Commerce e-Scenario applications provide a leading solution for extending these
ERP systems to the Internet.
We believe that SAP is the largest global provider of ERP systems. According
to SAP, it has a customer base of over 12,000 companies, including a majority
of the Fortune 500, with installations in more than 100 countries. We believe
that our e-Scenario applications are well suited to meet the needs of users of
these systems and we will continue to aggressively market our e-Scenario
applications to them. To date, we have sold our e-Scenario applications to 36
customers, 35 of which use ERP systems provided by SAP. In addition, we
recently introduced packaged integration capabilities with ERP systems provided
by J.D. Edwards. According to J.D. Edwards, it has approximately 5,700
customers. We plan to aggressively market our software applications to users of
these systems as well.
Expand Our Strategic Relationships with Systems Integrators
We license our software applications to business customers through our
direct sales force and through co-selling and co-marketing arrangements with
systems integrators. We have established relationships with a number of systems
integrators, including Clarkston, Deloitte Consulting, KPMG, marchFIRST and
PSINet. These systems integrators assist in our sales and marketing efforts and
provide implementation services to our customers.
We believe that the best way to deliver value to our customers is through a
combination of our strength in software development and systems integrators'
expertise in project management, implementation and service. As a result, we
intend to expand our relationships with systems integrators to increase our
sales reach and our implementation capacity. For example, we are aggressively
expanding our relationship with KPMG. As part of this relationship, we jointly
market our e-Scenario applications to both existing and potential KPMG
customers and KPMG takes a leadership role in implementing and supporting our
products for these customers.
Cross-Sell Within Our Large Customer Base
Since 1996, we have sold HAHTsite products, which include our application
server and development platform, to approximately 700 customers in over 20
countries. We believe our installed base of customers gives us significant
brand value and credibility in the marketplace. Furthermore, our direct
relationships with our customers provide us with critical information about
their changing business needs and market developments.
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We believe that our HAHTsite customers have a significant need for software
applications that can extend the capabilities of their ERP systems to the
Internet. Of our 700 HAHTsite customers, we have identified approximately 200
that use ERP systems developed by SAP or J.D. Edwards. Because of our ability
to provide packaged applications that enable real-time integration with these
ERP systems, we believe that these customers represent an attractive market for
our software applications.
Build Our Expertise Across Large Vertical Markets
We typically sell our software applications to large companies with complex
channels of distribution. To date, we have targeted companies in multiple
industries, including chemicals, consumer packaged goods and high technology.
We plan to continue to build upon our expertise, customer relationships and
brand awareness within these industries. In addition, we intend to expand our
sales and marketing efforts to the building materials industry, the medical
supplies industry and other vertical markets. As we pursue this expansion, we
believe we can take advantage of the extensive contacts and expertise we have
developed from our past sales and implementation efforts.
Increase Our International Presence
We believe there is a significant opportunity for us to market our products
to customers outside of North America, especially in Europe and Asia. Many
international markets are experiencing significant growth in business-to-
business e-commerce and have a large installed base of business software
systems. For example, we believe that the majority of SAP's installed customer
base is located in Europe, with a considerable presence also in Asia,
especially Japan. We plan initially to address this international opportunity
by selling additional products to our existing multi-national customers. We
also plan to expand our direct sales force, co-marketing arrangements with
systems integrators and relationships with resellers and distributors. We have
established a presence in Europe and Asia, and we currently have sales offices
in The Netherlands and Australia.
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Products and Services
We sell a suite of software products, along with related services, including
implementation, customization, training and ongoing support. Our HAHT Commerce
e-Scenario applications deliver the key functionality of a company's enterprise
digital marketplace. Distributors, resellers and other business customers can
connect to a company's enterprise digital marketplace through either a standard
web browser or an XML-based connection facilitated by our HAHT Commerce Links
products. The enterprise digital marketplace is also accessible through mobile
devices with our HAHT Mobile product. All of our software applications run on
our application server platform, the HAHTsite Scenario Server, which can
integrate with virtually any business software system to enable the real-time
exchange of information between these systems and our customer's enterprise
digital marketplace. The following diagram identifies the current and future
products within each of our product families:
HAHT Commerce e-Scenarios
Comprehensive suite of packaged applications for Internet-based product
marketing, selection and configuratino, order entry and tracking, data analysis
and post-sales support
. HAHT Shop
. HAHT Track
. HAHT Catalog
. HAHT Market
. HAHT Service
. HAHT Insight*
HAHT Commerce Links
Connects companies' business software systems directly to those of their
business customers to automate the exchange of information
. HAHT Links
. HAHT Partner Links*
. HAHT Channels for Ariba, Commerce One, EDI* and RosettaNet*
. HAHT Sellside Exchange
HAHT Mobile
Enables sales personnel and customers to access and use our software
applications over wireless devices
HAHTsite
The application server and platform on which our software applications operate
. HAHTsite Scenario Server
. HAHTsite Scenario Workbench
. HAHTsite Secenario Publisher
. HAHTsite Scenario Integration Kit*
-----------------
* These products are in various stages of development and are scheduled for
commericial release prior to July 2001.
HAHT Commerce e-Scenario Product Family
Our HAHT Commerce e-Scenarios are a suite of packaged business-to-business
software applications that deliver the key functionality of an enterprise
digital marketplace, enabling businesses to provide sales, marketing, order
fulfillment and customer service functions over the Internet. We offer packaged
applications that can be deployed either individually or as a comprehensive
suite: HAHT Shop, HAHT Track, HAHT Catalog, HAHT Market, HAHT Service and HAHT
Insight, which is under development. We can customize our e-Scenario
applications to deliver the look and feel, content and functionality necessary
to satisfy our customers' requirements. For example, our e-Scenarios can
support multiple languages and currencies. To date, we have sold our e-Scenario
applications to 36 customers, 12 of which have purchased three or more
e-Scenario applications.
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Current and future applications in the e-Scenario product family include:
HAHT Shop--HAHT Shop enables buyers to find, configure, price and order
products over the Internet. It allows them to retrieve customer-specific
pricing and inventory availability information in real-time from our
customers' ERP or order management system. HAHT Shop can also show future
availability information for products still in production. We believe HAHT
Shop improves order accuracy, reduces the need for follow-up and minimizes
product returns.
HAHT Track--HAHT Track provides real-time order and shipment status
information that enables buyers to track an order from placement through
delivery, check inventory availability and receive information from
external shipping companies through a single interface. We believe HAHT
Track improves buyer confidence, strengthens channel partner and business
customer relationships, and limits the diversion of management and customer
service resources by giving customers self-service access to this
information.
HAHT Catalog--HAHT Catalog is an Internet-based product catalog that
integrates with our other HAHT Commerce e-Scenarios and a seller's ERP or
other business software systems. It provides searching capabilities as well
as automatic updating of product information. In addition, businesses can
personalize content within the HAHT Catalog for specific customers or
individuals. For example, a large distributor might be given access to more
product lines and information than a direct customer with focused product
needs. The HAHT Catalog also works with our HAHT Links product to provide
access to catalog content through both online e-commerce exchanges and
procurement systems, using software provided by Commerce One and Ariba.
HAHT Market--HAHT Market enables a business to create customer-specific
marketing campaigns and product promotions to encourage repeat business.
For example, businesses can use HAHT Market to create customer-specific
product recommendations designed to increase order size. HAHT Market
displays these recommendations when customers select products in HAHT
Catalog or HAHT Shop. These recommendations can be up-sells, which suggest
a substitute product of greater value, or cross-sells, which suggest an
additional product. HAHT Market also manages e-mail based marketing
campaigns with personalized content and links back to specific product
information in HAHT Shop and HAHT Catalog. HAHT Market also provides
businesses with real-time access to customer data, such as buying patterns
and other customer traits, that helps them design successful sales and
marketing programs and evaluate their effectiveness.
HAHT Service--HAHT Service is designed to strengthen business customers'
satisfaction after a sale has been completed, which encourages repeat
business. HAHT Service also reduces overhead costs by automating service
functions. HAHT Service contains three distinct applications, which can be
implemented separately or in any combination, and can be integrated with
our other HAHT Commerce e-Scenarios. These three applications are:
Account Status--Account Status is primarily a financial tool that
allows companies to provide their distributors, resellers and other
business customers with direct, real-time access to the financial
account information in the companies' ERP or other business software
systems. This reduces the burden on companies' call centers and
accounting staff.
Service Management--Service Management allows companies to enable
their business customers and the employees that interact with them to
place and track service requests directly into the companies' ERP or
other business software systems, which reduces the burden on call
centers and makes service technicians more efficient.
Product Returns--Product Returns allows companies to enable their
business customers to request product return authorizations over the
Internet. It also automates approval for most of these requests, which
reduces the burden on call centers.
HAHT Insight--HAHT Insight, which is currently under development, will
enable companies to capture and analyze information generated from their e-
commerce sites, and combine that information with
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data residing in their existing business software systems. This allows a
company to measure and analyze the effectiveness of its overall e-commerce
strategy. We believe HAHT Insight will enable companies to design more
effective e-commerce strategies and allow them to react quickly to changes
in the customers and markets they serve.
HAHT Commerce Links Product Family
Our HAHT Links products automate the exchange of information between our
customers and their distributors, resellers and other business customers either
directly or through online e-commerce exchanges. Despite advances in
technology, a significant amount of data entry is still required to execute
most business-to-business e-commerce transactions. For example, although an ERP
system at a plastics company can signal the need to purchase additional
chemicals, current browser-based e-commerce systems require involvement from
the plastics company's employees to place an order for chemicals. Our HAHT
Links products bridge the communication gap between our customers' systems and
those of their distributors, resellers and other business customers, which
limits the need for human intervention. These products enable businesses to
communicate with each other either directly or through online e-commerce
exchanges, using various XML-based Internet standards. Our HAHT Links software
is configured to communicate either with online e-commerce exchanges or
procurement systems, using software provided by Ariba or Commerce One.
For example, a plastics company can communicate with a chemical producer
through a direct XML connection to retrieve data from a product catalog, check
pricing, create a purchase request and submit a sales order directly into the
chemical producer's ERP system, all on a real-time basis. HAHT Links receives
the purchase request directly from the plastics company's ERP system and
automatically sends it to the chemical producer's business software systems. In
addition, a household products company running Ariba's procurement software can
purchase products from the chemical producer through a direct XML connection or
an online e-commerce exchange.
A HAHT Links-Enabled Enterprise Digital Marketplace
(A drawing that illustrates different types of HAHT Links connections
between a customer and its partners. "Our Customer", a "Large Chemical
Producer", is a picture of a factory to the left of the "Internet," which is
represented by a cloud. To the right of the "Internet" are lines connecting to
two pictures: a "Plastics Company" and a "Private Chemical Exchange",
represented by a sphere. Lines connect the "Plastics Company" to two other
pictures, "Plastics Company Partner A" and "Plastics Company Partner B". Lines
from the "Private Chemical Exchange" connect to pictures of a "Home Products
Company" and a "Chemical Distributor.")
Current and future products in the HAHT Links product family include:
HAHT Links--HAHT Links integrates directly with our customers' ERP and
other business software systems to enable real-time XML-based communication
with their customers' business systems. We plan to release an update to
HAHT Links in the first half of calendar 2001 that will also allow a HAHT
Links customer to integrate with its suppliers. As a result, a customer
will be able to send a purchase order from its ERP system directly to its
supplier's ERP system through HAHT Links installations at both sites. This
update will provide the foundation for HAHT Partner Links.
HAHT Partner Links--We plan to release HAHT Partner Links in the first
half of calendar 2001. We will provide our HAHT Links customers with a
limited number of Partner Links licenses, which they can give to their
buyers and suppliers. HAHT Partner Links will have the same capabilities as
HAHT Links, but will enable communication only between the licensee and the
company that gave it the Partner Links license. We believe that licensees
of HAHT Partner Links will be potential customers of the full version of
HAHT Links and our HAHT Commerce e-Scenario products.
HAHT Channels--HAHT Channels are modules that are combined with HAHT
Links and HAHT Partner Links to enable businesses to connect to online e-
commerce exchanges or to customers using
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specific versions of XML, including Ariba's cXML and Commerce One's xCBL.
As these standards evolve, we plan to release updated versions of HAHT
Channels. In the first half of calendar 2001, we expect to introduce HAHT
Channels that will support the RosettaNET XML standard and the EDI
communication standard.
We believe we will provide our customers with significant cost savings
by permitting them to communicate over new versions of XML without having
to incur the costs associated with custom development. We also intend to
provide our customers with tools that will enable them to create customized
channels to support other versions of XML.
HAHT Sellside Exchange--We expect to release HAHT Sellside Exchange in
the first half of calendar 2001. Sellside Exchange will be a hosted version
of HAHT Links, which means that we will maintain and operate the HAHT Links
software on our computer systems rather than on our customers' systems. We
believe that Sellside Exchange will provide our customers with a variety of
benefits over operating the software themselves. Our customers will not be
responsible for upgrading the HAHT Links software and will automatically
benefit from enhancements to the software platform. Sellside Exchange will
also enable our customers to remotely administer their accounts through a
standard web browser.
HAHT Mobile Products
Our HAHT Mobile products allow us to provide our customers substantially all
of the functionality of our e-Scenarios over wireless devices and protocols.
For example, these products help dealers, customers, support staff and sales
people check pricing, product availability and shipping status as well as find,
configure and price products at a seller's e-commerce site, all using various
wireless devices and protocols. We are currently engaged in our first HAHT
Mobile implementation. HAHT Mobile supports several communication standards,
including WML, HDML and web clipping for use on cellular phones, pagers,
personal digital assistants and other handheld devices.
HAHTsite Products
Our HAHTsite products provide the platform to run our software applications.
Current and future HAHTsite products include:
. HAHTsite Scenario Workbench
. HAHTsite Scenario Server
. HAHTsite Scenario Publisher
. HAHTsite Scenario Integration Kit
The HAHTsite Scenario Workbench is used to create, customize and maintain
Internet applications, including our e-Scenario applications. It is also used
to compile and transfer these applications to our operating environment, which
we call our HAHTsite Scenario Server. All of our software applications run on
this server. The HAHTsite Scenario Publisher is a simplified version of our
HAHTsite Scenario Workbench. Our HAHTsite Scenario Integration Kit, which is
currently under development, will be a software developers toolkit designed to
enable our customers and systems integrators to connect our e-Scenarios to
virtually any ERP, database, mainframe or other business system. This kit will
provide the information required to integrate our e-Scenarios with systems with
which we do not have pre-packaged integration capabilities, such as PeopleSoft,
Baan, PRISM and mainframe systems.
Services
Our services include customization and implementation of our products,
training, maintenance and customer support. We generally charge for our
customization, implementation and training services on a time and expense
basis. Customers also purchase our maintenance and support services under
annual renewable
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contracts. As of September 30, 2000, we had 26 customization, implementation
and training personnel who had an average of approximately 12 years of
experience, and 11 customer support personnel.
We use a rapid application development, or RAD, methodology to implement our
software. RAD is a team approach that involves our services staff, customers
and systems integrators throughout the implementation process. We believe RAD
helps us to accelerate the deployment of our software, satisfy customer
requirements and deliver a high level of customer service.
We offer a comprehensive support program through which our customers can
receive upgrades for our products and access to our support personnel. Our
support personnel are available 24 hours per day and can remotely access our
customers' systems and provide online assistance and software upgrades. Through
our HAHT Academy, we also offer an education and training program for our
customers, employees and systems integrators.
Customers
To date, we have licensed HAHTsite products, which include an application
server and development platform, to approximately 700 customers. Since we
announced the commercial availability of our first HAHT Commerce e-Scenario
application in February 1999, we have licensed e-Scenario products to a total
of 36 customers. The average price of invoiced software applications per new e-
Scenario customer was approximately $150,000 for the fiscal year ended April
30, 2000 and $270,000 for the three months ended July 31, 2000. Of our
e-Scenario customers, 12 have purchased three or more e-Scenario products. Our
e-Scenario customers are primarily Fortune 1000 companies that use complex ERP
and other business software systems. Our e-Scenarios customers, listed by
industry, include:
Chemicals Manufacturing / Industrial Supplies
Aventis Cryovac North America
Basell Polyolefins CSR America
Celanese Geneva Steel
Dow Corning Lamson & Sessions
Occidental Chemical Mine Safety Appliances
Orica International Management Nordson
Sigma-Aldrich Sloan Valve
Solutia, Inc. Tharco
Consumer Packaged Goods Medical / Bio-Tech / Pharmaceutical
Callard & Bowser-Schuard Inc., a Medline Industries
subsidiary of Kraft Foods Respironics
Harman Consumer Group
Justin Brands, a subsidiary of Telecommunications / Media
Berkshire Hathaway DIRECTV, a division of Hughes
Pennzoil-Quaker State Network Systems
Metro-Goldwyn-Mayer
High Technology Progistix Solutions, a subsidiary
Fujitsu Microelectronics of Bell Canada
Infineon Technologies
LAM Research
Printronix
Minolta
Scientific-Atlanta
Sony
Symbol Technologies
Tellabs
U.S. Print
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HAHT Customer Case Studies
The following case studies illustrate how several of our customers are using
our HAHT Commerce e-Scenario applications as part of their e-commerce strategy:
Metro-Goldwyn-Mayer: Metro-Goldwyn-Mayer is actively engaged in the
worldwide production and distribution of entertainment product, including
motion pictures and television programming. We and MGM are engaged in the
first implementation and testing of our HAHT Mobile product. This product
allows MGM's home entertainment sales representatives to use HAHT Track to
access order status, movie release schedules, the corporate directory,
email and calendar information from MGM's ERP and Lotus Notes systems using
a browser or an Internet-enabled mobile device. MGM anticipates that
customer service will improve and sales representatives will achieve higher
productivity by being able to track orders from any location at any time.
Pennzoil-Quaker State: Pennzoil-Quaker State is a worldwide leader in
consumer vehicle care and maintenance products. Pennzoil-Quaker State
implemented HAHT Track and HAHT Service Account Status to improve service
and cost-effectively manage relationships with its distributors and
dealers. Pennzoil-Quaker State is implementing HAHT Shop and HAHT Catalog
to allow customers to place orders over the Internet, providing an
alternative to phoning or faxing orders to the customer service department.
As their distributors and dealers begin to place orders over the Internet,
Pennzoil-Quaker State sales professionals and customer service
representatives can devote more time to value-added activities instead of
administering the sales process. In 2001, Pennzoil-Quaker State plans to
implement HAHT Market to communicate product and service promotions and
other company information more rapidly and effectively to customers.
Sigma-Aldrich: Sigma-Aldrich is the largest supplier of research
chemicals and supplies for university, government and commercial labs
throughout the world. Through the implementation of HAHT Shop and HAHT
Track, Sigma-Aldrich can provide customers with the ability to purchase
products and get real-time product pricing, availability and order status
information. Sigma-Aldrich has purchased and plans to implement HAHT Market
to create product recommendations and promotions based on individual
customer needs and preferences, and to track the success of marketing
programs. HAHT Market will use existing customer information residing in
Sigma-Aldrich's ERP systems and incorporate customer buying information to
enable marketers to adjust promotions to produce better results.
Minolta: Minolta Corporation is a leader in the photographic and office
automation markets. Minolta chose our products because it wanted to provide
its dealers with a secure method to access information from its business
software systems over the Internet. Minolta worked with us and KPMG to
implement HAHT Shop, HAHT Track and HAHT Catalog to create its online
dealer showroom and ordering web site. This allows Minolta's 400 office
product dealers in North America to enter business equipment orders
directly into Minolta's SAP ERP system, check order status and get
extensive business product information, all in real-time.
OxyChem: Occidental Chemical, known as OxyChem, is a leading chemical
manufacturer and a wholly owned subsidiary of Occidental Petroleum
Corporation. The company has manufacturing facilities in the United States
and six foreign countries. OxyChem implemented HAHT Shop and HAHT Track to
enable its customers to place orders and view real-time order status and
tracking over the Internet. OxyChem implemented these products to improve
the efficiency of its internal operations and enable its customers to
become more self-servicing for routine information.
Sales and Marketing
We focus our sales and marketing efforts on companies with at least $200
million in annual sales that we believe can substantially benefit from our e-
commerce solutions. Specifically, we target companies that use ERP systems,
primarily from SAP and J.D. Edwards, and are pursuing business-to-business e-
commerce initiatives. We expect to continue to focus on companies in specific
vertical industries, including chemicals,
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consumer packaged goods and high technology. We believe that we have a
competitive advantage in addressing the business-to-business e-commerce needs
of these companies and we expect to continue to build upon our expertise,
customer relationships and brand awareness within these industries.
We have identified approximately 2,600 companies in North America that use
SAP, of which approximately 600 are in the chemical industry, 500 are in the
high technology industry and 450 are in the consumer packaged goods industry.
We market to chief information officers and other officers and executives with
responsibility for business functions such as sales and marketing. We conduct a
variety of marketing programs to educate our target market and support our
sales organization. For example, we sponsor focus groups and participate in
trade shows, conferences, and web-based informational and industry-specific
seminars. We also conduct direct mail campaigns, advertising, Internet
marketing and press relations initiatives. We intend to market new products to
our existing customer base and take advantage of our strategic relationships
with systems integrators and technology companies to gain new customers.
We sell our products and services primarily through our direct sales force
and through co-marketing and co-selling arrangements with our systems
integrators. As of September 30, 2000, we had 33 sales professionals and
application engineers located in California, Colorado, Connecticut, Georgia,
Illinois, North Carolina, Rhode Island and Wisconsin. As of September 30, 2000,
our European sales and marketing team consisted of eight sales professionals
and our Asian sales and marketing team consisted of six sales professionals.
All of these sales offices are supported by our marketing department, which
consisted of 20 employees as of September 30, 2000. We have established a
presence in Europe and Asia, and have sales offices in The Netherlands and
Australia.
Our sales teams consist of both sales and technical professionals who work
individually as well as with our systems integration partners. Initial sales
activities typically include a demonstration of our products at the potential
customer's site, along with a detailed technical review of their existing
systems. Because of the flexibility and speed of implementation of our
products, we are often able to create live demonstrations of our products in as
little time as one day. These demonstrations allow potential customers to view
real-time information from their ERP systems over the Internet. Our
applications engineers complement our direct sales force by providing potential
customers with pre-sales support and technical expertise. In addition, our
e-Solutions Group, which consisted of 26 full-time employees as of September
30, 2000, assists our sales efforts by addressing industry-specific issues and
facilitating the implementation process, drawing upon its prior experience with
implementations and customizations of our HAHT Commerce e-Scenario products.
As a critical element of our sales strategy, we develop relationships with
systems integrators to assist us in enhancing our marketing, sales and
distribution capabilities. As of September 30, 2000, we had five employees
devoted to our effort to develop and strengthen our relationships with systems
integrators. We have established relationships with a number of systems
integrators, including Clarkston, Deloitte Consulting, KPMG, marchFIRST and
PSINet. We generate sales leads by working with these systems integrators to
jointly market our products to their potential and existing customers. We
believe that the best way to deliver value to our customers is through a
combination of our strength in software development and a systems integrator's
expertise in project management, implementation and service. We anticipate that
systems integrators will help generate an increasing percentage of our software
sales in the future and will provide an increasing amount of the integration
and implementation services related to these sales.
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Strategic Technology Relationships
We have formed strategic relationships with various technology companies to
help us provide comprehensive, highly scalable and secure software applications
and to broaden market acceptance of our products. The following are examples of
strategic technology relationships that we have established:
<TABLE>
<CAPTION>
Category Value to our Business Representative Companies
-------- -------------------------- --------------------------
<S> <C> <C>
Independent Software Integrate with or Acta, Cybercash, Eprise,
Vendors incorporate software into Mercury Interactive,
our products to provide Microsoft, Oracle, Rogue
increased functionality Wave, Sagent, Sybase
E-commerce Exchange Allow our products to Ariba, Commerce One,
Software and Standards connect to customers and RosettaNet
multiple online e-commerce
exchanges through a single
interface
Joint Marketing Expand our distribution Compaq, Ericsson, Hewlett-
channels to broaden market Packard, Hitachi, Fujitsu,
acceptance Sprint PCS, Sun
Microsystems
</TABLE>
Competition
The market for business-to-business e-commerce applications is new and
rapidly evolving. Although there are only a few companies that we believe offer
directly competitive software suites, we expect these markets will become
highly competitive in the future. We face direct competition from application
software companies including Art Technology Group, Broadvision, Click Commerce,
Intershop and Ironside Technologies. We face indirect competition from
traditional business system software companies that develop applications to
extend the functionality of their systems to the Internet, such as SAP, Oracle
and J.D. Edwards. We also indirectly compete with software companies that
specialize in integrating business software systems and Internet applications,
including BEA Systems and WebMethods. In addition, our potential customers
often consider either developing e-commerce solutions internally, or hiring
firms such as IBM to create custom solutions, instead of purchasing packaged
software applications.
The principal competitive factors affecting our market include the ability
to provide Internet applications that integrate with existing business software
systems, the comprehensive nature of the software applications, the quality of
underlying technology, the speed of deployment and the quality of service and
support professionals. Another important competitive factor is the ability to
support customer communication through browsers, machine-to-machine
interactions using XML and wireless devices. We believe that our products
compete favorably with respect to most of these factors. Our future success,
however, depends on our ability to address the rapidly changing needs of our
current and potential customers and new technological developments by
developing and deploying new products or enhanced versions of our existing
products.
Technology
We believe we are a leader in developing technology for business-to-business
e-commerce applications. We base our products on a variety of industry-standard
technologies.
HAHTsite Application Server Technologies
The HAHTsite Scenario Server provides the core platform on which our other
applications run. The Scenario Server is designed to achieve enterprise-class
performance and scalability. Our server supports a large number of concurrent
users and is designed to provide uninterrupted service even when system
failures occur or when normal periodic maintenance is performed.
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The Scenario Server executes standard Java code using Java virtual machines
from Sun Microsystems for Solaris, Windows and Linux, or Java code as ported by
IBM and Hewlett-Packard to their platforms. Because HAHTsite uses industry
standard Java, any third-party Java component can easily be added to a HAHTsite
application in source code or object code form. The Scenario Server includes
CORBA, Enterprise Java Beans and other Java 2 Enterprise Edition technologies.
The Scenario Server can also execute Basic code using a Basic virtual machine.
The Basic virtual machine is fully compatible with objects written in Microsoft
Visual C++ or Visual Basic. We license some of these technologies from third
parties.
Our Scenario Workbench provides a complete and integrated development
environment for building web applications. The Scenario Workbench uses our
internally developed code generation technologies to turn web pages into Java
or Basic code that can be executed on our HAHTsite Scenario Server. Our Java e-
Connector is part of the Scenario Server and Scenario Workbench and provides
connectivity to SAP's R/3 ERP systems.
E-Scenario and Links Technologies
One of the key features of our products is their high degree of modularity,
which we have achieved by building additional functionality on top of our
HAHTsite Scenario Server. Our HAHT Commerce e-Scenario and HAHT Links products
are built in layers. The bottom layer, which runs on the ERP vendor's platform,
provides integration with the customer's ERP system. We provide this layer as
part of our product when integrating with systems provided by SAP and J.D.
Edwards. For other ERP systems, our HAHTsite Scenario Integration Kit will
provide detailed guidance for creating and implementing custom ERP integration
layers. Above this ERP integration layer is a layer that handles ERP-
independent integration and performance functions. Above this is the user
interface layer, which we can customize to meet the specific needs of our
customers, including a branded look and feel and any additional functionality
that might require access to other databases or software products.
We deliver our e-Scenario applications to customers in full source code
form. Customers can use our HAHTsite Scenario Workbench to customize both the
user interface and the business logic of these applications and ensure that the
deployed e-Scenario meets their specific business needs.
Intellectual Property
We rely on a combination of copyright, trade secret, trademark and trade
dress laws, confidentiality agreements and contractual provisions to protect
our proprietary rights in our products and technology. For example, we license
rather than sell our software to customers and enter into license agreements
with our customers that protect against unauthorized use, copying and transfer.
We also generally enter into confidentiality agreements with our employees and
consultants that limit access to, and distribution of, our proprietary
information. We maintain trademarks on the names of our products, development
tools and service offerings and rely upon trademark and trade dress laws to
protect our proprietary rights in these marks. We have various trademarks,
including HAHT(R), HAHT Software(R), HAHTsite(R) and HAHT Commerce e-
Scenario(TM).
If the steps taken by us to protect our intellectual property rights are not
adequate or third parties infringe or misappropriate our proprietary rights,
our competitive position and financial results could suffer. In addition, third
parties might assert claims against us alleging that we infringe their
intellectual property rights, which could harm our business. We also might be
subject to claims of intellectual property infringement resulting from
technology that we license from third parties. Defending against these claims,
whether they are with or without merit, might lead to costly litigation,
diversion of technical and management personnel or product shipment delays.
Properties
Our headquarters are located in Raleigh, North Carolina. We are currently
leasing approximately 43,000 square feet of space under a lease that expires in
October 2005. We have an option to lease additional space at
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this location. We also lease sales offices in California, Colorado,
Connecticut, Illinois, Rhode Island and Wisconsin. These sales offices are each
approximately 200 to 600 square feet and are typically renewable on an annual
basis.
HAHT Software BV, our Dutch subsidiary, leases 2,800 square feet of space in
Waddinxveen, The Netherlands. This lease expires in January 2006. HAHT Commerce
Pty. Limited, our Australian subsidiary, leases 3,000 square feet of space in
Chatswood, Australia. This lease expires in November 2003.
Employees
As of September 30, 2000, we had 178 permanent full-time employees,
including 70 in sales and marketing and 61 in product development and support.
Of these employees, 164 were located in the United States, eight in The
Netherlands and six in Australia. None of our employees is represented by a
collective bargaining agreement, nor have we experienced any work stoppages. We
consider our relations with our employees to be good.
Legal Proceedings
We are not presently a party to any material legal proceedings.
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MANAGEMENT
Executive Officers, Key Employees and Directors
The following table contains information concerning our executive officers,
key employees and directors as of October 31, 2000:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
Rowland Archer................... 47 Chairman, President and Chief Executive Officer
J. Nick Riehle................... 48 Chief Financial Officer
Michael Kelley................... 42 Vice President, Software Development
Alexander Plavocos............... 53 Vice President, Marketing
Keith Boswell.................... 36 Vice President, Product Management and
Technology Alliances
Thomas Mackey.................... 50 Vice President, Sales
Pat. Salmonese................... 47 Vice President and General Manager, e-Solutions
Group
Sam Bayer, Ph.D. ................ 43 Vice President, Partner Programs
John Veling...................... 56 Managing Director, HAHT Europe
Keith Wannop..................... 49 Managing Director, HAHT Asia
James Atkins..................... 52 Director
Sonja Hoel....................... 34 Director
Richard Holcomb.................. 38 Director
Christopher Hollenbeck........... 32 Director
Paul J. Rizzo.................... 72 Director
Roger Sippl...................... 45 Director
Douglas Williamson............... 49 Director
</TABLE>
Rowland Archer, one of our founders, has served as President and Chief
Executive Officer and has been a member of our board of directors since August
1997. He became Chairman of our board of directors in October 2000. From July
1995 until August 1997, he served as our Chief Operating Officer. From
September 1992 to April 1995, Mr. Archer served as the vice president of
research and development for Q+E Software, Inc., a supplier of client-server
database access technology. He received a B.A. in physics from Vassar College
and an M.S. in computer science from the Massachusetts Institute of Technology.
J. Nick Riehle has been our Chief Financial Officer since August 1996. From
1979 to 1996, he held various positions at Northern Telecom, a communications
equipment company, now known as Nortel Networks. These positions included
controller, Northern Telecom Asia, director of finance, switching services and
software applications and, from 1995 to 1996, director of marketing. He
received a B.Com. in business from McGill University in Montreal and an M.B.A.
from York University in Toronto, and was granted the CMA designation from the
Society of Management Accountants of Ontario.
Michael Kelley became our Vice President, Software Development in June 1996.
From May 1980 to June 1996, Mr. Kelley was employed at Data General
Corporation, a software and computer hardware vendor, where his most recent
position was director of UNIX software development. He received a B.E. in
electrical engineering computer science and mathematics from Vanderbilt
University and an M.S. in computer science from the University of North
Carolina at Chapel Hill.
Alexander Plavocos became our Vice President, Marketing in July 1998. From
June 1994 to May 1998, Mr. Plavocos served as vice president of marketing for
Computron Software Inc., a manufacturer of financial, capital asset and
knowledge-management client-server software. He has also held marketing
positions with NCR Corporation, Applied Data Research, which later became
Computer Associates, and Information Builders. He received a B.A. in computer
science from the State University of New York at Potsdam and an M.S. in
computer science from the University of Dayton.
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Keith Boswell became our Vice President, Product Management and Technology
Alliances in June 1999. From May 1998 to February 1999, Mr. Boswell served as
vice president of e-commerce solutions at Merant, Inc., a global e-business
software solutions company. He also served as the director of the tools
business unit at Seer Technologies, a provider of software development tools,
from May 1997 to May 1998, as a senior product manager for BroadBand
Technologies, Inc., a broadband solutions provider, from May 1996 to May 1997,
and as a product manager for Seer Technologies from September 1994 to May 1996.
Mr. Boswell received both a B.A. in Management Information Systems and an
M.B.A., from James Madison University.
Thomas Mackey became our Vice President, Sales in July 1998. From January
1997 to July 1998, Mr. Mackey was vice president of sales for Synquest, Inc., a
maker of supply-chain optimization software suites. He served as vice president
of sales for Datalogics International, Inc., a supplier of client-server
software for process manufacturing, from January 1996 to January 1997 and as
vice president of sales at Numetrix Limited, a provider of Internet-based
solutions for supply chain integration, from January 1995 to January 1996. He
received a B.A. in English from Hofstra University and an M.A. in English from
the State University of New York at Stony Brook.
Pat. Salmonese became our Vice President and General Manager, e-Solutions
Group in March 2000. From May 1997 to December 1999, Ms. Salmonese served as
the business unit general manager and executive head of the information
technology services business unit of TRW, Inc., an automotive and defense
technology company. From February 1996 to May 1997, Ms. Salmonese served as a
principal of FPS Resources, Inc., a business consulting firm.
Sam Bayer, Ph.D. became our Vice President, Partner Programs, in March 2000.
From March 1998 to March 2000, Mr. Bayer served as our Vice President, e-
Solutions Group. From June 1997 to March 1998, he was a principal of Bayer
Consulting Group. From June 1993 to June 1997, he was director of consulting
services for Sapiens U.S.A., a unit of Sapiens International Corporation N.V.,
a software company. He received both a B.S. and a Ph.D. from the University of
Florida.
John Veling became Managing Director of HAHT Europe in October 1998. Mr.
Veling served as a consultant for our European activities from September 1996
to October 1998. From 1988 to April 1996, Mr. Veling was founder and president
of MicroScope, a Dutch-based software distributor. Mr. Veling received an HBS
from Mendel College in Haarlem, The Netherlands and a Beta-extension from the
R.K. Lyceum in Hilversum, the Netherlands.
Keith Wannop became Managing Director of HAHT Commerce Pty. Ltd., our
Australian subsidiary, in July 2000. From July 1997 to July 2000, Mr. Wannop
was general manager of HAHT Asia Pty. Ltd., a former distributor of our
products. From 1994 to 1996, he served as business unit manager for Logical
Solutions, an information technology company and a wholly owned subsidiary of
Fujitsu.
James Atkins has been a member of our board of directors since September
1997. Since July 1999, Mr. Atkins has been the chief executive officer of
ComplianceTraining.com, a private software company that develops web-based
regulatory training programs. From 1992 to 1997, Mr. Atkins was the chief
executive officer of Baja Corporation, a consulting firm specializing in
assisting private technology companies in accelerating their growth. He
received an A.B. in mathematics from Duke University and an M.S. in computer
science from the University of North Carolina at Chapel Hill.
Sonja Hoel has been a member of our board of directors since April 1996.
Since 1994, she has been a general partner and managing director of Menlo
Ventures, a venture capital firm. Ms. Hoel previously was an associate for the
Edison Venture Fund, worked in business development for Symantec Corporation
and was an investment analyst for TA Associates. She received a B.S. in
commerce from the University of Virginia and an M.B.A. from Harvard University.
Richard Holcomb, one of our founders, has been a member of our board of
directors since July 1995. From July 1995 until October 2000, Mr. Holcomb
served as our Chairman, and was our Chief Executive
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Officer from July 1995 to August 1997. From 1994 to 1995, Mr. Holcomb had his
own consulting company, HB Ventures. Previously, he founded Q+E Software, a
supplier of client-server database access technology, and served as that
company's president from 1986 to 1994. Currently, Mr. Holcomb is an appointed
member of the Information Resource Management Commission, which provides
strategic information technology planning and policy development for North
Carolina. Since May 1995, he has served as a director of Neon Systems, Inc., an
enterprise access and integration software provider. He received a B.S. from
the University of South Carolina and an M.S. in computer science from North
Carolina State University.
Christopher B. Hollenbeck has been a member of our Board of Directors since
December 1997. He became Managing Director of Granite Ventures, a venture
capital firm, in August 2000. From July 1998 to August 2000, he was a principal
in H&Q Venture Associates, the predecessor to Granite Ventures, and he served
as vice president of Hambrecht & Quist's venture capital group from June 1996
to July 1998. Since July 1998, he has been an investment manager for the Adobe
Ventures investment funds, which are affiliated with Granite Ventures. Mr.
Hollenbeck joined Hambrecht & Quist in 1990, where he worked in the mergers and
acquisitions department and the corporate finance department until June 1996.
Mr. Hollenbeck serves on the boards of directors of AvantGo and ESPS, Inc. He
received a B.A. in American Studies from Stanford University.
Paul J. Rizzo has been a member of our board of directors since June 2000.
Since 1996, he has served as chairman of the board of Franklin Street Partners,
a private investment company. He also serves as a director of the following
public companies: Kenan Transport Co., Pharmaceutical Product Development,
Ryder System Inc., BTI Telecom Corp., and Johnson & Johnson. Mr. Rizzo left his
position as vice chairman of IBM in 1987 to become dean of the Kenan-Flagler
Business School at the University of North Carolina at Chapel Hill. He returned
to IBM in 1993 as vice chairman and retired from that position in 1994. Mr.
Rizzo serves as chairman of the board of the University of North Carolina
Healthcare System.
Roger J. Sippl became a member of our board of directors in April 2000.
Since January 1999, Mr. Sippl has served as a director of Support.com, Inc.,
which delivers support software through the Internet or intranets. Since August
1995, Mr. Sippl has served as the managing partner of Sippl Macdonald Ventures,
a venture capital firm. From 1980 to 1989, Mr. Sippl served as chief executive
officer of Informix Corporation, a database company that he founded. He served
as chairman of the board of Informix from 1989 to 1993. From December 1990 to
1996, he served as a director of The Vantive Corporation, a customer
relationship management solutions company that he co-founded. From 1996 to
1998, he served as chairman of the board of The Vantive Corporation. From
February 1993 until March 1998, Mr. Sippl served as the chief executive officer
and chairman of the board of Visigenic Software, Inc., a software development
tools provider company that he founded. From March 1998 to July 1998, he served
as chief technology officer of Borland International, Inc., a software
development tools provider which acquired Visigenic Software, Inc. Mr. Sippl
holds a B.S. in computer science from the University of California at Berkeley.
Douglas C. Williamson has been a member of our board of directors since
January 1998. Mr. Williamson is senior vice president and managing director of
NationsBank Capital Investors, a venture capital fund owned by BancAmerica
Capital Investors. Prior to joining NationsBank Capital Investors in 1989, he
held senior management positions with two operating companies and various
corporate finance and corporate lending positions with Rotan Mosele, W.R. Grace
and Cleveland Trust. Mr. Williamson serves on the board of directors of North
American Technologies, Inc. He is a C.P.A. in Texas. Mr. Williamson received a
B.A. from Denison University and an M.B.A. from Columbia University.
Board of Directors and Committees
Our board of directors is currently composed of eight members. Each director
will hold office until the next annual meeting of our stockholders or until his
or her successor is duly elected and qualified. Mr. Archer, Mr. Atkins, Ms.
Hoel, Mr. Holcomb, Mr. Hollenbeck and Mr. Williamson serve on our board of
directors pursuant to a stockholders agreement entered into in connection with
our preferred stock financings. All rights
50
<PAGE>
to elect directors under this agreement terminate upon the conversion of our
preferred stock into common stock upon completion of this offering. Our
certificate of incorporation and bylaws provide that, beginning with the first
meeting of the board of directors following this offering, the board of
directors will be divided into three classes as nearly equal as possible, with
each class serving staggered, three-year terms as follows:
.the term of our class I directors will expire at our 2001 annual meeting;
.the term of our class II directors will expire at our 2002 annual meeting;
and
.the term of our class III directors will expire at our 2003 annual
meeting.
We have both a compensation committee and an audit committee. The
compensation committee makes recommendations to the board of directors about
salaries and incentive compensation for our officers and employees, and
administers our stock option and employee stock purchase plans. The members of
the compensation committee are Messrs. Atkins and Williamson and Ms. Hoel. The
audit committee makes recommendations to the board of directors about the
selection of independent auditors, reviews the results and scope of audits and
other accounting-related services and reviews and evaluates our internal
control functions. The members of the audit committee are Messrs. Hollenbeck,
Sippl and Rizzo.
Director Compensation
Our directors are reimbursed for travel expenses incurred in connection with
attending board meetings, but receive no other cash compensation for their
services as board members. On January 13, 2000, we granted Mr. Atkins an option
to purchase 50,000 shares of our common stock with an exercise price of $0.40
per share. This option was fully vested at the time of grant. On March 27,
2000, we granted Sippl Macdonald Ventures, an entity affiliated with Mr. Sippl,
an option to purchase 100,000 shares of our common stock with an exercise price
of $0.40 per share. This option vests over two years.
Limitation of Liability and Indemnification Matters
Our bylaws provide for mandatory indemnification of directors and officers
to the fullest extent permitted by Delaware law. In addition, our certificate
of incorporation limits the liability of our directors to us or our
stockholders for breaches of the directors' fiduciary duties to the fullest
extent permitted by Delaware law.
Compensation Committee Interlocks and Insider Participation
Our compensation committee consists of Messrs. Atkins and Williamson and Ms.
Hoel. No member of the compensation committee serves as an officer or employee.
No member of the compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more
executive officers serving as a member of our board of directors or
compensation committee.
51
<PAGE>
Executive Compensation
Summary Compensation Table
The following table presents information concerning the compensation during
the fiscal year ended April 30, 2000 of our chief executive officer and each of
our four other most highly compensated executive officers for fiscal 2000, who
we refer to in this prospectus as our named executive officers.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
------------------ --------------------------
Securities
Underlying All Other
Name and Principal Positions Salary($) Bonus($) Options Compensation($)
---------------------------- --------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
Rowland Archer(1)............. $186,667 $40,083 -- --
President and Chief Executive
Officer
Richard Holcomb(2)............ 133,750 21,438 -- --
Chairman
Michael Kelley................ 133,333 19,167 375,000 --
Vice President, Software
Development
Alexander Plavocos............ 159,167 27,333 -- --
Vice President, Marketing
Thomas Mackey................. 184,167 58,438(3) -- --
Vice President, Sales
</TABLE>
--------
(1) In October 2000, Mr. Archer was named Chairman of our board of directors.
(2) Mr. Holcomb served as Chairman of our board of directors from July 1995
until October 2000.
(3) Includes sales commissions of $47,605.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Potential
Realizable
Value at
Assumed
Percent Annual Stock
of Total Price
Number of Options Appreciation
Securities Granted to for Option
Underlying Employees Exercise Term(1)
Options in Fiscal Price Per Expiration -------------
Name Granted Year(2) Share($) Date 5% 10%
---- ---------- ---------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Rowland Archer........ -- -- -- -- -- --
Richard Holcomb....... -- -- -- -- -- --
Michael Kelley........ 375,000 8.7% $0.40 3/27/2010 $ $
Alexander Plavocos.... -- -- -- -- -- --
Thomas Mackey......... -- -- -- -- -- --
</TABLE>
--------
(1) Potential realizable values are net of exercise price, but before the
payment of taxes associated with exercise. Amounts represent hypothetical
gains that could be achieved for the options if exercised at the end of the
option term. The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the SEC and do not represent our
estimate or projection of our future common stock prices. These amounts
represent assumed rates of appreciation in the value of our common stock
from the assumed offering price of $ per share. Actual gains, if any, on
stock option exercises are dependent on the future performance of the
common stock and overall stock market conditions. The amounts reflected in
the table may not necessarily be achieved.
(2) Based on options to purchase an aggregate of 4,323,500 shares of common
stock granted to our employees during fiscal 2000.
52
<PAGE>
Options Exercised and Fiscal Year-End Option Values
The following table presents information about the shares acquired and the
value realized upon the exercise of stock options for fiscal 2000 and the
fiscal year-end number and value of unexercised options with respect to the
named executive officers.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Value Options at April 30, 2000 April 30, 2000(1)
Acquired on Realized ------------------------- -------------------------
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rowland Archer.......... -- -- -- -- -- --
Richard Holcomb......... -- -- -- -- -- --
Michael Kelley.......... 50,000 $ 34,969 415,031 $ $
Alexander Plavocos...... -- -- 242,425 188,536 $ $
Thomas Mackey........... -- -- 444,428 202,014 $ $
</TABLE>
--------
(1) There was no public trading market for the common stock as of April 30,
2000. Accordingly, these values have been calculated on the basis of an
assumed offering price of $ per share, less the applicable exercise
price per share, multiplied by the number of shares underlying the options.
Employee Benefit Plans
1995 Stock Award Plan
Our 1995 Stock Award Plan was adopted by our board of directors in August
1995. A total of 15,000,000 shares of common stock have been reserved for
issuance under the 1995 plan. As of October 31, 2000, outstanding options to
purchase 9,267,660 shares of common stock with a weighted average exercise
price of $0.43 per share were outstanding under the plan, and 942,950 shares
had been issued under the plan at a weighted average exercise price of $0.16
per share. The 1995 plan will terminate in August 2005, unless sooner
terminated by our board of directors.
The 1995 plan provides for grants of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code to employees and grants of
nonstatutory options to directors, employees and consultants. The 1995 plan is
administered by the compensation committee. The exercise price of incentive
stock options must not be less than the fair market value of our common stock
on the date of grant. With respect to any option holder who owns stock
representing more than 10% of the voting power of all classes of our
outstanding capital stock, the exercise price of any incentive stock option
must be equal to at least 110% of the fair market value of our common stock on
the date of grant, and the term of the option must not exceed five years. The
terms of all other options may not exceed ten years. The aggregate fair market
value of common stock, determined as of the date of the option grant, for which
incentive stock options may for the first time become exercisable by any
individual in any calendar year may not exceed $100,000.
Our board of directors can amend or terminate the 1995 plan at any time,
except that stockholder approval is required for some amendments. No amendment
or termination can adversely affect the rights, with respect to previous
grants, of any option holder without his or her consent. The board of directors
can also select the persons to whom options can be granted as well as the
number of shares of common stock covered by each award and the terms and
conditions, including any vesting schedule, for each award.
In the event of an acquisition or liquidation of our company, unless the
option holder is both offered employment by the acquiring entity and offered
options equivalent to the option holder's then-unvested options, then upon the
effective date of the transaction, a number of options will vest and become
exercisable equal to the number of options that would have become vested
through the one-year period following the transaction.
53
<PAGE>
2000 Employee Stock Purchase Plan
In October 2000, our board of directors adopted the HAHT Commerce, Inc. 2000
Employee Stock Purchase Plan. Our stockholders approved the purchase plan in
2000. The purchase plan is intended to qualify as an employee stock
purchase plan under the Internal Revenue Code. A total of shares of our
common stock are reserved for issuance under the purchase plan.
The purchase plan will be administered by the compensation committee of our
board of directors. Generally, each offering of common stock under the purchase
plan is for a period of six months. Offerings will start on or about and
of each year. The first plan offering, however, will begin on the effective
date of this offering and end on the last day of the sixth full calendar month
following the calendar month in which this offering began. The purchase plan
will continue until terminated by the board of directors or until all of the
shares reserved for issuance under the purchase plan have been issued.
Only our full-time employees who have been with us for at least six months
can participate in the purchase plan. Payroll deductions must equal at least 1%
of the employee's compensation for each pay period and cannot exceed 15% of the
employee's compensation for the pay period. No person who owns shares or holds
options to purchase, or who as a result of participation in the plan would own
shares or hold options to purchase, 5% or more of the total combined voting
power or value of all classes of our stock is entitled to participate in the
purchase plan. Once an employee becomes a participant in the purchase plan, he
or she will automatically participate in each successive offering until he or
she ceases to be a full-time employee or withdraws from the purchase plan.
On the last day of each offering period, participants purchase shares of our
common stock with their accumulated payroll deductions. The purchase price per
share generally will be 85% of the lesser of the fair market value of the
shares on the beginning or end of the six-month offering period.
Under the purchase plan, participants may not purchase shares having a fair
market value exceeding $25,000, as determined as of the beginning of each
offering period, in any calendar year.
A participant may withdraw from an offering at any time without affecting
his or her eligibility to participate in future offerings. Once a participant
withdraws from an offering, however, he or she may not again participate in the
same offering.
In the event of a transfer of control of our company, our board of directors
may arrange with the surviving, continuing, successor or purchasing
corporation, or the parent of that corporation, to assume our rights and
obligations under the purchase plan. Purchase rights that are neither assumed
by the acquiring corporation nor exercised as of the transfer of control
terminate as of the date of the transfer of control.
Our board of directors may at any time amend or terminate the purchase plan,
except that any termination will not affect purchase rights previously granted
under the purchase plan, nor will any amendment make any change in a purchase
right previously granted under the purchase plan that would adversely affect
the right of any participant. In addition, an amendment to the purchase plan
must be approved by our stockholders within 12 months of the adoption of the
amendment if required under any applicable law.
401(k) Retirement Plan
Effective January 1, 1998, we established a 401(k) retirement plan for
eligible employees. In order to be a participant in the 401(k) plan, an
employee must be at least 18 years old. A participant can contribute up to 15%
of his or her total annual compensation to the 401(k) plan, or up to a
statutorily prescribed annual limit, if less. The annual limit for the year
ended December 31, 2000 is $10,500. Each participant is fully vested in his or
her deferred salary contributions. Participant contributions are held and
invested by the 401(k) plan's trustee. We can make discretionary contributions
as a percentage of participant contributions, subject to established limits. To
date, we have not made any contributions to the 401(k) plan on behalf of
participants. The 401(k)
54
<PAGE>
plan is intended to qualify under Section 401 of the Internal Revenue Code, so
that contributions by us or our employees to the 401(k) plan, and income earned
on the 401(k) plan contributions, are not taxable to employees until withdrawn
from the 401(k) plan, and so that our contributions, if any, will be deductible
by us when made.
55
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Other Related Parties
Series E Financing
In December 1999, we issued 14,465,888 shares of our Series E preferred
stock, at a purchase price of $0.929 per share, to a group of private investors
in the initial closing of a private placement for an aggregate purchase price
of $13,438,810. In January 2000, we issued 2,475,764 shares of our Series E
preferred stock, at a purchase price of $0.929 per share, to a group of private
investors in a subsequent closing of a private placement for an aggregate
purchase price of $2,299,985. In March 2000, we issued 9,892,361 shares of our
Series E preferred stock, at a purchase price of $0.929 per share, to a group
of private investors in a subsequent closing of a private placement for an
aggregate purchase price of $9,190,003. Each outstanding share of Series E
preferred stock will convert into one share of common stock immediately prior
to the completion of this offering. The following related parties were
purchasers of our Series E preferred stock:
<TABLE>
<CAPTION>
Number of Aggregate
Name, Relationship Shares Purchase Price
------------------ --------- --------------
<S> <C> <C>
An affiliate of CIBC World Markets Corp., a principal
stockholder......................................... 5,382,132 $5,000,000
James Atkins, a director and principal stockholder... 2,152,854 $2,000,000
Affiliates of Menlo Ventures, a principal stockholder
affiliated with Ms. Hoel, one of our directors...... 856,836 $ 796,000
Affiliates of Sippl Macdonald Ventures, a principal
stockholder affiliated with Mr. Sippl, one of our
directors........................................... 2,583,425 $2,400,000
Southeast Interactive Technology Fund II, a principal
stockholder......................................... 2,781,486 $2,584,000
An affiliate of BancAmerica Capital, a principal
stockholder affiliated with Mr. Williamson, one of
our directors....................................... 914,963 $ 850,000
Adobe Ventures II, L.P., an entity affiliated with
Mr. Hollenbeck, one of our directors................ 454,252 $ 422,000
</TABLE>
At the time of the transaction:
. Ms. Hoel, one of our directors, was a general partner and director of
Menlo Ventures and its affiliated funds;
. Mr. Sippl, one of our directors, was a principal of Sippl Macdonald
Ventures and its affiliated funds;
. Mr. Williamson, one of our directors, was a senior vice president and
managing director of NationsBank Capital Investors, now part of
BancAmerica Capital; and
. Mr. Hollenbeck, one of our directors, was an investment manager for
Adobe Ventures II, L.P.
56
<PAGE>
Series D Financing
In September 1997, we issued 5,962,817 shares of our Series D preferred
stock, at a purchase price of $0.80 per share, to a group of private investors
in the initial closing of a private placement for an aggregate purchase price
of $4,770,254. In December 1997, we issued 11,500,000 shares of our Series D
preferred stock, at a purchase price of $0.80 per share, to a group of private
investors in a subsequent closing of a private placement for an aggregate
purchase price of $9,200,000. In February 1998, we issued 536,180 shares of our
Series D preferred stock, at a purchase price of $0.80 per share, to a group of
private investors in a subsequent closing of a private placement for an
aggregate purchase price of $428,944. Each outstanding share of Series D
preferred stock will convert into one share of common stock immediately prior
to the completion of this offering. The following related parties were
purchasers of our Series D preferred stock:
<TABLE>
<CAPTION>
Number of Aggregate
Name, Relationship Shares Purchase Price
------------------ --------- --------------
<S> <C> <C>
James D. Atkins, a director and principal
stockholder.......................................... 2,500,000 $2,000,000
Richard Holcomb, a director........................... 625,159 $ 500,127
Affiliates of Menlo Ventures, a principal stockholder
affiliated with Ms. Hoel, one of our directors....... 1,508,722 $1,206,978
An affiliate of Sippl Macdonald Ventures, a principal
stockholder affiliated with Mr. Sippl, one of our
directors............................................ 257,425 $ 205,940
Southeast Interactive Technology Fund II, a principal
stockholder.......................................... 625,000 $ 500,000
An affiliate of BancAmerica Capital, a principal
stockholder affiliated with Mr. Williamson, one of
our directors........................................ 6,250,000 $5,000,000
Adobe Ventures II, L.P., an entity affiliated with Mr.
Hollenbeck, one of our directors..................... 2,500,000 $2,000,000
</TABLE>
At the time of the transaction:
. Ms. Hoel, one of our directors, was a general partner and director of
Menlo Ventures and its affiliated funds;
. Mr. Sippl, one of our directors, was a principal of Sippl Macdonald
Ventures and its affiliated funds;
. Mr. Williamson, one of our directors, was a senior vice president and
managing director of NationsBank Capital Investors, now part of
BancAmerica Capital; and
. Mr. Hollenbeck, one of our directors, was an investment manager for
Adobe Ventures II, L.P.
Prior to the Series D financing, in July 1997, we borrowed $386,124 from
various parties as a bridge loan bearing interest at a rate of 6.07% per year.
In August 1997, we borrowed $351,000 from various parties as an additional
bridge loan bearing interest at a rate of 5.72% per year. The principal and
interest on these bridge loans was converted into shares of our Series D
preferred stock at a conversion price of $0.80 in September 1997. The following
related parties made loans to us:
<TABLE>
<CAPTION>
Principal
Name, Relationship Amount Borrowed
------------------ ---------------
<S> <C>
Entities affiliated with Menlo Ventures, a principal
stockholder and entity affiliated with one of our directors... $321,168
Richard Holcomb, a director.................................... $133,000
</TABLE>
At the time of the transaction, Ms. Hoel, one of our directors, was a
general partner and director of Menlo Ventures and its affiliated funds.
57
<PAGE>
Series C-1 Financing
In September 1997, in connection with the Series D Financing, we exchanged
1,361,708 shares of Series C preferred stock for 4,289,382 shares of Series C-1
preferred stock at an exchange ratio of 1 to 3.15. Only those holders of Series
C preferred stock who also participated in the Series D Financing were eligible
for the exchange. Each outstanding share of Series C-1 preferred stock will
convert into one share of common stock immediately prior to the completion of
this offering. The following related parties participated in the share
exchange:
<TABLE>
<CAPTION>
Number of
Number of Series
Name, Relationship Series C Exchanged C-1 Received
------------------ ------------------ ------------
<S> <C> <C>
Affiliates of Menlo Ventures, a principal
stockholder affiliated with Ms. Hoel, one of
our directors............................... 1,073,576 3,381,764
Affiliates of Sippl Macdonald Ventures, a
principal stockholder affiliated with Mr.
Sippl, one of our directors................. 90,362 284,639
</TABLE>
At the time of the transaction:
. Ms. Hoel, one of our directors, was a general partner and director of
Menlo Ventures and its affiliated funds; and
. Mr. Sippl, one of our directors, was a principal of Sippl Macdonald
Ventures and its affiliated funds.
Option to Purchase Common Stock Agreement
On August 17, 1997, we entered into an Option to Purchase Common Stock
Agreement with James Hebert, one of our former executive officers. Under the
terms of this agreement, we were granted the right to purchase up to 1,365,525
shares of our common stock from Mr. Hebert at a purchase price of $0.40 per
share at any time prior to August 17, 2007. Mr. Hebert also granted us an
irrevocable proxy with respect to the voting of these shares. We assigned our
rights and obligations under this agreement to various parties in connection
with our Series C-1 and Series D financings. The following related parties
received assignments of these options:
<TABLE>
<CAPTION>
Number of
Shares
Subject to
Assigned
Name, Relationship Option
------------------ ----------
<S> <C>
Rowland Archer, an executive officer and director.................. 455,208
Richard Holcomb, a director........................................ 151,736
An affiliate of Sippl Macdonald Ventures, a principal stockholder
affiliated with one of our directors.............................. 157,617
</TABLE>
At the time of the transaction, Mr. Sippl, one of our directors, was a
principal of Sippl Macdonald Ventures and its affiliated funds. In June of
2000, Sippl Macdonald Ventures I, L.P. exercised its option to purchase 157,617
shares of our common stock from Mr. Hebert at an exercise price per share of
$0.40, for an aggregate exercise price of $63,046.80.
Employment Agreements
We have entered into an employment agreement with Alexander Plavocos, our
Vice President, Marketing. Mr. Plavocos' agreement provides for four months'
salary and continuation of benefits during this four-month period in the event
of his termination. In addition, if his employment is terminated within 12
months of a change of control of our company, an additional 25% of the total
number of shares subject to the stock options granted to him will vest. Under
this agreement, a change of control includes any merger or acquisition in which
a majority of our equity securities change ownership.
58
<PAGE>
We have entered into an employment agreement with Thomas Mackey, our Vice
President, Sales. Mr. Mackey's agreement provides for six months' salary and
continuation of benefits for this six-month period in the event of his
termination. In addition, if his employment is terminated within 12 months of a
change of control of our company, an additional 25% of the total number of
shares subject to the stock options granted to him will vest. Under this
agreement, a change of control includes any merger or acquisition in which a
majority of our equity securities change ownership.
59
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of October 31, 2000 the number of shares
of common stock and the percentage of outstanding shares of common stock that
are beneficially owned by:
. each named executive officer;
. each of our directors;
. all of our current directors and executive officers as a group; and
. each other person that is the beneficial owner of more than 5% of our
common stock.
Beneficial ownership includes voting or investment power with respect to
securities, subject to community property laws, where applicable. Shares of
common stock subject to options and warrants that are presently exercisable or
exercisable within 60 days of October 31, 2000 are deemed to be outstanding and
beneficially owned by the person holding the option or warrant for the purpose
of computing the percentage of ownership of that person, but they are not
deemed outstanding for the purpose of computing the percentage of any other
person. Percentage ownership is based on 66,603,612 shares of common stock
outstanding on October 31, 2000, and shares of common stock outstanding
upon completion of this offering. Unless otherwise noted, each of the persons
listed below has sole voting and investment power with respect to his or her
shares and the address for each of the persons listed below as beneficially
owning more than 5% of our outstanding capital stock is 400 Newton Road,
Raleigh, North Carolina 27615.
<TABLE>
<CAPTION>
Percent
Number of Beneficially Owned
Shares --------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering(1)
------------------------------------ ------------ -------- -----------
<S> <C> <C> <C>
Named Executive Officers and Directors
Rowland Archer(2).......................... 3,305,208 5.0%
Alexander Plavocos(3)...................... 260,383 * *
Thomas Mackey(4)........................... 228,950 * *
Michael Kelley(5).......................... 101,573 * *
James Atkins(6)............................ 4,427,854 6.6
Sonja Hoel(7).............................. 6,760,849 10.2
Richard Holcomb(8)......................... 2,831,894 4.3
Christopher Hollenbeck(9).................. 2,954,252 4.4
Paul J. Rizzo(10).......................... 2,152,853 3.2
Roger Sippl(11)............................ 3,948,368 5.9
Douglas Williamson(12)..................... 7,164,963 10.8
All directors and executive officers as a
group (13 persons)(13).................... 34,536,520 51.2
Other Beneficial Owners of More Than 5% of
our Common Stock
Entities affiliated with BancAmerica
Capital(12)................................. 7,164,963 10.8
901 Main Street, 22nd Floor
Dallas, TX 75202
Entities affiliated with Menlo Ventures(7)... 6,760,849 10.2
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Entities affiliated with CIBC World Markets
Corp.(14)................................... 5,382,132 8.1
BCE Place, 8th Floor
Toronto, Ontario, Canada M5J 2S8
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Percent
Number of Beneficially Owned
Shares --------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering(1)
------------------------------------ ------------ -------- -----------
<S> <C> <C> <C>
Entities affiliated with Sippl Macdonald 3,948,368 5.9
Ventures(11)................................
1422 El Camino Real
Menlo Park, CA 94025
Southeast Interactive Technology Fund II..... 3,406,486 5.1
630 Davis Drive, Suite 220
Morrisville, NC 27560
</TABLE>
--------
* Indicates beneficial ownership of less than one percent.
(1) Assumes no exercise of the underwriter's over-allotment option. If the
underwriter's over-allotment option is exercised in full, we will sell an
additional shares of common stock, and shares of our common stock
will be outstanding after the completion of the offering.
(2) Includes 455,208 shares Mr. Archer has the right to acquire from one of
our stockholders pursuant to an outstanding option exercisable within 60
days.
(3) Includes 260,383 shares Mr. Plavocos has the right to acquire pursuant to
outstanding options exercisable within 60 days, all of which will have
vested.
(4) Includes 228,950 shares Mr. Mackey has the right to acquire pursuant to
outstanding options exercisable within 60 days, all of which will have
vested.
(5) Includes 9,573 shares Mr. Kelley has the right to acquire pursuant to
outstanding options exercisable within 60 days, all of which will have
vested.
(6) Includes 50,000 shares Mr. Atkins has the right to acquire pursuant to
outstanding options exercisable within 60 days, all of which will have
vested.
(7) Includes 100,247 shares held by Menlo Entrepreneurs Fund VI, L.P. and
6,660,602 shares held by Menlo Ventures VI, L.P. MV Management VI, L.P. is
a general partner of Menlo Entrepreneurs Fund VI, L.P. and Menlo Ventures
VI, L.P. and Ms. Hoel is a general partner of MV Management VI, L.P. Ms.
Hoel disclaims beneficial ownership of the shares held by Menlo Ventures
VI, L.P. and Menlo Entrepreneurs Fund VI, L.P., except to the extent of
her proportionate pecuniary interests therein, but exercises shared voting
and investment power with respect to these shares.
(8) Includes 151,736 shares Mr. Holcomb has the right to acquire from one of
our stockholders pursuant to an outstanding option exercisable within 60
days.
(9) Includes 2,954,252 shares held by Adobe Ventures II, L.P. H&Q Adobe
Ventures Management II Co. LLC is the general partner of Adobe Ventures
II, L.P. and Mr. Hollenbeck is a manager of H&Q Adobe Ventures Management
II Co. LLC. Mr. Hollenbeck disclaims beneficial ownership of the shares
held by Adobe Ventures II, L.P., except to the extent of his pecuniary
interests therein.
(10) Includes 2,152,853 shares held by HAHT Partners LLC. Mr. Rizzo is a member
of HAHT Partners LLC and a stockholder of Franklin Street Partners Inc., a
member of HAHT Partners LLC. Mr. Rizzo is also a member of FSP Investors
LLC, the managing member of HAHT Partners LLC, which exercises voting and
investment power with respect to these shares. Mr. Rizzo disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interests therein, but exercises shared voting and investment power with
respect to these shares as a member of FSP Investors LLC.
(11) Includes 1,364,943 shares held by Sippl Macdonald Ventures I, L.P.,
430,571 shares held by Sippl Macdonald Ventures II, L.P. and 538,214
shares held by Sippl Macdonald Ventures III, L.P. Mr. Sippl is a general
partner of Sippl Macdonald Ventures I, L.P. Mr. Sippl is also the managing
member of Sippl Investments LLC, which is the managing member of Sippl
Macdonald Management LLC, the general partner of Sippl Macdonald Ventures
II, L.P., and the managing member of Sippl Macdonald Management III LLC,
the general partner of Sippl Macdonald Ventures III, L.P. Mr. Sippl
disclaims beneficial ownership of these shares except to the extent of his
individual partnership interests, but exercises shared voting and
investment power with respect to these shares. Also includes 1,614,640
shares held by Sippl Investments LLC. As the managing member of Sippl
Investments LLC, Mr. Sippl exercises sole voting and investment power with
respect to these shares.
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(12) Includes 6,250,000 shares held by BA Capital Company, L.P. Mr. Williamson
is a member of BA Equity Management GP, LLC, which exercises voting and
investment power with respect to these shares. Also includes 914,963
shares held by BANCAMERICA Capital Investors SBIC I, L.P. Mr. Williamson
is a member of BACM I GP, LLC, which exercises voting and investment power
with respect to these shares.
(13) Includes 1,505,223 shares subject to options exercisable within 60 days,
including 606,944 shares subject to options to purchase shares from one of
our stockholders.
(14) Includes 1,345,533 shares held by CIBC Employee Private Equity Fund
Partners and 4,036,599 shares held by CIBC WMV Inc.
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DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, our certificate of incorporation will
authorize the issuance of shares of common stock, $0.001 par value per
share, and shares of preferred stock, $0.001 par value per share.
Immediately prior to this offering, 66,603,612 shares of common stock and no
shares of preferred stock will be issued and outstanding. After this offering
shares of common stock will be outstanding if the underwriters do not
exercise their over-allotment option in full and shares of common stock
will be outstanding if the underwriters exercise their over-allotment option in
full.
Common Stock
Holders of common stock are entitled to one vote per share on all matters to
be voted upon by the stockholders generally, including the election of
directors. Holders of common stock will be entitled to receive dividends, if
any, declared from time to time by our board of directors out of funds legally
available for dividends. If we are liquidated, dissolved or wound-up, holders
of common stock will share proportionately in all assets available for
distribution. However, dividend and distribution rights of holders of common
stock will be subject to the rights of any holders of any series of preferred
stock as described below. The holders of common stock have no preemptive or
conversion rights. The common stock does not have cumulative voting rights. As
a result, the holders of more than half of the shares of common stock voting
for the election of directors can elect all directors being elected at that
time. All shares of common stock outstanding immediately following the offering
will be fully paid and will not be subject to further calls or assessments.
There are no redemption or sinking fund provisions applicable to the common
stock.
Preferred Stock
After this offering, no shares of preferred stock will be outstanding. Our
board of directors is authorized, without further stockholder action, to issue
up to shares of preferred stock in one or more series and to fix the
voting rights, liquidation preferences, dividend rights, repurchase rights,
conversion rights, redemption rights and terms, including sinking fund
provisions, and various other rights and preferences, of the preferred stock.
Although there is no current intention to do so, our board of directors may,
without stockholder approval, issue shares of a class or series of preferred
stock with voting and conversion rights which could adversely affect the voting
power or divided rights of the holders of common stock and may have the effect
of delaying, deferring or preventing a change in control.
Warrants
As of October 31, 2000, there were warrants outstanding to purchase 248,022
shares of preferred stock convertible into 248,022 shares of common stock that
will expire if not exercised prior to the effectiveness of this offering. There
were warrants outstanding to purchase shares of preferred stock
convertible into shares of common stock that are not required to be
exercised in connection with and will not expire upon the completion of this
offering, assuming an initial public offering price of $ per share.
Registration Rights
We are party to a registration rights agreement dated December 21, 1999, as
amended March 6, 2000, with stockholders who held, as of October 31, 2000, an
aggregate of 54,283,040 shares of common stock. In addition, we have granted
the holders of warrants to purchase shares of our common stock, assuming an
initial public offering price of $ per share, rights to include those shares
in future registrations. Pursuant to a lock-up agreement with the underwriters,
these stockholders and warrantholders may not exercise any of their rights
under this agreement for a period of 180 days following this offering. This
registration rights agreement provides the following rights to these holders:
1. The right to demand that their shares of common stock be registered
under the Securities Act of 1933, as amended, in a manner similar to the
registration of the shares that are offered by this prospectus.
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Any combination of holders holding at least 30% of the shares of common
stock included in the registration rights agreement may initiate up to two
registrations. Each registration must include common stock with a fair
market value in excess of $5,000,000.
2. The right to demand that their shares of common stock be registered
under the Securities Act on Form S-3 or equivalent registration statement
once we are eligible for that form or equivalent registration statement. We
expect to be eligible for that form or equivalent registration statement
one year after this offering. Any holder that is a party to the
registration rights agreement may initiate these registrations. However,
only two registrations must be made within any 12-month period and each
registration must include common stock with a fair market value in excess
of $750,000.
3. The right to have their shares of common stock included in any
registration of common stock that we file under the Securities Act, other
than those effected on Forms S-4 or S-8, subject to underwriter cutbacks in
the event of over subscription and only to the extent that inclusion will
not diminish the number of securities included by us.
We are required to bear all customary registration expenses including
registration and filing fees, exchange listing fees, printing expenses, fees
and expenses of our counsel, and expenses of one counsel to the holders of the
common stock being registered. The holders of the common stock being registered
must pay all underwriting discounts, selling commissions and fees customarily
allocable to each holder registering shares.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions; Anti-
Takeover Effects
Delaware Corporate Law
The State of Delaware has a statute designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the Delaware General Corporate
Law, is intended to discourage various takeover practices by impeding the
ability of a hostile acquirer to engage in various transactions with the target
company.
In general, Section 203 provides that a person who owns 15% or more of the
outstanding voting stock of Delaware corporation, referred to as an interested
stockholder, may not consummate a merger or other business combination
transaction with the corporation at any time during the three-year period
following the date that person became an interested stockholder. The term
business combination is defined broadly to cover a wide range of corporate
transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
The statute exempts the following transactions from the requirements of
Section 203:
. any business combination if, prior to the date a person became an
interested stockholder, the board of directors approved either the
business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
. any business combination involving a person who acquired at least 85% of
the outstanding voting stock in the transaction in which he became an
interested stockholder, with the number of shares outstanding calculated
without regard to those shares owned by the corporation's directors who
are also officers and by various employee stock plans; and
. any business combination with an interested stockholder that is approved
by the board of directors and by a two-thirds vote of the outstanding
voting stock not owned by the interested stockholder.
A corporation may exempt itself from the requirements of the statute by
adopting an amendment to its certificate of incorporation or bylaws electing
not to be governed by Section 203. At the present time, our board of directors
does not intend to propose this type of amendment.
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<PAGE>
Certificate of Incorporation and Bylaws
Effective upon the completion of this offering, our certificate of
incorporation and bylaws will provide:
. for the authorization of the board of directors to issue, without
further action by the stockholders, up to shares of preferred stock
in one or more series and to fix the rights, preferences, privileges and
restrictions of these shares;
. that special meetings of our stockholders may be called only by a
majority of the members of the board of directors;
. that our stockholders may not take action by written consent;
. that stockholders must give advance notice of stockholder proposals and
director nominations;
. for a classified board of directors; and
. that vacancies on the board of directors, including newly created
directorships, can be filled only by a majority of the directors then in
office.
These provisions in our certificate of incorporation and bylaws are
intended to enhance continuity and stability in the composition of, and the
policies formulated by, the board of directors. In addition, they are designed
to discourage certain types of transactions that may involve an actual or
threatened change of control of us. These provisions are also designed to
reduce our vulnerability to an unsolicited proposal for a takeover that does
not contemplate the acquisition of all of our outstanding shares, or an
unsolicited proposal for the restructuring or sale of all or part of our
company. These provisions, however, could discourage potential acquisition
proposals and could delay or prevent a change in control of us. These
provisions may also have the effect of preventing changes in our management.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is .
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock, and no prediction can be made as to the effect, if any, that sales of
shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock. Nevertheless, sales of
substantial amounts of common stock in the public market, or the perception
that these sales could occur, could adversely affect the market price of our
common stock and could impair our future ability to raise capital through the
sale of our equity securities.
Upon completion of this offering and assuming no exercise of stock options
or warrants after October 31, 2000, there will be an aggregate of shares of
our common stock outstanding. The shares offered by this prospectus, or
shares if the underwriters' option is exercised in full, will be freely
transferable without restriction or limitation under the Securities Act of
1933, as amended, unless purchased by our affiliates as that term is defined in
Rule 144 under the Securities Act. The remaining shares outstanding upon
completion of the offering will be restricted securities within the meaning of
Rule 144 under the Securities Act, and are subject to restrictions under the
Securities Act.
Our directors, officers and holders of substantially all of our common stock
have agreed not to dispose of or hedge any shares of our common stock or any
securities convertible into or exchangeable for our common stock for a period
of 180 days from the date of the final prospectus relating to this offering
without the prior written consent of Salomon Smith Barney Inc. In addition,
during the 180-day period, we have agreed not to file any registration
statement with respect to our common stock or any securities convertible into
or exercisable or exchangeable for common stock without the prior written
consent of Salomon Smith Barney Inc.
In general, under Rule 144, a person, or persons whose shares are required
to be aggregated, who owns shares that were purchased from us or any of our
affiliates at least one year previously, is entitled to sell in brokers
transactions or to market makers, within any three-month period commencing 90
days after the date of this prospectus, the number of shares of common stock
that does not exceed the greater of:
. one percent of the number of then outstanding shares, approximately
shares immediately after the offering; or
. the average weekly reported trading volume during the four calendar weeks
preceding the date on which the required notice of sale is filed with the
SEC.
Sales under Rule 144 are generally subject to the availability of current
public information about us. Any person, or persons whose shares are
aggregated, who owns shares that were purchased from us or any of our
affiliates at least two years previously and who has not been an affiliate of
ours at any time during the 90 days preceding the sale, would be entitled to
sell shares under Rule 144(k) without regard to the volume limitations or
manner of sale, public information or notice requirements of Rule 144.
Any of our employees, officers, directors or consultants who have purchased
or were awarded shares or options to purchase shares pursuant to a written
compensatory plan or contract are entitled to rely on the resale provisions of
Rule 701 under the Securities Act, which permits affiliates and non-affiliates
to sell these shares without having to comply with the holding period
restrictions of Rule 144, in each case commencing 90 days after the date of
this prospectus, but subject to their lock-up agreements. In addition, non-
affiliates may sell these shares without complying with the public information,
volume and notice provisions of Rule 144. Rule 701 is available for our option
holders as to all shares issued pursuant to the exercise of options granted
prior to this offering.
After the offering, we intend to file a registration statement on Form S-8
to register all of the shares of common stock reserved for issuance under our
stock plans. Accordingly, after the 180-day period starting on the date of the
final prospectus relating to this offering, shares issued under those plans
will be freely tradeable by holders who are not our affiliates and, subject to
the volume and other limitations of Rule 144, by holders who are our
affiliates.
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U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general discussion of the principal U.S. federal income
and estate tax consequences of the ownership and disposition of our common
stock by a non-U.S. holder. As used in this prospectus, the term "non-U.S.
holder" is a person other than:
. a citizen or individual resident of the United States for U.S. federal
income tax purposes;
. a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States or of any political
subdivision of the United States;
. an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of its source; or
. a trust, in general, if it is subject to the primary supervision of a
court within the United States and the control of one or more U.S.
persons.
This discussion does not consider:
. other federal, state, local or non-U.S. tax consequences;
. specific facts and circumstances that may be relevant to a particular
non-U.S. holder's tax position, including, if the non-U.S. holder is a
partnership, that the U.S. tax consequences of holding and disposing of
our common stock may be affected by certain determinations made at the
partner level;
. the tax consequences for the stockholders or beneficiaries of a non-U.S.
holder;
. any special tax rules that may apply to certain non-U.S. holders,
including banks, insurance companies, dealers in securities and traders
in securities who elect to apply a mark-to-market method of accounting;
or
. special tax rules that may apply to a non-U.S. holder that holds our
common stock as part of a "straddle," "hedge," or "conversion
transaction," or any similar or hybrid financial instrument.
The following is based on current provisions of the U.S. Internal Revenue
Code of 1986, as amended, applicable U.S. Treasury regulations and
administrative and judicial interpretations, all as of the date of this
prospectus, and all of which may change, retroactively or prospectively. The
following summary is for general information. Each non-U.S. holder should
consult a tax advisor regarding the U.S. federal, state, local and non-U.S.
income and other tax consequences of acquiring, holding and disposing of shares
of our common stock.
Dividends
In the event that dividends are paid on the shares of common stock,
dividends paid to a non-U.S. holder of common stock generally will be subject
to withholding of U.S. federal income tax at a 30% rate, or such lower rate as
may be provided by an applicable income tax treaty. Non-U.S. holders should
consult their tax advisors regarding their entitlement to benefits under a
relevant income tax treaty. A non-U.S. holder may be required to satisfy
certain certification requirements in order to claim such treaty benefits.
Dividends that are effectively connected with a non-U.S. holder's conduct of
a trade or business in the United States or, if an income tax treaty applies,
attributable to a "permanent establishment", or, in the case of an individual,
a "fixed base", in the United States, as provided in that treaty ("U.S. trade
or business income"), are generally subject to U.S. federal income tax on a net
income basis at regular graduated rates, but are not generally subject to the
30% withholding tax if the non-U.S. holder files the appropriate U.S. Internal
Revenue Service form with the payor. Any U.S. trade or business income received
by a non-U.S. holder that is a corporation may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate,
or a lower rate as may be provided by an applicable income tax treaty.
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Dividends paid prior to January 1, 2001 to an address in a foreign country
are presumed, absent actual knowledge to the contrary, to be paid to a resident
of that country for purposes of the withholding discussed above and for
purposes of determining the applicability of a tax treaty rate. For dividends
paid after December 31, 2000:
. a non-U.S. holder of common stock who claims the benefit of an
applicable income tax treaty rate generally will be required to satisfy
applicable certification and other requirements;
. in the case of common stock held by a foreign partnership, the
certification requirement will generally be applied to the partners of
the partnership and the partnership will be required to provide certain
information, including a U.S. taxpayer identification number; and
. look-through rules will apply for tiered partnerships.
A non-U.S. holder of common stock that is eligible for a reduced rate of
U.S. withholding tax under an income tax treaty may obtain a refund or credit
of any excess amounts withheld by filing an appropriate claim for refund with
the IRS.
Gain on Disposition of Common Stock
A non-U.S. holder generally will not be subject to U.S. federal income tax
on any gain realized on a sale or other disposition of common stock unless:
. the gain is effectively connected with a U.S. trade or business of the
non-U.S. holder or, if a tax treaty applies, is attributable to a
permanent establishment in the United States maintained by the non-U.S.
holder, which gain, in the case of a corporate non-U.S. holder, must
also be taken into account for branch profits tax purposes;
. the non-U.S. holder is an individual who holds his or her common stock
as a capital asset, which is generally an asset held for investment
purposes, and is present in the U.S. for a period or periods aggregating
183 days or more during the taxable year in which the sale or
disposition occurs and certain other conditions are met;
. the non-U.S. holder is subject to tax pursuant to the provisions of the
U.S. tax law applicable to certain U.S. expatriates; or
. we are or have been a "U.S. real property holding corporation" for U.S.
federal income tax purposes.
We believe we have not been and are not currently, and we do not anticipate
becoming, a U.S. real property holding corporation for U.S. federal income tax
purposes.
Information Reporting and Backup Withholding Tax
Under specified circumstances, U.S. Treasury regulations require information
reporting and backup withholding at a rate of 31% on certain payments on common
stock. Under currently applicable law, non-U.S. holders of common stock
generally will be exempt from these information reporting requirements and from
backup withholding on dividends paid prior to January 1, 2001 to an address
outside the United States. For dividends paid after December 31, 2000, however,
a non-U.S. holder of common stock that fails to certify its non-U.S. holder
status in accordance with applicable U.S. Treasury regulations may be subject
to backup withholding at a rate of 31% on payments of dividends.
The payment of the proceeds of a disposition of common stock of a non-U.S.
holder:
. to or through the U.S. office of a broker generally will be subject to
information reporting and backup withholding at a rate of 31% unless the
holder either certifies its status as a non-U.S. holder under penalties
of perjury or establishes another exemption;
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. to or through a non-U.S. office of a non-U.S. broker will not be subject
to backup withholding or information reporting unless the broker is a
U.S. person or a "U.S. related person";
. to or through a non-U.S. office of a broker that is a U.S. person or a
"U.S. related person", information reporting, but currently not backup
withholding, on the payment applies unless the broker receives a
statement from the owner, signed under penalty of perjury, certifying
its non-U.S. status or the broker has documentary evidence in its files
that the holder is a non-U.S. holder and the broker has no actual
knowledge to the contrary.
For this purpose, a "U.S. related person" is:
. a "controlled foreign corporation" for U.S. federal income tax purposes;
. a foreign person 50% or more of whose gross income for certain periods
is derived from the conduct of a U.S. trade or business; or
. effective after December 31, 2000, a foreign partnership if, at any time
during its taxable year:
--at least 50% of the capital or profits interest in the partnership is
owned by U.S. persons; or
--the partnership is engaged in a U.S. trade or business.
Effective after December 31, 2000, backup withholding generally will not
apply to the payment of disposition proceeds by or through a non-U.S. office of
a broker that is a U.S. person or a "U.S. related person" unless the broker has
actual knowledge that the holder is a U.S. person.
Non-U.S. holders should consult their own tax advisors regarding the
application of the information reporting and backup withholding rules to them,
including changes to these rules that will become effective after December 31,
2000.
Any amount withheld under the backup withholding rules from a payment to a
non-U.S. holder will be credited against the holder's U.S. federal income tax
liability, if any, and may entitle the non-U.S. holder to a refund provided
that the required information is furnished to the IRS.
Estate Tax
An individual non-U.S. holder who owns common stock at the time of his or
her death or has made certain lifetime transfers of an interest in common stock
will be required to include the value of that common stock in the holder's
gross estate for U.S. federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise.
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UNDERWRITING
Salomon Smith Barney Inc., CIBC World Markets Corp. and U.S. Bancorp Piper
Jaffray Inc. are acting as representatives of the underwriters named below.
Subject to the terms and conditions stated in the underwriting agreement dated
the date of this prospectus, each underwriter named below has agreed to
purchase, and we have agreed to sell to that underwriter, the number of shares
set forth opposite the underwriter's name.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Salomon Smith Barney Inc..........................................
CIBC World Markets Corp...........................................
U.S. Bancorp Piper Jaffray Inc....................................
----
Total...........................................................
====
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
to purchase the shares included in this offering are subject to approval of
legal matters by counsel and to other conditions. The underwriters are
obligated to purchase all the shares, other than those covered by the over-
allotment option described below, if they purchase any of the shares.
The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus and
some of the shares to dealers at the public offering price less a concession
not to exceed $ per share. The underwriters may allow, and dealers may
reallow, a concession not to exceed $ per share on sales to other dealers. If
all of the shares are not sold at the initial offering price, the
representatives may change the public offering price and the other selling
terms. The representatives have advised us that the underwriters do not intend
to confirm any sales to any accounts over which they exercise discretionary
authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to additional shares of common
stock at the public offering price less the underwriting discount. The
underwriters may exercise the option solely for the purpose of covering over-
allotments, if any, in connection with this offering. To the extent the option
is exercised, each underwriter must purchase a number of additional shares
approximately proportionate to that underwriter's initial commitment.
We, our officers and directors and our holders of substantially all of our
common stock have agreed that, for a period of 180 days from the date of this
prospectus, we and they will not, without the prior written consent of Salomon
Smith Barney Inc., dispose of or hedge any shares of our common stock or any
securities convertible into or exchangeable for our common stock. Salomon Smith
Barney Inc. in its sole discretion may release any of the securities subject to
these lock-up agreements at any time without notice.
At our request, the underwriters have reserved up to % of the shares of
common stock for sale, or shares, at the initial public offering price to
persons who are directors, officers or employees, or who are otherwise
associated with us through a directed share program. The number of shares of
common stock available for sale to the general public will be reduced by the
number of directed shares purchased by participants in the program. Any
directed shares not purchased will be offered by the underwriters to the
general public on the same basis as all other shares of common stock offered.
We have agreed to indemnify the underwriters against various liabilities and
expenses, including liabilities under the Securities Act, in connection with
the sales of the directed shares.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the shares was
determined by negotiations between us and the representatives. Among
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the factors considered in determining the initial public offering price were
our record of operations, our current financial condition, our future
prospects, our markets, the economic conditions in and future prospects for the
industry in which we compete, our management, and currently prevailing general
conditions in the equity securities markets, including current market
valuations of publicly traded companies considered comparable to our company.
We cannot assure you, however, that the prices at which the shares will sell in
the public marker after this offering will not be lower than the initial public
offering price or that an active trading market in our common stock will
develop and continue after this offering.
We have applied to have our common stock included for quotation on the
Nasdaq National Market under the symbol "HAHT."
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per share.................................................. $ $
Total...................................................... $ $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include short sales, syndicate covering transactions and
stabilizing transactions. Short sales involve syndicate sales of common stock
in excess of the number of shares to be purchased by the underwriters in the
offering, which creates a syndicate short position. "Covered" short sales are
sales of shares made in an amount up to the number of shares represented by the
underwriters' over-allotment option. In determining the source of shares to
close out the covered syndicate short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase shares thorough the
over-allotment option. Transactions to close out the covered syndicate short
involve either purchases of the common stock in the open market after the
distribution has been competed or the exercise of the over-allotment option.
The underwriters may also make "naked" short sales of shares in excess of the
over-allotment option. The underwriters must close out any naked short position
by purchasing shares of common stock in the open market. A naked short position
is more likely to be created if the underwriters are concerned that there may
be downward pressure on the price of the shares in the open market after
pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of bids for or purchases of shares in the open
market while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc. repurchases shares originally sold by that syndicate
member in order to cover syndicate short positions or make stabilizing
purchases.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common stock. They may also cause the price
of the common stock to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriters may
conduct these transactions on the Nasdaq National Market or in the over-the-
counter market, or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.
We estimate that the total expenses of this offering will be $ .
Affiliates of CIBC World Markets Corp., a representative of the
underwriters, hold shares of our preferred stock purchased in our Series E
preferred stock financing round. The representatives might, from time to time,
engage in transactions with and perform services for us in the ordinary course
of their business.
71
<PAGE>
A prospectus in electronic format might be made available on the web sites
maintained by one or more of the underwriters. The representatives may agree to
allocate a number of shares to underwriters for sale to their online brokerage
account holders. The representatives will allocate shares to underwriters that
may make Internet distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities dealers who
resell shares to online brokerage account holders.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed on for us by
Wyrick Robbins Yates & Ponton LLP, Raleigh, North Carolina. Cravath, Swaine &
Moore, New York, New York, will pass upon legal matters in connection with this
offering for the underwriters. Attorneys of Wyrick Robbins Yates & Ponton LLP
beneficially own 21,528 shares of our common stock through an investment
partnership.
EXPERTS
The financial statements as of April 30, 1999 and 2000 and for each of the
three years in the period ended April 30, 2000, included in this prospectus
have been included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on Form S-1,
including exhibits, schedules and amendments, under the Securities Act with
respect to the shares of common stock to be sold in this offering. This
prospectus does not contain all the information included in the registration
statement. For further information about us and the shares of our common stock
to be sold in this offering, please refer to this registration statement.
Complete exhibits have been filed with our registration statement on Form S-1.
You may read and copy our registration statement and any contract, agreement
or other document filed as an exhibit to our registration statement or any
other information from our filings at the Commission's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the Commission.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information about the public reference rooms. Our filings with the
Commission, including our registration statement, are also available to you on
the Securities and Exchange Commission's Web site, http://www.sec.gov. As a
result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, and will file
periodic reports, proxy statements and other information with the Commission.
Upon approval of our common stock for quotation on the Nasdaq National Market,
these reports, proxy statements and other information may also be inspected at
the offices of Nasdaq Operations, 1735 K Street N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing audited
financial statements, and make available to our stockholders quarterly reports
for the first three quarters of each year containing unaudited interim
financial information.
72
<PAGE>
HAHT COMMERCE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of Independent Accountants..................................... F-2
Consolidated Balance Sheets at April 30, 1999 and 2000 and July 31,
2000................................................................. F-3
Consolidated Statements of Operations for the years ended April 30,
1998, 1999 and 2000 and the three months ended July 31, 1999 and
2000................................................................. F-4
Consolidated Statements of Stockholders' Deficit for the years ended
April 30, 1998, 1999 and 2000 and the three months ended July 31,
2000................................................................. F-5
Consolidated Statements of Cash Flows for the years ended April 30,
1998, 1999 and 2000 and the three months ended July 31, 1999 and
2000................................................................. F-6
Notes to Consolidated Financial Statements............................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and
Stockholders of HAHT Commerce, Inc.
(formerly HAHT Software, Inc.)
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' deficit, and of cash
flows present fairly, in all material respects, the financial position of HAHT
Commerce, Inc. (formerly HAHT Software, Inc.) and its wholly owned subsidiaries
at April 30, 1999 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended April 30, 2000, in
conformity with accounting principles generally accepted in the United States
of America. 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 of
America, 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
Raleigh, North Carolina
July 24, 2000
F-2
<PAGE>
HAHT COMMERCE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, Pro Forma
-------------------------- July 31, July 31,
1999 2000 2000 2000
------------ ------------ ------------ ------------
(unaudited) (unaudited)
(Note 1)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 4,608,446 $ 14,102,567 $ 12,372,268 $ 12,372,268
Short-term
investments--held to
maturity.............. 796,690 2,014,118 -- --
Accounts receivable,
net of allowances of
$159,838, $490,000 and
$641,972,
respectively.......... 1,711,648 2,960,945 3,408,463 3,408,463
Prepaid expenses and
other current assets.. 213,165 375,977 462,790 462,790
------------ ------------ ------------ ------------
Total current assets... 7,329,949 19,453,607 16,243,521 16,243,521
Property and equipment,
net.................... 583,906 846,831 935,151 935,151
Other assets............ 163,871 558,197 871,673 871,673
------------ ------------ ------------ ------------
Total assets........... $ 8,077,726 $ 20,858,635 $ 18,050,345 $ 18,050,345
============ ============ ============ ============
LIABILITIES AND
STOCKHOLDERS' (DEFICIT)
EQUITY
Current liabilities:
Accounts payable and
accrued expenses...... $ 1,809,465 $ 3,987,962 $ 4,626,677 $ 4,626,677
Deferred revenue....... 1,126,462 2,411,387 3,345,037 3,345,037
Current portion of
capital lease
obligation............ 6,444 2,745 2,768 2,768
Line of credit......... 1,000,000 -- -- --
Current portion of
notes payable......... 105,630 29,348 12,304 12,304
------------ ------------ ------------ ------------
Total current
liabilities........... 4,048,001 6,431,442 7,986,786 7,986,786
------------ ------------ ------------ ------------
Capital lease
obligation, less
current portion........ 4,368 1,623 1,383 1,383
Notes payable, less
current portion........ 34,319 19,243 16,001 16,001
Mandatorily redeemable
convertible preferred
stock in series, no par
value as of April 30,
1999 and 2000, $0.001
par value as of July
31, 2000; 29,297,356,
56,955,940 and
56,955,940 shares
authorized as of April
30, 1999 and 2000 and
July 31, 2000,
respectively;
27,223,927 shares
issued and outstanding
as of April 30, 1999,
54,283,040 shares
issued and outstanding
as of April 30, 2000
and July 31, 2000, none
issued and outstanding
pro forma; liquidation
value of $21,440,320 as
of April 30, 1999,
$71,419,966 as of April
30, 2000 and July 31,
2000................... 20,951,631 44,811,674 44,883,578 --
Stockholders' (deficit)
equity:
Series A convertible
preferred stock, no
par value as of April
30, 1999 and 2000,
$0.001 par value as of
July 31, 2000;
1,000,000 shares
authorized, issued and
outstanding as of
April 30, 1999 and
2000 and July 31,
2000, none issued and
outstanding pro
forma................. 200,000 200,000 1,000 --
Common stock, no par
value as of April 30,
1999 and 2000, $0.001
par value as of July
31, 2000; 70,000,000,
84,000,000 and
84,000,000 shares
authorized as of April
30, 1999 and 2000 and
July 31, 2000,
respectively;
9,943,586, 10,615,545
and 10,736,979 shares
issued and outstanding
as of April 30, 1999
and 2000 and July 31,
2000, respectively,
66,020,019 shares
issued and outstanding
pro forma............. 182,092 262,817 10,737 66,020
Additional paid-in
capital............... 759,279 941,294 1,589,957 46,419,252
Deferred compensation.. (68,155) (5,998) (181,852) (181,852)
Accumulated other
comprehensive loss.... (3,676) (3,359) (3,305) (3,305)
Accumulated deficit.... (18,030,133) (31,800,101) (36,253,940) (36,253,940)
------------ ------------ ------------ ------------
Total stockholders'
(deficit) equity...... (16,960,593) (30,405,347) (34,837,403) 10,046,175
------------ ------------ ------------ ------------
Total liabilities and
stockholders'
(deficit) equity...... $ 8,077,726 $ 20,858,635 $ 18,050,345 $ 18,050,345
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
HAHT COMMERCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended July
Year Ended April 30, 31,
-------------------------------------- ------------------------
1998 1999 2000 1999 2000
----------- ----------- ------------ ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Software.............. $ 2,786,728 $ 3,967,743 $ 3,999,951 $ 1,165,860 $ 1,486,492
Services.............. 1,302,522 3,473,320 6,718,417 2,104,997 2,405,477
----------- ----------- ------------ ----------- -----------
Total revenues...... 4,089,250 7,441,063 10,718,368 3,270,857 3,891,969
----------- ----------- ------------ ----------- -----------
Cost of revenues:
Software.............. 312,375 325,299 474,370 162,894 178,222
Services.............. 895,187 2,369,252 4,546,472 1,502,912 1,431,643
----------- ----------- ------------ ----------- -----------
Total cost of
revenues........... 1,207,562 2,694,551 5,020,842 1,665,806 1,609,865
----------- ----------- ------------ ----------- -----------
Gross profit........ 2,881,688 4,746,512 5,697,526 1,605,051 2,282,104
----------- ----------- ------------ ----------- -----------
Operating expenses:
Sales and marketing... 3,887,894 6,175,817 12,324,343 2,603,851 4,130,521
Research and
development.......... 1,967,498 3,018,068 4,096,660 809,928 1,926,638
General and
administrative....... 1,452,511 2,026,113 2,997,885 596,346 878,478
----------- ----------- ------------ ----------- -----------
Total operating
expenses........... 7,307,903 11,219,998 19,418,888 4,010,125 6,935,637
----------- ----------- ------------ ----------- -----------
Operating loss...... (4,426,215) (6,473,486) (13,721,362) (2,405,074) (4,653,533)
Interest income......... 248,808 404,176 283,262 49,336 216,089
Interest expense........ (104,289) (83,465) (331,868) (37,007) (16,395)
----------- ----------- ------------ ----------- -----------
Loss before income
taxes.............. (4,281,696) (6,152,775) (13,769,968) (2,392,745) (4,453,839)
Provision for income
taxes.................. 20,000 -- -- -- --
----------- ----------- ------------ ----------- -----------
Net loss............ (4,301,696) (6,152,775) (13,769,968) (2,392,745) (4,453,839)
Accretion of mandatorily
redeemable preferred
shares................. -- -- (23,919) -- (71,904)
----------- ----------- ------------ ----------- -----------
Net loss
attributable to
common
stockholders....... $(4,301,696) $(6,152,775) $(13,793,887) $(2,392,745) $(4,525,743)
=========== =========== ============ =========== ===========
Net loss per common
share--basic and
diluted................ $ (0.44) $ (0.62) $ (1.36) $ (0.24) $ (0.42)
Weighted average common
shares outstanding--
basic and diluted...... 9,872,973 9,887,481 10,172,994 9,962,276 10,668,223
Pro forma net loss per
common share--basic and
diluted (unaudited).... $ (0.30) $ (0.07)
Pro forma weighted
average common shares
outstanding--basic and
diluted (unaudited).... 45,179,406 65,951,263
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
HAHT COMMERCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Series A Accumulated
Preferred Stock Common Stock Additional Other Total
------------------- -------------------- Paid-in Deferred Comprehensive Accumulated Stockholders'
Shares Amount Shares Amount Capital Compensation Loss Deficit Deficit
--------- --------- ---------- --------- ---------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April
30, 1997........ 1,000,000 $ 200,000 9,872,100 $ 175,896 $ 765,021 $(285,004) $ -- $ (7,575,662) $ (6,719,749)
Exercise of
stock options.. -- -- 6,250 3,125 -- -- -- -- 3,125
Forfeiture of
stock options
and related
deferred
compensation... -- -- -- -- (5,742) 5,742 -- -- --
Amortization of
deferred
compensation... -- -- -- -- -- 110,000 -- -- 110,000
Net loss........ -- -- -- -- -- -- -- (4,301,696) (4,301,696)
--------- --------- ---------- --------- ---------- --------- ------- ------------ ------------
Balance at April
30, 1998........ 1,000,000 200,000 9,878,350 179,021 759,279 (169,262) -- (11,877,358) (10,908,320)
Exercise of
stock options.. -- -- 65,236 3,071 -- -- -- -- 3,071
Amortization of
deferred
compensation... -- -- -- -- -- 101,107 -- -- 101,107
Net loss ....... -- -- -- -- -- -- -- (6,152,775) (6,152,775)
Other
comprehensive
loss--foreign
currency
translation
adjustment..... -- -- -- -- -- -- (3,676) -- (3,676)
--------- --------- ---------- --------- ---------- --------- ------- ------------ ------------
Balance at April
30, 1999........ 1,000,000 200,000 9,943,586 182,092 759,279 (68,155) (3,676) (18,030,133) (16,960,593)
Exercise of
stock options.. -- -- 671,959 80,725 -- -- -- -- 80,725
Deferred
compensation
relating to
grant of stock
options........ -- -- -- -- 34,551 (34,551) -- -- --
Amortization of
deferred
compensation... -- -- -- -- -- 96,708 -- -- 96,708
Warrants to
purchase Series
E preferred
stock issued in
connection with
debt........... -- -- -- -- 100,000 -- -- -- 100,000
Warrants to
purchase Series
E preferred
stock issued in
connection with
services....... -- -- -- -- 71,383 -- -- -- 71,383
Accretion of
Series E
preferred stock
to redemption
value.......... -- -- -- -- (23,919) -- -- -- (23,919)
Net loss........ -- -- -- -- -- -- -- (13,769,968) (13,769,968)
Other
comprehensive
income--foreign
currency
translation
adjustment..... -- -- -- -- -- -- 317 -- 317
--------- --------- ---------- --------- ---------- --------- ------- ------------ ------------
Balance at April
30, 2000........ 1,000,000 200,000 10,615,545 262,817 941,294 (5,998) (3,359) (31,800,101) (30,405,347)
Adjustment to
reflect change
in par value... -- (199,000) -- (281,961) 480,961 -- -- -- --
Exercise of
stock options.. -- -- 121,434 29,881 -- -- -- -- 29,881
Deferred
compensation
relating to
grant of stock
options........ -- -- -- -- 186,250 (186,250) -- -- --
Expense relating
to the grant of
stock options
to
consultants.... -- -- -- -- 53,356 -- -- -- 53,356
Amortization of
deferred
compensation... -- -- -- -- -- 10,396 -- -- 10,396
Accretion of
Series E
preferred stock
to redemption
value.......... -- -- -- -- (71,904) -- -- -- (71,904)
Net loss........ -- -- -- -- -- -- -- (4,453,839) (4,453,839)
Other
comprehensive
income--foreign
currency
translation
adjustment..... -- -- -- -- -- -- 54 -- 54
--------- --------- ---------- --------- ---------- --------- ------- ------------ ------------
Balance at July
31, 2000
(unaudited)..... 1,000,000 $ 1,000 10,736,979 $ 10,737 $1,589,957 $(181,852) $(3,305) $(36,253,940) $(34,837,403)
========= ========= ========== ========= ========== ========= ======= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
HAHT COMMERCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended July
Year Ended April 30, 31,
-------------------------------------- ------------------------
1998 1999 2000 1999 2000
----------- ----------- ------------ ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $(4,301,696) $(6,152,775) $(13,769,968) $(2,392,745) $(4,453,839)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Amortization of
deferred
compensation.......... 110,000 101,107 96,708 36,428 10,396
Expense relating to
the grant of stock
options to
consultants........... -- -- -- -- 53,356
Bad debt expense....... 26,763 132,811 402,821 -- 154,000
Depreciation and
amortization.......... 339,173 359,976 433,887 114,745 118,799
Amortization of non-
cash deferred loan
costs................. -- -- 100,000 -- --
Changes in operating
assets and
liabilities:
Accounts receivable... (737,829) (575,428) (1,652,118) (750,689) (601,518)
Prepaid expenses and
other assets......... (13,634) (285,770) (557,138) (94,386) (250,789)
Accounts payable and
accrued expenses..... 45,697 923,139 2,178,497 111,765 638,715
Deferred revenue...... 214,293 595,808 1,284,925 (157,888) 933,650
----------- ----------- ------------ ----------- -----------
Net cash used in
operating
activities.......... (4,317,233) (4,901,132) (11,482,386) (3,132,770) (3,397,230)
----------- ----------- ------------ ----------- -----------
Cash flows from
investing activities:
Purchases of property
and equipment......... (184,551) (390,940) (696,812) (81,456) (207,119)
Maturities (purchases)
of short-term
investments........... (3,011,815) 2,215,125 (1,217,428) (9,167) 2,014,118
Advances to
distributor........... -- -- -- -- (149,500)
----------- ----------- ------------ ----------- -----------
Net cash (used in)
provided by
investing
activities.......... (3,196,366) 1,824,185 (1,914,240) (90,623) 1,657,499
----------- ----------- ------------ ----------- -----------
Cash flows from
financing activities:
Payment on capital
lease obligation...... (6,609) (9,109) (6,444) (2,552) (217)
Proceeds from issuance
of notes payable...... 737,123 50,557 -- -- --
Payments of principal
on notes payable...... (82,066) (97,059) (91,358) -- --
Payments on line of
credit................ -- -- (1,458,470) (28,618) (20,286)
Net proceeds from line
of credit............. 271,823 250,677 458,470 -- --
Proceeds from sale of
redeemable convertible
preferred stock, net
of issuance costs of
$116,265 and
$1,301,699 as of April
30, 1998 and 2000,
respectively.......... 13,540,506 -- 23,698,482 -- --
Proceeds from exercise
of warrants to
purchase redeemable
convertible preferred
stock................. -- -- 209,025 -- --
Exercise of stock
options............... 3,125 3,071 80,725 9,546 29,881
----------- ----------- ------------ ----------- -----------
Net cash provided by
(used in) financing
activities.......... 14,463,902 198,137 22,890,430 (21,624) 9,378
----------- ----------- ------------ ----------- -----------
Effect of exchange
rates on cash....... -- (3,676) 317 249 54
----------- ----------- ------------ ----------- -----------
Net increase
(decrease) in cash
and cash
equivalents......... 6,950,303 (2,882,486) 9,494,121 (3,244,768) (1,730,299)
Cash and cash
equivalents:
Beginning of period.... 540,629 7,490,932 4,608,446 4,608,446 14,102,567
----------- ----------- ------------ ----------- -----------
End of period.......... $ 7,490,932 $ 4,608,446 $ 14,102,567 $ 1,363,678 $12,372,268
=========== =========== ============ =========== ===========
Supplemental
disclosures:
Cash paid for
interest.............. $ 104,289 $ 82,949 $ 232,384 $ 37,007 $ 16,361
=========== =========== ============ =========== ===========
Cash paid for income
taxes................. $ 20,000 $ -- $ -- $ -- $ --
=========== =========== ============ =========== ===========
Noncash investing and
financing activities:
Acquisition of
equipment in accounts
payable............... $ 19,000 $ 22,845 $ -- $ -- $ --
=========== =========== ============ =========== ===========
Acquisition of
equipment with capital
leases................ $ -- $ 8,630 $ -- $ -- $ --
=========== =========== ============ =========== ===========
Deferred compensation
relating to grant of
stock options......... $ -- $ -- $ 34,551 $ 18,715 $ 186,250
=========== =========== ============ =========== ===========
Warrants to purchase
Series E preferred
stock issued in
connection with
services.............. $ -- $ -- $ 71,383 $ -- $ --
=========== =========== ============ =========== ===========
Accretion of Series E
preferred stock to
redemption value...... $ -- $ -- $ 23,919 $ -- $ 71,904
=========== =========== ============ =========== ===========
Conversion of debt and
accrued interest to
Series D redeemable
convertible preferred
stock................. $ 742,427 $ -- $ -- $ -- $ --
=========== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Description of Business
HAHT Commerce, Inc. (the "Company") sells a suite of software applications
that enable companies to use the Internet to conduct business with their
distributors, resellers and other business customers. The Company was
incorporated in North Carolina as HAHT Software, Inc. in July 1995 and
reincorporated into Delaware as HAHT Commerce, Inc., as of June 30, 2000.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, HAHT Commerce B.V. and HAHT Commerce PTY.
All significant intercompany balances and transactions have been eliminated.
Unaudited Interim Financial Statements
The consolidated financial statements as of July 31, 2000 and for the three
month periods ended July 31, 1999 and 2000 are unaudited and reflect all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of the Company's management, necessary for a fair presentation of
financial position, results of operations and cash flows. All financial
statement disclosures related to the three-month periods ended July 31, 1999
and 2000 are also unaudited.
Unaudited Pro Forma Balance Sheet
Effective upon the closing of the Company's initial public offering, all
shares of the Series A convertible preferred stock and Series B, C, C-1, D and
E mandatorily redeemable preferred stock will automatically convert into shares
of common stock on a one-to-one conversion ratio. The pro forma unaudited
balance sheet reflects the subsequent conversion of Series A convertible
preferred stock and Series B, C, C-1, D and E mandatorily redeemable preferred
stock into common stock as if such conversion had occurred on July 31, 2000.
Revenue Recognition
Software revenues are derived from sales of software licenses. Services
revenues consist of revenue derived from implementation or customization of the
Company's software products, training and ongoing software product support and
maintenance. The Company's revenue recognition policies are in accordance with
Statement of Position ("SOP") 97-2, "Software Revenue Recognition," as modified
by SOP 98-9 "Modification of SOP 97-2, Software Revenue Recognition with
Respect to Certain Transactions," which is the authoritative guidance for
recognizing revenue on software transactions. In the case of software
arrangements which require significant implementation, modification or
customization of software, the Company follows the guidance in SOP 81-1,
"Accounting for Performance of Construction-Type and Certain Production-Type
Contracts."
The Company's revenue recognition policy is as follows:
Software revenues: The Company recognizes revenue from sales of software
licenses upon persuasive evidence of an arrangement (as provided by agreements
or contracts executed by both parties), delivery of the software and
determination that collection of a fixed or determinable license fee is
considered probable.
F-7
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
When the software license arrangement requires the Company to provide
consulting services for significant implementation, customization or
modification of the software or when the customer considers these services
essential to the functionality of the software product, both the software
license revenue and consulting services revenue are recognized in accordance
with the provisions of SOP 81-1. The Company recognizes revenue from these
arrangements using the percentage-of-completion method primarily based on labor
hour inputs. Therefore, during the implementation period, both product license
and consulting services revenue are recognized as work progresses.
When the fees for software upgrades and enhancements, maintenance,
consulting and training are bundled with the license fee, they are unbundled
using the Company's objective evidence of the fair value of the multiple
elements represented by the Company's customary pricing for each element in
separate transactions. If such evidence of fair value for each element of the
arrangement does not exist, all revenue from the arrangement is deferred until
such time that evidence of fair value exists for undelivered elements or until
all elements of the arrangement are delivered, subject to certain exceptions
set forth in SOP 97-2. SOP No. 98-9 amended SOP No. 97-2 to allow recognition
of revenue using the "residual method" in circumstances outlined in SOP No. 98-
9. According to the residual method, the total fair value of the undelivered
elements, as indicated by vendor-specific objective evidence, is deferred and
the difference between the total arrangement fee and the amount deferred for
the undelivered element is recognized as revenue related to the delivered
elements.
Services Revenues: Revenue from implementation, customization and training
services is recognized as the services are performed. Maintenance service
revenues are recognized ratably over the term of the underlying maintenance
agreement, which in most cases is one year. Maintenance includes technical
support and updates and upgrades to the Company's software.
Amounts invoiced prior to satisfying the Company's revenue recognition
criteria are reflected in deferred revenue.
Cost of Revenues
Cost of software revenues consists of the costs to distribute the product,
including the costs of the media on which it is delivered and royalty payments
to third-party vendors. Cost of services revenues consists primarily of
consulting and support personnel salaries and related costs. Research and
development costs are excluded from the cost of revenues.
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
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.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. As of April 30, 1999 and
2000, cash and cash equivalents included approximately $2,514,847 and
$3,025,740 respectively, of certificates of deposit with maturities of less
than ninety days.
F-8
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Investments
The Company's investments consist of interest-bearing deposits and
commercial paper that have been classified as held to maturity and, therefore,
reported at cost, which approximates market value due to the short terms of
these investments.
Property and Equipment
Property and equipment is stated at historical cost and depreciated using
the straight-line method over the estimated useful lives of the assets,
generally three to five years. Leasehold improvements are amortized over the
shorter of the estimated life of the improvement or the lease term.
The Company evaluates long-lived assets for potential impairment by
analyzing the operating results, trends and prospects for the Company, and
considering any other events and circumstances which might indicate potential
impairment.
Other Assets
Included in other assets at April 30, 2000 and July 31, 2000 is a
certificate of deposit in the amount of approximately $190,000, which serves as
collateral for a letter of credit related to the Company's leased office space.
This certificate of deposit is classified as long-term based on the expected
release date of the restrictions. Other assets also include prepaid royalties
on software that is included in the Company's products and deferred costs of
revenue on software products for which the related revenue has also been
deferred.
Research and Development and Software Development Costs
Financial Accounting Standards Board Statement No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed," requires
the capitalization of certain software development costs once technological
feasibility has been established. The Company considers that technological
feasibility has been established once a working model of a product has been
produced and tested. The Company has not capitalized any software development
costs because amounts incurred subsequent to the establishment of technological
feasibility have not been material. Prior to the creation of a working model,
the Company expenses costs as research and development.
Advertising Costs
The Company expenses all advertising costs as incurred. The Company incurred
total advertising expenditures of approximately $172,000, $215,000 and $228,920
during the years ended April 30, 1998, 1999 and 2000, respectively.
Income Taxes
The Company records income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company reviews its
ability to realize deferred tax assets each period in order to determine the
need for a valuation allowance.
F-9
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Accounting for Stock-Based Compensation
The Company measures compensation expense for its employee stock-based
compensation using the intrinsic value method and provides pro forma
disclosures of net loss as if the fair value method had been applied in
measuring compensation expense (see Note 9). Under the intrinsic value method
of accounting for stock-based compensation, when the exercise price of options
granted to employees is less than the estimated fair value of the underlying
stock on the date of grant, deferred compensation is recognized and is
amortized to compensation expense over the applicable vesting period.
Net Loss Per Common Share
The Company computes net loss per common share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share," ("SFAS No.
128") and the Securities and Exchange Commission ("SEC") Staff Accounting
Bulletin ("SAB") No. 98 ("SAB No. 98"). Under the provisions of SFAS No. 128
and SAB No. 98, basic net loss per common share ("Basic EPS") is computed by
dividing net loss attributable to common stockholders by the weighted average
number of common shares outstanding. Diluted net loss per common share
("Diluted EPS") is computed by dividing net loss attributable to common
stockholders by the weighted average number of common shares and dilutive
potential common share equivalents then outstanding. Potential common shares
consist of shares issuable upon the exercise of stock options and warrants and
shares issuable upon conversion of convertible preferred stock. The calculation
of the net loss per share available to common stockholders for the fiscal years
ended April 30, 1998, 1999 and 2000, and for the three months ended July 31,
1999 and 2000 does not include 32,605,051, 33,396,934, 64,021,908, 33,468,359
and 64,893,719 potential shares of common stock equivalents, respectively,
because their impact would be antidilutive.
Pro Forma Net Loss Per Common Share (Unaudited)
Pro forma net loss per common share is calculated assuming conversion of all
Series A preferred stock and Series B, C, C-1, D and E mandatorily redeemable
preferred stock, which converts automatically upon the completion of an initial
public offering into 55,283,040 shares of common stock (see Note 8), at May 1,
1999 or the date of issuance, if later. Therefore, accretion of mandatorily
redeemable preferred stock of $23,919 and $71,904 for the year ended April 30,
2000 and for the three-month period ended July 31, 2000, respectively, is
excluded from the calculation of pro forma net loss per common share.
The calculation of pro forma net loss per common share for the year ended
April 30, 2000 and for the three-month period ended July 31, 2000, does not
include 8,738,868 and 9,610,679 potential shares of common stock equivalents,
respectively, as their impact would be anti-dilutive.
Segment Reporting
The Company applies Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," ("SFAS
No. 131") which uses a "management approach" to determine business segments.
The management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reporting segment. For the periods presented, the
Company has determined that it only has one reportable segment.
F-10
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Comprehensive Income (Loss)
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"), effective May 1, 1998. SFAS
No. 130 requires the Company to display an amount representing comprehensive
income for the year in a financial statement which is displayed with the same
prominence as other financial statements. The Company has elected to present
this information in the Statement of Stockholders' Deficit.
Translation of Foreign Financial Statements
Assets and liabilities of foreign operations, where the functional currency
is the local currency, are translated into U.S. dollars at the rate of exchange
at each reporting date. Income and expenses are translated at the average rate
of exchange prevailing during the month in which the transaction occurs. Gains
and losses from translating foreign currency financial statements are
accumulated in other comprehensive income.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133 established accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. In July 1999, the Financial
Accounting Standards Board issued SFAS No. 137, "Accounting with Derivative
Instruments and Hedging Activities Deferral of the Effective Date of FASB
Statement No. 133" ("SFAS No. 137"). SFAS No. 137 deferred the effective date
of SFAS No. 133 until the first fiscal quarter of the first fiscal year
beginning after June 15, 2000. The Company has not engaged in hedging
activities or invested in derivative instruments and accordingly, does not
believe the implementation of SFAS No. 133 will have an effect on its financial
statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB No. 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. Management
believes that it has complied with the guidance in SAB No. 101.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation--An Interpretation of APB
Opinion No. 25" ("FIN 44"). This Interpretation clarifies the definition of an
employee for the purposes of applying APB Opinion No. 25, "Accounting for Stock
Issued to Employees," the criteria for determining whether a plan qualifies as
a non-compensatory plan, the accounting consequences of various modifications
to the terms of a previously fixed stock option or award, and the accounting
for an exchange of stock compensation awards in a business combination. This
Interpretation is effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occur after either December 15, 1998,
or January 12, 2000. The adoption of FIN 44 in the three months ended July 31,
2000, did not have a material impact on the Company's financial position or
results of operation.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 2000
presentation with no effect on previously reported net loss or stockholders'
deficit.
F-11
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Accounts Receivable
The activity in the Company's allowance for doubtful accounts consisted of
the following:
<TABLE>
<CAPTION>
April 30,
---------------------------- July 31,
1998 1999 2000 2000
-------- -------- -------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Balance at beginning of period... $135,000 $110,000 $159,838 $490,000
Charged to expense............... 26,763 132,811 402,821 154,000
Deductions....................... (51,763) (82,973) (72,659) (2,028)
-------- -------- -------- --------
Balance at end of period......... $110,000 $159,838 $490,000 $641,972
======== ======== ======== ========
</TABLE>
3. Property and Equipment
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
April 30,
----------------------- July 31,
1999 2000 2000
---------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Computer equipment................... $1,157,867 $ 1,701,229 $ 1,865,163
Furniture, fixtures, and equipment... 157,622 178,445 219,161
Leasehold and land improvements...... 158,710 139,246 141,715
---------- ----------- -----------
1,474,199 2,018,920 2,226,039
Less accumulated depreciation and
amortization........................ (890,293) (1,172,089) (1,290,888)
---------- ----------- -----------
$ 583,906 $ 846,831 $ 935,151
========== =========== ===========
</TABLE>
Depreciation and amortization amounted to $339,173, $359,976, $433,887,
$114,745 and $118,799 for the years ended April 30, 1998, 1999 and 2000 and for
the three months ended July 31, 1999 and July 31, 2000, respectively. The net
book value of assets acquired under capital leases was $8,080, $6,500 and $0 at
April 30, 1999 and 2000 and July 31, 2000, respectively.
4. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
<TABLE>
<CAPTION>
April 30,
--------------------- July 31,
1999 2000 2000
---------- ---------- -----------
(unaudited)
<S> <C> <C> <C>
Accounts payable.......................... $ 368,540 $ 566,121 $ 798,132
Vacation.................................. 353,814 698,045 757,155
Compensation.............................. 268,335 580,833 606,107
Other accrued expenses.................... 818,776 2,142,963 2,465,283
---------- ---------- ----------
$1,809,465 $3,987,962 $4,626,677
========== ========== ==========
</TABLE>
F-12
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Commitments
The Company leases its office facilities and certain equipment under
operating lease agreements and leases equipment under a capital lease
agreement. As of April 30, 2000, future lease payments under noncancelable
operating leases and the capital lease agreement were as follows:
<TABLE>
<CAPTION>
Operating Capital
Leases Lease
---------- -------
<S> <C> <C>
Year ending April 30,
2001................................................... $1,069,128 $ 3,059
2002................................................... 826,439 1,665
2003................................................... 820,765 --
2004................................................... 853,596 --
2005................................................... 887,740 --
Thereafter............................................. 607,401 --
---------- -------
Total minimum payments................................... $5,065,069 4,724
==========
Less amount representing interest........................ (356)
-------
Present value of capital lease obligation................ 4,368
Less current portion..................................... (2,745)
-------
Capital lease obligation, long-term...................... $ 1,623
=======
</TABLE>
Rent expense under operating leases was approximately $275,000, $395,000 and
$981,003 for the years ended April 30, 1998, 1999 and 2000, respectively.
The Company has entered into various royalty agreements under which third-
party software is incorporated into software sold by the Company. The Company
expensed $78,000, $112,000 and $98,754 during the years ended April 30, 1998,
1999 and 2000, respectively, related to such agreements.
F-13
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
April 30,
----------------- July 31,
1999 2000 2000
-------- ------- -----------
(unaudited)
<S> <C> <C> <C>
Notes payable at an imputed rate of 13.50%,
due in monthly installments of $9,453,
including interest, through July 2000;
collateralized by equipment................. $ 92,561 $14,272 $ --
Note payable at an imputed rate of 14.30%,
due in monthly installments of $1,585,
including interest, with a final payment of
$5,056 in April 2002; collateralized by
equipment................................... 47,388 34,319 28,305
-------- ------- -------
139,949 48,591 28,305
Less current maturities.................... (105,630) (29,348) 12,304
-------- ------- -------
Long-term debt, less current maturities.... $ 34,319 $19,243 $16,001
======== ======= =======
As of April 30, 2000 maturities of long-term debt were as follows:
2001....................................... $29,348
2002....................................... 19,243
-------
$48,591
=======
</TABLE>
In August 1999, the Company entered into a loan agreement with a due date of
120 days. Under the terms of the agreement, interest was due monthly at prime
rate plus 2.5% per annum and advances were provided for up to $4,500,000. The
Company paid all advances made under the agreement prior to the due date. In
consideration of the financing, the Company also issued warrants to purchase
350,000 shares of the Company's Series E mandatorily redeemable convertible
preferred stock at an exercise price of $0.929 per share. The Company used the
Black-Scholes pricing model to estimate the fair value of the warrants and
recorded this estimated fair value of $100,000 as deferred loan costs, which
were amortized during the year. The holders of these warrants exercised 225,000
warrants in April 2000. The remaining warrants are exercisable any time through
August 2006.
7. Line of Credit
In June 1998, the Company entered into a bank line of credit agreement. The
credit agreement provided for working capital advances of up to $1,000,000. The
line of credit agreement expired on August 7, 1999. As of April 30, 1999, there
was $1,000,000 outstanding under the line of credit. All amounts due on this
line of credit were paid during the year ended April 30, 2000.
8. Capital Stock and Authorized Shares
Change in par value and authorized shares
On March 13, 2000, the Company approved an amendment to the Articles of
Incorporation changing the number of authorized shares of common stock and
preferred stock. The Company increased the authorized shares of common stock
from 70,000,000 shares to 84,000,000 shares and increased the authorized shares
of
F-14
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
preferred stock from 48,297,356 shares to 62,955,940 shares. As part of the
June 30, 2000 reincorporation as a Delaware corporation, the Company changed
its common and preferred stock so that each would have a par value of $0.001.
Preferred Stock
As of April 30, 2000 the Company had 62,955,940 authorized shares of
preferred stock, of which 5,000,000 shares were undesignated. The Company had
designated 1,000,000 shares as Series A convertible preferred stock ("Series
A"), 3,258,200 shares as Series B mandatorily redeemable convertible preferred
stock ("Series B"), 3,039,156 shares as Series C mandatorily redeemable
convertible preferred stock ("Series C"), 5,000,000 shares as Series C-1
mandatorily redeemable convertible preferred stock ("Series C-1"), 18,000,000
shares as Series D mandatorily redeemable convertible preferred stock ("Series
D") and 27,658,584 shares as Series E mandatorily redeemable convertible
preferred stock ("Series E").
The following is a summary of preferred stock and liquidation values, by
series, as of April 30, 2000:
<TABLE>
<CAPTION>
Shares
Shares Issued and Liquidation
Authorized Outstanding Preference
---------- ----------- -----------
<S> <C> <C> <C>
Undesignated.............................. 5,000,000 -- $ --
---------- ---------- -----------
Designated:
Series A................................ 1,000,000 1,000,000 --
---------- ---------- -----------
Redeemable Series:
Series B.............................. 3,258,200 3,258,200 1,700,123
Series C.............................. 3,039,156 1,677,448 2,784,414
Series C-1............................ 5,000,000 4,289,382 2,260,585
Series D.............................. 18,000,000 17,998,997 14,399,198
Series E.............................. 27,658,584 27,059,013 50,275,646
---------- ---------- -----------
Total................................ 56,955,940 54,283,040 71,419,966
---------- ---------- -----------
Total preferred stock................ 62,955,940 55,283,040 $71,419,966
========== ========== ===========
</TABLE>
During the period from December 1999 to March 2000, the Company sold
26,834,013 shares of Series E stock in a private placement transaction in
exchange for proceeds of $23,698,482, net of issuance costs of $1,301,699. Such
costs include the value of 248,022 detachable warrants issued to purchase the
Company's Series E preferred stock at an exercise price of $0.929 per share.
The Company used the Black-Scholes pricing model to estimate the fair value of
the warrants and recorded this estimated fair value of $71,383 as stock
issuance costs. These warrants are exercisable any time through March 2005, but
will expire if not exercised prior to the completion of an initial public
offering.
Each share of Series A, Series B, Series C, Series C-1, Series D and Series
E preferred stock, collectively the "Preferred Stock", is convertible into
common stock at the option of the holder on a one-for-one basis. Each series of
Preferred Stock will automatically convert upon the closing date of an
underwritten public offering of the Company's common stock with aggregate
proceeds of more than $30,000,000 and an offering price of at least $2.32 per
share. The conversion ratio of the Series B, Series D and Series E preferred
stock will be adjusted for dilution in the event of future issuances of common
stock or its equivalent for a per share consideration less than that paid by
the Series B, Series D and Series E preferred stockholders, except for issuance
of up to an aggregate of 15,000,000 shares to employees, consultants or
directors through exercise of stock options. The Company has reserved a total
of 57,955,940 shares of common stock in the event of the conversion of the
Preferred Stock.
F-15
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Holders of the Preferred Stock are entitled to one vote for each share of
common stock into which such shares may be converted. Each share of the
Preferred Stock entitles the holder to receive noncumulative dividends, if and
when declared by the board of directors. As of April 30, 2000, no dividends had
been declared by the board of directors. The Series B, Series C, Series C-1,
Series D and Series E preferred stock have restrictive rights which require
approval by the holders of the Series B, Series C, Series C-1, Series D and
Series E preferred stock, as defined in the Certificate of Incorporation, to
consent to liquidation, to enact certain amendments to the Certificate of
Incorporation or bylaws, or to approve certain redemptions of the Preferred
Stock.
In the event of dissolution, liquidation, or winding up of the business, the
holders of Series E preferred stock have preference over the holders of Series
A, Series B, Series C, Series C-1 and Series D preferred stock and common
stock. The liquidation payment to the holders of Series E preferred stock would
be equal to the original issuance price of $0.929 per share plus declared but
unpaid dividends on Series E preferred stock. In the event the total
distribution made under this preference and the pro rata distribution made
along with other classes of stock below to Series E preferred stock holders is
less than $1.858 per share, such holders will be entitled to a distribution at
this rate prior to any other distributions. In the event funds are not
sufficient to make the above preferred distribution, the holders of Series E
preferred stock shall share ratably in any distribution of the assets of the
Company in proportion to the amount that would have been paid if all amounts
owed to the holders had been paid in full.
The holders of the Series B, Series C, Series C-1 and Series D have
preference over the holders of the Series A preferred stock and common stock.
The liquidation payment to the holders of Series B, Series C, Series C-1, and
Series D preferred stock, after the preferential distribution to Series E
preferred stock, would be equal to the original issuance price of the Series B
preferred stock ($0.5218 per share), Series C preferred stock ($1.66 per
share), Series C-1 preferred stock ($0.527 per share), and Series D preferred
stock ($0.80 per share), plus declared but unpaid dividends. In the event funds
are not sufficient to make the preferred distribution as noted above, then the
holders of Series B, Series C, Series C-1 and Series D preferred stock shall
share ratably in any distribution of the assets of the Company in proportion to
the amount that would have been paid if all amounts owed to the holders of
Series B, Series C, Series C-1 and Series D preferred stock had been paid in
full.
The holders of Series A preferred stock, after the preferential distribution
to Series B, Series C, Series C-1, Series D and Series E preferred stock, will
be entitled to receive, along with the holders of Series B, Series C, Series C-
1, Series D and Series E preferred stock and common stock, on a pro rata basis
(assuming all preferred series holders have converted the preferred stock into
shares of common stock) that portion of the remaining assets of the Company
legally available for distribution, if any.
As long as at least 250,000 shares of the Series A preferred stock are
outstanding, at least 814,550 shares of the Series B preferred stock are
outstanding, at least 759,589 shares of the Series C preferred stock are
outstanding, at least 2,500,000 shares of the Series D preferred stock are
outstanding, and at least 2,691,066 shares of the Series E preferred stock are
outstanding, the holders of each of these series of Preferred Stock, voting
separately as a class, have the right to elect one member of the Company's
board of directors.
Upon written request by the majority of the stockholders of the Series B,
Series C, Series C-1, Series D and Series E preferred stock, the Company may be
required to redeem the Series B, Series C, Series C-1, Series D and Series E
preferred stock at its original price plus declared but unpaid dividends at any
time after August 31, 2004, in three equal annual installments each beginning
60 days after the end of the first full calendar month after the date of
request. The Company has no funding requirements prior to the redemption dates.
As a result of this redemption feature, the Company had not classified the
Series B, Series C, Series C-1, Series D and Series E preferred stock as
stockholders' equity as of April 30, 1999 or 2000.
F-16
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a summary of the Company's activity related to the Series
B, Series C, Series C-1, Series D and Series E mandatorily redeemable
convertible preferred stock for the years ended April 30, 1999 and 2000 and for
the three months ended July 31, 2000.
<TABLE>
<CAPTION>
Total
Mandatorily
Redeemable
Convertible
Series B Series C Series C-1 Series D Series E Preferred Stock
---------- ---------- ---------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30,
1998.................. $1,659,424 $2,748,689 $2,260,585 $14,282,933 $ -- $20,951,631
---------- ---------- ---------- ----------- ----------- -----------
Balance at April 30,
1999.................. 1,659,424 2,748,689 2,260,585 14,282,933 -- 20,951,631
Issuance of 26,834,013
shares of Series E at
$0.929 per share, net
of issuance costs of
$1,301,699........... -- -- -- -- 23,627,099 23,627,099
Exercise of warrant to
purchase 225,000
shares of Series E
preferred stock at
$.0929 per share..... -- -- -- -- 209,025 209,025
Accretion of Series E
preferred stock to
redemption value..... -- -- -- -- 23,919 23,919
---------- ---------- ---------- ----------- ----------- -----------
Balance at April 30,
2000.................. 1,659,424 2,748,689 2,260,585 14,282,933 23,860,043 44,811,674
Accretion of Series E
preferred stock to
redemption value
(unaudited).......... -- -- -- -- 71,904 71,904
---------- ---------- ---------- ----------- ----------- -----------
Balance at July 31,
2000 (unaudited)...... $1,659,424 $2,748,689 $2,260,585 $14,282,933 $23,931,947 $44,883,578
========== ========== ========== =========== =========== ===========
</TABLE>
9. Stock Option Plan
In August 1995, the Company adopted the 1995 Stock Award Plan (the "Plan")
which provides for the grant of options to purchase up to 3,162,130 shares of
common stock. During the years ended April 30, 1999 and 2000, the Plan was
amended to provide for the grant of options to purchase up to 7,000,000 and
15,000,000 shares of common stock, respectively. Under the Plan, incentive
stock options may be granted to employees, and non-statutory stock options may
be granted to employees, directors and consultants. Incentive stock options
granted under the Plan must be for periods not to exceed ten years, except for
options granted to stockholders who own greater than 10% of the outstanding
stock, which must be for periods not to exceed five years. Options granted
under the Plan during the years ended April 30, 1999 and 2000 and for the
three-month period ended July 31, 2000 generally vest 25% after the first year
and ratably each month over the following thirty-six month period.
The Company had deferred compensation balances of $68,155, $5,998 and
$181,852 at April 30, 1999 and 2000 and July 31, 2000, respectively, as a
result of the exercise price of certain of the Company's common stock options
being below the fair value of the Company's common stock on the date of the
grant. Deferred compensation is being amortized over the vesting period of the
individual options, which is generally four years. Compensation expense
recognized during the years ended April 30, 1998, 1999 and 2000, and for the
three months ended July 31, 2000 totaled $110,000, $101,107, $96,708 and
$10,396, respectively.
F-17
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes the activity under the Plan for the fiscal
years ended April 30, 1998, 1999 and 2000 and the three months ended July 31,
2000:
<TABLE>
<CAPTION>
Fiscal Year Ended April 30, 2000
------------------------------------------------------------ Three Months Ended
1998 1999 2000 July 31, 2000
------------------- -------------------- ------------------- -------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Exercise Exercise Exercise
Shares Price Shares Price Shares Price Shares Price
--------- -------- ---------- -------- --------- -------- --------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 1,945,851 $0.20 4,381,024 $0.14 5,172,907 $0.18 8,365,846 $0.29
Granted................. 2,828,923 0.20 2,084,577 0.26 4,213,561 0.40 1,260,000 1.06
Exercised............... (6,250) 0.50 (65,236) 0.05 (671,959) 0.12 (121,434) 0.25
Forfeited............... (387,500) 0.86 (1,227,458) 0.20 (348,663) 0.25 (266,755) 0.38
--------- ---------- --------- ---------
Outstanding at end of
period................. 4,381,024 0.14 5,172,907 0.18 8,365,846 0.29 9,237,657 0.39
Options exercisable at
end of period.......... 1,114,162 1,180,312 2,204,054 2,964,950
Weighted average fair
value of options
granted during the
period................. $0.08 $0.05 $0.13 $0.49
</TABLE>
The fair value of options granted during the fiscal years ended April 30,
1999 and 2000 and for the three month period ended July 31, 2000 was equal to
$104,228, $545,805 and $617,400, respectively.
The fair value of the Company's stock-based awards to employees was
estimated as of the date of the grant using the Black-Scholes option-pricing
model, using the following weighted-average assumptions:
<TABLE>
<CAPTION>
Year Ended April
30,
-----------------
1998 1999 2000
----- ----- -----
<S> <C> <C> <C>
Expected life (in years)................................... 5.0 6.7 6.7
Expected volatility........................................ 0% 0% 0%
Risk free interest rate.................................... 6.00% 6.00% 6.00%
Expected dividend yield.................................... 0% 0% 0%
</TABLE>
F-18
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For disclosure purposes, the adjusted estimated fair value of the Company's
stock-based awards to employees is amortized over the vesting period. Had
compensation expense for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates as calculated in
accordance with SFAS 123, the Company's net loss and loss per share for the
fiscal years April 30, 1998, 1999 and 2000 would have been increased to the pro
forma amounts indicated below. The Company's adjusted information follows (in
thousands, except for per share information):
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------
1998 1999 2000
------- ------- --------
<S> <C> <C> <C>
Net loss, as reported........................... $(4,302) $(6,153) $(13,793)
Net loss, as adjusted........................... (4,391) (6,312) (13,995)
Pro forma net loss per share, as reported
Basic and diluted............................. (0.44) (0.62) (1.36)
Net loss per share, as adjusted
Basic and diluted............................. (0.45) (0.64) (1.38)
</TABLE>
The following table summarizes information about stock options outstanding
at April 30, 2000:
<TABLE>
<CAPTION>
Remaining
Contractual
Life for Options
Number Outstanding Number
Exercise Price Outstanding (Years) Exercisable
-------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$0.0006 1,038,250 4.2 1,038,250
0.06 12,500 5.7 12,500
0.20 1,553,752 7.0 1,073,022
0.25 1,334,447 8.2 294,866
0.30 220,000 6.7 80,867
0.40 4,146,000 9.4 404,548
0.50 22,500 0.2 22,500
1.00 38,397 7.6 38,397
--------- ---------
8,365,846 2,964,950
========= =========
</TABLE>
During the three month period ended July 31, 2000, the Company issued
745,000 stock options with an exercise price of $1.00 per share, which was
below the estimated fair value of the common stock at the date of grant.
Accordingly, $186,250 was recorded as deferred compensation and is being
amortized over the related vesting period.
F-19
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Income Taxes
No provision for United States federal or state income taxes has been
recorded as the Company has incurred net operating losses since inception.
Significant components of the Company's deferred tax assets and liabilities
consist of the following:
<TABLE>
<CAPTION>
April 30,
-------------------------
1999 2000
----------- ------------
<S> <C> <C>
Domestic net operating loss carryforwards......... $ 5,924,022 $ 10,393,163
Foreign net operating loss carryforwards.......... -- 189,366
Deferred revenue.................................. 3,114 4,666
Stock based compensation.......................... 141,669 164,464
Startup and organization costs.................... 141,337 70,668
Compensation accruals............................. 237,413 480,526
Bad debt and sales reserves....................... 61,993 190,047
Fixed assets...................................... 44,304 76,239
Credit carryforwards.............................. 196,743 247,005
Other accruals.................................... -- 175,020
----------- ------------
Total deferred tax assets....................... 6,750,595 11,991,164
Valuation allowance for deferred assets......... (6,750,595) (11,991,164)
----------- ------------
Deferred tax assets............................. $ -- $ --
=========== ============
</TABLE>
At April 30, 1999 and 2000, the Company provided a full valuation allowance
against its net deferred tax assets since realization of these benefits could
not be reasonably assured. The increase in valuation allowance resulted
primarily from the additional net operating loss carryforward generated.
As of April 30, 2000, the Company had federal and state net operating loss
carryforwards of $27,500,000 and $21,803,000, respectively. These net operating
loss carryforwards begin to expire in 2011. The utilization of the federal net
operating loss carryforwards may be subject to limitation under the rules
regarding a change in stock ownership as determined by the Internal Revenue
Code. Additionally, the Company has foreign net operating loss carryforwards of
$541,000. These loss carryforwards may be carried forward indefinitely.
Taxes computed at the statutory federal income tax rate of 34% are
reconciled to the provision for income taxes as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------
1998 1999 2000
-------- -------- --------
% of % of % of
Pretax Pretax Pretax
Earnings Earnings Earnings
-------- -------- --------
<S> <C> <C> <C>
United States federal tax benefit at
statutory rate.............................. (34.0)% (34.0)% (34.0)%
State taxes (net of federal benefit)......... (4.6)% (1.2)% (3.8)%
Change in valuation reserves................. 39.0% 38.2% 38.1%
Foreign rate differential.................... -- -- (0.5)%
Foreign withholding on royalty............... 0.5% -- --
Income tax credits........................... (0.5)% (3.1)% (0.3)%
Other nondeductible expenses................. 0.1% 0.1% 0.5%
----- ----- -----
Provision for income taxes................... 0.5% -- --
===== ===== =====
</TABLE>
F-20
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Significant Customers and Concentration of Credit Risk
The Company's principal financial instruments subject to potential
concentration of credit risk are cash and cash equivalents, investments and
trade accounts receivable. The Company places substantially all cash and cash
equivalents and investments with federally insured financial institutions.
However, at times these deposits have exceeded the amounts insured by the
Federal Deposit Insurance Corporation. The concentration of credit risk with
respect to trade accounts receivable is limited due to the number of customers
and their dispersion across different geographic locations. Although the
Company generally does not require collateral for unpaid balances, credit
losses have been within management expectations.
For the fiscal years ended April 30, 1998 and 1999, one customer accounted
for 21.5% and 28.3%, respectively, of total revenue. For the fiscal year ended
April 30, 2000, no customer accounted for more than 10% of total revenue. For
the quarter ended July 31, 2000, one customer accounted for 11.4% of total
revenues.
As of April 30, 1999 and 2000, one customer each year accounted for 15.9%
and 18.9% of outstanding receivables, respectively. As of July 31, 2000, no
customer accounted for more than 10% of total outstanding receivables.
As of April 30, 1999 and 2000, the Company had significant balances
outstanding from individual customers due to the nature of its operations. It
is the policy of the Company to closely monitor all accounts receivable and to
record a provision for uncollectible accounts, as they become estimable.
Generally, no collateral is required.
As of April 30, 1999 and 2000 and July 31, 2000 the Company had $200,
$24,077 and $212,356, respectively, of U.S. dollar equivalent cash balances
denominated in foreign currencies, predominantly the Dutch Guilder. As of April
30, 1999 and 2000 and July 31, 2000 the Company had $6,500, $3,386 and $20,789,
respectively, of U.S. dollar equivalent trade receivable balances denominated
in foreign currencies, predominantly the Dutch Guilder.
12. Geographic Information
The following table presents a summary of revenue by geographic region which
is based on the geographic region in which the customer is domiciled:
<TABLE>
<CAPTION>
April 30,
--------------------------------- July 31,
1998 1999 2000 2000
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
North America................... $3,717,802 $6,899,831 $10,064,929 $3,672,567
Europe.......................... 313,277 533,554 627,150 152,332
Other........................... 58,171 7,678 26,289 67,070
---------- ---------- ----------- ----------
$4,089,250 $7,441,063 $10,718,368 $3,891,969
========== ========== =========== ==========
</TABLE>
The following table represents a summary of long-lived assets by geographic
region:
<TABLE>
<CAPTION>
April 30,
------------------- July 31,
1999 2000 2000
-------- ---------- ----------
<S> <C> <C> <C>
North America................................. $742,756 $1,369,429 $1,773,923
Europe........................................ 5,021 35,599 32,901
</TABLE>
F-21
<PAGE>
HAHT COMMERCE, INC.
(formerly HAHT Software, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Subsequent Events (Unaudited)
Acquisition
On October 31, 2000, the Company entered into an agreement to acquire
certain assets of an independent distributor, HAHT Asia, Inc. ("HAI"), in
exchange for 250,000 shares of the Company's common stock, warrants to acquire
150,000 shares of the Company's common stock at a price of $2.50 per share, the
forgiveness of approximately $308,000 in amounts owed to the Company by HAI,
and the assumption of not more than $200,000 of certain liabilities. Both the
shares and the warrants are to be held in escrow until the later of the first
anniversary of the closing date of the transaction or 180 days after the
completion of a public offering of stock by the Company. Prior to the escrow
termination date, the Company may elect to assume additional liabilities of HAI
for which an appropriate number of shares or warrants held in escrow will
revert back to the Company based upon the fair market value of the Company's
common stock on the escrow termination date.
Credit Facilities
In October 2000, the Company entered into loan agreements with a bank (the
"Bank Agreement") and another lender (the "Lender Agreement") that allow the
Company to receive advances up to $4,000,000 and $7,000,000, respectively.
Under the terms of the Bank Agreement, any advances are due in August 2001 and
incur interest at a rate of prime plus 2% per annum. In connection with this
agreement, the bank was also issued a warrant to acquire shares of the
Company's stock. The exercise price of this warrant ("Bank Exercise Price")
will be the average of $0.929 and the price per share of the Company's next
preferred stock offering, as defined in the warrant. This warrant will be
exerciseable for the same class of shares as those sold in the Company's next
preferred stock offering with the number of shares to be determined by the
product of $200,000 divided by the Bank Exercise Price. In the event the
Company is acquired or the next preferred stock offering does not occur before
August 31, 2001, the Bank Exercise Price will be $0.929. This warrant expires
in October 2005.
Under the terms of the Lender Agreement any advances are due the earlier of
August 2001 or upon completion of a public offering, as defined in the
agreement, and incur interest at a rate of prime plus 3% per annum. In
connection with this agreement, the lender was also issued a warrant to acquire
shares of the Company's capital stock. Under the terms of this warrant, the
exercise price of this warrant ("Lender Exercise Price") will be the average of
$0.929 and the price per share of the Company's next financing, as defined in
the warrant. This warrant will be exerciseable for the same class of shares as
those sold in the Company's next financing with the number of shares to be
determined by the product of $700,000 divided by the Lender Exercise Price. In
the event the Company is acquired or the next financing does not occur before
August 31, 2001, the Lender Exercise Price will be $0.929. This warrant expires
in October 2007.
F-22
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shares
HAHT Commerce, Inc.
Common Stock
[LOGO OF HAHT COMMERCE]
------------
PROSPECTUS
, 2001
------------
Salomon Smith Barney
CIBC World Markets
U.S. Bancorp Piper Jaffray
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<S> <C>
SEC Registration Fees............................................ $19,800
NASD Fees........................................................ 8,000
Nasdaq National Market Listing Fees..............................
Printing and Engraving Expenses..................................
Legal Fees and Expenses..........................................
Accounting Fees and Expenses.....................................
Blue Sky Fees and Expenses.......................................
Transfer Agent Fees..............................................
Miscellaneous and Registrant's Costs.............................
-------
Total.......................................................... $
=======
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact
that he is or was a director, officer, employee or agent of HAHT Commerce, Inc.
may and, in certain cases, must be indemnified by HAHT Commerce against, in the
case of a non-derivative action, judgments, fines, amounts paid in settlement
and reasonable expenses (including attorneys' fees) incurred by him as a result
of such action, and in the case of a derivative action, against expenses
(including attorneys' fees), if in either type of action he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of HAHT Commerce. This indemnification does not apply, in a
derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to HAHT Commerce, unless upon court order
it is determined that, despite such adjudication of liability, but in view of
all the circumstances of the case, he is fairly and reasonably entitled to
indemnity for expenses, and, in a non-derivative action, to any criminal
proceeding in which such person had reasonable cause to believe his conduct was
unlawful.
HAHT Commerce's certificate of incorporation provides that no director of
HAHT Commerce shall be liable to HAHT Commerce or its stockholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permitted by the DGCL.
HAHT Commerce's certificate of incorporation also provides that HAHT
Commerce shall indemnify to the fullest extent permitted by Delaware law any
and all of its directors and officers, or former directors and officers, or any
person who may have served at HAHT Commerce's request as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise.
Item 15. Recent Sales of Unregistered Securities.
In October 2000, HAHT Commerce issued 250,000 shares of common stock and a
warrant to purchase 150,000 shares of common stock, which expires October 31,
2005, at an exercise price of $2.50 per share, to one company pursuant to the
terms of an asset purchase agreement. The shares and warrant were issued
pursuant to an exemption from registration under Section 4(2) of the Securities
Act.
II-1
<PAGE>
In October 2000, HAHT Commerce issued a warrant for the purchase of shares
of Series F preferred stock, or Series E if Series F preferred stock is not
issued, in an amount to be determined by dividing up to $700,000 by the average
of the price of the securities sold in this offering and $0.929, in reliance
upon the exemption from registration under Section 4(2) of the Securities Act
to an accredited investor pursuant to the terms of a credit facility. The
number of shares subject to this warrant may be adjusted if HAHT Commerce
requests an extension of the credit facility or fails to pay all amounts
outstanding under the credit facility by the due date. This warrant expires on
October 6, 2007. Also in October 2000, HAHT Commerce issued a warrant for the
purchase of shares of Series F preferred stock, or Series E preferred stock if
Series F preferred stock is not issued, in an amount to be determined by
dividing $200,000 by the average of the price of the preferred stock sold in
the next offering of preferred stock and $0.929, in reliance upon the exemption
from registration under Section 4(2) of the Securities Act to another
accredited investor pursuant to the terms of a credit facility. This warrant
expires in October of 2005.
In December 1999, HAHT Software, Inc., a North Carolina corporation and
predecessor of the Registrant, issued 14,465,888 shares of its Series E
preferred stock at a purchase price of $0.929 per share to accredited investors
in the initial closing of a private placement for an aggregate purchase price
of $13,438,810. In January 2000, HAHT Software issued 2,475,764 shares of
Series E preferred stock at a purchase price of $0.929 per share to accredited
investors in a subsequent closing of the private placement for an aggregate
purchase price of $2,299,985. In March 2000, HAHT Software issued 9,892,361
shares of Series E preferred stock at a purchase price of $0.929 per share to a
group of accredited investors in the final closing in this private placement
for an aggregate purchase price of $9,190,003. An aggregate of $563,000 was
paid in commissions, and a warrant for the purchase of 248,022 shares of Series
E preferred stock with an exercise price of $0.929 per share was issued to the
placement agent, an accredited investor. This warrant expires on the earliest
to occur of April 24, 2005, the effectiveness of this public offering or a
change in control of the Registrant. A total of 37 accredited investors
purchased Series E preferred stock in reliance on an exemption from
registration under the Securities Act provided by Rule 506 of Regulation D
thereunder, and the warrant was issued in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.
In August 1999, HAHT Software issued a stock purchase warrant exercisable
for 225,000 shares of Series E preferred stock and a stock purchase warrant
exercisable for 125,000 shares of Series E preferred stock, both at an exercise
price of $0.929 per share, to two accredited investors pursuant to the terms of
two credit facilities. The warrant for the purchase of 225,000 shares of Series
E preferred stock was exercised on July 3, 2000, and the remaining warrant
expires on August 31, 2006. These warrants, and the Series E preferred stock
issued upon exercise thereof, were issued in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.
In September 1997, HAHT Software issued 5,962,817 shares of its Series D
preferred stock at a purchase price of $0.80 per share to accredited investors
in the initial closing of a private placement for an aggregate purchase price
of $4,770,254. In December 1997, HAHT Software issued 11,500,000 shares of
Series D preferred stock at a purchase price of $0.80 per share to accredited
investors in a subsequent closing of the private placement for an aggregate
purchase price of $9,200,000. In February 1998, HAHT Software issued 536,180
shares of Series D preferred stock at a purchase price of $0.80 per share to
accredited investors in the final closing in this private placement for an
aggregate purchase price of $428,944. A total of 25 accredited investors
purchased Series D preferred stock in reliance on an exemption from
registration under the Securities Act provided by Rule 506 of Regulation D
thereunder.
Since November 1, 1997, HAHT Commerce has issued options to purchase an
aggregate of 10,799,561 shares of common stock pursuant to our 1995 Stock Award
Plan at a weighted average exercise price of $0.44 per share. HAHT Commerce has
also issued an aggregate of 942,950 shares of common stock to various employees
and former employees upon the exercise of options granted pursuant to this
stock plan for an aggregate consideration of $147,308, at a weighted average
exercise price of $0.16 per share. These grants of options, and the sales of
common stock upon the exercise of these options, were made in reliance on the
exemptions from registration under the Securities Act provided by Section 4(2)
and Rule 701 thereunder.
II-2
<PAGE>
Item 16. Exhibits and Financial Statements Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Asset Purchase Agreement between the Registrant, Haht Asia, Inc.,
and Haht Asia Pty., Ltd.
3.1 Certificate of Incorporation of the Registrant as currently in
effect.
3.2* Form of Amended and Restated Certificate of Incorporation of the
Registrant to be in effect immediately upon the closing of the
offering.
3.3 Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2* Specimen certificate for shares of common stock.
4.3 Third Amended and Restated Registration Rights Agreement between the
Registrant and certain stockholders.
4.4 Amendment No. 1 to the Third Amended and Restated Registration
Rights Agreement between the Registrant and certain stockholders.
5.1* Opinion of Wyrick Robbins Yates & Ponton LLP.
10.1 Registrant's 1995 Stock Award Plan, as amended through June 30,
2000.
10.2 Registrant's 2000 Employee Stock Purchase Plan.
10.3 Lease Agreement by and among the Registrant, LMC Investments, LLC,
and John P. McConnell.
10.4 Lease Modification Agreement by and among the Registrant, LMC
Investments, LLC, and John P. McConnell.
10.5 Senior Loan and Security Agreement No. L0054 between the Registrant
and Phoenix Leasing Incorporated, including Notes issued thereunder.
10.6 Amendment No. 1 to Senior Loan and Security Agreement No. L0054
between the Registrant and Phoenix Leasing Incorporated.
10.7 Loan and Security Agreement between the Registrant and Silicon
Valley Bank, Commercial Finance Division.
10.8 Loan Agreement between the Registrant and Sand Hill Capital II, L.P.
10.9 Option to Purchase Common Stock Agreement between the Registrant and
James Hebert.
10.10 Option Transfer Agreement between the Registrant and certain
transferees.
10.11 Warrant to Purchase Shares of Series E Preferred Stock issued to
Silicon Valley Bank.
10.12 Warrant to Purchase Shares of Series E Preferred Stock issued to
Chase H&Q.
10.13 Warrant to Purchase Stock issued to Silicon Valley Bank.
10.14 Stock Purchase Warrant to purchase Common Stock issued to Haht Asia,
Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.15 Warrant to Purchase Shares of Series F Preferred Stock issued to Sand Hill Capital II, L.P.
10.16** mySAP.com Partner-Services Agreement between the Registrant and SAP America, Inc.
10.17 Form of Registrant's HAHT Commerce e-Scenario License Agreement.
10.18 Employment Agreement between the Registrant and Thomas Mackey.
10.19 Employment Agreement between the Registrant and Alexander Plavocos.
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Wyrick Robbins Yates & Ponton LLP (contained in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
99.1 Audit Committee Charter.
</TABLE>
--------
*To be filed by amendment.
** Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. Such portions have been filed separately with the
SEC.
(b) Financial Statement Schedules.
Schedules have been omitted because the information required to be set forth
therein is not applicable or is shown in the financial statements or the
related notes.
Item 17. Undertakings.
The undersigned hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person will unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) of
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at this time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Raleigh, State of North
Carolina, on this 7th day of November, 2000.
HAHT Commerce, Inc.
/s/ Rowland Archer
By: _________________________________
Rowland Archer,
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and/or officers of HAHT Commerce, Inc. (the
"Company"), hereby severally constitute and appoint Rowland Archer and J. Nick
Riehle, and each of them individually, with full powers of substitution and
resubstitution, our true and lawful attorneys, with full powers to them and
each of them to sign for us, in our names and in the capacities indicated
below, the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission, and any and all amendments to said Registration Statement
(including post-effective amendments), and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, in
connection with the registration under the Securities Act of 1933, as amended,
of equity securities of the Company, and to file or cause to be filed the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of them, or their
substitute or substitutes, shall do or cause to be done by virtue of this Power
of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on November 7, 2000:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
/s/ Rowland Archer Chairman, President and November 7, 2000
______________________________________ Chief Executive Officer
Rowland Archer (Principal Executive
Officer)
/s/ J. Nick Riehle Chief Financial Officer November 7, 2000
______________________________________ (Principal Financial and
J. Nick Riehle Accounting Officer)
/s/ James Atkins Director November 7, 2000
______________________________________
James Atkins
/s/ Sonja Hoel Director November 7, 2000
______________________________________
Sonja Hoel
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
/s/ Richard Holcomb Director November 7, 2000
______________________________________
Richard Holcomb
/s/ Christopher Hollenbeck Director November 7, 2000
______________________________________
Christopher Hollenbeck
/s/ Paul J. Rizzo Director November 7, 2000
______________________________________
Paul J. Rizzo
/s/ Roger Sippl Director November 7, 2000
______________________________________
Roger Sippl
/s/ Douglas Williamson Director November 7, 2000
______________________________________
Douglas Williamson
</TABLE>
II-6
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Asset Purchase Agreement between the Registrant, Haht Asia, Inc.,
and Haht Asia Pty., Ltd.
3.1 Certificate of Incorporation of the Registrant as currently in
effect.
3.2* Form of Amended and Restated Certificate of Incorporation of the
Registrant to be in effect immediately upon the closing of the
offering.
3.3 Bylaws of the Registrant.
4.1 Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2* Specimen certificate for shares of common stock.
4.3 Third Amended and Restated Registration Rights Agreement between the
Registrant and certain stockholders.
4.4 Amendment No. 1 to the Third Amended and Restated Registration
Rights Agreement between the Registrant and certain stockholders.
5.1* Opinion of Wyrick Robbins Yates & Ponton LLP.
10.1 Registrant's 1995 Stock Award Plan, as amended through June 30,
2000.
10.2 Registrant's 2000 Employee Stock Purchase Plan.
10.3 Lease Agreement by and among the Registrant, LMC Investments, LLC,
and John P. McConnell.
10.4 Lease Modification Agreement by and among the Registrant, LMC
Investments, LLC, and John P. McConnell.
10.5 Senior Loan and Security Agreement No. L0054 between the Registrant
and Phoenix Leasing Incorporated, including Notes issued thereunder.
10.6 Amendment No. 1 to Senior Loan and Security Agreement No. L0054
between the Registrant and Phoenix Leasing Incorporated.
10.7 Loan and Security Agreement between the Registrant and Silicon
Valley Bank, Commercial Finance Division.
10.8 Loan Agreement between the Registrant and Sand Hill Capital II, L.P.
10.9 Option to Purchase Common Stock Agreement between the Registrant and
James Hebert.
10.10 Option Transfer Agreement between the Registrant and certain
transferees.
10.11 Warrant to Purchase Shares of Series E Preferred Stock issued to
Silicon Valley Bank.
10.12 Warrant to Purchase Shares of Series E Preferred Stock issued to
Chase H&Q.
10.13 Warrant to Purchase Stock issued to Silicon Valley Bank.
10.14 Stock Purchase Warrant to purchase Common Stock issued to Haht Asia,
Inc.
10.15 Warrant to Purchase Shares of Series F Preferred Stock issued to
Sand Hill Capital II, L.P.
10.16** mySAP.com Partner-Services Agreement between the Registrant and SAP
America, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.17 Form of Registrant's HAHT Commerce e-Scenario License Agreement.
10.18 Employment Agreement between the Registrant and Thomas Mackey.
10.19 Employment Agreement between the Registrant and Alexander Plavocos.
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Wyrick Robbins Yates & Ponton LLP (contained in Exhibit
5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
99.1 Audit Committee Charter.
</TABLE>
--------
*To be filed by amendment.
** Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. Such portions have been filed separately with the
SEC.
