<PAGE>
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
July 16, 1998
-------------
Date of Report (Date of earliest event reported)
DOCUMENTUM, INC.
----------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-27358 95-4261421
-----------------------------------------------------------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
5671 GIBRALTAR DRIVE
PLEASANTON, CA 94588-8547
--------------------------
(Address of principal executive offices)
(925) 463-6800
--------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The undersigned registrant hereby amends its Form 8-K dated July 16,
1998 and filed on July 31, 1998 by adding Items 7(a) and 7(b).
(a) Financial Statements of the Business Acquired
Report of Independent Accountants
To the Board of Directors and Stockholders
of Relevance Technologies, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' deficit and of cash flows present fairly, in all
material respects, the financial position of Relevance Technologies, Inc. (a
development stage company) at May 31, 1998, and the results of its operations
and its cash flows for the year ended May 31, 1998 and the period from inception
(September 30, 1996) through May 31, 1998 in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards 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
San Jose, California
June 25, 1998, except for Note 9 which is
as of July 16, 1998
<PAGE>
RELEVANCE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
May 31,
1998
----
ASSETS
Current Assets:
Cash and cash equivalents $ 2,988,000
Prepaid expenses and other current assets 157,000
------------------
Total current assets 3,145,000
Property and equipment, net 409,000
------------------
$ 3,554,000
==================
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Borrowings under line of credit $ 597,000
Notes payable, current 89,000
Accounts payable 71,000
Accrued liabilities 404,000
------------------
Total current liabilities 1,161,000
Notes payable, long-term 198,000
------------------
Mandatorily redeemable convertible preferred stock 5,761,000
------------------
Commitments (Note 5)
Stockholders' Deficit:
Common stock, $0.001 par value; 20,000,000 shares
authorized; 4,071,642 shares issued and outstanding 4,000
Additional paid-in capital 646,000
Deficit accumulated during the development stage (3,786,000)
Other (430,000)
------------------
Total stockholders' deficit (3,566,000)
------------------
$ 3,554,000
==================
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
RELEVANCE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
For the
period from
inception
(September 30,
Year 1996)
ended through
May 31, May 31,
1998 1998
---- ----
Operating expenses:
Research and development $ 2,066,000 $ 2,417,000
Sales and marketing 407,000 460,000
General and administrative 731,000 921,000
------------- -----------------
Total operating expenses 3,204,000 3,798,000
------------- -----------------
Interest income (expense), net (5,000) 12,000
------------- -----------------
Net loss $ (3,209,000) $ (3,786,000)
============= =================
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
RELEVANCE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage Other Total
--------- --------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock
for goods and services
at $.065 per share 322,500 $ - $ 21,000 $ - $ - $ 21,000
Issuance of common stock
for cash at $.065 per share 2,677,500 3,000 172,000 - - 175,000
Net loss - - - (577,000) - (577,000)
--------- --------- ----------- ------------ ----------- ------------
Balance at May 31, 1997 3,000,000 3,000 193,000 (577,000) - (381,000)
Common stock options
exercised in exchange for
cash and notes receivable 1,071,642 1,000 113,000 - (90,000) 24,000
Deferred Compensation - - 340,000 - (340,000) -
Net loss - - - (3,209,000) - (3,209,000)
--------- --------- ----------- ------------ ----------- ------------
Balance at May 31, 1998 4,071,642 $ 4,000 $ 646,000 $ (3,786,000) $ (430,000) $ (3,566,000)
========= ========= =========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
RELEVANCE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the
period from
inception
(September 30,
Year ended 1996) through
May 31, May 31,
1998 1998
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,209,000) $ (3,786,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on write-off of fixed assets - 7,000
Issuance of common stock for goods and services - 21,000
Accretion of mandatorily redeemable convertible
preferred stock issuance costs 4,000 4,000
Depreciation 74,000 81,000
Amortization of debt discount 4,000 4,000
Changes in current assets and liabilities:
Prepaid expenses and other current assets (60,000) (157,000)
Accounts payable 30,000 71,000
Accrued liabilities 378,000 404,000
-------------- ---------------
Net cash used in operating activities (2,779,000) (3,351,000)
-------------- ---------------
Cash flows used in investing activities for
purchases of property and equipment (434,000) (490,000)
-------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock 24,000 199,000
Proceeds from issuance of mandatorily redeemable
convertible preferred stock, net of issuance costs 3,957,000 5,725,000
Proceeds from notes payable, net of repayments 287,000 308,000
Proceeds from borrowings under line of credit 597,000 597,000
-------------- ---------------
Net cash provided by financing activities 4,865,000 6,829,000
-------------- ---------------
Net increase in cash and cash equivalents 1,652,000 2,988,000
Cash and cash equivalents at beginning of period 1,336,000 -
-------------- ---------------
Cash and cash equivalents at end of period $ 2,988,000 $ 2,988,000
============== ===============
Supplemental cash flow information:
Cash paid for interest $ 51,000 $ 56,000
============== ===============
Supplemental non-cash investing and financing activity:
Conversion of promissory note to Series A mandatorily
redeemable convertible preferred stock $ - $ 21,000
============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company
Relevance Technologies, Inc., (the "Company"), develops software which
utilizes an information modeling technology called Semantic Modeling
Architecture to automate the process of capturing and categorizing information.
The Company was incorporated in the State of Delaware on September 30, 1996.
The Company is in the development stage, devoting substantially all of its
efforts to product development. The Company has funded its operating losses
since inception through the sale of equity securities. The Company expects to
generate revenues beginning in fiscal year 1999 through the licensing of its
software products. On July 16, 1998, Documentum, Inc., the holders of Series C
mandatorily redeemable convertible preferred stock acquired the remaining shares
of the Company for $35.0 million in cash and common stock.
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 disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At May 31,
1998, the Company had no investments with maturities greater than three months.
Concentration of credit risk
Financial instruments that potentially subject the Company to a concentration
of credit risk consist of cash and cash equivalents. The Company deposits cash
and cash equivalents with high credit quality financial institutions. The
carrying value of all financial instruments approximates their respective fair
value.
Capitalized software development costs
Software development costs are included in research and development and are
expensed as incurred. After technological feasibility is established, material
software development costs are capitalized. The capitalized cost is then
amortized on a straight-line basis over the estimated product life, or on the
ratio of current revenues to total projected product revenues, whichever is
greater. To date, there have been no software development costs qualifying for
capitalization.
Property and equipment
Property and equipment, including leasehold improvements, are recorded at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, three to six years, or the life of the
lease, whichever is shorter.
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25") and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation ("SFAS No. 123").
Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income
and its components in financial statements. Comprehensive income as defined
includes all changes in equity (net assets) during a period from nonowner
sources. Examples of items to be included in comprehensive income which are
excluded from net income include foreign currency translation adjustments and
unrealized gain/loss on available-for-sale securities. The disclosures
prescribed by SFAS 130 will be effective for the year ending May 31, 1999. The
Company does not expect adoption of SFAS 130 to have a material impact on its
financial statements.
6
<PAGE>
In June 1997, the FASB issued SFAS 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"). This statement establishes
standards for the way companies report information about operating segments in
annual financial statements. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The disclosures prescribed by SFAS 131 will be effective for the year ending May
31, 1999. The Company does not expect adoption of SFAS 131 to have a material
impact on its financial statements.
NOTE 2 - BALANCE SHEET COMPONENTS:
May 31,
1998
-----------
Property and equipment:
Computer equipment $ 409,000
Furniture and fixtures 57,000
Leasehold improvements 24,000
-----------
490,000
Less: Accumulated depreciation (81,000)
-----------
$ 409,000
===========
Accrued liabilities:
Payroll and related expenses $ 80,000
Professional fees 83,000
Taxes 73,000
Travel expenses 57,000
License fees 25,000
Royalty 20,000
Other 66,000
-----------
$ 404,000
===========
NOTE 3 - INCOME TAXES:
No provision for federal and state income taxes has been recorded as the
Company incurred net operating losses through May 31, 1998. At May 31, 1998,
the Company had approximately $3,470,000 of federal and $1,735,000 of state net
operating loss carryforwards available to offset future taxable income which
expire in varying amounts beginning in 2012. Under the Tax Reform Act of 1986,
the amounts of and benefits from net operating loss carryforwards may be
impaired or limited in certain circumstances including the transaction described
in Note 9.
Deferred tax assets, aggregating approximately $1,500,000 at May 31, 1998,
consist primarily of net operating loss carryforwards and reserves and accrued
expenses which are not currently deductible for tax purposes. The Company has
provided a full valuation allowance on the deferred tax assets because of the
uncertainty regarding realization based upon the weight of currently available
information.
NOTE 4 - BORROWINGS:
Line of credit
At May 31, 1998, the Company had $597,000 outstanding and due under a line
of credit with a financial institution. The line of credit provides for
borrowings up to $600,000 which are secured by all assets of the Company. The
line of credit expires on October 10, 1998 and charges interest at a rate of
prime (8.5% at May 31, 1998) plus 2% per annum. On June 12, 1998, the line of
credit was repaid in full.
7
<PAGE>
Notes payable
At May 31, 1998, the Company had $287,000 outstanding and due under notes
payable due to a third party. The notes bear interest at 7.92% per annum and
are secured by the Company's fixed assets. In connection with the notes, the
Company issued warrants to purchase 23,963 shares of the Company's Series A
mandatorily redeemable convertible preferred stock at $1.085 per share which
expire at the earlier of March 31, 2003 or time of a merger or reorganization,
after which stockholders of the Company immediately prior to such transaction
own less than 50% of the equity securities of the surviving corporation, so long
as the surviving entity is publicly traded. Upon issuance of the notes, the
proceeds were allocated between the debt and the warrants based on the fair
value of the financial instruments. The Company has determined the fair value
of the warrants to be $13,000, which has been reflected as a discount on the
related notes. As of May 31, 1998, the maturities under the notes payable are
$89,000 in 1999, $106,000 in 2000 and $98,000 in 2001.
NOTE 5 - COMMITMENTS:
Royalty obligations
On June 26, 1997, the Company entered into a license agreement with a third
party to utilize the third party's technology. The agreement specifies a
royalty payment of up to 2.25% of future sales of the Company's products which
utilize the third party's technology. The minimum rates are $136, $100 and $50
per product sold, as defined in the agreement, during the first, second and
third calendar year ends of the agreement, respectively. In addition, the
Company is required to pay a 10% maintenance fee based on royalty revenue and a
minimum non-refundable royalty totaling $60,000. During fiscal year 1998,
$40,000 was paid. The remaining $20,000 is payable during the 1999 fiscal year.
Leases
The Company leases office space which expires during fiscal year 1999. Rent
expense for the year ended May 31, 1998 and the period from inception (September
30, 1996) through May 31, 1998 was $116,000 and $157,000, respectively. The
Company recognizes rent expense on a straight-line basis over the lease period,
and has accrued for rent expense incurred but not paid. Future minimum lease
payments under the noncancelable lease are $120,000 for the year ended May 31,
1998.
NOTE 6 - MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Mandatorily redeemable convertible preferred stock ("Preferred Stock") at May
31, 1998 consists of the following:
Proceeds
Shares Net of
--------------------------- Liquidation Issuance
Series Authorized Outstanding Amount Costs
- ------ ---------- ----------- ----------- --------
A 1,689,124 1,665,161 $ 1,807,000 $ 1,789,000
B 1,700,000 1,655,629 2,500,000 2,476,000
C 900,000 862,068 1,500,000 1,481,000
----------- ----------- ----------- -----------
4,289,124 4,182,858 $ 5,807,000 $ 5,746,000
=========== =========== =========== ===========
The holders of Preferred Stock have various rights and preferences as
follows:
Voting
Each share of Series A, B and C Preferred Stock has voting rights equal to an
equivalent number of shares of common stock into which it is convertible and
votes together as one class with the common stock.
Holders of Series A, B and C Preferred Stock have the right to vote on an as-
if-converted basis with the holders of common stock.
The Company must obtain approval from a majority of the shares of Preferred
Stock outstanding for the following items to (i) sell or otherwise dispose of
all or substantially all of its property or business or effect any transaction
or series of related transactions in which more than 50% of the voting power is
disposed of, (ii) change the rights, preferences or privileges of the shares
8
<PAGE>
of Preferred Stock, (iii) change the authorized number of shares of Preferred
Stock, (iv) authorize or issue any other equity security having preference over
the Preferred Stock, (v) effect a dissolution, liquidation or winding up of the
Company, (vi) redeem, purchase or otherwise acquire Preferred Stock, or declare
or pay dividends on common stock.
Dividends
Holders of Series A, B and C Preferred Stock are entitled to receive
noncumulative dividends at the per annum rate of $0.08, $0.11 and $0.13 per
share, respectively, or, if greater, an amount paid to any other outstanding
shares of the Company, when and if declared by the Board of Directors.
Dividends are not cumulative. No dividends on Preferred Stock or common stock
have been declared by the Board from inception through May 31, 1998.
Liquidation
In the event of liquidation, dissolution or winding up of the Company
(including an acquisition of this Company through any transaction or series of
related transactions that results in a transfer of 50% or more of the
outstanding voting power or a sale or other disposition of all, or substantially
all, of the assets of this Company), the holders of Series A Preferred Stock
shall be entitled to receive $1.085 per share and an amount equal to declared
but unpaid dividends. Holders of Series B Preferred Stock shall be entitled to
receive $1.51 per share and an amount equal to declared but unpaid dividends.
Holders of the Series C Preferred Stock shall be entitled to receive $1.74 per
share and an amount equal to declared but unpaid dividends. Should the
liquidation funds be insufficient to satisfy the holders of Series A, B and C
Preferred Stock, then the available funds will be distributed ratably among the
holders of Series A, B and C Preferred Stock in proportion to the aggregate
preferences detailed above. After satisfaction of the Series A, B and C
liquidation preferences, the remaining assets shall be distributed ratably among
the holders of Series B Preferred Stock and common stock until holders of Series
B Preferred Stock have received an aggregate of $3.775 per share. Thereafter,
holders of common stock shall receive the remaining assets of the Company based
upon the number of common stock held by each stockholder.
Conversion
Shares of Series A, B and C Preferred Stock are convertible at the option of
the holder at a ratio computed by dividing the original issue price by the
conversion price in effect at the time of the conversion which is currently 1:1
and subject to certain dilution protection. Holders of Series A, B and C
Preferred Stock have the right to collect any declared but unpaid dividends at
the time of conversion. Additionally, Series A, B and C Preferred Stock
immediately converts upon the earlier of (i) sale of common stock in a bona
fide, firm commitment underwritten offering whereby the gross proceeds aggregate
a minimum of $10,000,000 and $5.00 per share, or (ii) date specified by
agreement of the holders of a majority of the then outstanding shares of Series
A, Series B and Series C Preferred Stock.
Redemption
At any time after February 1, 2004, upon a written request from holders of
the majority of the then outstanding Series A, Series B and Series C Preferred
Stock, the Company shall redeem in four annual installments $1.085 per share
plus all declared but unpaid dividends of Series A Preferred Stock, $1.51 per
share plus all declared but unpaid dividends of Series B Preferred Stock and
$1.74 per share plus all declared but unpaid dividends of Series C Preferred
Stock. The difference between the carrying value of the Preferred Stock and
their redemption value is being accreted ratably to the statement of operations
through February 1, 2004.
NOTE 7 - COMMON STOCK:
The Company's Articles of Incorporation, as amended, authorize the Company to
issue 20,000,000 shares of $0.001 par value common stock. A portion of the
shares sold are subject to a right of repurchase by the Company subject to
vesting, which is generally over a four year period until vesting is complete.
At May 31, 1998, there were 797,792 shares subject to repurchase.
As of May 31, 1998, the Company has reserved shares of common stock as
follows:
Conversion of Preferred Stock and Preferred Stock warrants 4,289,124
Options under stock option plan (Note 8) 1,197,273
-----------
Total shares reserved 5,486,397
===========
9
<PAGE>
NOTE 8 - STOCK OPTION PLANS:
In December 1996, the Company adopted the 1996 Stock Option Plan (the
"Plan"). The Plan provides for the granting of stock options to employees and
consultants of the Company. Options granted under the Plan may be either
incentive stock options or nonqualified stock options. Incentive stock options
("ISO") may be granted only to Company employees (including officers and
directors who are also employees). Nonqualified stock options ("NSO") may be
granted to Company employees and consultants. The Board of Directors authorized
2,268,915 shares of common stock to be issued under the plan. At May 31, 1998,
300,452 were available for grant.
Options under the Plan may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date
of grant as determined by the Board of Directors, provided, however, that (i)
the exercise price of an ISO and NSO shall not be less than 100% and 85% of
the estimated fair value of the shares on the date of grant, respectively, and
(ii) the exercise price of an ISO and NSO granted to a 10% shareholder shall
not be less than 110% of the estimated fair value of the shares on the date of
grant, respectively. Options are exercisable immediately and if exercised
prior to vesting, subject to a repurchase option which expires over the
vesting period. To date, options granted generally vest over four years. At
May 31, 1998, 747,764 shares were subject to repurchase by the Company.
During fiscal year 1998, 831,642 options to purchase common stock were
exercised by three employees in exchange for full recourse notes receivable
totaling $90,000. The notes bear interest at an annual rate of 6% per annum,
are due on May 12, 2000 and have been recorded in Stockholders' Deficit in the
accompanying balance sheet at May 31, 1998.
During fiscal year 1998, the Company granted 358,000 options at less than
fair market value with a weighted average exercise price of $0.25 per share and
recorded deferred stock compensation totaling $340,000 related to these stock
options. The amount has been recorded under additional paid-in capital and has
been fully offset by the unvested portion in Other Stockholders' Deficit in the
accompanying balance sheet.
Weighted
Average
Options Exercise
Outstanding Price
------------- ----------
Granted 1,176,692 $0.10
-----------
Outstanding at May 31, 1997 1,176,692 0.10
Granted 840,000 0.17
Exercised (1,071,642) 0.10
Canceled (48,229) 0.10
-----------
Outstanding at May 31, 1998 896,821 0.16
===========
Options outstanding at May 31, 1998 can be exercised at prices between $0.10-
$0.30 and have a weighted average remaining contractual life of 9.0 years.
10
<PAGE>
Fair value disclosures
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
For the
period from
inception
(September 30
Year ended 1996) through
May 31, May 31,
1998 1998
------------- -------------
Net loss:
As reported $ 3,209,000 $ 3,786,000
============= =============
Pro forma $ 3,231,000 $ 3,817,000
============= =============
The Company calculated the fair value of each option grant on the date of
grant using the Black-Scholes pricing method with the following assumptions:
dividend yield at 0%; weighted average expected option term of four years; risk
free interest rate of 5.2% to 6.0% and 5.2% to 6.1% for the year ended May 31,
1998 and the period from inception (September 30, 1996) through May 31, 1998,
respectively. The weighted average fair value of options granted at fair value
during 1998 and the period from inception (September 30, 1996) through May 31,
1998 was $0.02.
NOTE 9 - SUBSEQUENT EVENTS:
On July 16, 1998, Documentum, Inc. ("Documentum"), the holders of the Series C
Preferred Stock agreed to acquire the remaining shares of the Company for $35.0
million in cash and common stock.
11
<PAGE>
(b) Pro Forma Financial Information
Effective July 16, 1998, Documentum, Inc. ("Documentum"), a Delaware
corporation, completed its acquisition of substantially all of the assets of
Relevance Technologies, Inc. ("Relevance"), a Delaware corporation for $5.0
million in cash (including $1.5 million attributable to an earlier investment by
Documentum in Relevance) and $31,500,000 worth of Documentum Common Stock,
valued at $48.30475 per share. The transaction was accounted for using the
purchase method; accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on their fair market values at the date
of acquisition.
The following unaudited pro forma combined condensed financial statements
give effect to the acquisition accounted for as a purchase. The unaudited pro
forma combined condensed balance sheet at March 31, 1998 is based on the
individual balance sheets of Documentum and Relevance and has been prepared to
reflect the acquisition as of March 31, 1998. The unaudited pro forma combined
condensed statements of operations are based on the individual statements of
operations of Documentum and Relevance and combines the results of operations
for the year ended December 31, 1997 and three months ended March 31, 1998 as if
the acquisition occurred on January 1, 1997.
The unaudited pro forma combined condensed balance sheet and pro forma
combined condensed statements of operations are not necessarily indicative of
the operating results that would have been achieved if the transaction had
occurred on the date indicated and should not be construed as representative of
future operations. The historical financial statements of Relevance are
included elsewhere in this filing and the unaudited pro forma financial
statements presented herein should be read in conjunction with those financial
statements and related notes.
12
<PAGE>
Documentum, Inc.
Pro Forma Combined Condensed Balance Sheet-Unaudited
March 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Combined
Documentum Relevance Adjustments Pro Forma
----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 20,924 $ 2,295 $ (5,000) (d) $ 18,219
Short-term investments 80,059 -- -- 80,059
Accounts receivable, net 17,773 -- -- 17,773
Other current assets 4,566 150 -- 4,716
---------- ---------- ---------- ----------
Total current assets 123,322 2,445 (5,000) 120,767
Property and equipment, net 9,512 323 -- 9,835
Other assets 409 -- -- 409
Goodwill -- -- 1,121 (e) 1,121
---------- ---------- ---------- ----------
$ 133,243 $ 2,768 $ (3,879) $ 132,132
========== ========== ========== ==========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Line of credit $ -- $ 597 $ -- $ 597
Accounts payable 2,228 67 -- 2,295
Accrued liabilities 16,700 212 300 (c) 17,212
Deferred revenue 11,525 -- -- 11,525
Other liabilities 334 56 -- 390
---------- ---------- ---------- ----------
Total current liabilities 30,787 932 300 32,019
---------- ---------- ---------- ----------
Long-term obligations -- 157 -- 157
Mandatorily redeemable convertible preferred stock -- 4,277 (4,277)(a) --
Stockholders' equity (deficit) 102,456 (2,598) 4,277 (a)
(1,679)(b)
31,500 (d)
(34,000)(f) 99,956
---------- ---------- ---------- ----------
$ 133,243 $ 2,768 $ (3,879) $ 132,132
========== ========== ========== ==========
</TABLE>
Unaudited Notes to Pro Forma Balance Sheet
------------------------------------------
NOTE 1 - The pro forma balance sheet has been prepared to reflect the
acquisition of Relevance by Documentum for an aggregate price of $36.5 million.
Pro forma adjustments are made to reflect:
(a) The conversion of the Relevance mandatorily redeemable convertible preferred
stock necessary to complete the purchase acquisition.
(b) The elimination of the stockholders' deficit accounts of Relevance.
(c) The costs incurred related to the acquisition.
(d) The issuance of common stock and cash by Documentum.
(e) The excess of acquisition costs over the fair value of net assets acquired
(goodwill).
(f) The write-off of purchased in-process research and development costs.
13
<PAGE>
Documentum, Inc.
Pro Forma Combined Condensed Statement of Operations-Unaudited
For the year ended December 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Combined
Documentum Relevance Adjustments Pro Forma
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 75,635 $ -- $ -- $ 75,635
Cost of revenues 14,780 -- -- 14,780
---------- ---------- ---------- ----------
Gross profit 60,855 -- -- 60,855
---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing 35,084 442 -- 35,526
Research and development 10,986 928 -- 11,914
General and administrative 5,976 393 -- 6,369
Amortization of goodwill -- -- 578 (a) 578
---------- ---------- ---------- ----------
Total operating expenses 52,046 1,763 578 54,387
---------- ---------- ---------- ----------
Income (loss) from operations 8,809 (1,763) (578) 6,468
Interest and other income (expense), net 2,333 28 -- 2,361
---------- ---------- ---------- ----------
Income (loss) before income tax provision 11,142 (1,735) (578) 8,829
Provision for income taxes (3,788) -- 590 (b) (3,198)
---------- ---------- ---------- ----------
Net income (loss) $ 7,354 $ (1,735) $ 12 $ 5,631
========== ========== ========== ==========
Basic earnings per share $ 0.51 $ 0.37
========== ==========
Diluted earnings per share $ 0.49 $ 0.37
========== ==========
Shares used to compute basic earnings per share 14,463 578 (c) 15,041
========== ========== ==========
Shares used to compute diluted earnings per share 15,098 74 (c) 15,172
========== ========== ==========
</TABLE>
14
<PAGE>
Documentum, Inc.
Pro Forma Combined Condensed Statement of Operations-Unaudited
For the three months ended March 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Combined
Documentum Relevance Adjustments Pro Forma
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 25,072 $ -- $ -- $ 25,072
Cost of revenues 6,249 -- -- 6,249
---------- ---------- ---------- ----------
Gross profit 18,823 -- -- 18,823
---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing 10,569 238 -- 10,807
Research and development 3,641 455 -- 4,096
General and administrative 2,296 206 -- 2,502
Acquisition and related costs 2,171 -- -- 2,171
Amortization of goodwill -- -- 144 (a) 144
---------- ---------- ---------- ----------
Total operating expenses 18,677 899 144 19,720
---------- ---------- ---------- ----------
Income (loss) from operations 146 (899) (144) (897)
Interest and other income (expense), net 1,110 (13) -- 1,097
---------- ---------- ---------- ----------
Income (loss) before income tax provision 1,256 (912) (144) 200
Provision for income taxes (766) -- 310 (b) (456)
---------- ---------- ---------- ----------
Net income (loss) $ 490 $ (912) $ 166 $ (256)
========== ========== ========== ==========
Basic earnings per share $ 0.03 $ (0.02)
========== ==========
Diluted earnings per share $ 0.03 $ (0.02)
========== ==========
Shares used to compute basic earnings per share 15,807 578 (c) 16,385
========== ========== ==========
Shares used to compute diluted earnings per share 16,729 -- (c) 16,385
========== ========== ==========
</TABLE>
Unaudited Notes to Pro Forma Statements of Operations
-----------------------------------------------------
NOTE 1 - The above statements give effect to the following pro forma adjustments
necessary to reflect the acquisition:
(a) Amortization of goodwill on a straight-line basis over two years.
(b) Reduction in income taxes to offset the losses generated by Relevance
against taxable income of Documentum.
(c) Common shares issued in the purchase acquisition.
Management estimates that $34.0 million of the purchase price represents
in-process technology that has not yet reached technological feasibility and has
no alternative future use. This amount will be expensed as a non-recurring,
non-tax deductible charge upon consummation of the merger. This amount has been
reflected as a reduction of stockholders' equity and has not been included in
the pro forma combined statements of operations due to its non-recurring nature.
15
<PAGE>
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
(1)2.1 Agreement and Plan of Merger and Reorganization,
dated as of July 16 1998, among Documentum, Inc. a
Delaware corporation, RTI Acquisition Corp, a
Delaware corporation, and Relevance Technologies,
Inc. a Delaware corporation
23.1 Consent of PricewaterhouseCoopers LLP.
(2)99.1 Press Release of Documentum, Inc, dated July 16,
1998.
(1) Incorporated by reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-3 (333-59331).
(2) Incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K
filed with the Commission on July 16, 1998.
16
<PAGE>
SIGNATURE
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.
DOCUMENTUM, INC.
Date: August 4, 1998 /s/ Mark S. Garrett
-------------------
Mark S. Garrett
Vice President, Chief Financial Officer and
Secretary
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
(1)2.1 Agreement and Plan of Merger and Reorganization,
dated as of July 16 1998, among Documentum, Inc. a
Delaware corporation, RTI Acquisition Corp, a
Delaware corporation, and Relevance Technologies,
Inc. a Delaware corporation
23.1 Consent of PricewaterhouseCoopers LLP.
(2)99.1 Press Release of Documentum, Inc, dated July 16, 1998.
(1) Incorporated by reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-3 (333-59331).
(2) Incorporated by reference to Exhibit 99.2 to Current Report on Form 8-K
filed with the Commission on July 16, 1998.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-08709, 333-01832, 333-15239, 333- 39027) of
Documentum Inc., of our report dated June 25, 1998 except for Note 9 which is
as of July 16, 1998, relating to the financial statements of Relevance
Technologies, Inc. which appears in the Current Report of Form 8-K/A of
Documentum Inc. dated August 5, 1998.
/s/ PRICEWATERHOUSECOOPERS LLP
- -----------------------------------------
PRICEWATERHOUSECOOPERS LLP
San Jose, California
August 5, 1998
