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Proc-Type: 2001,MIC-CLEAR
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UNITED STATES FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: June 17, 2002 Date of Earliest Event Reported: April 1, 2002
(Exact name of Registrant as specified in its Charter)
Delaware 93-105328 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
20400 Stevens Creek Boulevard, Suite 400
(408) 517-6100
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial Statements of Business Acquired.
ONDEMAND, INC. 1,333 -- 25 36 The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC. The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC. The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC. The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC. (119 (285 The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC.
YEAR ENDED SEPTEMBER 30, 2001 1. Description of Business OnDemand, Inc. (the "Company") was
incorporated in the state of Delaware. The Company is a software and application
service provider that offers a proprietary solution to companies who rely on
channel organizations for revenue. The Company's business-to-business portals
deliver a suite of vendor-specific information and e-business services to
automate, unify and support channel sales. The Company conducts its business
primarily in the United States. 2. Significant Accounting Policies Basis of Presentation The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. The Company
has incurred recurring losses since inception and had an accumulated deficit of
$37,299 at September 30, 2001. Net losses are expected for the foreseeable
future. Future capital requirements depend on many factors, including the
Company's ability to execute its business plan. The Company is presently
discussing raising additional financing through the issuance of debt or equity
securities in order to complete development activities and to reach a state at
which profitable operations become a possibility. There can be no assurance that
the Company will be able to raise additional financing or that financing will be
available on terms satisfactory to them; significant reductions in spending and
the delay or cancellation of planned activities may be necessary. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty. The Company's management is
committed to managing expenses and has executed on cost optimization
opportunities. The management team will execute further reductions, if needed,
if revenue projections are not realized. 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 the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents For the purpose of the statements of cash
flows, the Company considers all investments purchased with original maturities
of three months or less to be cash equivalents. Concentrations of Credit Risk and Credit
Evaluations Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist primarily of cash
equivalents. The Company primarily places its cash and cash equivalents with one
domestic financial institution with high credit standing. The Company licenses its product to companies
in the United States. The Company performs ongoing credit evaluations of these
customers and generally does not require collateral. The Company has had
insignificant credit losses to date. Revenues from three customers accounted for
10%, 9%, and 8% of total revenues for the year ended September 30, 2001.
Revenues from three customers accounted for 19%, 16%, and 13% of total revenues
for the year ended September 30, 2000. Accounts Receivable Accounts receivable are stated net of
allowance for doubtful accounts of approximately $32 and $60 in 2001 and 2000,
respectively. Property and Equipment Equipment is stated at cost. Depreciation is
provided over the estimated useful lives of the related assets using primarily
the straight-line method. The estimated useful lives approximate three years.
Depreciation expense of approximately $603 and $170 was recognized in the years
ended September 30, 2001 and 2000, respectively. Revenue Recognition Revenue results from hosting services, setup
fees, and supporting professional services. Cost of revenues includes the
personnel and expenses incurred in providing hosting services, customer support,
and training. Under the terms of the Company's agreements
with its customers, customers do not have the contractual right to take
possession of the Company's software. As a result, the Company accounts for
revenue in accordance with Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101), and Emerging Issues Task
Force 00-3, "Application of AICPA Statement of Position 97-2, Software Revenue
Recognition, to Arrangements that Include the Right to Use Software Stored on
Another Entity's Hardware" (EITF 00-3). Revenue, including revenue from setup fees, is
recognized ratably over the term of the related contract as hosting services are
provided. Professional services revenues are recognized as the services are
provided. The Company determines whether evidence of an arrangement exists,
delivery has occurred, the fee is fixed or determinable, and collection is
probable. If any of these criteria are not met, revenue recognition is deferred
until such time as all of the criteria are met. Advertising Costs Advertising costs are expensed in the period
incurred and totaled approximately $37 and $762 in 2001 and 2000, and none in
1999. Software Development Costs Costs of software developed internally by the
Company or obtained for use in its operations are accounted for under the
American Institute of Certified Public Accountant's Statement of Position (SOP)
98-1, "Accounting for the Costs of Corporate Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 requires the capitalization of certain costs
related to internal use software once specific criteria have been met. All
capitalized internal use computer software was obtained from external sources.
Capitalized internal use software was $404 and $285 at September 30, 2001 and
2000, respectively. The purchased software is being amortized on a straight-line
basis into research and development expense over three years, the expected
useful life. Amortization expense of $116 and $47 was recorded during the years
ended September 30, 2001 and 2000, respectively. Intangible Assets Intangible assets consist of: customer lists,
workforce and technological know how resulting from business acquisitions, see
Note 3. The intangible assets are amortized on a straight-line basis over 6 and
24 months, which represents the estimated period of benefit. Amortization
expense of $1,180 and none was recorded for years ended September 30, 2001 and
2000, respectively. Stock-Based Compensation The Company accounts for stock options and
performance-based stock awards as prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and has
adopted the disclosure only option of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123).
Accordingly, no compensation cost for stock options is recorded at the time of
issuance when the option price is set at the market price of the Company's stock
at date of grant. The effect of applying the fair value method under SFAS 123 to
the Company's stock options would result in pro forma net losses that are not
materially different from the historical amounts reported. Comprehensive Income (loss) Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130"), requires components of
other comprehensive income, including gains and losses on available-for-sale
investments, to be included as part of total comprehensive income (loss). Total
comprehensive income (loss) for each of the periods presented is equal to net
loss. In accordance with the provision of SFAS No.
131 "Disclosures about Segments of an Enterprise and Related Information," the
Company has determined that it has only one operating segment, the application
service provider segment. Reclassifications Certain reclassifications of prior-year
amounts have been made to conform to the current-year presentation, including
certain debt issuance costs. In addition, the Company has reflected the
reclassification of convertible preferred stock to redeemable convertible
preferred stock to reflect a redemption provision that was added to those
securities in September 2000. Impact of Recently Issued Accounting
Pronouncements In July 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard No. 141,
"Business Combination" ("SFAS 141") and Statement of Financial Accounting
Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141
eliminates the pooling-of-interests method of accounting for business
combinations except for qualifying business combinations that were initiated
prior to July 1, 2001. SFAS 141 further clarifies the criteria to recognize
intangible assets separately from goodwill. The requirements of SFAS 141 are
effective for any business combination accounted for by the purchase method that
is completed after June 30, 2001 (i.e., the acquisition date is July 1, 2001 and
thereafter). Under SFAS 142, goodwill and indefinite-lived intangible assets are
no longer amortized but are reviewed annually (or more frequently if indicators
arise, for impairment). Separable intangible assets that are not
deemed to have an indefinite life will continue to be amortized over their
useful lives. The Company is required to adopt SFAS Nos. 141 and 142 on October
1, 2001. The Company has not determined the impact, if any, that SFAS Nos. 141
and 142 will have on its financial statements. In October 2001, the FASB issued SFAS No. 144
("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets,"
which is effective for fiscal periods beginning after December 15, 2001. SFAS
144 provides a single accounting model for, and supersedes previous guidance on,
accounting and reporting for the impairment/disposal of long-lived assets.
SFAS 144 sets new criteria for the classification of assets held-for-sale and
changes the reporting of discontinued operations. The Company does not believe
that the adoption of SFAS 144 will have a significant impact on its financial
statements. Income Taxes The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," which requires the use of the liability method in accounting
for income taxes. Under this method, deferred tax assets and liabilities are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. 3. Other Long-Term Assets Other long-term assets consisted of the
following at September 30: 2001 2000 Deposits $ 94 $ 74 Prepaid royalties -- 10 Total: $ 94 $ 84 4. Accrued Liabilities Accrued liabilities consist of the following
at September 30: 2001 2000 Accrued bonus $ 161 $ 168 Accrued payroll 269 215 Accrued vacation 200 157 Accrued marketing 25 267 Other 342 407 Total: $ 997 $ 1,214 5. Business Acquisitions Acquisition of Wommera, Inc. ("Wommera") On March 22, 2001, the Company acquired all of
the intellectual property and workforce of Wommera's business of email
campaigning (Wommera). This transaction has been accounted for as a purchase.
The intangible assets are being amortized over estimated useful lives of 12 to
24 months. Results of operations of Wommera have been included in the Company's
financial statements since March 22, 2001. The total purchase price of the Wommera
acquisition has been allocated to individual assets and liabilities based upon
an estimate of their fair values. The following tables depict the total purchase
price and the allocation thereof: Total purchase price: Value of Series D redeemable convertible preferred stock
("Series D") issued (226,804 shares at $1.94 per share) Value of Wommera options assumed Cash tendered Subtotal: Acquisition costs Total purchase cost Purchase price allocation: Intangible assets acquired: Assembled workforce Core technology Net liabilities assumed Total purchase consideration Acquisition of North Systems, Inc. ("North
Systems") On March 30, 2001, the Company acquired all of
the assets of North Systems' business-to-business portal communication (North
Systems). The transaction has been accounted for as a purchase. The purchase
price includes a contingent liability of between $0 and $500 worth of Series D
preferred stock based on revenue the Company collects for North Systems
contracts. The contingent payment was not recorded as management determined that
the probability of achievement of the triggering events was remote. The total
purchase price of the North Systems acquisition has been allocated to individual
assets based upon an estimate of fair values. The following table depicts the
total purchase price and the allocation thereof: Total purchase price: Cash (in form of drawdown on line of credit) $ 716 Value of Series D issued (347,939 share at $1.94 per
share) 675 Contingent payment -- 1,391 Acquisition costs 93 Total purchase cost $ 1,484 Purchase price allocation: Tangible assets acquired: Accounts receivable $ 35 Computer equipment 411 Intangible assets acquired: Customer base 1,038 Total purchase consideration $ 1,484 The intangible assets are being amortized over
an estimated useful life of six months. The computer equipment is being
depreciated over its remaining estimated useful life of 36 months. Results of
operations of North Systems have been included in the Company's financial
statements since March 30, 2001. Pro forma financial information has not been
provided as the revenues for the period were not significant. 6. Line of Credit In fiscal 2001, the Company entered into a
second working capital and equipment line of credit of $2,500. Interest is based
on a designated rate of 9.54%, and all assets of the Company secure the line of
credit. The balance is due on or before August 2004. In fiscal 2000, the Company entered into its
first working capital and equipment financing line of credit of $2,500 and on
March 2001 increased it to $2,722. Interest is based on a prime rate of 8.5%,
and all assets of the Company secure the line of credit. The balance is due on
or before November 2003. $3,718 of these lines of credit had been used and $2,652
remained outstanding as of September 30, 2001. In conjunction with the initial $2,500
financing, the Company issued warrants to purchase Series C redeemable
convertible preferred stock ("Series C") equal to 13% of the commitment amount
on working capital and 5% on the equipment line of credit. The value of warrants
on the initial line, approximately $364, has been recorded as debt issuance
costs and is being amortized to interest expense over the life of the loan.
Approximately $50 and $236 of these costs were amortized in 2001 and 2000,
respectively. In fiscal 2001, in conjunction with the second
$2,500 line of credit, the Company issued 110,147 warrants to purchase Series D
redeemable convertible preferred stock ("Series D") equal to 6% of the
commitment amount. The value of the warrants on the second line of credit,
approximately $182, has been recorded as debt issuance costs and is being
amortized over the life of the loan. Approximately $52 of these costs was
amortized in 2001. See Note 10 for valuation of the warrants. 7. Capital Leases Future minimum commitments for capital leases
having remaining noncancelable lease terms in excess of one year are as follows
for fiscal years ending September 30, 2001: 2002 $15 2003 23 2004 -- 2005 -- 2006 -- Total minimum lease payments 38 Amount representing interest (5) Present value of minimum capital lease
payments 33 Less current portion 8 $25 The equipment that serves as collateral for
the leases was recorded at approximately $49 and $413 and had accumulated
depreciation of approximately $12 and $121 for 2001 and 2000, respectively.
Depreciation of the assets is included in depreciation expense. 8. Operating Leases The Company leases certain facilities under
operating leases. Rent expense for the years ended September 30, 2001 and 2000,
was approximately $380 and $274, respectively. Future minimum commitments for
operating leases having remaining noncancelable lease terms in excess of one
year are as follows: 2002 $371 2003 238 2004 -- 2005 -- 2006 -- Thereafter -- Total minimum operating lease payments $609 9. Income Taxes Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets are as
follows: September 30 2001 2000 Deferred tax assets: NOL's $ 12,850 $ 6,110 Research credit 664 270 Other 292 270 Total deferred tax assets 13,806 6,650 Valuation allowance (13,806) (6,650) Net deferred tax assets $ -- $ -- Realization of deferred tax assets is
dependent upon future earnings, if any, the timing and amount of which are
uncertain. Accordingly, the net deferred tax assets have been fully offset by a
valuation allowance. The valuation allowance increased by $7,156 and $4,650
during 2001 and 2000, respectively. As of September 30, 2001, the Company had net
operating loss carryforwards for federal income tax purposes of approximately
$32,000 which expire at various dates beginning in 2001, if not utilized. Utilization of the Company's net operating
loss may be subject to substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code and a similar state provision.
Such an annual limitation could result in the expiration of the net operating
loss before utilization. 10. Redeemable Convertible Preferred Stock As of September 30, 2001, the Company had
150,670 shares of Series A redeemable convertible preferred stock ("Series A"),
1,917,336 shares of Series B redeemable convertible preferred stock ("Series
B"), 6,818,956 shares of Series C and 15,846,041 shares of Series D outstanding.
In September 2000 and October 2000, the
Company issued 9,453,179 shares and 5,799,219 shares, respectively, of Series D
to various investors at $1.94 per share, with aggregate gross proceeds to the
Company of $18,340 and $11,250, respectively. In the fiscal year ended September 30, 2000,
the Company issued a total of 5,220,848 shares of Series C convertible preferred
stock to various investors at $1.40 per share, with aggregate gross proceeds to
the Company of $7,309. In October and November 1999, the Company
issued a total of $800 in 6.5% convertible promissory notes. Additionally,
preferred stock warrants were issued in accordance with the terms of the
convertible promissory note. See Note 10 for details of the warrants. During the
year ended September 30, 2000, the Company recorded $512 in imputed noncash
interest expense for the beneficial conversion feature associated with
convertible promissory notes issued during the year. In December 1999, the
Company converted all outstanding convertible promissory notes (including
accrued interest) into 471,690 shares of Series B convertible preferred stock
and 1,598,108 shares of Series C convertible preferred stock. Under the Company's Articles of Incorporation,
redeemable convertible preferred stock is issuable in series and the Board of
Directors is authorized to determine the rights, preference, and terms of each
series. The holders of Series B, Series C and Series D
are entitled to receive noncumulative dividends at an annual rate of 8%, when
and if declared by the Board of Directors, prior to any dividend on the Series A
and common stock. After all dividends payable to Series B, C and D shareholders
have been declared and paid the holders of Series A are entitled to receive
noncumulative dividends at an annual rate of 6%. No dividends have been declared
as of September 30, 2001. Series A, B, C and D stockholders are entitled
to receive, upon liquidation, an amount per share equal to a price of $0.75,
$1.40, $1.40, and $1.94, respectively, plus declared and unpaid dividends. After
the distribution to Series A, B, C and D stockholders, the remaining assets of
the Company will be distributed to the holders of common stock until each holder
has received an aggregate amount equal to the applicable payment limit for each
share of preferred stock held. The payment limit is equal to three times the per
share amount. Thereafter, if assets remain in the Company, the holders of common
stock receive all of the remaining assets on a pro rata basis. Each share of Series A, B, C and D has a
number of votes equal to the number of shares of common stock into which it is
convertible. As long as a majority of the Series A, B, C and D shares originally
issued remain outstanding the holders of the Series A, B, and C voting together
as a single class, shall be entitled to elect three directors to the Board of
Directors, and the holders of Series D voting together as a single class, shall
be entitled to elect two directors to the Board of Directors. The holders of the
common stock, Series A, B, C and D, voting together as a single class, shall
elect the remaining two directors. Upon written consent of the holders of
two-thirds of the shares of preferred stock outstanding, the holders of Series
A, B, C and D have the right of redemption in three annual installments on or
after September 2005 at a redemption price equal to the purchase price plus any
unpaid but declared and accrued dividends. Each share of Series A, B, C and D is
convertible at the option of the holder and is determined by dividing $0.75,
$1.40, $1.40, and $1.94, respectively, by the applicable conversion price. At
the current conversion price, each share of Series A, B, C and D will convert
into one share of common stock. The conversion price per share shall be adjusted
for certain recapitalizations, splits, and combinations. Series D automatically
converts into shares of common stock at the conversion price in effect upon the
earlier of (i) the closing of an underwritten public offering registered under
the Securities Act of 1933, as amended, covering the offer and sale of common
stock at a public offering price of not less that $4.85 per share (adjusted for
stock dividends, stock splits, or recapitalizations) with aggregate cash
proceeds to the Company of at least $25,000 or (ii) the date specified by
written consent or agreement of the holders of two-thirds of the aggregate
number of outstanding shares. Series A, B, and C automatically converts into
shares of common stock at the conversion price in effect upon the earlier of (i)
the closing of an underwritten public offering registered under the Securities
Act of 1933, as amended, sale of common stock with aggregate cash proceeds to
the Company of at least $25,000 or (ii) the date specified by written consent or
agreement of the holders of a majority of the then outstanding shares. During the year ended September 30, 2001, the
Company issued 18,360 shares of Series D to an employee, recognizing stock-based
compensation of $35. 11. Common Stock Stock Issued to Consultants The Company grants common stock to consultants
from time to time in exchange for services performed for the Company. In
general, these grants are not subject to repurchase when granted. However, some
stock grants are subject to repurchase over a four-year period. In 2001 and 2000
, the Company granted 87,235 and 400,528 shares, respectively, of the Company's
common stock to consultants, with the fair value of these grants determined to
be approximately $100 and $154, respectively. Common stock grants in 2001 and
2000 were valued using the Black-Scholes valuation model and the following
inputs: volatility of 1.0%, dividend yield of 0%, risk-free interest rate of
6.0%, and expected life of three years. These charges are subject to adjustment
based on the fair value of the stock at the final lapse of the repurchase right. Deferred Compensation The Company recorded deferred compensation of
approximately $657 in 2000, based on the fair value of options and stock grants
at the date of issuance for the value of shares granted subject to repurchase
and options not yet vested. These amounts and amounts previously deferred are
being amortized over the vesting period of the individual grants, generally a
48-month period. During the year ended September 30, 2001, the Company reversed
$175 of unamortized deferred compensation relating to unvested options on
employee termination. During 2001 and 2000, the Company amortized approximately
$159 and $178, respectively, of deferred compensation related to these grants. Notes Receivable from Stockholders In January and April 2000, the Company sold
1,365,000 shares of its common stock to key officers of the Company in exchange
for promissory notes in the aggregate amount of $191. The notes are full
recourse and bear interest at 6.2%, which the Company believes is a market rate
of interest for the respective borrowers. During the year ended September 30, 2001, the
Company and one of the key officers entered into a separation agreement that
forgave the accrued principal and interest on the promissory note in the amount
of $26. The remaining portion of the note that was associated with the unvested
shares was forgiven in exchange for the repurchase of the unvested shares of
common stock, which amounted to 39,375 shares or $6. Because the Company forgave
this full recourse note, the stock associated with the remaining notes to the
key officers will be accounted for variably. As of September 31, 2001, notes of
$117 principal, plus accrued interest are due in January 2004, and notes of $42
principal, plus accrued interest are due in April 2004. Common Stock Option Plan During 1996, the Company adopted the 1996
Stock Plan (the 1996 Plan) that authorized the issuance of 3,000,000 shares of
common stock. The options granted under this Plan could be either incentive
stock options or nonstatutory stock options. Under the 1996 Plan, options to
purchase common stock were granted at prices no less than 85% of the fair market
value on the date of grant (110% of fair value in certain instances). Options
generally vest over a 48-month period. The 1996 Plan was terminated in August
1998. Options granted under the 1996 Plan, before its termination, remain
outstanding in accordance with their terms. In August 1998, the Company adopted the 1998
Stock Incentive Plan (the 1998 Plan). The 1998 Plan authorized for issuance of
1,400,000 shares of common stock for granting of either incentive, nonqualified
stock options, or restricted stock to eligible participants. The 1998 Plan
serves as the successor equity incentive program to the Company's 1996 Plan.
Options to purchase common stock may be granted at prices no less than 85% of
the fair market value on the date of grant (110% of fair value in certain
instances). Options to purchase shares of common stock generally vest
immediately or over a period of four years from the date of the option grant.
Employees can only exercise their options of common stock. Any unvested
exercised shares are subject to repurchase rights whereby the Company has the
option to repurchase any unvested exercised shares upon termination of
employment, at the original exercise price. In 2001 and 2000, the Company
repurchased 39,375 and 0 shares, respectively. As of September 30, 2001, 776,416
shares were subject to repurchase. In December 1999, the Board of Directors
increased the number of shares authorized under the 1998 Plan from 1,400,000
shares to 4,150,000 shares. In November 2000, the Board of Directors increased
the number of shares authorized under the 1998 Plan by 933,000 shares to
5,083,000 shares. A summary of the Company's stock option
activity in the Stock Incentive Plan and related information for the years ended
September 30 follows: Options and Purchase Shares Weighted- Available Number of Price Average for Grant Shares Per Share Exercise Price Balance at September 30, 1999 1,337,848 578,250 $0.06 - $0.14 $0.12 Authorized 2,750,000 -- -- -- Granted (3,478,998) 3,478,998 $0.14 - $0.42 $0.35 Forfeited 310,537 (310,537) $0.14 - $0.42 $0.15 Exercised -- (1,801,104) $0.14 $0.29 Balance at September 30, 2000 919,387 1,945,607 $0.14 - $0.42 -- Authorized 933,000 -- -- -- Granted (2,302,735) 2,302,735 $0.49 $0.49 Forfeited 1,526,874 (1,526,874) $0.14 - $0.49 $0.36 Exercised -- (321,805) $0.06 - $0.49 $0.29 Balance at September 30, 2001 1,076,526 2,399,663 $0.06 - $0.49 -- The weighted-average fair value of options
granted during fiscal years ended September 30, 2001 and 2000 was $0.49 and
$0.35, respectively. Exercise prices for options outstanding as of
September 30, 2001 ranged from $0.06 to $0.49 per share. The weighted-average
remaining contractual life of those options is 8.67 years. As of September 30, 2001, 767,323 options were
exercisable with exercise prices ranging from $0.06 to $0.49 per share. The Company computed the pro forma disclosures
required in SFAS 123 for options granted during the year ended September 30,
2001 using the Black-Scholes option pricing model and the following assumptions:
a risk free interest rate of 6.0%, a weighted-average expected life of 10 years,
a volatility rate of 100%, and no dividend yield. The impact on the calculation
of pro forma results of operations required by SFAS 123 was determined to be
immaterial. 12. Common and Redeemable Convertible
Preferred Stock Warrants At September 30, 2001, warrants to purchase
58,600 shares of common stock held by nonemployees were outstanding, with
exercise prices ranging from $0.0625 to $1.25 per share. These warrants expire
in 2007. During the year ended September 30, 2000, in
connection with the issuance of convertible debentures, the Company issued
399,738 warrants to purchase Series B and Series C at an exercise price of $1.40
per share. The warrants were valued at $512 using the Black-Scholes valuation
model with the following inputs: volatility of 1.0%, dividend yield of 0%,
risk-free interest rate of 6.0%, and expected life of 10 years. The value was
initially recorded as a discount in the convertible debentures to be amortized
to interest expense over the life of the debenture. All convertible debentures
were converted to preferred stock as of September 30, 2000, therefore, the
discount was fully amortized to interest expense during the year ended
September 30, 2000. The warrants expire in 2009. In May 1999 and January 2000, the Company
issued 166,415 warrants to purchase Series B at an exercise price of $1.40 per
share to a financial institution in connection with the loans. The warrants
expire in 2009 and 2010. The warrants were valued at $214 using the
Black-Scholes valuation model with the following inputs: volatility of 1.0%,
dividend yield of 0%, risk-free interest rate of 6.0%, and expected life of 10
years. The loans have been repaid; therefore, the value of the warrants was
recognized as interest expense during the year ended September 30, 2000.
In February 2000 and July 2000 the Company
issued 116,071 warrants and 8,088 warrants, respectively, to purchase Series C
at an exercise price of $1.40 per share to a leasing company. The warrants
expire in 2010. The warrants were valued at approximately $150 using the
Black-Scholes valuation model with the following inputs: volatility of 1.0%,
dividend yield of 0%, risk-free interest rate of 6.0%, and expected life of 10
years. The Company will record the value of the warrants as additional interest
expense over the lease term, approximately $35 and $21 in the years ended
September 30, 2001 and 2000, respectively. During fiscal 2001, the Company issued 110,147
warrants to purchase Series D at an exercise price of $1.94 per share to a
leasing company. The warrants expire in seven-year increments ending in March
2008. The warrants were valued at approximately $182 using the Black-Scholes
valuation model with the following inputs: volatility of 1.0%, dividend yield of
0%, risk-free interest rate of 6.0%, and expected life of 7 years. The Company
will record the value of the warrants as additional interest expense over the
lease term, $52 in the year ended September 30, 2001. No warrants have been exercised. As of
September 30, 2001, the following warrants are outstanding: Common stock 58,600 Series B 320,880 Series C 1,187,892 Series D 110,147 1,677,519 13. Defined Contribution Pension Plan Beginning in 1997, the Company sponsored a
defined contribution pension plan (the "Plan") for its employees. Employees
become eligible to enter the Plan at the beginning of the month immediately
following the completion of 30 days of service with the Company. Contribution to
the Plan is based on a percentage of the employee's gross compensation, limited
by IRS guidelines for such plans. The Company does not match contributions made
by employees, but does pay the Plan's administrative expenses. Administrative
expenses for the Plan totaled approximately $2 and $1.5 in fiscal 2001 and 2000,
respectively. 14. Subsequent Events In October, the Company entered into an
arrangement with a former officer of the Company whereby the Company granted the
officer three months of accelerated vesting on certain stock grants. This
acceleration caused 52,813 shares to be vested. The expense associated with the
fair value using the Black-Scholes method of the compensation expense is
immaterial and therefore no additional expense will be recorded. As further
consideration for the agreement, the Company extended the payment terms for the
note, which the officer had entered into as consideration for the stock
purchase. The Company also committed to continue the officer's health insurance
benefits for 12 months following the termination date. Lastly, in accordance
with the original terms of the note, the Company agreed to repurchase from the
former officer 422,500 shares of stock as payment for the outstanding principal
balance on the note that pertained to those shares. The accrued interest on the
outstanding note was paid in full by the former officer and amounted to
approximately $14. On October 1, 2001 and February 6, 2002, the
Company implemented restructuring plans to reduce its operating expenses and
conserve its existing cash resources. Such restructuring plans involved the
termination of approximately 16 and 28 employees, representing approximately 27%
and 64% of the Company's workforce. The Company incurred severance costs of $117
connection with these restructurings. However, this restructuring plan caused
elements of the Company's facilities to essentially become idle, which is an
indicator of impairment. Accordingly, the Company performed long-lived asset
impairment tests at the enterprise-level, the lowest level for which there are
identifiable cash flows that are largely independent of the cash flows of other
groups of assets. The tests were performed by comparing the expected aggregate
undiscounted cash flows to the carrying amounts of long-lived assets. Based on
the results of these tests, the Company determined that long-lived assets were
not impaired at that date. On February 22, 2000, the Company entered into
a non-binding letter of agreement and term sheet under which the Company and a
potential acquiror will proceed with discussions regarding a potential
acquisition of the Company. The letter of agreement also includes exclusivity
provisions that limit the Company's ability to negotiate with potential
acquirors through March 24, 2002. 15. Subsequent Events (Unaudited) On March 28, 2002, the Company signed an
Agreement and Plan of Merger with Chordiant Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Chordiant Software, Inc.
("Chordiant"). Upon the closing on April 1, 2002, pursuant to the merger
agreement, Chordiant Acquisition Corp. merged with and into the Company, thereby
making the Company a wholly owned subsidiary of Chordiant. In connection with
the merger, the stockholders of the Company received approximately $11,500 in
cash, in the aggregate, in exchange for their shares, subject to certain
indemnities and escrow provisions.
ONDEMAND, INC. 1,377 1,333 22 25 3,612 4,224 The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC. The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC. The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC. 31 - The accompanying notes are an integral part of
these condensed consolidated financial statements.
ONDEMAND, INC.
(in thousands, except share and per share data) 1. Description of Business OnDemand, Inc, (the "Company") was incorporated in the state of Delaware.
The Company is a software and application service provider that offers a
proprietary solution to companies who rely on channel organizations for
revenue. The Company's business-to-business portals deliver a suite of
vendor-specific information and e-business services to automate, unify and
support channel sales. The Company conducts its business primarily in the
United States. 2. Significant Accounting Policies Basis of presentation The accompanying unaudited interim financial statements reflect all
adjustments, consisting of only normal and recurring items, which in the
opinion of management, are necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. The results of operations for interim periods are not
necessarily indicative of the results expected for the full fiscal year
or for any future period. These financial statements should be read in
conjunction with the audited financial statements and related notes of
the Company for the fiscal year ended September 30, 2001 included in
this Form 8K/A. Certain prior period balances have been reclassified to
conform to current period presentation. All information as of
December 31, 2001 and for the three month periods ended December 31,
2001 and 2000 presented on these financial statements are unaudited. The Company has completed several rounds of private equity financing.
However, the Company has incurred substantial losses and negative cash
flows from operations since inception. For the three months ended
December 31, 2001, the Company incurred a loss of $2,426 and
negative cash flows from operations of $2,346. As of December 31,
2001, the Company has an accumulated deficit of $39,732. Management
expects operating losses and negative cash flows to continue for the
foreseeable future because of additional costs and expenses related to
sales, marketing and other promotional activities, continued research
and development efforts and development of relationships with other
business. Management's plans with regard to these matters include
increasing revenues and reducing operating expenses as well as seeking
additional financing or selling the Company (see Note 10). Failure to
generate sufficient revenues, reduce certain discretionary spending,
raise additional capital or sell the Company could have a material
effect on the Company's ability to achieve its intended business
objectives. Use of estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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. Actual
results could differ from those estimates. Concentrations of credit risk and credit evaluations Financial instruments, which potentially expose the Company to
concentrations of credit risk, consist primarily of cash and cash
equivalents and accounts receivables. The Company primarily deposits its
cash and cash equivalents with one domestic financial institution that
management considers credit worthy. The Company provides services to companies in the United States. The
Company performs ongoing credit evaluations of its customers, does not
require collateral, and maintains allowances for potential credit losses
on customer accounts when deemed necessary. To date, such losses have
been within management's expectations. Revenues from four customers accounted for 12%, 12%, 10% and 10%
(unaudited) of total revenues for the three months ended December 31,
2001, respectively. At December 31, 2001, four customers accounted for
28%, 26%, 16% and 12% (unaudited) of gross accounts receivable,
respectively. Revenue recognition Revenue results from hosting services, setup fees, and supporting
professional services. Under the terms of the Company's agreements with its customers,
customers do not have the contractual right to take possession of the
Company's software. As a result, the Company accounts for revenue in
accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition
in Financial Statements" (SAB 101), and Emerging Issues Task Force ("EITF")
No. 00-3, "Application of AICPA Statement of Position 97-2, Software
Revenue Recognition, to Arrangements that Include the Right to Use
Software Stored on Another Entity's Hardware". Revenue, including revenue from setup fees, is recognized ratably
over the term of the related contract as hosting services are provided.
Professional services revenues are recognized as the services are
provided. The Company determines whether evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable, and
collection is probable. If any of these criteria are not met, revenue
recognition is deferred until such time all of the criteria are met. Software development costs Research and development costs are expensed as incurred. Software
development costs associated with internal-use software are accounted
for in accordance with Statement of Position ("SOP") No. 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." The Company capitalizes purchased software which is ready
for service and development costs for marketable software incurred from
the time the preliminary project stage is completed until the software
is ready for use. Under the provisions of SOP No. 98-1, costs associated
with software developed or obtained for internal use should be
capitalized when both the preliminary project stage is completed and
management has authorized further funding for the project which it deems
probable will be completed and used to perform the function intended.
Capitalization of such costs ceases no later than the point at which the
project is substantially complete and ready for its intended purpose.
Post-implementation training, maintenance and other operating costs are
expensed as incurred. Capitalized internal-use software was $404
(unaudited) at December 31, 2001. The software is being amortized on a
straight-line basis in research and development over three years, the
expected useful economic life. Amortization expense of $64
(unaudited) was recorded during the three months ended December 31,
2001. Comprehensive income Comprehensive income does not materially differ from net income for
the three months ended December 31, 2001. Recent accounting pronouncements In July 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill
and Other Intangible Assets." SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business combinations
except for qualifying business combinations that were initiated prior to
July 1, 2001. SFAS No. 141 further clarifies the criteria to recognize
intangible assets separately from goodwill. The requirements of SFAS No.
141 are effective for any business combination accounted for by the
purchase method that is completed after June 30, 2001 (i.e., the
acquisition date is July 1, 2001 and thereafter). Under SFAS No. 142,
goodwill and indefinite-lived intangible assets are no longer amortized
but are reviewed annually (or more frequently if indicators arise, for
impairment). Separable intangible assets that are not deemed to have an indefinite
life will continue to be amortized over their useful lives. The Company
is required to adopt SFAS Nos. 141 and 142 on October 1, 2002. The
Company does not believe that the adoption of these pronouncements will
have a significant impact on its financial statements. In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which is effective for
fiscal periods beginning after December 15, 2001. SFAS No. 144 provides
a single accounting model for, and supersedes previous guidance on,
accounting and reporting for the impairment/disposal of long-lived
assets. SFAS No. 144 sets new criteria for the classification of assets
held-for-sale and changes the reporting of discontinued operations. The
Company does not believe that the adoption of SFAS No. 144 will have a
significant impact on its financial statements. In November 2001, the EITF reached consensus on EITF No. 01-09,
"Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products." EITF No. 01-09 addresses the
accounting for consideration given by a vendor to a customer and is
codification of EITF No. 00-14, "Accounting for Certain Sales
Incentives," EITF No. 00-22 "Accounting for 'Points' and Certain Other
Time-Based or Volume-Based Sales Incentives Offers and Offers for Free
Products or Services to be Delivered in the Future" and EITF No. 00-25,
"Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products." The Company does not believe that
the adoption of this pronouncement will have a material impact on its
financial position or results of operations. 3. Restructuring On October 1, 2001, the Company implemented a restructuring plan to
reduce its operating expenses and conserve its existing cash resources.
The restructuring plan involved the termination of approximately 16
employees, representing approximately 27% of the Company's workforce.
The Company incurred severance costs of $42 (unaudited) in
connection with the restructuring. 4. Lines of Credit and Capital Lease Obligations Lines of credit In fiscal 2000, the Company entered into its first working capital
and equipment financing line of credit of $2,500 and on March 2001
increased it to $2,722. Interest is based on a prime rate of 8.5%,
and all assets of the Company secure the line of credit. The balance is
due on or before November 2003. In fiscal 2001, the Company entered into a second working capital and
equipment line of credit of $2,500. Interest is based on a
designated rate of 9.54%, and all assets of the Company secure the line
of credit. The line of credit expires on or before August 2004. $3,718 of these lines of credit had been used and $2,372
remained outstanding as of December 31, 2001 (unaudited). Future maturity under the lines of credit as of December 31, 2001 are
as follows (unaudited): In conjunction with the initial $2,500 financing, the Company
issued warrants to purchase Series C redeemable convertible preferred
stock ("Series C") equal to 13% of the commitment amount on working
capital and 5% on the equipment line of credit. The value of warrants on
the initial line, approximately $364, has been recorded as debt
issuance costs and is being amortized to interest expense over the life
of the loan. Approximately $15 (unaudited) of these costs were
amortized in the three months ended December 31, 2001. In fiscal 2001, in conjunction with the second $2,500 line of
credit, the Company issued 110,147 warrants to purchase Series D
redeemable convertible preferred stock ("Series D") equal to 6% of the
commitment amount. The value of the warrants on the second line of
credit, approximately $182, has been recorded as debt issuance costs
and is being amortized over the life of the loan. Approximately $12
(unaudited) of these costs were amortized in the three months ended
December 31, 2001. Capital lease obligations The Company has entered into capital lease agreements for certain
equipment. These agreements require monthly lease payments including
interest. Future minimum lease obligations under the capital lease as of
December 31, 2001 are as follows (unaudited): 5. Balance Sheet Components Property and equipment, net Total assets acquired under capital leases at December 31, 2001
totaled $1,967 (unaudited). Accumulated depreciation of assets under
capital leases totaled $945 (unaudited) at December 31, 2001. 6. Operating Leases The Company leases certain facilities under operating leases. Rent
expense for the three months ended December 31, 2001, was approximately
$93 (unaudited). Future minimum lease payments under noncancelable
operating leases at December 31, 2001 are approximately as follows
(unaudited): 7. Redeemable Convertible Preferred Stock As of December 31, 2001, the Company had 150,670 shares of Series A
redeemable convertible preferred stock ("Series A"), 1,917,336 shares of
Series B redeemable convertible preferred stock ("Series B"), 6,818,956
shares of Series C redeemable convertible preferred stock ("Series C")
and 15,846,041 shares of Series D redeemable convertible preferred stock
("Series D") outstanding. Under the Company's Articles of Incorporation, redeemable convertible
preferred stock is issuable in series and the Board of Directors is
authorized to determine the rights, preference, and terms of each
series. Dividends The holders of Series B, Series C and Series D are entitled to
receive noncumulative dividends at an annual rate of 8%, when and if
declared by the Board of Directors, prior to any dividend on the Series
A and common stock. After all dividends payable to Series B, C and D
shareholders have been declared and paid the holders of Series A are
entitled to receive noncumulative dividends at an annual rate of 6%. No
dividends have been declared as of December 31, 2001. Liquidation preference Series A, B, C and D stockholders are entitled to receive, upon
liquidation, an amount per share equal to a price of $0.75, $1.40,
$1.40, and $1.94, respectively, plus declared and unpaid dividends.
After the distribution to Series A, B, C and D stockholders, the
remaining assets of the Company will be distributed to the holders of
common stock after each Series A, B, C and D stockholders has received
an aggregate amount equal to the applicable payment limit for each share
of preferred stock held. The payment limit is equal to three times the
per share amount. Thereafter, if assets remain in the Company, the
holders of common stock receive all of the remaining assets on a pro
rata basis. Voting Each share of Series A, B, C and D has a number of votes equal to the
number of shares of common stock into which it is convertible. As long
as a majority of the Series A, B, C and D shares originally issued
remain outstanding the holders of the Series A, B, and C voting together
as a single class, shall be entitled to elect three directors to the
Board of Directors, and the holders of Series D voting together as a
single class, shall be entitled to elect two directors to the Board of
Directors. The holders of the common stock, Series A, B, C and D, voting
together as a single class, shall elect the remaining two directors. Redemption Upon written consent of the holders of two-thirds of the shares of
preferred stock outstanding, the holders of Series A, B, C and D have
the right of redemption in three annual installments on or after
September 2005 at a redemption price equal to the purchase price plus
any unpaid but declared and accrued dividends. Conversion Each share of Series A, B, C and D is convertible at the option of
the holder and is determined by dividing $0.75, $1.40, $1.40, and $1.94,
respectively, by the applicable conversion price. At the current
conversion price, each share of Series A, B, C and D will convert into
one share of common stock. The conversion price per share shall be
adjusted for certain recapitalizations, splits, and combinations. Series
D automatically converts into shares of common stock at the conversion
price in effect upon the earlier of (i) the closing of an underwritten
public offering registered under the Securities Act of 1933, as amended,
covering the offer and sale of common stock at a public offering price
of not less that $4.85 per share (adjusted for stock dividends, stock
splits, or recapitalizations) with aggregate cash proceeds to the
Company of at least $25,000 or (ii) the date specified by written
consent or agreement of the holders of two-thirds of the aggregate
number of outstanding shares. Series A, B, and C automatically converts
into shares of common stock at the conversion price in effect upon the
earlier of (i) the closing of an underwritten public offering registered
under the Securities Act of 1933, as amended, sale of common stock with
aggregate cash proceeds to the Company of at least $25,000 or (ii)
the date specified by written consent or agreement of the holders of a
majority of the then outstanding shares. 8. Common Stock Stock issued to consultants The Company grants common stock to consultants from time to time in
exchange for services performed for the Company. During the three month
ended December 31, 2001, the Company granted 55,000 shares of the
Company's common stock to consultants, with the fair value of these
grants determined to be approximately $6 (unaudited). Deferred compensation Previously deferred compensation charges are being amortized over the
vesting period of the individual grants, generally a 48-month period.
During the three month period ended December 31, 2001, the Company
amortized approximately $34 (unaudited) of deferred compensation
related to these grants. During the three month period ended December
31, 2001, the Company also reversed $54 (unaudited) of unamortized
deferred compensation relating to unvested options on employee
termination. Notes receivable from stockholders In January and April 2000, the Company sold 1,365,000 shares of its
common stock to key officers of the Company in exchange for promissory
notes in the aggregate amount of $191. The notes are full recourse
and bear interest at 6.2%, which the Company believes is a market rate
of interest for the respective borrowers. During the year ended September 30, 2001, the Company and one of the
key officers entered into a separation agreement that forgave the
accrued principal and interest on the promissory note in the amount of
$26. The remaining portion of the note that was associated with the
unvested shares was forgiven in exchange for the repurchase of the
unvested shares of common stock, which amounted to 39,375 shares or
$6. Because the Company forgave this full recourse note, the stock
associated with the remaining notes to the key officers have been
accounted for variably. In October 2001, the Company entered into a termination agreement
with a former officer of the Company whereby the Company agreed to
repurchase 422,500 shares of unvested stock for $59 as payment for
the outstanding balance on a note that pertained to these shares and
extended repayment of the remaining balance under the note of $59
until April 2003. The Company also accelerated the vesting of 52,813
unvested options and agreed to continue the officers health insurance
benefits for 12 months following the termination date. The compensation
expense related to the acceleration of vesting of the unvested options
was not significant. A compensation expense of $5 was recorded in
relation to the health benefits provided after the officer's
termination. Common stock option plan During 1996, the Company adopted the 1996 Stock Plan (the 1996 Plan)
that authorized the issuance of 3,000,000 shares of common stock. The
options granted under this Plan could be either incentive stock options
or nonstatutory stock options. Under the 1996 Plan, options to purchase
common stock were granted at prices no less than 85% of the fair market
value on the date of grant (110% of fair value in certain instances).
Options generally vest over a 48-month period. The 1996 Plan was
terminated in August 1998. Options granted under the 1996 Plan, before
its termination, remain outstanding in accordance with their terms. In August 1998, the Company adopted the 1998 Stock Incentive Plan
(the 1998 Plan). The 1998 Plan authorized for issuance of 1,400,000
shares of common stock for granting of either incentive, nonqualified
stock options, or restricted stock to eligible participants. The 1998
Plan serves as the successor equity incentive program to the Company's
1996 Plan. Options to purchase common stock may be granted at prices no
less than 85% of the fair market value on the date of grant (110% of
fair value in certain instances). Options to purchase shares of common
stock generally vest immediately or over a period of four years from the
date of the option grant. Employees can only exercise their options of
common stock. Any unvested exercised shares are subject to repurchase
rights whereby the Company has the option to repurchase any unvested
exercised shares upon termination of employment, at the original
exercise price. As of December 31, 2001, 258,000 shares were subject to
repurchase. A summary of the Company's stock option activity in the Stock
Incentive Plan (unaudited):
1,076,526
(95,000)
$0.49
336,988
--
1,318,514 Had compensation cost been determined based on the fair value at the
grant dates for awards in the three months ended December 31, 2001, the
Company's net loss would not have been materially different from the
reported loss. Because options vest over several years and additional
option grants are expected to be made in future years, the above pro
forma results are not representative of the pro forma results in future
years. The fair value of each option grant has been estimated on the date of
grant using the minimum value method with the following assumptions: December 31, 2001 (unaudited) 9. Common and Redeemable Convertible Preferred Stock Warrants At September 30, 2001, warrants to purchase 58,600 shares of
common stock held by nonemployees were outstanding, with exercise
prices ranging from $0.0625 to $1.25 per share. These warrants
expire in 2007. As of December 31, 2001, the following warrants are outstanding
(unaudited): December 31, 2001 (unaudited) 10. Subsequent Event On March 28, 2002, the Company entered into a merger agreement
(the "Agreement") with Chordiant Software, Inc. The acquisition
closed on April 1, 2002. Under the terms of
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Cupertino, CA 95014
(Address of Principal Executive Offices including Zip Code)
(Registrant's Telephone Number, Including Area Code)
(Former name, former address and former fiscal year if changed
since last report)
On April 1, 2002, we completed an acquisition of OnDemand, Inc. Further details are contained in our press
release dated April 1, 2002 and filed with our form 8-K filed on
April 12, 2002.
BALANCE SHEETS
(In
thousands, except share data)
September 30,
2001
September 30,
2000
ASSETS
Current assets:
Cash and cash equivalents
$
11,920
$
18,651
Accounts receivable, net
162
190
Prepaids and other current assets
143
61
Total current assets
12,225
18,902
Property and equipment
Computer
equipment
1,701
953
Computer software
345
100
Furniture and
fixtures
234
11
2,280
1,064
Accumulated
depreciation
(915
)
(312
)
1,365
752
Other long-term assets
Product software,
net
241
238
Other long-term
assets
94
84
Debt issuance
costs, net
208
128
Intangible
assets, net
436
--
979
450
Total assets
$
14,569
$
20,104
LIABILITIES,
REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
224
$
1,200
Accrued liabilities
997
1,214
Line of credit, current
1,319
1,335
Capital lease, current
8
46
Deferred revenue
318
428
Deferred rent
--
40
Total current liabilities
2,866
4,263
Line of credit,
non current
Capital lease, non current
Commitments
Redeemable convertible preferred
stock, $0.001 par value, 30,000,000 shares authorized:
Series A: 150,670 shares
designated, 150,670 shares issued and outstanding in 2001 and 2000, liquidation value of
$115 and $113 at September 30, 2001 and 2000
121
120
Series B: 2,238,216 shares
designated, 1,917,336 shares issued and outstanding in 2001 and 2000, liquidation value of
$2,686 and $2,684 at September 30, 2001 and 2000
4,730
4,728
Series C: 8,100,000 shares
designated, 6,818,956 shares issued and outstanding in 2001 and 2000, liquidation value of
$9,551 and $9,547 at September 30, 2001 and 2000
10,676
10,672
Series D:
16,250,000 shares designated, 15,846,041and 9,453,719 shares issued and outstanding
in 2001 and 2000, liquidation value of $30,758 and $18,340 at September 30,
2001 and 2000
30,857
18,318
Stockholders' Deficit:
Common Stock, $0.0001 part value:
45,000,000 shares authorized, 4,357,350 and 4,074,920 shares issued and outstanding
in 2001 and 2000, respectively
4
4
Additional paid-in capital
1,714
1,619
Notes receivable from stockholders
(167
)
(199
)
Deferred compensation
(291
)
(625
)
Accumulated deficit
(37,299
)
(18,832
)
Total stockholders' deficit
(36,039
)
(18,033
)
Total liabilities,
redeemable convertible preferred stock and stockholders' deficit
$
14,569
$
20,104
STATEMENTS OF OPERATIONS
(In
thousands)
Year
ended
September 30,
2001
September
30,
2000
Revenues
$
1,730
$
672
Cost of revenues
4,668
1,372
Gross profit (loss)
(2,938
)
(700
)
Operating expenses:
Sales
3,454
1,780
Marketing
4,409
4,092
Research and development
4,203
1,611
General and administrative
2,769
1,969
Amortization of
intangible assets
1,180
--
Total operating expenses
16,015
9,452
Loss from operations
(18,953
)
(10,152
)
Interest income
984
149
Interest and other expenses
(473
)
(1,399
)
Net loss and comprehensive net loss
(18,442
)
(11,402
)
Accretion of
redemption value of redeemable convertible preferred stock
(25
)
--
Net loss applicable to common
stockholders
$
(18,467
)
$
(11,402
)
STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' DEFICIT
(In
thousands, except share data)
Redeemable Convertible Preferred Stock
Convertible Preferred Stock
Common Stock
Additional Paid-in Capital
Deferred Compensation
Notes Receivable from Stockholders
Accumulated Deficit
Total Stockholders' Deficit
Shares
Amount
Shares
Amount
Shares
Amount
Balances at
September 30, 1999
--
$--
1,596,316
$3,946
2,273,816
$2
$722
($146)
$--
($7,430)
($2,906)
Exercise of stock options
--
--
--
--
3,500
--
1
--
--
--
1
Issuance of
common stock to consultants in exchange for services
--
--
--
--
400,528
1
45
--
--
--
46
Issuance of
common stock in exchange for services
--
--
--
--
32,076
--
4
--
--
--
4
Deferred
compensation related to certain stock grants and stock options to employees
--
--
--
--
--
--
--
--
--
--
--
Amortization of
deferred compensation
--
--
--
--
--
--
275
(275)
--
--
178
Issuance of
Series B convertible preferred stock for convertible note
--
--
471,690
660
--
--
--
178
--
--
660
Issuance
of Series C convertible preferred stock, net of stock issuance fees of $21
--
--
5,220,848
7,289
--
--
--
--
--
--
7,289
Issuance
of preferred stock warrants for convertible debentures (Series B $13, Series
C $499)
--
--
--
512
--
--
--
--
--
--
512
Beneficial
conversion feature related to convertible debentures (Series B $13, Series C
$499)
--
--
--
512
--
--
--
--
--
--
512
Issuance of
preferred stock warrants to lenders (Series B $215, Series C $149)
--
--
--
364
--
--
--
--
--
--
364
Issuance of
Series C convertible preferred stock for convertible note
--
--
1,598,108
2,237
--
--
--
--
--
--
2,237
Issuance of
Series D redeemable convertible preferred stock, net of stock issuance fees
of $22
9,453,719
18,318
--
--
--
--
--
--
--
--
--
Issuance of
common stock to employees
--
--
--
--
1,365,000
1
572
(382)
(191)
--
Interest accrued on notes
receivable from stockholders
--
--
--
--
--
--
--
--
(8)
(8)
Reclassification of convertible preferred stock due to addition of
redemptive provision
8,886,962
15,520
(8,886,962)
(15,520)
--
--
--
--
--
(15,520)
Net loss and comprehensive net
loss
--
--
--
--
--
--
--
--
--
(11,402)
(11,402)
Balance at
September 30, 2000
18,340,681
$33,838
--
$--
4,074,920
$4
$1,619
($625)
($199)
($18,832)
($18,033)
STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' DEFICIT
(In
thousands, except share data)
Redeemable Convertible Preferred Stock
Convertible Preferred Stock
Common Stock
Additional Paid-in Capital
Deferred Compensation
Notes Receivable from Stockholders
Accumulated Deficit
Total Stockholders' Deficit
Shares
Amount
Shares
Amount
Shares
Amount
Balances at
September 30, 2000
18,340,681
$33,838
--
$--
4,074,920
$4
$1,619
($625)
($199)
($18,832)
($18,033)
Issuance of
Series D redeemable convertible preferred stock, net of stock issuance fees
of $61
5,799,219
11,189
--
--
--
--
--
--
Issuance
of Series D redeemable convertible preferred stock related to the
acquisition of North Systems and Wommera
574,743
1,115
--
--
--
--
--
--
Issuance
of Series D redeemable convertible preferred stock warrants to lenders
--
182
--
--
--
--
--
Issuance
of Series D redeemable convertible preferred stock to
an employee
18,360
35
--
--
--
--
--
--
Issuance of
stock options in connection with the acquisition of Wommera
--
--
--
--
--
--
10
--
--
10
Exercise of
stock options
--
--
--
--
234,570
--
44
--
--
44
Issuance of
common stock to consultants in exchange for services
--
--
--
--
87,235
--
100
--
--
100
Acceleration
related to certain stock grants and stock options to employees
--
--
--
--
--
--
41
--
--
41
Amortization of
deferred compensation
--
--
--
--
--
--
--
159
--
159
Reversal of
deferred compensation for terminated employees
--
--
--
--
--
--
(175)
175
--
--
Repurchase of
stock in exchange for notes receivable forgiveness
--
--
--
--
(39,375)
--
(6)
6
--
--
Forgiveness of
notes receivable plus accrued interest in exchange for services preformed
--
--
--
--
--
--
--
26
--
26
Remeasurement
of variable stock related to notes
--
--
--
--
--
--
81
--
81
Accretion of
issue costs related to redeemable convertible preferred stock
--
25
--
--
--
--
--
(25)
(25)
Net loss and comprehensive net
loss
--
--
--
--
--
--
--
(18,442)
(18,442)
Balance at
September 30, 2001
24,733,003
$46,384
--
$--
4,357,350
$4
$1,714
($291)
($167)
($37,299)
($36,039)
STATEMENTS OF CASH FLOWS
(In
thousands)
Year
Ended
September 30,
2001
September
30,
2000
Cash flows from operating activities:
Net loss
$
(18,442
)
$
(11,402
)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
1,899
218
Noncash interest expense
102
1,361
Interest receivable on notes
receivable from stockholders
(11
)
(8
)
Stock-based compensation
283
50
Amortization of
deferred compensation
159
177
Acquisition of
product software
)
)
Change in other
operating assets and liabilities net of effects from business acquisitions:
Accounts receivables
63
(178
)
Prepaid and other current
assets
(71
)
(33
)
Other long-term assets
(10
)
(24
)
Accounts payable
and accrued liabilities
(1,207
)
1,823
Deferred
revenue
(110
)
383
Deferred rent
(40
)
40
Net cash used in operating
activities
(17,504
)
(7,878
)
Cash flows from investing activities:
Capital expenditures
(805
)
(794
)
Cash used for business acquisitions
(923
)
--
)
Net cash used in investing
activities
(1,728
)
(794
)
Cash flows from financing activities:
Borrowings under
short-term convertible debt
--
800
Repayment of
short-term convertible debt
--
(500
)
Borrowings under
line of credit
2,218
1,500
Repayment of line
of credit
(901
)
(665
)
Payment of
obligations under capital lease
(49)
(45
)
Proceeds from issuance of common
stock
44
1
Proceeds from
issuance of convertible preferred stock, net
--
7,289
Proceeds from
issuance of redeemable convertible preferred stock, net
11,189
18,318
Net cash provided by
financing
activities
12,501
26,698
Net (decrease) increase in cash and cash
equivalents
(6,731
)
18,026
Cash and cash equivalents at beginning of
period
18,651
625
Cash and cash equivalents at end of
period
$
11,920
$
18,651
Supplemental disclosure of cash
flow information:
Interest paid
$
276
$
101
Schedule of noncash transactions:
Equipment
acquired under capital leases
$
--
$
291
Issuance of
common stock for subscription receivable
$
--
$
191
Conversion of
debt to preferred stock
$
--
$
2,898
Issuance of
preferred stock for acquisition of businesses
$
1,115
$
--
NOTES TO FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
$ 440
10
49
499
65
$ 564
$ 153
425
(14)
$ 564
Rights Outstanding
Total:
BALANCE SHEETS
(In
thousands, except share data)
December
31,
2001 (Unaudited)
September 30,
2001
ASSETS
Current assets:
Cash and cash equivalents
$
9,199
$
11,920
Accounts receivable, net
213
162
Prepaids and other current assets
197
143
Total current assets
9,609
12,225
Property and equipment, net
1,354
1,606
Intangible
assets, net
349
436
Other long-term assets
325
302
Total assets
$
11,637
$
14,569
LIABILITIES,
REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
200
$
224
Accrued liabilities
781
997
Line of credit, current
995
1,319
Capital lease, current
8
8
Deferred revenue
229
318
Total current liabilities
2,213
2,866
Line of credit,
non current
Capital lease, non current
Commitments (Notes 4 and 6)
Redeemable convertible preferred
stock, $0.001 par value, 30,000,000 shares authorized:
Series A: 150,670 shares
designated, 150,670 shares issued and outstanding (liquidation value of
$115,000)
122
121
Series B: 2,228,216 shares
designated, 1,917,336 shares issued and outstanding (liquidation value of
$2,686,000)
4,731
4,730
Series C: 8,100,000 shares
designated, 6,818,956 shares issued and outstanding (liquidation value of
$9,551,000)
10,677
10,676
Series D:
16,250,000 shares designated, 15,846,041shares issued and outstanding
(liquidation value of $30,758,000)
30,861
30,857
Stockholders' Deficit:
Common Stock, $0.0001 part value:
45,000,000 shares authorized, 4,029,725 shares issued and outstanding
4
4
Additional paid-in capital
1,667
1,714
Notes receivable from stockholders
(102
)
(167
)
Deferred compensation
(203
)
(291
)
Accumulated deficit
(39,732
)
(37,299
)
Total stockholders' deficit
(38,366
)
(36,039
)
Total liabilities,
redeemable convertible preferred stock and stockholders' deficit
$
11,637
$
14,569
STATEMENTS OF OPERATIONS
(In
thousands)
(Unaudited)
Three Months Ended
December 31,
2001
December 31,
2000
Revenues
$
531
$
312
Cost of revenues
498
896
Gross profit (loss)
33
(584
)
Operating expenses:
Sales and marketing
Non-cash compensation expense
10
9
Other sales and marketing
875
2,463
Research and development
Non-cash compensation expense
-
4
Other research and development
763
1,136
General and administrative
Non-cash compensation expense
55
13
Other general and administrative
524
697
Amortization of
intangible assets
91
-
Restructuring charge
42
-
Total operating expenses
2,360
4,322
Loss from operations
(2,327
)
(4,906
)
Interest expense
(122
)
(83
)
Interest and other income, net
23
374
Net loss and comprehensive net loss
(2,426
)
(4,615
)
Accretion of
redemption value of redeemable convertible preferred stock
(7
)
(7
)
Net loss applicable to common
stockholders
$
(2,433
)
$
(4,622
)
STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' DEFICIT
(In
thousands, except per share date)
(Unaudited)
Redeemable Convertible Preferred Stock
Common Stock
Additional Paid-in Capital
Deferred Compensation
Notes Receivable from Stockholders
Accumulated Deficit
Total Stockholders' Deficit
Shares
Amount
Shares
Amount
Balances at
September 30,2001
24,733,003
$46,384
4,357,350
$4
$1,714
($291)
($167)
($37,299)
($36,039)
Exercise of stock options
--
--
39,875
--
6
--
--
--
6
Issuance of
common stock to consultants in exchange for services
--
--
55,000
--
29
--
--
--
29
Reversal of
deferred compensation related to employee terminations
--
--
--
--
(54)
54
--
--
--
Amortization of
deferred compensation
--
--
--
--
--
34
--
--
34
Acceleration of vesting for
terminated employees
--
--
--
--
31
--
--
--
31
Repurchase of
unvested shares
--
--
(422,500)
--
(59)
--
59
--
--
Interest accrued on notes
receivable from stockholders
--
--
--
--
--
--
6
--
6
Accretion of
issue costs related to Redeemable Convertible Preferred Stock
--
7
--
--
--
--
--
(7)
(7)
Net loss and comprehensive net
loss
--
--
--
--
--
--
--
(2,426)
(2,426)
Balance at December 31, 2001
27,733,003
$46,391
4,029,725
$4
$1,667
$(203)
($102)
($39,732)
$(38,366)
STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
Three Months Ended
December 31,
2001
December 31,
2000
Cash flows from operating activities:
Net loss
$
(2,426
)
$
(4,615
)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
316
111
Interest receivable on notes
receivable from stockholders
6
(3
)
Gain or loss on disposal of assets
66
-
Issuance of common stock to
consultants
29
-
Amortization of
deferred compensation
34
26
Stock based
compensation expense in conjunction with acceleration of vesting of unvested
stock
Noncash debt
issuance expense
27
9
Change in other
operating assets and liabilities net of effects from business acquisitions:
Accounts receivables
(51
)
(576
)
Prepaids and other current
assets
(54
)
(965
)
Other long-term assets
5
(29
)
Accounts payable
and accrued liabilities
(240
)
145
Deferred
revenue
(89
)
459
Net cash used in operating
activities
(2,346
)
(5,438
)
Cash flows from investing activities:
Capital expenditures
(43
)
(579
)
Net cash used in investing
activities
(43
)
(579
)
Cash flows from financing activities:
Proceeds from issuance of preferred
stock
-
11,191
Borrowings under line of credit
-
866
Repayment of line
of credit
(335
)
(277
)
Repayment of
capital lease
(3
)
-
Proceeds from exercise of stock
options
6
18
Net cash provided by
(used in) financing
activities
(332
)
11,798
Net increase
(decrease) in cash and cash
equivalents
(2,721
)
5,781
Cash and cash equivalents at beginning of
period
11,920
18,651
Cash and cash equivalents at end of
period
$
9,199
$
24,432
Schedule of noncash transactions:
Accretion of
issuance costs
$
7
$
7
Settlement of note receivable in
exchange for unvested options
$
59
$
-
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
2002
$995
2003
$1,377
2002
$
11,000
2003
23,000
Total minimum lease payments
34,000
Amount representing interest
(4,000
Present value of minimum capital lease payments
30,000
Less current portion
8,000
$
22,000
December 31, 2001 (unaudited)
September 30, 2001
(In thousands)
Computer equipment
$
1,648
$
1,701
Product software
404
241
Office equipment and furniture
236
234
Computer software
373
345
$
2,661
$
2,521
Less:
Accumulated depreciation
$
(1,307)
$
(915)
$
1,354
$
1,606
Year Ended
2002
$
371
2003
238
Total minimum lease payments
$
609
Shares available for Grant
Options Outstanding
Exercise Price
Weighted Average Exercise Price
Balances at September 30, 2001
2,399,663
$0.06 - $0.49
$0.38
Granted
95,000
$0.49
Forfeited
(336,988)
$0.14 - $0.49
$0.38
Exercised
(39,875)
$0.14 - $0.42
$0.14
Balances at December 31, 2001
2,117,800
$0.14 - $0.49
$0.36
Weighted average risk free interest rates
4.53%
Expected lives
5 years
Dividend
yield
0%
Common stock
58,600
Series B
320,880
Series C
1,187,892
Series D
110,147
1,677,519
(b) Pro Forma Financial Information.
CHORDIANT SOFTWARE, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(in thousands, except share and per share information)
The following unaudited pro forma combined condensed financial statements have been prepared to give effect to the merger of Chordiant Software, Inc. and OnDemand, Inc. ("OnDemand") which closed on April 1, 2002 (the "Merger") and the acquisition of Prime Response, Inc. ("Prime") by Chordiant which occurred on March 27, 2002 as previously reported by Chordiant on Form 8-K filed on January 8, 2001. Both acquisitions have been accounted for using the purchase method of accounting. These pro forma financial statements were prepared as if the Merger and the acquisition of Prime had been completed as of January 1, 2001 for statement of operations purposes and, for the Merger, as of December 31, 2001 for balance sheet purposes.
The unaudited pro forma combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations that would have actually been reported had the Merger occurred at December 31, 2001 for balance sheet purposes, or the Merger and the acquisition of Prime as of January 1, 2001 for statement of operations purposes, nor are these presentations necessarily indicative of the future financial position or results of operations. The pro forma combined financial statements include adjustments, based upon preliminary estimates, to reflect the allocation of purchase consideration to the acquired assets and liabilities assumed of Prime and OnDemand before any integration or restructuring adjustments. The final allocation of the purchase consideration will be determined after the completion of an appraisal and a comprehensive final evaluation of the fair value of all assets and liabilities assumed as considered appropriate. The pro forma adjustments may differ materially based upon the final allocation.
These unaudited pro forma combined financial statements are based upon the historical consolidated financial statements of Chordiant, Prime and OnDemand and should be read in conjunction with the historical consolidated financial statements included in Chordiant's Annual Report on Form 10-K for the year ended December 31, 2001 on file with the Securities and Exchange Commission, Chordiant's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001, June 30, 2001 and September 30, 2001 on file with the Securities and Exchange Commission, the historical financial statements of Prime as of March 27, 2001 and for the period from January 1, 2001 to March 27, 2001 (date of the acquisition) and the historical consolidated financial statements of OnDemand included in this Form 8-K/A.
CHORDIANT SOFTWARE, INC.
UNAUDITED
PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2001
(amounts in
thousands)
|
|
Pro Forma | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Chordiant |
OnDemand |
Adjustments |
Combined | ||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents |
$ |
27,068 | $ | 9,199 | (11,500 | ) (a) |
$ |
24,767 | ||||||
Short-term investments and restricted cash | 24,072 | -- | 24,072 | |||||||||||
Accounts receivable, net | 21,573 | 213 | 21,786 | |||||||||||
Other current assets | 5,267 | 197 | 5,464 | |||||||||||
|
|
|
||||||||||||
Total current assets | 77,980 | 9,609 | 76,089 | |||||||||||
Property and equipment, net | 7,083 | 1,354 | 8,437 | |||||||||||
Goodwill and other intangible assets, net | 27,792 | 349 | 3,652 | (c) | 31,793 | |||||||||
Other assets | 2,010 | 325 | 2,335 | |||||||||||
|
|
|
||||||||||||
Total assets |
$ |
114,865 |
$ |
11,637 |
$ |
118,654 | ||||||||
|
|
|
||||||||||||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED | ||||||||||||||
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable |
$ |
5,575 |
$ |
200 |
$ |
5,775 | ||||||||
Accrued liablities | 10,142 | 781 | 200 | (b) | 11,123 | |||||||||
Line of credit, current | 75 | 995 | 1,070 | |||||||||||
Capital lease obligations, current | -- | 8 | 8 | |||||||||||
Deferred revenue, current | 22,457 | 229 | (23 | )(d) | 22,663 | |||||||||
|
|
|
||||||||||||
Total current liabilities | 38,249 | 2,213 | 40,639 | |||||||||||
Deferred revenue, non current | 4,406 | -- | 4,406 | |||||||||||
Line of credit, non current | -- | 1,377 | 1,377 | |||||||||||
Capital lease obligations, non current | -- | 22 | 22 | |||||||||||
Other liabilities | 910 | -- | 910 | |||||||||||
|
|
|
||||||||||||
Total liabilities | 43,565 | 3,612 | 47,354 | |||||||||||
Redeemable convertible preferred stock | ||||||||||||||
Series A | -- | 122 | (122 | )(e) | -- | |||||||||
Series B | -- | 4,731 | (4,731 | )(e) | -- | |||||||||
Series C | -- | 10,677 | (10,677 | )(e) | -- | |||||||||
Series D | -- | 30,861 | (30,861 | )(e) | -- | |||||||||
Stockholders' equity (deficit): | ||||||||||||||
Common stock | 55 | 4 | (4 | )(e) | 55 | |||||||||
Additional paid-in capital | 217,395 | 1,667 | (1,667 | )(e) | 217,395 | |||||||||
Treasury stock | (332 | ) | -- | (332) | ||||||||||
Note receivable from stockholder | (961 | ) | (102 | ) | 102 | (e) | (961) | |||||||
Deferred compensation | (4,045 | ) | (203 | ) | 203 | (e) | (4,045) | |||||||
Accumulated other comprehensive loss | (630 | ) | -- | (630) | ||||||||||
Accumulated deficit | (140,182 | ) | (39,732 | ) | 39,732 | (e) | (140,182) | |||||||
Total stockholders' equity (deficit) | 71,300 | (38,366 | ) | 71,300 | ||||||||||
|
|
|
||||||||||||
Total liabilities, redeemable convertible preferred stock and stockholders' equity |
$ |
114,865 |
$ |
11,637 |
$ |
118,654 | ||||||||
|
|
|
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
CHORDIANT SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
AS OF DECEMBER 31, 2001
(amounts in
thousands)
|
Chordiant |
Pro Forma | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
||||||||||||||
|
Historical Chordiant | Historical Prime | Pro Forma Adjustments | Pro Forma Chordiant | Historical OnDemand | Adjustments | Combined | ||||||||
Revenues: | |||||||||||||||
License | $39,664 | 454 | $40,118 | $-- | $40,176 | ||||||||||
Service | 36,307 | 3,308 | 39,615 | 1,949 | 41,506 | ||||||||||
|
|
|
|
|
|||||||||||
Total revenues | 75,971 | 3,762 | 79,733 | 1,949 | 81,682 | ||||||||||
|
|
|
|
|
|||||||||||
Cost of revenues: | |||||||||||||||
License | 1,982 | -- | 1,982 | -- | 1,982 | ||||||||||
Service | 30,607 | 2,690 | 33,297 | 4,270 | 37,567 | ||||||||||
Non-cash compensation expense | 698 | 29 | 727 | -- | 727 | ||||||||||
|
|
|
|
|
|||||||||||
Total cost of revenues | 33,287 | 2,719 | 36,006 | 4,270 | 40,276 | ||||||||||
|
|
|
|
|
|||||||||||
Gross profit/(loss): | 42,684 | 1,043 | 43,727 | (2,321) | 41,406 | ||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | |||||||||||||||
Non-cash compensation expense | 1,040 | 514 | 1,554 | 41 | 1,595 | ||||||||||
Other sales and marketing | 41,651 | 3,931 | 45,582 | 6,822 | 52,404 | ||||||||||
Research and Development | |||||||||||||||
Non-cash compensation expense | 1,076 | 29 | 1,105 | 16 | 1,121 | ||||||||||
Other research and development | 20,457 | 1,753 | 22,210 | 3,216 | 25,426 | ||||||||||
Purchased in-process research and development | 3,025 | -- | 3,025 | -- | 3,025 | ||||||||||
General and administrative | |||||||||||||||
Non-cash compensation expense | 406 | 29 | 435 | 99 | 534 | ||||||||||
Other research and development | 9,604 | 5,298 | 14,902 | 2,546 | 17,448 | ||||||||||
Amortization of intangible assets | 9,699 | -- | 1,985 | (f) | 11,684 | 1,271 | 1,334 | (g) | 14,289 | ||||||
Restructuring expense | 1,669 | 3,772 | 5,441 | 42 | 5,483 | ||||||||||
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Total operating expenses | 88,627 | 15,326 | 105,938 | 14,053 | 121,325 | ||||||||||
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Loss from operations | (45,943) | (14,283) | (62,211) | (16,374) | (79,919) | ||||||||||
Interest expense | (79) | (28) | (107) | (512) | (619) | ||||||||||
Other income (expense), net | 3,960 | 355 | 4,315 | 653 | (351) | (h) | 4,948 | ||||||||
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Net loss before income taxes | (42,062) | (13,956) | (58,003) | (16,253) | (75,590) | ||||||||||
Provision for income taxes | 200 | -- | 200 | -- | 200 | ||||||||||
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Net loss | (42,262) | ($13,956) | ($58,203) | ($16,253) | ($75,790) | ||||||||||
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Pro forma net loss per share: | |||||||||||||||
basic and diluted: | $(0.86) | ($1.46) | |||||||||||||
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Shares used to compute pro forma net loss per share: | |||||||||||||||
basic and diluted: | 49,252 | 2,750 | (i) | 52,002 | |||||||||||
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The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
CHORDIANT SOFTWARE, INC.
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
On March 28, 2002, Chordiant and OnDemand entered into a Merger Agreement whereby Chordiant acquired each share of common stock and preferred stock of OnDemand in exchange of a cash consideration of $11,500 (before OnDemand Merger related costs). Options and warrants issued and outstanding prior to the Merger were not assumed by Chordiant. The Merger closed on April 1, 2002.
The unaudited pro forma combined condensed balance sheet at December 31, 2001 combines the consolidated financial position of Chordiant with OnDemand and reflects the Merger as if it had occurred on December 31, 2001.
The unaudited pro forma combined condensed statement of operations for the year ended December 31, 2001 includes the results of: Chordiant for the year ended December 31, 2001; OnDemand for the year ended December 31, 2001; and Prime for the period from January, 1, 2001 to March 27, 2001 (acquisition date). The financial statements of OnDemand were conformed to Chordiant's fiscal periods. The pro forma statement of operations have been prepared assuming the Merger and the acquisition of Prime by Chordiant were each completed as of January 1, 2001.
The unaudited pro forma combined condensed financial statements reflect a purchase price of approximately $11,700 including $200 of estimated direct acquisition cost.
The unaudited pro forma combined condensed financial statements have been prepared on the basis of assumptions relating to the allocation of consideration paid for the assets and liabilities based on primarily estimates of their fair value. The actual allocation of the consideration for the acquisition to the tangible and identifiable intangible assets acquired and liabilities assumed will be based on the basis of their estimated fair values on the effective date of the acquisition and may differ from those assumptions reflected in the unaudited combined financial statements after final valuations have been completed. Chordiant does not expect that the final allocation of the purchase price will differ materially from the primarily allocation. The preliminary purchase price allocation is as follows:
Fair value of tangible assets acquired | $ | 11,288 | |
Developed technology | 3,030 | ||
Customer list | 181 | ||
Goodwill | 790 | ||
Fair value of liabilities assumed | (3,589) | ||
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$ | 11,700 | ||
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The accompanying unaudited pro forma combined condensed balance sheet has been prepared as if the Merger was completed on December 31, 2001 and reflects the following pro forma adjustments:
(a) To record the cash issued to the OnDemand shareholders.
(b) To record the estimated direct Merger costs of approximately $200 to be incurred by Chordiant.
(c) To record the estimated fair value of the acquired intangible assets of OnDemand.
(d) To reduce the OnDemand deferred revenue to estimated fair value.
(e) To eliminate the historical stockholders' equity OnDemand.
The accompanying unaudited pro forma combined condensed statements of operations have been prepared as if the Merger and the acquisition of Prime by Chordiant were each completed as of January 1, 2001 and reflects the following pro forma adjustments:
(f) To record the amortization of intangible assets resulting from the acquisition of Prime by Chordiant on a straight-line basis over their economic lives.
(g) To record the amortization of intangible assets resulting from the acquisitions of OnDemand by Prime on a straight-line basis over their economic lives.
(h) To eliminate the interest income recorded by Chordiant on a cash balance of $11,500.
(i) To reflect the issuance by Chordiant of 11,918,805 shares of common stock in connection with the acquisition of Prime.
Chordiant Software, Inc.
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 thereunto duly authorized.
Dated: June 17, 2002
Chordiant Software, Inc. |
(Registrant) |
/s/ Steve G. Vogel |
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Steve G. Vogel | |
Senior Vice President of Finance, Chief Financial Officer and Secretary | |
(Principal Financial and Accounting Officer) |
INDEX TO EXHIBITS
Exhibit No. Description of Document
23.1 Consent of Ernst & Young, LLP.
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Form 8-K/A of Chordiant Software, Inc. dated April 1, 2002 of our report dated November 20, 2001, except for Note 12 as to which the date is February 22, 2002 with respect to the financial statements of On Demand, Inc. for the years ended September 30, 2000 and 2001.
Palo Alto, California
June 14, 2002