EX-99.2 3 v00984exv99w2.txt EXHIBIT 99.2 EXHIBIT 99.2 MAGNIFIRE WEBSYSTEMS INC. (A DEVELOPMENT STAGE COMPANY) INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2004 U.S. DOLLARS IN THOUSANDS UNAUDITED INDEX
PAGE ---- CONSOLIDATED BALANCE SHEETS 2 CONSOLIDATED STATEMENTS OF OPERATIONS 3 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) 4 CONSOLIDATED STATEMENTS OF CASH FLOWS 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 - 8
- - - - - - - - - - MAGNIFIRE WEBSYSTEMS INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA
MARCH 31, DECEMBER 31, 2004 2003 --------- ------------ UNAUDITED AUDITED --------- ------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 901 $ 1,157 Restricted cash 76 78 Inventory 83 80 Accounts receivable and prepaid expenses 73 63 -------- -------- Total current assets 1,133 1,378 -------- -------- SEVERANCE PAY FUND 170 170 -------- -------- PROPERTY AND EQUIPMENT, NET 90 105 -------- -------- $ 1,393 $ 1,653 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Trade payables $ 232 $ 209 Employees and payroll accruals 150 123 Other accounts payable and accrued expenses 102 99 Deferred revenues 8 - -------- -------- Total current liabilities 492 431 -------- -------- ACCRUED SEVERANCE PAY 176 174 -------- -------- CONVERTIBLE PROMISSORY NOTE 2,089 1,608 -------- -------- STOCKHOLDERS' EQUITY (DEFICIENCY): Share capital - Convertible Preferred A stock of $ 0.01 par value: Authorized: 5,658,720 shares as of March 31, 2004 and 2003 and December 31, 2003; Issued and outstanding: 5,658,720 shares as of March 31, 2004 and 2003 and December 31, 2003; Liquidation preference of $ 6,735 as of March 31, 2004 57 57 Convertible Preferred B stock of $ 0.01 par value: Authorized: 7,899,225 shares as of March 31, 2004 and 2003 and December 31, 2003; Issued and outstanding: 7,899,225 shares as of March 31, 2004 and 2003 and December 31, 2003; Liquidation preference of $ 3,102 as of March 31, 2004 79 79 Common stock of $ 0.01 par value: Authorized: 32,442,056 shares as of March 31, 2004 and 2003 and December 31, 2003; Issued and outstanding: 2,240,500 shares as of March 31, 2004 and 2003 and as of December 31, 2003 22 22 Deferred stock compensation (245) (264) Additional paid-in capital 9,429 9,429 Deficit accumulated during the development stage (10,706) (9,883) -------- -------- Total shareholders' equity (deficiency) (1,364) (560) -------- -------- $ 1,393 $ 1,653 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. - 2 - MAGNIFIRE WEBSYSTEMS INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS U.S. DOLLARS IN THOUSANDS
PERIOD FROM JULY 15, 2000 THREE MONTHS ENDED (DATE OF INCEPTION) MARCH 31, THROUGH ------------------------ MARCH 31, 2004 2003 2004 -------- -------- ------------------- UNAUDITED ------------------------ Revenues $ - $ 32 $ 32 Cost of revenues - 24 125 -------- -------- -------- Gross profit (loss) - 8 (93) Operating expenses: Research and development 384 504 6,690 Sales and marketing 364 278 3,597 General and administrative 52 20 300 -------- -------- -------- Operating loss 800 794 10,680 Financial expenses (income), net 23 (1) 17 Other expenses - - 9 -------- -------- -------- Net loss $ 823 $ 793 $ 10,706 ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. - 3 - MAGNIFIRE WEBSYSTEMS INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA
DEFICIT CONVERTIBLE CONVERTIBLE ACCUMULATED COMMON STOCK PREFERRED A STOCK PREFERRED B STOCK DEFERRED ADDITIONAL DURING THE ---------------- ----------------- ------------------ STOCK PAID-IN DEVELOPMENT NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT COMPENSATION CAPITAL STAGE TOTAL --------- ------ -------- ------ --------- ------ ------------ ---------- ----------- -------- Balance at July 15, 2000 (date of inception) - $ - - $ - - $ - $ - $ - $ - $ - Issuance of shares in BVI - - - - - - - 1 - 1 Net loss - - - - - - - - (363) (363) --------- ---- --------- ---- --------- ----- --------- -------- --------- ------- Balance at December 31, 2000 - $ - - $ - - $ - $ - $ 1 $ (363) $ (362) Exercise of stock options 1,300 *) - - - - - - - *) - Issuance of convertible Preferred A stock, net - - 4,517,672 45 - - - 5,104 - 5,149 Issuance of Common stock 110,725 1 - - - - - - - 1 Conversion of convertible loans - - 267,827 3 - - - 772 - 775 Stock split effected as a stock dividend 2,128,475 21 873,221 9 - - - (31) - (1) Net loss - - - - - - - - (2,248) (2,248) --------- ---- --------- ---- --------- ----- -------- -------- --------- ------- Balance at December 31, 2001 2,240,500 22 5,658,720 57 - - - 5,846 (2,611) 3,314 Issuance of Preferred B stock, net - - - - 7,899,225 79 - 2,879 - 2,958 Stock-based compensation related to options granted to consultants - - - - - - - 30 - 30 Net loss - - - - - - - - (3,116) (3,116) --------- ---- --------- ---- --------- ----- -------- -------- --------- ------- Balance at December 31, 2002 2,240,500 22 5,658,720 57 7,899,225 79 8,755 (5,727) 3,186 Deferred stock compensation - - - - - - (310) 310 - - Amortization of deferred stock compensation - - - - - - 46 - - 46 Stock-based compensation related to options granted to consultants - - - - - - 364 - 364 Net loss - - - - - - - (4,156) (4,156) --------- ---- --------- ---- --------- ----- -------- -------- --------- ------- Balance at December 31, 2003 2,240,500 22 5,658,720 57 7,899,225 79 (264) 9,429 (9,883) (560) Amortization of deferred stock compensation - - - - - - 19 - - 19 Net loss - - - - - - - - (823) (823) --------- ---- --------- ---- --------- ----- -------- -------- --------- ------- Balance at March 31, 2004 (unaudited) 2,240,500 $ 22 5,658,720 $ 57 7,899,225 $ 79 $ (245) $ 9,429 $ (10,706) $(1,364) ========= ==== ========= ==== ========= ===== ======== ======== ========= =======
*) Represent an amount lower than $ 1. The accompanying notes are an integral part of the consolidated financial statements. - 4 - MAGNIFIRE WEBSYSTEMS INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. DOLLARS IN THOUSANDS
PERIOD FROM JULY 15, 2000 THREE MONTHS ENDED (DATE OF INCEPTION) MARCH 31, THROUGH ----------------------- MARCH 31, 2004 2003 2004 -------- -------- ------------------- UNAUDITED ----------------------- Cash flows from operating activities: Net loss $ (823) $ (793) $(10,706) Adjustments required to reconcile loss to net cash used in operating activities: Depreciation 16 18 190 Gain on sale of property and equipment - - (5) Increase in inventory (3) (38) (83) Increase in accounts receivable and prepaid expenses (10) (55) (155) Stock-based compensation in respect of warrants granted to consultants - 1 395 Amortization of deferred stock compensation 19 - 65 Increase in trade payables 23 53 232 Increase in employees and payroll accruals 27 1 150 Increase (decrease) in other accounts payable and accrued expenses 3 (25) 102 Increase in deferred revenues 8 - 90 Increase (decrease) in accrued severance pay, net 2 (13) 6 Accrued interest expenses on promissory note 11 - 19 -------- -------- -------- Net cash used in operating activities (727) (851) (9,700) -------- -------- -------- Cash flows from investing activities: Decrease (increase) in restricted cash 2 1 (76) Purchase of property and equipment (1) (7) (318) Proceeds from sale of property and equipment - - 43 -------- -------- -------- Net cash provided by (used in) investing activities 1 (6) (351) -------- -------- -------- Cash flows from financing activities: Proceeds from issuance of stock capital, net - - 8,107 Proceeds from convertible promissory note 470 - 2,890 Principal payment of long-term loan - - (45) -------- -------- -------- Net cash provided by financing activities 470 - 10,952 -------- -------- -------- Increase (decrease) in cash and cash equivalents (256) (857) 901 Cash and cash equivalents at beginning of period 1,157 3,328 - -------- -------- -------- Cash and cash equivalents at end of period $ 901 $ 2,471 $ 901 ======== ======== ======== Supplemental disclosure of non-cash investing and financing activities: Issuance of Preferred stock upon conversion of conversion promissory notes $ - $ - $ (775) ======== ======== ======== Issuance of shares without consideration $ - $ - $ (1) ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. - 5 - MAGNIFIRE WEBSYSTEMS INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. DOLLARS IN THOUSANDS NOTE 1:- GENERAL a. Magnifire Websystems Inc. (the Company") was incorporated and commenced its operations in the State of Delaware on January 29, 2001. The Company is engaged in the development of solutions for Internet security applications. b. The Company's wholly-owned subsidiary was incorporated on November 15, 2000, under the name Magnifire Networks Limited (a British Virgin Islands corporation). Its wholly-owned subsidiary was incorporated and commenced its operations on July 15, 2000 under the name Magnifire Networks (Israel) Limited. c. Magnifire Networks Limited (BVI) repurchased all of its shares from its stockholders on January 30, 2001 and issued 100 shares par value of $ 0.01 each to Magnifire Websystems Inc. (see Note 7c). The Company issued 100% of its issued and outstanding share capital to the original stockholders of Magnifire Networks Limited (BVI). d. The Company and its subsidiaries are devoting substantially all of their efforts toward conducting research, development and marketing of their software. The Company's and its subsidiaries' activities also include raising capital and recruiting personnel. In the course of such activities, the Company and its subsidiaries have sustained operating losses and expect such losses to continue in the foreseeable future. The Company and its subsidiaries have not generated sufficient revenues and have not achieved profitable operations or positive cash flow from operations. The Company's accumulated deficit aggregated to $ 10,706 thousand as of March 31, 2004. The Company has a shareholder's deficiency of $ 1,364 thousand. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). a. Use of estimates: The preparation of the financial statements in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. b. The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2003, are applied consistently in these interim financial statements. - 6 - MAGNIFIRE WEBSYSTEMS INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. DOLLARS IN THOUSANDS NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.) c. Deferred revenue includes unearned amounts received under maintenance and support contracts, and amounts received from customers but not recognized as revenues. d. For further information, refer to the consolidated financial statements as of December 31, 2003. e. Accounting for stock-based compensation: Under SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS No. 123"), pro forma information regarding net loss and net loss per share is required, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a minimal value option-pricing model with the following weighted-average assumptions:
THREE MONTHS ENDED MARCH 31, YEAR ENDED ---------------------- DECEMBER 31, 2004 2003 2003 ------- -------- ------------ UNAUDITED ---------------------- Risk-free interest rates 1% 1.5% 1.5% Dividend yields 0% 0% 0% Expected life 4 4 4 Pro forma information under SFAS 123: Net loss as reported $ 823 $ 793 $ 4,061 Add: stock based employee compensation - intrinsic value 19 - 46 Deduct: stock-based employee - fair value (21) 1 (48) ------- ------- ------- Pro forma net loss $ 821 $ 794 $ 4,059 ======= ======= =======
The Company adopted the disclosure provisions of Financial Accounting Standards Board Statement No. 148, "Accounting for Stock-Based Compensation - transition and disclosure" ("SFAS No. 148"), which amended certain provisions of SFAS 123 to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation, effective as of the beginning of the fiscal year. The Company continues to apply the provisions of APB No. 25, in accounting for stock-based compensation. - 7 - MAGNIFIRE WEBSYSTEMS INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. DOLLARS IN THOUSANDS NOTE 3:- UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2004, are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. NOTE 4:- SUBSEQUENT EVENT On May 31, 2004, the Company was acquired by F5 Networks Inc., in consideration of $ 29,000, in cash. - - - - - - - - - - - 8 -