<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
AMENDMENT NO. 1
Date of Report (date of earliest event reported): December 30, 1997
Segue Software, Inc.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 0-27794 95-4188982
- -------------------------------------------------------------------------------
(Sate or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
1320 Centre Street, Newton Centre, Massachusetts 02159
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 796-1000
---------------------------
<PAGE>
ITEM 7. Financial Statements, Pro Forma Information and Exhibits
(a) Financial Statements of Businesses Acquired
- -----------------------------------------------
This item is amended to include the following:
I. SQLBench International, Inc.
(i) Report of Independent Accountants
(ii) Balance Sheets as of December 31, 1996 and September 30, 1997 (unaudited)
(iii) Statements of Operations for the period from October 22, 1996 (date of
inception) to December 31, 1996 and for the nine months ended September 30, 1997
(unaudited)
(iv) Statements of Cash Flows for the period from October 22, 1996 (date of
inception) to December 31, 1996 and for the nine months ended September 30, 1997
(unaudited)
(v) Statements of Stockholders' Equity for the period from October 22, 1996
(date of inception) to December 31, 1996 and for the nine months ended September
30, 1997 (unaudited)
(vi) Notes to Financial Statements
II. ARC Dr. Ambichl & Dr. Reindl OEG
(i) Report of Independent Accountants
(ii) Balance Sheet as of December 31, 1996 and September 30, 1997 (unaudited)
(iii) Statement of Operations for the year ended December 31, 1996 and for the
nine months ended September 30, 1997 and 1996 (unaudited)
(iv) Statement of Cash Flows for the year ended December 31, 1996 and for the
nine months ended September 30, 1997 and 1996 (unaudited)
(v) Statement of Changes in Partners' Capital for the year ended December 31,
1996 and for the nine months ended September 30, 1997 (unaudited)
(vi) Notes to Financial Statements
(b) Pro Forma Financial Information
- -----------------------------------
This item is amended to include the following:
I. Segue Software, Inc.
(i) Introductory Information
(ii) Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1997
(iii) Unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1997
(iv) Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1996
(v) Notes to Unaudited Pro Forma Consolidated Financial Statements
(c) Exhibits
- ------------
See Exhibit Index attached hereto.
<PAGE>
SQLBENCH INTERNATIONAL, INC.
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
AND FOR THE PERIOD FROM OCTOBER 22, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of SQLBench International, Inc.:
We have audited the accompanying balance sheet of SQLBench International, Inc.
as of December 31, 1996 and the related statements of operations, cash flows,
and stockholders' equity (deficit) for the period from October 22, 1996 (date of
inception) to December 31, 1996. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SQLBench International, Inc. as
of December 31, 1996 and the results of its operations and its cash flows for
the period from October 22, 1996 (date of inception) to December 31, 1996 in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 13, 1998
<PAGE>
SQLBENCH INTERNATIONAL, INC.
BALANCE SHEETS
September 30, 1997 (unaudited) and December 31, 1996
UNAUDITED
ASSETS 1997 1996
--------- --------
Current assets:
Cash and cash equivalents $115,204 $ 1,000
Accounts receivable 284,196 101,915
Prepaid expenses 1,409 -
Other current assets 3,883 -
-------- --------
Total current assets 404,692 102,915
Property and equipment, net (Note C) 20,377 -
Other assets, net 417 493
-------- --------
Total assets $425,486 $103,408
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,939 $ 53,627
Accrued expenses 140,284 10,009
Accrued royalties (Note E) 123,000 50,000
-------- --------
Total current liabilities 288,223 113,636
-------- --------
Stockholders' equity:
Common stock, $.10 par value, 1,000,000
shares authorized, 10,000 shares issued
and outstanding 1,000 1,000
Retained earnings (accumulated deficit) 136,263 (11,228)
-------- --------
Total stockholders' equity (deficit) 137,263 (10,228)
-------- --------
Total liabilities and stockholders'
equity $425,486 $103,408
======== ========
The accompanying notes are an integral part of the financial statements.
<PAGE>
SQLBENCH INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
for the nine months ended September 30, 1997 (unaudited) and for the period from
October 22, 1996 (date of inception) to December 31, 1996
UNAUDITED
1997 1996
--------- ----------
Revenues $730,330 $100,000
Cost of revenues 362,822 50,000
-------- --------
Gross profit 367,508 50,000
Selling, general and administrative expenses 132,147 61,228
-------- --------
Operating profit (loss) 235,361 (11,228)
Interest income 2,528 -
-------- --------
Income (loss) before provision for income taxes 237,889 (11,228)
Income tax expense 90,398 -
-------- --------
Net income (loss) $147,491 $(11,228)
======== ========
The accompanying notes are an integral part of the financial statements.
<PAGE>
SQLBENCH INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1997 (unaudited) and
for the period from October 22, 1996 (date of inception)
to December 31, 1996
UNAUDITED
1997 1996
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 147,491 $ (11,228)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,875 17
Changes in operating assets and liabilities:
(Increase) in accounts receivable (182,281) (101,915)
(Increase) in prepaid expenses (1,409) -
(Increase) in other current assets (3,883) -
(Increase) in other assets - (510)
Increase (decrease) in accounts payable (28,688) 53,627
Increase in accrued expenses and royalties 203,275 60,009
--------- ---------
Net cash provided by operating activities 137,380 -
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (23,176) -
--------- ---------
Net cash used in investing activities (23,176) -
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock - 1,000
--------- ---------
Net cash provided by financing activities - 1,000
--------- ---------
Net increase in cash and cash equivalents 114,204 1,000
Cash and cash equivalents at beginning of period 1,000 -
--------- ---------
Cash and cash equivalents at end of period $ 115,204 $ 1,000
========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
SQLBENCH INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
for the nine months ended September 30, 1997 (unaudited) and
for the period from October 22, 1996 (date of inception)
to December 31, 1996
<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
COMMON STOCK (ACCUMULATED STOCKHOLDERS'
SHARES PAR VALUE DEFICIT) EQUITY (DEFICIT)
------------ ------------ -------------- ----------------
<S> <C> <C> <C> <C>
Issuance of common stock 10,000 $1,000 $ 1,000
Net loss $(11,228) (11,228)
------ ------ ------------- ---------------
Balance at December 31, 1996 10,000 1,000 (11,228) (10,228)
Net income 147,491 147,491
------ ------ ------------- ---------------
Balance at September 30, 1997 10,000 $1,000 $136,263 $137,263
====== ====== ============= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
SQLBENCH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
A. NATURE OF BUSINESS:
------------------
SQLBench International, Inc. (the "Company") was incorporated in Georgia on
October 22, 1996. The Company markets and distributes automated load testing
software under a license and distribution agreement with ARC - Dr. Ambichl &
Dr. Reindl Communications GmbH (formerly named ARC Dr. Ambichl & Dr. Reindl
OEG) ("ARC"). ARC is located in Austria and develops, supports, and markets
automated testing software (see Note E).
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to provide 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. Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of money market funds and
accounts receivable. The Company maintains substantially all of its money
market funds with one commercial bank. In addition, substantially all of the
Company's revenues were derived from a software license agreement with Segue
Software, Inc. ("Segue") (see Note E).
ORGANIZATION COSTS
Organization costs are recorded at cost and are amortized using the
straight-line method over a five-year period.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using
an accelerated method over the estimated useful lives of the assets,
typically five to seven years.
Maintenance and repairs are charged to expense as incurred. When assets are
retired or otherwise disposed of, the assets and related allowances for
depreciation and amortization are eliminated from the accounts and any
resulting gain or loss is reflected in income.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of ninety days or less at acquisition to be cash equivalents.
Continued
<PAGE>
SQLBENCH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
REVENUE RECOGNITION
Revenue from software license agreements is recognized as payments become
due, assuming collection is probable and no significant obligations remain.
C. PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment consisted of the following at September 30, 1997:
Computer and equipment $16,330
Furniture and fixtures 6,846
-------
23,176
Less: accumulated depreciation (2,799)
-------
$20,377
=======
Depreciation expense amounted to $2,799 for the nine months ended
September 30, 1997.
D. FEDERAL AND STATE INCOME TAXES:
------------------------------
No provision for income taxes was recorded in 1996 as the Company incurred a
net loss. For the nine months ended September 30, 1997, income taxes have
been provided based on the estimated federal and state income tax rates for
the full fiscal year.
E. SOFTWARE LICENSE AGREEMENTS:
---------------------------
In November 1996, the Company entered into a software license agreement with
Segue whereby the Company agreed to license SQLBench software to Segue for
the purposes of marketing and distribution. Under the terms of the
agreement, the Company would be paid $1,000,000 in software license
royalties through December 31, 1997.
In November 1996, the Company entered into a license and distribution
agreement with ARC whereby ARC agreed to grant the Company an exclusive
right to license and distribute its SQLBench software to third parties in
North America, Latin America and Asia. Under the terms of the agreement, the
Company is required to pay ARC 50% of the revenues earned on sales of the
related software. For the nine months ended September 30, 1997 and for the
period from October 22, 1996 (date of inception) through December 31, 1996,
the Company recognized royalty expense of $350,000 and $50,000,
respectively, which is included in cost of revenues, pursuant to this
agreement.
Continued
<PAGE>
SQLBENCH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
F. SUBSEQUENT EVENT:
----------------
On December 30, 1997, the Company was acquired by Segue for $696,200 in cash
paid upon closing of the acquisition, a subordinated promissory note in the
principal amount of $696,200 payable over three years, and 143,885 shares of
Segue common stock. In addition, the Company refunded to Segue $630,000 of
software license royalties paid under the software license agreement with
Segue.
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED),
THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
ARC Dr. Ambichl & Dr. Reindl OEG
We have audited the accompanying balance sheet of ARC Dr. Ambichl & Dr. Reindl
OEG, as of December 31, 1996 and the related statements of operations, partners'
capital and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements have been prepared in accordance with accounting principles generally
accepted in Austria.
Scope
We conduct our audit in accordance with auditing standards generally accepted in
Austria, which are substantially similar to those followed in the United States.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ARC Dr. Ambichl & Dr. Reindl
OEG, as of December 31, 1996 and the results of its operations and its cash
flows for the year then ended in accordance with accounting principles generally
accepted in Austria.
Accounting principles generally accepted in Austria vary in certain respects
from accounting principles generally accepted in the United States.
/s/ Coopers & Lybrand
INTER-TREUHAND GmbH
Wirtschaftspruefungs-und
Steuerberatungsgesellschaft
Linz, Austria
March 3, 1998
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
BALANCE SHEET
September
30, 1997 December
ASSETS (unaudited) 31, 1996
--------- --------
Current assets:
Cash and cash equivalents $277,146 $156,690
Accounts receivable, trade 207,418 107,505
Inventories 12,494 17,516
Prepaid expenses and other current assets 1,256 2,997
-------- --------
Total current assets 498,314 284,708
Property, plant and equipment, net of
accumulated depreciation 12,239 10,093
-------- --------
Total assets $510,553 $294,801
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable, trade $ 17,173 $ 37,788
Accrued expenses 4,423 5,760
Other liabilities 26,005 18,163
-------- --------
Total current liabilities 47,601 61,711
Long-term debt 44,227 50,210
-------- --------
Total liabilities 91,828 111,921
Partners' capital 418,725 182,880
-------- --------
Total liabilities and partners'
capital $510,553 $294,801
======== ========
The accompanying notes are an integral part of the financial statements.
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
STATEMENT OF OPERATIONS
Nine months Nine months
ended ended
September 30, Year ended September 30,
1997 December 31, 1996
(unaudited) 1996 (unaudited)
------------ ------------ ------------
Sales $ 544,200 $ 394,078 $ 219,039
Costs of material 133,330 102,901 88,251
Wages and Social Security costs 31,029 19,705 11,683
Depreciation 5,674 5,762 4,369
Other operating expenses 67,341 88,848 65,083
----------- ----------- -----------
Income from operations 306,826 176,862 49,653
Interest income (net) 2,373 317 241
----------- ----------- -----------
Net income $ 309,199 $ 177,179 $ 49,894
=========== =========== ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
Balance at January 1, 1996 $ 86,542
Net income and changes of reserves 184,851
Payments to owners (71,091)
Translation difference and changes of reserves (17,422)
----------
Balance at December 31, 1996 182,880
Net income 309,199
Payments to owners (44,357)
Translation difference (28,997)
----------
Balance at September 30, 1997 (unaudited) $ 418,725
==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the
Nine Months For the Nine Months
ended Year ended
September ended September
30, 1997 December 30, 1996
(unaudited) 31, 1996 (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income $ 309,199 $ 177,179 $ 49,894
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,674 5,762 4,369
Changes in assets and liabilities:
Accounts receivable and other current assets (98,172) (84,462) (15,799)
Inventories 5,022 3,260 1,279
Other accruals (1,337) 4,273 (92)
Accounts payable-trade (20,615) 29,463 (606)
Other liabilities 7,842 (2,665) 10,275
--------- --------- --------
Net cash provided by operating activities 207,613 132,810 49,320
--------- --------- --------
Cash flows from investing activities:
Additions to property and equipment (8,668) (6,386) (2,483)
--------- --------- --------
Net cash used in investing activities (8,668) (6,386) (2,483)
Cash flows from financing activities:
Payments (44,357) (71,091) (44,789)
--------- --------- ---------
Net cash used in financing activities (44,357) (71,091) (44,789)
Net increase in cash 154,588 55,333 2,048
--------- --------- ---------
Translation difference (34,132) (13,488) (7,161)
Cash and cash equivalents at beginning of the year 156,690 114,845 114,845
--------- --------- ---------
Cash and cash equivalents, at end of period $ 277,146 $ 156,690 $ 109,732
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
NOTES TO FINANCIAL STATEMENTS
1. Partnership Organization:
------------------------
ARC Dr. Ambichl & Dr. Reindl OEG (the "Partnership") was formed as an
Austrian general partnership and changed its name to ARC Dr. Ambichl & Dr.
Reindl Communication GmbH in 1997. The Partnership manufactures software
and resells soft - and hardware. The Partnership conducts business with a
geographic concentration in Austria and the United States of America. The
Partnership is wholly-owned by Dr. Ernst Ambichl and Dr. Manfred Reindl.
2. Summary of Significant Accounting Policies:
------------------------------------------
Risks and Uncertainties
The Partnership invests its cash primarily in deposits and with commercial
banks. The Partnership has not experienced any losses to date on its
invested cash.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of trade receivables. The
Partnership performs ongoing credit analysis for all existing customers,
consisting primarily of companies in Austria.
Cash and Cash Equivalents
All highly liquid debt instruments purchased with an original maturity of
three months or less are classified as cash and cash equivalents and
approximate fair value.
Inventories
Inventories are carried at the lower of cost or market. Cost is determined
under the first-in, first-out (FIFO) method.
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Property, Plant and Equipment
Property, plant and equipment of the Partnership are recorded at cost.
Depreciation is computed using the straight-line method calculated to
amortize the cost of assets over the estimated useful lives. The useful
lives used in determining depreciation are:
Computer hardware 4 years
Furniture and fixtures 8 years
Expenditures for maintenance, repairs and minor improvements are expensed as
incurred. When plant and equipment are retired or otherwise disposed, the
cost and related accumulated depreciation are removed from the accounts and
any resulting gain or loss is included in operations.
Income Taxes
Income taxes are not included in the financial statements since such taxes,
if any are the responsibility of the individual partners.
Revenue Recognition
Sales and related costs are recorded by the Company upon shipment of
products to customers. Revenues from software license agreements are
recognized as payments become due, assuming collection is probable and no
significant obligations remain.
Cost of Sales
Cost of sales includes direct manufacturing costs of materials.
3. Inventories:
-----------
Inventories consist of the following:
September 30,
1997 December 31,
(unaudited) 1996
------------- ------------
Work in process $ 12,494 $ 13,237
Finished goods - 4,279
------------- ------------
$ 12,494 $ 17,516
============= ============
Continued
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Property, Plant and Equipment:
------------------------------
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(unaudited) 1996
-------------- --------------
<S> <C> <C>
Computer hardware and furniture and fixture $ 32,609 $ 27,179
Accumulated depreciation (20,370) (17,086)
-------------- --------------
$ 12,239 $ 10,093
============== ==============
</TABLE>
Depreciation expense was $5,674 and $5,762 for the nine months ended
September 30, 1997 and for the year ended December 31, 1996, respectively.
5. Long-Term Debt:
---------------
Long-term debt at December 31, 1996 consists of Unsecured notes, payable in
one amount of $50,210 on March 1, 1999 (interest at 3.5%). Subsequent to
September 30, 1997 the full amount has been paid.
6. Application of Generally Accepted Accounting Principles in the United States
----------------------------------------------------------------------------
of America:
-----------
In certain circumstances accounting principles followed in the preparation of
Austrian financial statements differ from those generally accepted in the
United States of America. However, for ARC, net income and partners' capital
determined in accordance with generally accepted accounting principles in
Austria are not materially different than the net income and partners'
capital determined in accordance with generally accepted accounting
principles in the United States of America.
Footnote disclosures in these financial statements are in accordance with
generally accepted accounting principles in Austria and Austrian reporting
requirements. These disclosures may vary from disclosures prepared in
accordance with generally accepted accounting principles in the United States
of America.
Continued
<PAGE>
ARC DR. AMBICHL & DR. REINDL OEG
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. Subsequent Event:
----------------
On December 30, 1997, certain assets including the SQLBench software product
were acquired by Segue Software, Inc. for $3,718,800 in cash paid upon closing
of the acquisition and a subordinated promissory note in the principal amount of
$3,718,800. In addition, the Company refunded $388,000 of software license
royalties paid under its license agreement with its distributor, SQLBench
International, Inc.
<PAGE>
SEGUE SOFTWARE, INC.
PRO FORMA FINANCIAL INFORMATION
-------------------------------
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
<PAGE>
Segue Software, Inc.
Pro Forma Financial Information
Introductory Information
On December 30, 1997, Segue Software, Inc. ("Segue" or "the Company") acquired
both SQLBench International, Inc. ("SQLBench") and ARC - Dr. Ambichl & Dr.
Reindl Communication GmbH (formerly named ARC Dr. Ambichl & Dr. Reindl OEG)
("ARC"). Since the acquisition of each company was contingent upon both
companies being acquired, the transaction was accounted for as a single business
combination. The combined purchase had aggregate consideration of approximately
$10.1 million, including transaction costs, and consisted of a combination of
cash, promissory notes payable over three years and common stock. The purchase
price was allocated to $1.0 million of completed technology and $9.1 million of
purchased research and development which was recorded in the fourth quarter of
fiscal 1997. The charge for purchased research and development is excluded from
the accompanying unaudited pro forma statements of operations.
The unaudited pro forma consolidated balance sheet was prepared as if the
acquisition had occurred on September 30, 1997. The unaudited pro forma
consolidated statements of operations for the year ended December 31, 1996 and
for the nine months ended September 30, 1997 were prepared as if the acquisition
had taken place as of January 1, 1996.
For purposes of presenting pro forma financial information, all transactions
between the Company, SQLBench and ARC have been eliminated as if the acquisition
had been consummated on the assumed effective date. The pro forma financial
information reflects other adjustments that are directly attributable to the
acquisition as described in the accompanying notes.
For the purposes of this presentation, certain pro forma adjustments have been
made to the balance sheet and results of operations to provide information as to
how the acquisition might have affected the financial position and statement of
operations. This unaudited pro forma financial information does not purport to
be indicative of the results of operations that would have been obtained if the
operations had been combined as of the beginning of the period presented, and is
not intended to be a projection of future results.
<PAGE>
Segue Software, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Consolidated
Assets Segue SQLBench ARC Adjustments Pro Forma
------- ---------- ----- ------------- --------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $16,851 $ 115 $ 277 $ (4,415)(i) $ 12,436
(392)(iii)
Short-term investments 23,905 - - - 23,905
Accounts receivable, net 3,453 285 208 (493)(iii) 3,453
Other current assets 1,613 5 13 (899)(iii) 732
------- ---------- ----- ------------- -------------
Total current assets 45,822 405 498 (6,199) 40,526
Property and equipment, net 2,312 20 12 (21)(ii) 2,323
Other assets 310 - - 1,006 (ii) 1,316
------- ---------- ----- ------------- -------------
Total assets $48,444 $ 425 $ 510 $ (5,214) 44,165
======= ========== ===== ============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable - - - $ 883 (i) $ 883
Accounts payable $ 294 $ 25 $ 17 (42)(ii) 294
Accrued compensation and benefits 762 - - - 762
(170)(ii)
Accrued expenses 828 140 30 250 (ii) 1,078
Deferred revenue 2,171 - - - 2,171
Accrued royalties 667 123 - (643)(iii) 147
------- ---------- ----- ------------- -------------
Total current liabilities 4,722 288 47 278 5,335
Long-term notes payable - - 44 (44)(ii)
3,532 (i) 3,532
Stockholders' equity:
Common stock 74 1 - (i) 75
Partners capital - - 419 (419)(ii) -
Additional paid-in capital 46,855 - - 1,031 (i) 47,886
Unearned compensation (332) - - - (332)
(497)(ii)
Retained earnings (accumulated deficit) (2,875) 136 - (9,095)(ii) (12,331)
------- ---------- ----- ------------- --------------
Total stockholders' equity 43,722 137 419 (8,980) 35,298
------- ---------- ----- ------------- --------------
Total liabilities and stockholders' equity $48,444 $ 425 $ 510 $ (5,214) $ 44,165
======= ========== ===== ============= ==============
</TABLE>
<PAGE>
Segue Software, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the nine months ended September 30, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Consolidated
Segue SQLBench ARC Adjustments Pro Forma
------- ---------- ----- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue $15,790 $ 730 $544 $ (1,060)(iv) $ 16,004
251 (i)
Cost of revenue 2,705 363 133 (513)(iv) 2,939
------- --------- ---- ------------ -------------
Gross margin 13,085 367 411 (798) 13,065
Operating expenses:
Sales and marketing 8,406 132 (vi) 8,538
Research and development 3,665 - - 104 (vi) 3,769
General and administrative 2,344 132 104 (236)(vi) 2,344
------- --------- ---- ------------ -------------
Total operating expenses 14,415 132 104 - 14,651
------- --------- ---- ------------ -------------
Income (loss) from operations (1,330) 235 307 (798) (1,586)
Interest income, net 1,630 2 2 (463)(ii)/(iii) 1,171
------- --------- ---- ------------ -------------
Income (loss) before provision for income
taxes 300 237 309 (1,261) (415)
Provision for income taxes 56 90 - (90)(v) 56
------- --------- ---- ------------ -------------
Net income (loss) $ 244 $ 147 $309 $ (1,171) $ (471)
======= ========= ==== ============ =============
Net income (loss) per share - basic $ .03 $ (.06)
Weighted average shares outstanding - basic 7,299 7,443
Net income (loss) per share - diluted $ .03 $ (.06)
Weighted average shares outstanding - diluted 7,908 7,443
</TABLE>
See accompanying notes
<PAGE>
Segue Software, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Consolidated
Segue SQLBench ARC Adjustments Pro Forma
------- ---------- ----- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue $16,973 $ 100 $394 $ (150)(iv) $ 17,317
335 (i)
Cost of revenue 2,251 50 103 (56)(iv) 2,683
------- --------- ---- ------------ -------------
Gross margin 14,722 50 291 (429) 14,634
Operating expenses:
Sales and marketing 8,500 - - 61 (vi) 8,561
Research and development 3,806 - - 114 (vi) 3,920
General and administrative 2,546 61 114 (175)(vi) 2,546
------- --------- ---- ------------ -------------
Total operating expenses 14,852 61 114 - 15,027
------- --------- ---- ------------ -------------
Income (loss) from operations (130) (11) 177 (429) (393)
Litigation settlement (744) - - - (744)
Interest income, net 1,535 - - (618)(ii)/(iii) 917
------- --------- ---- ------------ -------------
Income (loss) before provision for income taxes 661 (11) 177 (1,047) (220)
Provision for income taxes 20 - - - 20
------- --------- ---- ------------ -------------
Net income (loss) $ 641 $ (11) $177 $ (1,047) $ (240)
======= ========= ==== ============ =============
Net income (loss) per share - basic $ .12 $ (.04)
Weighted average shares outstanding - basic 5,364 5,508
Net income (loss) per share - diluted $ .08 $ (.04)
Weighted average shares outstanding - diluted 7,689 5,508
</TABLE>
See accompanying notes
<PAGE>
SEGUE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
PRO FORMA ADJUSTMENTS
a.) Balance Sheet:
i.) Upon consummation of the transaction, the purchase price paid
to the shareholders of SQLBench and ARC consisted of $4,415 paid in cash, $4,415
for promissory notes payable over three years, and 144 shares of common stock
with certain restrictions valued at $1,032.
ii.) The purchase price was allocated to $9,095 for purchased
research and development which has been reflected as a charge to retained
earnings, $11 of property and equipment and $1,006 of completed technology.
Transaction costs of $250, have also been reflected as part of the purchase
price. Partners' capital, retained earnings and assets and liabilities not
acquired from SQLBench or ARC have been eliminated as a pro forma adjustment.
iii.) Cash, accounts receivable, other current assets, accrued royalties
and expenses and retained earnings have been adjusted to reflect the refund of
prepaid royalties to Segue and to eliminate the related amounts for the various
license agreements among Segue, SQLBench and ARC.
iv.) The tax consequences of the charge for purchased research and
development have been offset with a full valuation allowance due to the
uncertainty of realization.
b.) Statements of Operations:
i.) Amortization expense for completed technology of $251 and $335
for the nine months ended September 30, 1997 and for the year ended December 31,
1996, respectively, has been recorded based upon an estimated three-year life.
ii.) Interest expense of $281 and $375 for the nine months ended
September 30, 1997 and for the year ended December 31, 1996, respectively, has
been recorded related to the promissory rates using an assumed interest rate of
8.5%.
iii.) Interest income has been reduced by $182 and $243 for the nine
months ended September 30, 1997 and for the year ended December 31, 1996,
respectively, to reflect the purchase price paid in cash using an assumed
interest rate of 5.5%.
iv.) Revenue and cost of revenue have been adjusted to reflect the
elimination of all amounts recorded by Segue, SQLBench and ARC under the various
software license agreements.
v.) The tax provision has been adjusted to reflect the combined
impact of the pro forma adjustments assuming no benefit for losses incurred.
<PAGE>
SEGUE SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(IN THOUSANDS)
vi.) Certain reclassifications have been made to the operating
expenses of SQLBench and ARC to reflect the classification based on Segue's
historical presentation.
vii.) The 144 shares of Segue common stock issued in the transaction have
been assumed to be outstanding for all periods presented for purposes of
determining the pro forma weighted-average shares outstanding.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SEGUE SOFTWARE, INC.
Dated: March 16, 1998 By: /s/ J. Jeffrey Bingenheimer
-----------------------------
J. Jeffrey Bingenheimer
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Coopers & Lybrand INTER-TREUHAND GmbH
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Segue Software, Inc. on Form S-8 (File No. 333-09393) of our report dated March
13, 1998, on our audit of the financial statements of SQLBench International,
Inc. as of December 31, 1996 and for the period from October 22, 1996 (date of
inception) to December 31, 1996, which report is included in this Current Report
on Form 8-K/A.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 13, 1998
<PAGE>
EXHIBIT 23.2
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration Statement of
Segue Software, Inc. on Form S-8 (File No. 333-09393) of our report, dated March
3, 1998, on our audit of the financial statements of ARC Dr. Ambichl & Dr.
Reindl OEG as of December 31, 1996, and for the year then ended, which report is
included in this Current Report on Form 8-K/A.
/s/ Coopers & Lybrand
INTER-TREUHAND GmbH
Wirtschaftspruefungs-und
Steuerberatungsgesellschaft
Linz, Austria
March 13, 1998
