<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
JANUARY 20, 2000
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
SYBASE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 000-19395 94-2951005
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
</TABLE>
6475 CHRISTIE AVENUE
EMERYVILLE, CA 94608
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES OF REGISTRANT)
(510) 922-3500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE> 2
AMENDMENT TO FORM 8-K
The undersigned Registrant hereby amends the following item of its
Current Report on Form 8-K, originally filed with the Securities and Exchange
Commission on February 3, 2000 (the "Form 8-K") as set forth below. The
capitalized terms not otherwise defined herein shall have the meaning ascribed
to those terms in the Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The following financial statements of Home Financial Network,
Inc. (renamed On-Line Financial Services, Inc. in connection with the Merger and
subsequently renamed Financial Fusion, Inc.), a Delaware corporation ("HFN"),
for the periods specified below are attached hereto as Exhibits 99.1:
1. HFN Audited Financial Statements for the years ended December
31, 1999 and 1998; and
(b) Pro Forma Financial Information.
The following pro forma financial information for the periods specified
below are attached hereto as Exhibit 99.2:
1. Unaudited Pro Forma Condensed Combining Balance Sheet as of
December 31, 1999;
2. Unaudited Pro Forma Condensed Combining Statement of
Operations for the year ended December 31, 1999; and
3. Notes to the Unaudited Pro Forma Condensed Combining Financial
Information.
EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- ------------
<S> <C>
23.1. Consent of PricewaterhouseCoopers LLP, Independent Auditors
99.1 HFN Audited Financial Statements for the years ended December 31, 1999 and
1998
99.2 Unaudited Pro Forma Condensed Combining Financial Information
</TABLE>
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 3, 2000
SYBASE, INC.
By: /s/ TERESA D. CHUH
----------------------------------
Title: Vice President, Associate
General Counsel and
Assistant Secretary
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-95079) and Form S-3 (No. 333-95753) of Sybase,
Inc. of our report dated March 16, 2000 relating to the financial statements of
Home Financial Network, Inc., which appear in this Current Report on Form 8-K.
/s/ PRICEWATERHOUSECOOPERS LLP
Stamford, CT
March 31, 2000
<PAGE> 1
EXHIBIT 99.1
HOME FINANCIAL NETWORK, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Home Financial Network, Inc.:
In our opinion, the accompanying balance sheets and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Home Financial Network, Inc. (the
"Company") at December 31, 1999 and 1998, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As described in Note 2 to the financial statements, on January 20, 2000 the
Company was acquired by Sybase, Inc. Accordingly, the operations of the Company
after January 20, 2000 will be combined with those of Sybase, Inc.
March 16, 2000
/s/ PricewaterhouseCoopers LLP
<PAGE> 3
HOME FINANCIAL NETWORK, INC.
Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents $ 1,589,466 $ 5,090,204
Short-term investments 880,662 8,272,010
Accounts receivable (less allowance for doubtful
accounts of $200,000 at December 31, 1999) 2,622,335 198,634
Unbilled amounts under contracts in progress 814,000 --
Other current assets 238,717 165,938
------------ ------------
Total current assets 6,145,180 13,726,786
Property and equipment, net 1,592,958 776,703
Other 85,508 83,503
------------ ------------
Total assets $ 7,823,646 $ 14,586,992
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities $ 3,271,595 $ 647,309
Deferred revenue 613,297 248,034
------------ ------------
Total current liabilities 3,884,892 895,343
Long-term liabilities:
Deferred rent 31,407 44,442
------------ ------------
Total liabilities 3,916,299 939,785
------------ ------------
Commitments and contingencies (Note 8)
Stockholders' equity:
Series A convertible preferred stock, $.001 par value; 5,000,000 shares
authorized, issued and outstanding (liquidation value, $5,000,000) 5,000 5,000
Series B convertible preferred stock, $.001 par value;
7,515,807 shares authorized; 4,816,667 shares issued
and outstanding (liquidation value $14,450,001) 4,817 4,817
Series C convertible preferred stock, $.001 par value;
2,500,000 shares authorized, issued and outstanding
(liquidation value, $7,500,000) 2,500 2,500
Common stock, $.001 par value; 27,000,000 shares
authorized; 8,086,526 shares issued and outstanding 8,087 8,087
Additional paid-in capital 28,929,542 26,924,941
Unearned compensation (1,656,354) --
Accumulated deficit (23,386,245) (13,298,138)
------------ ------------
Total stockholders' equity 3,907,347 13,647,207
------------ ------------
Total liabilities and stockholders' equity $ 7,823,646 $ 14,586,992
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
HOME FINANCIAL NETWORK, INC.
Statements of Operations
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Revenue $ 5,335,765 $ 1,346,036
Cost of revenue 2,714,187 877,327
------------ ------------
2,621,578 468,709
Operating expenses:
Research and development 4,963,545 3,629,732
General and administrative 9,282,452 3,324,765
------------ ------------
Loss from operations (11,624,419) (6,485,788)
============ ============
Other income:
Interest income 536,312 846,186
Contract termination fees (Note 7) 1,000,000 2,500,000
------------ ------------
1,536,312 3,346,186
------------ ------------
Net loss $(10,088,107) $ (3,139,602)
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
HOME FINANCIAL NETWORK, INC.
Statements of Stockholders' Equity
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Series A
Convertible Series B Series C
Preferred Convertible Convertible
Stock Preferred Stock Preferred Stock
------------------ --------------------- ---------------------
Shares Amount Shares Amount Shares Amount
------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 5,000,000 $5,000 4,816,667 $4,817 2,500,000 $2,500
Compensation expense incurred
in connection with stock options
Net loss for the year ended
December 31, 1998
--------- ------ --------- ------ --------- ------
Balance, December 31, 1998 5,000,000 5,000 4,816,667 4,817 2,500,000 2,500
Unearned compensation incurred
in connection with stock options
Amortization of unearned
compensation
Compensation expense incurred
in connection with warrants
Net loss for the year ended
December 31, 1999
--------- ------ --------- ------ --------- ------
Balance, December 31, 1999 5,000,000 $5,000 4,816,667 $4,817 2,500,000 $2,500
========= ====== ========= ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------- Paid-In Unearned Accumulated Stockholders'
Shares Amount Capital Compensation Deficit Equity
--------- ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 8,086,526 $8,087 $26,799,941 - $(10,158,536) $16,661,809
Compensation expense incurred
in connection with stock options 125,000
125,000
Net loss for the year ended
December 31, 1998 (3,139,602) (3,139,602)
--------- ------ ----------- ----------- ------------ ----------
Balance, December 31, 1998 8,086,526 8,087 26,924,941 - (13,298,138) 13,647,207
Unearned compensation incurred
in connection with stock options 1,804,000 (1,804,000) -
Amortization of unearned 147,646 147,646
compensation
Compensation expense incurred
in connection with warrants 200,601 200,601
Net loss for the year ended (10,088,107) (10,088,107)
December 31, 1999
--------- ------ ----------- ----------- ------------ ----------
Balance, December 31, 1999 8,086,526 $8,087 $28,929,542 $(1,656,354) $(23,386,245) $3,907,347
========= ====== =========== =========== ============ ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
HOME FINANCIAL NETWORK, INC.
Statements of Cash Flows
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash flow from operating activities:
Net loss $(10,088,107) $ (3,139,602)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 507,244 293,361
Provision for doubtful accounts 200,000 --
Loss on disposal of property and equipment 1,458 25,631
Stock option and warrant compensation expense 348,247 125,000
Changes in operating assets and liabilities:
Increase in accounts receivable (2,623,701) (68,410)
Increase in unbilled amounts under contracts in progress (814,000) --
Increase in other current and other assets (74,784) (128,980)
Increase (decrease) in accounts payable and accrued
liabilities 2,624,286 (135,696)
Decrease in deferred rent (13,035) (3,294)
Increase in deferred revenue 365,263 94,809
------------ ------------
Net cash used in operating activities (9,567,129) (2,937,181)
------------ ------------
Cash flow from investing activities:
Purchase of property and equipment (1,326,876) (344,677)
Purchases of short-term investments (8,844,714) (19,655,073)
Maturities of short-term investments 10,145,994 16,135,112
Proceeds from sale of investments 6,090,068 6,488,213
Proceeds from sale of property and equipment 1,919 1,000
------------ ------------
Net cash provided by investing activities 6,066,391 2,624,575
------------ ------------
Net decrease in cash and cash equivalents (3,500,738) (312,606)
Cash and cash equivalents at beginning of year 5,090,204 5,402,810
------------ ------------
Cash and cash equivalents at end of year $ 1,589,466 $ 5,090,204
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
HOME FINANCIAL NETWORK, INC
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
Home Financial Network, Inc. (the "Company") was incorporated on August
31, 1995. The Company develops, markets and implements online banking
technology and services that allow banks and other financial
institutions to offer banking and other financial services to consumers
over the Internet. Since inception, the Company's activities have
consisted primarily of developing proprietary software products,
establishing the sales and marketing of those products and raising
equity financing. For the year ended December 31, 1999 five customers
accounted for 68 percent of revenues. The Company operates in an
environment of rapid change in technology and is dependent upon the
continued services of its employees.
2. ACQUISITION
On January 20, 2000 the Company was acquired by Sybase, Inc. ("Sybase").
No adjustment to reflect the acquisition is included in the accompanying
financial statements as of December 31, 1999. Accordingly, the
operations of the Company after January 20, 2000 will be combined with
Sybase.
During 1999, the Company subcontracted services to Sybase in the
amount of $525,107. At December 31, 1999, $201,727 relating to this
amount was included in accounts payable and accrued liabilities.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consist of cash in banks and temporary cash
investments. Temporary investments consist principally of U.S. Treasury
Notes with original maturities of less than 90 days. Temporary
investments are recorded at cost plus accrued interest, which
approximates fair value.
SHORT-TERM INVESTMENTS:
The Company considers its short-term investments to be
"available-for-sale", as defined by Statement of Financial Accounting
Standard No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". At December 31, 1999 and 1998, the unrealized holding gains
and losses were not material, and short-term investments consist
primarily of U.S. Government Obligations with maturities between 90 and
180 days.
For the years ended December 31, 1999 and 1998, gross realized gains and
losses were not significant. In computing realized gains and losses, the
Company computes the cost of its investments on a specific
identification basis. Cost includes the direct costs to acquire the
securities, adjusted for the amortization of any discount or premium.
The fair value of short-term investments has been estimated based upon
quoted market prices.
REVENUE RECOGNITION:
The Company's operating revenue is derived principally from software
licensing fees, including monthly user fees, and consulting services. In
situations where the Company is engaged to combine its software and
know-how to develop turnkey Internet banking solutions for financial
institutions,
<PAGE> 8
revenues are recognized as income on a percentage-of-completion basis
based on time incurred. When delivered separately, software licensing
fees are recognized as income when a non-cancelable license agreement
has been executed by the customer, the Company has delivered the
product, the product is accepted by the customer and the collection of
the resulting receivable is assured. Monthly user fees are recognized as
income in the period earned. Revenue from consulting services is
recognized as income as the services are performed. All unearned revenue
is recorded as deferred revenue.
PROPERTY AND EQUIPMENT:
Property and equipment is stated at cost and depreciated using the
straight-line method over the following useful lives: computer equipment
and software, 3 years; office furniture, 7 years; and leasehold
improvements, initial term of lease or their estimated useful life, if
shorter. Gains and losses on disposals are recorded as income or
expense.
ACCOUNTING FOR STOCK-BASED COMPENSATION:
Stock issued to employees has been accounted for under the provisions of
APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No.
25"). Under APB No. 25, no compensation expense is recognized in the
accompanying financial statements in connection with the awarding of
stock option grants to employees provided that, as of the grant date,
all terms associated with the award are fixed and the fair market price
of the Company's stock, as of the grant date, is equal to or less than
the amount an employee must pay to acquire the stock as defined;
however, if the fair market price of the Company's stock as estimated by
the Board of Directors as of grant date is greater than the amount the
employee must pay or if the terms of the grant are variable, then the
Company will recognize compensation expense.
Stock options or warrants issued to non-employees are fair valued at the
time of vesting and would be included in the Company's operating
results.
Disclosures required by Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
including pro forma operating results had the Company prepared its
financial statements in accordance with the fair value based method of
accounting for stock-based compensation, have been included in Note 6.
INCOME TAXES:
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax
return. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and
tax bases of assets and liabilities ("temporary differences") and net
operating loss carryforwards using enacted tax rates in effect for the
year in which the differences are expected to reverse. Valuation
allowances are established when it is questionable whether deferred tax
assets will be recovered.
SOFTWARE DEVELOPMENT COSTS:
The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Marketed" ("SFAS 86").
SFAS 86 requires that certain software product development costs
("Capitalized Costs"), incurred after technological feasibility has been
established, be capitalized and amortized, commencing upon the general
release of the software product to the Company's customers,
<PAGE> 9
over the economic life of the software product. The Company determines
technological feasibility based upon the successful completion of
certain product development milestones. Annual amortization of
capitalized costs will be computed using the greater of: (i) the ratio
of current gross revenues for the software product over the total of
current and anticipated future gross revenues for the software product;
or (ii) the straight-line basis. Software product development costs
incurred prior to the product reaching technological feasibility are
expensed as incurred and included in research and development costs.
Capitalized Costs incurred to date have been immaterial and,
accordingly, SFAS 86 has not had any significant impact on the financial
position or results of operations of the Company.
USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The most
significant estimates relate to accounts receivable, accrued income,
fixed asset lives and contingent liabilities. Actual results could
differ from those estimates and such differences could be material.
4. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1999 and 1998 consists of the
following:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Computer equipment and software $ 2,004,633 $ 775,505
Office furniture 480,651 402,562
Leasehold improvements 130,113 123,790
----------- ---------
Total cost 2,615,397 1,301,857
Less, accumulated depreciation (1,022,439) (525,154)
----------- ---------
Property and equipment, net $ 1,592,958 $ 776,703
=========== =========
</TABLE>
5. INCOME TAXES
As of December 31, 1999 and 1998, net deferred tax assets are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Net operating loss carryforward $ 9,284,000 $ 5,225,000
Fixed assets (8,000) (7,000)
Deferred charges 15,000 24,000
Allowance for doubtful accounts 80,000 -
Unearned compensation expense 59,000 -
Research and development tax credit 199,000 148,000
----------- ----------
9,629,000 5,390,000
Less, valuation allowance (9,629,000) (5,390,000)
----------- ----------
Total $ - $ -
=========== ===========
</TABLE>
<PAGE> 10
As a result of the uncertainty regarding the Company's ability to
generate sufficient taxable income to utilize deferred tax assets, the
Company has provided a full valuation allowance.
As of December 31, 1999, net operating losses available for federal and
state income tax purposes totaled approximately $23 million, which
expire at various dates through 2014 for federal income tax purposes and
through 2004 for state income tax purposes. The research and development
tax credit expires at various dates through 2014. Future ownership
changes may limit the Company's ability to utilize net operating loss
and tax credit carryforwards as defined by tax rules and regulations.
6. STOCKHOLDERS' EQUITY
COMMON AND PREFERRED STOCK:
The Company's amended and restated certificate of incorporation provides
for the issuance of up to 42,015,807 shares of stock. The Company has
designated 27,000,000 shares as common stock and 5,000,000, 7,515,807
and 2,500,000 shares as Series A, B and C convertible preferred stock,
respectively, (collectively referred to herein as "preferred stock",
individually referred to herein as "Series A", "Series B" or "Series
C").
The Series A, B and C stock have a preference over common stockholders
in liquidation of $1.00, $3.00 and $3.00 per share, respectively. Each
share of preferred stock is convertible into one share of common stock
at the option of the holder. Conversion is automatic in the event the
Company completes an initial public offering of its equity securities,
as defined. The conversion rate is subject to certain anti-dilution
provisions, as defined. The preferred stockholders vote with common
stockholders on an as-if converted basis and have certain defined voting
rights regarding redemption, purchase or other acquisitions of any of
the Company's capital stock and the creation, authorization, designation
of capital stock ranking senior to or on parity with the respective
series of preferred stock.
STOCK OPTION PLAN:
The terms of the Company's 1995 Stock Plan, as amended, (the "Plan")
provide for the Company's Board of Directors (the "Board") to grant
options to officers, directors and employees. The fair market value of
the Company's common stock on the date of grant is estimated by the
Board of Directors. Options generally vest on a pro rata basis over a
four-year period and have a term of seven years. The Plan provides that,
upon initial election to the Board of Directors, each non-employee
director receives an option to purchase up to 50,000 shares of the
Company's common stock, and an additional option to purchase up to
10,000 shares annually thereafter. At December 31, 1999, the Company has
reserved a total of 3,500,000 shares of common stock for the Plan.
During 1999, the Company granted options to its employees with an
exercise price below the fair market value of the Company's common stock
on the date of grant. In connection therewith, the Company is
recognizing compensation expense, for the aggregate difference between
the estimated fair value of the common stock on the date of grant and
the option exercise price ($1,804,000), on a pro rata basis over the
respective options' vesting period. The unamortized balance at December
31, 1999 ($1,656,354), has been included as a component of stockholders'
equity.
<PAGE> 11
The following table summarizes stock option activity for the years ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE
------- -------- ------ ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 2,119,500 $2.38 1,839,500 $2.17
Granted 993,000 $3.00 687,000 $3.00
Granted 237,000 $7.00 - -
Cancelled (86,500) $3.00 (407,000) $2.45
--------- ----- --------- -----
Outstanding at December 31 3,263,000 $2.89 2,119,500 $2.38
========= ===== ======== =====
Options exercisable at December 31 1,216,750 $2.02 718,750 $1.75
========= ===== ======== =====
</TABLE>
The following table summarizes stock option information as of December
31, 1999:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
REMAINING NUMBER
EXERCISE PRICE NUMBER OUTSTANDING CONTRACT LIFE EXERCISABLE
-------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
$1.00 425,000 2.8 years 417,500
2.00 460,000 3.5 years 356,250
3.00 2,141,000 5.7 years 443,000
7.00 237,000 6.9 years -
---------- ---------
3,263,000 1,216,750
========== =========
</TABLE>
As of December 31, 1999, 237,000 shares were available for future grant
under the Plan.
The following table summarizes the pro forma operating results of the
Company had compensation costs for the Plan been determined in
accordance with the fair value based method of accounting for stock
based compensation as prescribed by SFAS No. 123:
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Net loss, as reported $ (10,088,107) $ (3,139,602)
Pro forma net loss (11,285,295) (3,703,690)
</TABLE>
For the purposes of the above pro forma information, the fair value of
each option granted from the Plan was estimated on the date of grant
using the Black-Scholes option-pricing model. The following
weighted-average assumptions were used in computing the fair value of
option grants during 1999 and 1998: expected volatility of 70%;
risk-free interest rate range of 4.8% - 6.3% and 5.6% - 5.8%,
<PAGE> 12
respectively; expected lives of six years and zero dividend yield for
all periods. Using the Black-Scholes option-pricing model, the weighted
average fair value of options granted with an exercise price equal to
the fair market value of the Company's common stock on the date of grant
during 1999 and 1998 was $3.32 and $2.01, respectively. Using the
Black-Scholes option pricing model, the weighted average fair value of
options granted with an exercise price below the fair market value of
the Company's common stock on the date of grant during 1999 was $4.27.
STOCK PURCHASE WARRANT:
A warrant to acquire 100,000 shares of the Company's common stock at an
exercise price of $2.50 per share that was outstanding at December 31,
1998, was cancelled at December 28, 1999.
During 1997, in connection with the sale of Series B and C preferred
stock, the Company issued warrants to acquire 73,133 shares of the
Company's Series B preferred stock (the "B Warrant"), exercise price of
$3.00 per share, and 640,000 shares of the Company's common stock (the
"Common Warrant"), exercise price of $2.60 per share. The B Warrant was
issued to an underwriter of the Series B and C preferred stock as
partial consideration for their services. The Common Warrant was issued
to the Series A preferred stockholder in consideration for certain
modifications to a stock purchase agreement thereby allowing the Company
to complete the sale of Series B and C preferred stock. The B Warrant
and the Common Warrant were exercisable on the date of issuance and
expire on March 31, 2002. The fair value of the B Warrant and the Common
Warrant was estimated by the Board of Directors and deemed to be part of
the cost of raising additional capital.
On April 1, 1999, the Company issued a warrant to acquire 100,000 shares
of the Company's common stock, with an exercise price of $3.00 per
share, to a strategic partner in consideration for consulting services.
The warrant was exercisable on the date of issuance and accordingly, the
Company recorded compensation expense for the fair value of the warrant
of $200,601. The warrant was still outstanding at December 31, 1999 and
expires on April 1, 2003.
7. CONTRACT TERMINATION FEES
During 1999 and 1998, the Company received $1 million and $2.5 million,
respectively, in cash as contract termination fees from customers who
unilaterally cancelled contracts.
8. COMMITMENTS AND CONTINGENCIES
LEASES:
The Company leases office space under operating leases that expire in
April 2001, May, 2001 and July, 2002. These leases contain certain
future rent escalations. The difference between rental expense recorded
on a straight-line basis and rent per the lease agreements has been
accounted for as deferred rent in the accompanying financial statements.
Rental expense recorded for the years ended 1999 and 1998 amounted to
approximately $403,228 and $315,925, respectively.
Future minimum lease payments under the leases total approximately
$1,071,000 and are payable as follows:
<TABLE>
<S> <C>
2000 635,000
2001 322,000
2002 114,000
</TABLE>
<PAGE> 13
CONTINGENCY:
The Company has received notification from the Business Software
Alliance on behalf of certain software licensors claiming the Company
used unlicensed copies of computer software during a period from 1998 to
1999. The Company is negotiating a settlement and at this time the
Company is unable to determine what effect, if any, the resolution of
this matter will have on the financial statements.
<PAGE> 1
EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION
The unaudited pro forma condensed combining financial information for Sybase,
Inc. ("Sybase") set forth below gives effect to the acquisition of HFN. The
historical financial information set forth below has been derived from, and is
qualified by reference to the consolidated financial statements of Sybase and
HFN, and should be read in conjunction with those financial statements and the
notes referred to below. The unaudited pro forma condensed combining statement
of operations data for the year ended December 31, 1999 set forth below give
effect to the acquisition as if it occurred on January 1,1999. The unaudited pro
forma condensed combining balance sheet as of December 31, 1999 set forth below
gives effect to the acquisition of HFN as if it occurred on December 31, 1999.
The unaudited pro forma condensed combining financial information set forth
below reflects certain adjustments, including among others, adjustments to
reflect the amortization of the excess purchase price. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial statements
and notes to the financial statements of Sybase which are incorporated by
reference herein from Sybase's Annual Reports on Form 10-K for the year ended
December 31, 1999 and HFN's audited financial statements and notes to the
financial statements for the years ended December 31, 1999 and 1998 included
herein. The unaudited pro forma condensed combining financial information set
forth below does not purport to represent what the consolidated results of
operations or financial condition of Sybase would actually have been if the HFN
acquisition and related transaction had in fact occurred on such date or to
project the future consolidated results of operations or financial condition of
Sybase.
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UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
SYBASE AS OF HFN AS OF BUSINESS AS OF
DECEMBER 31, DECEMBER 31, COMBINATION DECEMBER 31,
1999 1999 COMBINED ADJUSTMENTS 1999
------------- ------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 250,103 $ 1,589 $ 251,692 (3) $(25,916) $ 225,776
Short-term cash
investments........... 59,094 881 59,975 -- 59,975
Accounts receivable,
net................... 182,708 3,436 186,144 -- 186,144
Deferred income taxes.. 15,826 -- 15,826 -- 15,826
Other current assets... 14,924 239 15,163 -- 15,163
---------- --------- ---------- --------- ----------
Total current assets.... 522,655 6,145 528,800 (25,916) 502,884
Long-term cash
investments........... 43,702 -- 43,702 -- 43,702
Property, equipment and
improvements, net...... 67,587 1,593 69,180 -- 69,180
Deferred income taxes... 25,238 -- 25,238 -- 25,238
Capitalized software,
net................... 35,934 -- 35,934 -- 35,934
Other assets............ 42,219 86 42,305 149,420 191,725
---------- --------- ---------- --------- ----------
Total assets............ $ 737,335 $ 7,824 $ 745,159 $ 123,504 $ 868,663
========== ========= ========== ========= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....... $ 8,349 $ 3,272 $ 11,621 $ -- $ 11,621
Accrued compensation
and related expenses.. 57,625 -- 57,625 -- 57,625
Other accrued
liabilities........... 101,876 -- 101,876 -- 101,876
Deferred revenue. ..... 187,323 613 187,936 -- 187,936
Accrued income taxes... 40,253 -- 40,253 -- 40,253
--------- --------- ---------- --------- ----------
Total current
liabilities............ 395,426 3,885 399,311 -- 399,311
Other liabilities....... 5,799 32 5,831 -- 5,831
Stockholders' equity:
Common stock........... 83 8 91 (3) 7 90
(3) (8)
Preferred stock......... -- 12 12 (3) (12) --
Additional paid-in
capital............... 432,352 28,929 461,281 (3) 135,404 567,756
(3) (28,929)
Accumulated deficit.... (48,037) (23,386) (71,423) (1)(2) (8,000) (56,037)
(3) 23,386
Unearned compensation.. -- (1,656) (1,656) (3) 1,656 --
Accumulated other
comprehensive loss.... (16,426) -- (16,426) -- (16,426)
---------- --------- ---------- --------- ----------
Subtotal................ 367,972 3,907 371,879 123,504 495,383
Less: Cost of shares of --
treasury stock......... (31,862) -- (31,862) -- (31,862)
---------- --------- ---------- --------- ----------
Total stockholders'
equity................. 336,110 3,907 340,017 123,504 463,521
---------- --------- ---------- --------- ----------
Total liabilities and
stockholders' equity... $ 737,335 $ 7,824 $ 745,159 $ 123,504 $ 868,663
========== ========= ========== ========= ==========
</TABLE>
See accompanying notes to the Unaudited Pro Forma Condensed Combining Financial
Information.
<PAGE> 3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SYBASE HFN PRO FORMA
FOR THE FOR THE PRO FORMA FOR THE YEAR
YEAR ENDED YEAR ENDED BUSINESS ENDED
DECEMBER 31, DECEMBER 31, COMBINATION DECEMBER 31,
1998 1998 COMBINED ADJUSTMENTS 1998
------------ ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees.......... $ 421,454 $ 482 $ 421,936 $ -- $ 421,936
Services.............. 446,015 864 446,879 -- 446,879
---------- -------- ---------- ------- ----------
Total revenues.......... 867,469 1,346 868,815 -- 868,815
Costs and expenses:
Cost of license fees.. 37,573 198 37,771 -- 37,771
Cost of services ..... 235,574 679 236,253 -- 236,253
Product development
and engineering .... 148,583 3,630 152,213 -- 152,213
Sales and marketing... 392,979 392,979 (1) 20,982 413,961
General and
administrative....... 65,406 3,325 68,731 68,731
Costs of restructuring 74,167 -- 74,167 -- 74,167
---------- -------- ---------- ------- ----------
Total costs and expenses 954,282 7,832 962,114 20,982 983,103
---------- -------- ---------- ------- ----------
Operating loss.......... (86,813) (6,486) (93,299) 20,982 (114,281)
Interest income......... 10,077 846 10,923 -- 10,923
Interest expense and
other, net............. (2,329) 2,500 171 -- 171
---------- -------- ---------- ------- ----------
Loss before income taxes (79,065) (3,140) (82,205) (20,982) (103,187)
Provision for income
taxes.................. 14,063 -- 14,063 -- 14,063
---------- -------- ---------- ------- ----------
Net income loss ....... $ (93,128) $ (3,140) $ (96,268) $(20,982) $ (117,250)
========== ======== ========== ======= ==========
Pro forma net loss
per share--Basic and
Diluted (4) ........... $ (1.15) $ (.39) $ (1.32)
========== ======== ==========
Number of shares used in
pro forma per share
calculation--Basic and
Diluted (4)............ 80,893 8,087 7,817 88,710
========== ======== ======= ==========
</TABLE>
<PAGE> 4
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENTS OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SYBASE HFN PRO FORMA
FOR THE YEAR FOR THE YEAR PRO FORMA FOR THE YEAR
ENDED ENDED BUSINESS ENDED
DECEMBER 31, DECEMBER 31, COMBINATION DECEMBER 31,
1999 1999 COMBINED ADJUSTMENTS 1999
------------ ------------ -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees.............. $421,645 $ 948 $ 422,593 $ -- $422,593
Services.................. 449,988 4,388 454,376 -- 454,376
-------- -------- -------- -------- --------
Total revenues.............. 871,633 5,336 876,969 876,969
Cost and expenses:
Cost of license fees...... 46,241 -- 46,241 -- 46,241
Cost of services ......... 217,053 2,714 219,767 -- 219,767
Product development
and engineering......... 136,272 4,964 141,236 141,236
Sales and marketing....... 324,694 6,137 330,831 (1) 21,777 352,608
General and
administrative........... 68,876 3,145 72,021 -- 72,021
Cost of restructuring..... (8,528) -- (8,528) -- (8,528)
-------- -------- -------- -------- --------
Total costs and expenses.... 784,608 16,960 801,568 21,777 823,345
-------- -------- -------- -------- --------
Operating income (loss)..... 87,025 (11,624) 75,401 (21,777) 53,624
Interest income............. 13,626 536 14,162 -- 14,162
Interest expense and other,
net....................... 147 1,000 1,147 -- 1,147
-------- -------- -------- -------- --------
Income(loss) before
income taxes.............. 100,798 (10,088) 90,710 (21,777) 68,933
Provision for income taxes.. 38,303 0 38,303 (5) (3,530) 34,773
-------- -------- -------- -------- --------
Net income (loss)..... $ 62,495 $(10,088) $ 52,407 $(18,247) $ 34,160
======== ======== ========= ======== ========
Basic net income (loss)
per share ................. $ 0.76 $ (1.25) $ 0.38
======== ======== ========
Diluted net income (loss)
per share.................. $ 0.74 $ (1.25) $ 0.37
======== ======== ========
Shares used in computing
basic net income (loss)
per share.................. 81,817 8,087 7,382 89,199
======== ======== ===== =======
Shares used in computing
diluted net income (loss)
per share.................. 84,156 8,087 7,641 91,797
======== ======== ====== =======
</TABLE>
See accompanying notes to the Unaudited Pro Forma Condensed Combining Financial
Information
<PAGE> 5
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINING FINANCIAL INFORMATION
On January 20, 2000, Sybase acquired HFN in a transaction accounted for as a
purchase. The total purchase cost was approximately $161.3 million consisting
of approximately $25.9 million in cash and shares of Sybase common stock and
stock options with a fair value of approximately $135.4 million for all of the
HFN outstanding stock, warrants and stock options.
Pro forma adjustments for the unaudited pro forma condensed combining balance
sheet as of December 31, 1999 and statement of operations for the year ended
December 31, 1999 are as follows:
(1) Reflects the preliminary allocation of the purchase price and the
amortization of the cost over the fair value of net assets acquired for the HFN
acquisition. The preliminary allocation has resulted in a charge for purchased
in-process research and development estimated to be $8.0 million and estimated
customer list of $20.0 million, developed technology of $18.0 million and
goodwill of $111.4 million which is being amortized on a straight-line basis
over an average period of seven years.
The total estimated purchase price for the HFN acquisition has been allocated on
a preliminary basis to assets and liabilities based on management's best
estimates of their fair value with the excess costs over the net assets acquired
allocated to goodwill and intangibles. This allocation is subject to change
pending a final analysis of the value of the assets acquired.
(2) The pro forma condensed combining statement of operations for the year
ended December 31, 1999 does not include the purchased research and development
related charge of $8.0 million since it is considered a non-recurring charge.
(3) To reflect the purchase of all of the outstanding stock of HFN.
(4) Pro forma net income (loss) reflects the impact of the adjustments above.
Pro forma basic net income (loss) per share is computed using the
weighted-average number of shares of common stock outstanding after the issuance
of Sybase Common Stock to acquire all of the outstanding shares of HFN. Pro
forma diluted net income (loss) per share is computed as described above and
also gives effect to any dilutive options and warrants. Dilutive options and
warrants are excluded from the computation during loss periods as their effect
is antidilutive.
(5) The pro forma tax provision was adjusted downward to reflect the benefit the
combined group would have received from HFN's losses.
(6) Pro forma reclassifications are made to conform the HFN presentation to the
Sybase presentation.
