Taleo (TLEO) 8-K/A Financial Statements and Exhibits

EXHIBIT 99.3

     On May 5, 2008, the Company entered into an Agreement and Plan of Reorganization (the “Reorganization Agreement”) to purchase Vurv Technology, Inc. (“Vurv”), a private company with headquarters in Florida. Vurv is a provider of on demand talent management software.  On July 1, 2008, the Company completed the acquisition of Vurv.  Accordingly, the assets, liabilities and operating results of Vurv will be reflected in the Company’s consolidated financial statements beginning in the third quarter of 2008.  The total consideration paid by the Company in connection with the acquisition was approximately $37.5 million in cash and approximately 3.8 million shares of Class A common stock, of which approximately $36.8 million in cash and approximately 3.3 million shares of Class A common stock were paid on the closing date.  Of the total consideration, Vurv preferred stockholders received $76.4 million in total consideration including the Company’s Class A common stock with a value of $52.8 million and cash of $23.6 million.  Approximately 0.5 million shares were placed into escrow for one year following the closing to be held as security for losses incurred by the Company in the event of certain breaches of the representations and warranties contained in the Reorganization Agreement or certain other events.  Additionally, approximately $0.3 million was placed into escrow to pay for expenses incurred by the stockholder representative in connection with its duties under the Reorganization Agreement, and approximately $0.4 million was placed in escrow to compensate the Company in the event certain expenses are incurred in connection with payments to certain Vurv employees.  In addition, the Company assumed obligations for outstanding options to purchase shares of Vurv common stock, which converted into options to purchase approximately 0.4 million shares of the Company’s common stock. Taleo also repaid approximately $9.0 million of Vurv debt on the closing date.

     The Company has accounted for the acquisition as a business combination under the purchase method of accounting. Under the purchase method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed of Vurv based upon their estimated fair values. The unaudited pro forma combined condensed financial statements below have been prepared giving effect to the Reorganization Agreement using the purchase method of accounting.  The following unaudited pro forma combined condensed financial statements and related notes represent, in the opinion of management, all adjustments necessary to present the Company’s pro forma results of operation in accordance with Article 11 of Regulation S-X and are based upon available information and certain assumptions considered reasonable under the circumstances.

The unaudited pro forma combined condensed balance sheet gives effect to the acquisition as if the acquisition had occurred on June 30, 2008.  The unaudited pro forma combined condensed statements of operations for the fiscal year ended December 31, 2007 and six months ended June 30, 2008 gives effect to the acquisition as if the acquisition had occurred on January 1, 2007.

     The unaudited pro forma combined condensed financial statements, including the notes thereto, do not reflect any potential cost savings or other synergies that could result from the Reorganization Agreement. The unaudited pro forma combined condensed financial statements are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations for future periods or the results that would have been achieved if the Reorganization agreement had been consummated on the date indicated. The unaudited pro forma combined condensed financial information should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company and other financial information pertaining to the Company contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2007, which was filed with the SEC on March 14, 2008, and in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, which was filed with the SEC on August 11, 2008.  Taleo historical financial information presented in the unaudited pro forma combined condensed financial statements was obtained from its audited financial statements as of and for the year ended December 31, 2007 and its unaudited financial statements as of and for the six months ended June 30, 2008.  Vurv historical information presented in the unaudited pro forma combined condensed balance sheet as June 30, 2008 and in the unaudited pro forma combined condensed statement of operations for the six months ended June 30, 2008 was prepared from unaudited historical information provided by Vurv.  Vurv historical information presented in the pro forma combined condensed statement of operations for the year ended December 31, 2007 was obtained from its audited financial statements as of and for the year ended January 31, 2008.   Vurv fiscal year end of January 31, 2008 overlaps with the Company’s six month reporting period ended on June 30, 2008.  As a result, Vurv's financial information for the month ended January 31, 2008 is presented twice in the Company’s pro forma combined condensed statemtents of operations:  once in the statement of operations for the year ended December 31, 2007 and once in the statement of operations for the six months ended June 30, 2008.

TALEO CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 2008
(in thousands, except share and per share data)
	Historical
	Taleo		Vurv		Pro Forma Adjustments			Notes			Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	104,735	$	223	$	(46,541	)		(2	)	$	58,417
Accounts receivable, net		29,558		8,868		-						38,426
Other current assets		12,426		2,260		(1,334	)		(3	)		13,352
Total current assets		146,719		11,351		(47,875	)					110,195
Property and equipment, net		21,131		4,731		177			(4	)		26,039
Goodwill		9,707		9,966		73,297			(5	)		92,970
Other intangibles, net		1,186		1,415		47,885			(6	)		50,486
Other non-current assets		6,349		1,561		(3,953	)		(7	)		3,957
Total assets	$	185,092	$	29,024	$	69,531					$	283,647
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	24,558	$	8,857	$	4,286			(8	)	$	37,701
Deferred revenue and customer deposits		42,498		15,809		(8,552	)		(9	)		49,755
Notes payable		-		9,000		(9,000	)		(10	)		-
Other current liabilities		18		1,139		132			(11	)		1,289
Total current liabilities		67,074		34,805		(13,134	)					88,745
Non-current liabilities:
Fair value redeemable preferred stock conversion feature		-		20,316		(20,316	)		(12	)		-
Non-current deposits and long-term deferred revenue		1,254		139		-						1,393
Other non-current liabilities		3,695		1,502		54			(11	)		5,251
Class B Redeemable Common Stock, $0.00001 par value, 4,038,287 shares authorized; 462,118 shares outstanding at June 30, 2008		-		-		-						-

Total liabilities		72,023			56,762			(33,396	)				95,389
Exchangeable share obligation		226			-			-					226
Redeemable preferred stock					53,704			(53,704	)	(12	)		-
Stockholders’ equity:
Class A Common Stock		—			30			(30	)	(13	)		-
Additional paid-in capital		159,765						75,189		(14	)		234,954
Accumulated deficit		(48,712	)		(75,012	)		75,012		(13	)		(48,712	)
Treasury stock and accumulated other comprehensive income		1,790			(6,460	)		(6,460	)	(13	)		1,790
Total stockholders’ equity		112,843			(27,738	)		102,927					188,032
Total liabilities and stockholders’ equity	$	185,092		$	29,024		$	69,531				$	283,647

TALEO CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2008
(in thousands, except per share data)
	Historical
	Taleo		Vurv		Pro forma Adjustments		Notes			Pro forma Combined
Revenue:
Application		61,076	$	18,846	$	-				$	79,922
License				918		-					918
Consulting		14,967		7,254		-					22,221
Total revenue		76,043		27,018		-					103,061
Cost of revenue:
Application		12,646		5,879		623		(15	)		19,148
License				24		-					24
Consulting		11,283		5,089		-					16,372

Total cost of revenue		23,929			10,992			623					35,544
Gross profit		52,114			16,026			(623	)				67,517
Operating expenses:
Sales and marketing		22,502			8,922			4,024		(15	)		35,448
Research and development		14,399			4,818			(21	)	(15	)		19,196
General and administrative		13,763			10,235			(56	)	(15	)		23,942
Restructuring		281			-			-					281
Total operating expenses		50,945			23,975			3,946					78,866
Operating income / (loss)		1,169			(7,949	)		(4,569	)				(11,349	)
Other income / (expense):
Increase in fair value of redeemable preferred stock conversion feature					46,258			(46,258	)	(12	)		-
Interest income		1,296			18			(625	)	(16	)		689
Interest expense		(86	)		(510	)		263		(17	)		(333	)
Total other income / (loss), net		1,210			45,766			(46,620	)				356
Income / (loss)  before provision for income taxes		2,379			37,817			(51,190	)				(10,994	)
Provision / (benefit) for income taxes		(296	)		26			(96	)	(18	)		(366	)
Net income / (loss)	$	2,675		$	37,791		$	(51,094	)			$	(10,628	)
Net income / (loss) per share attributable to Class A common stockholders — basic	$	0.10										$	(0.37	)
Net income / (loss) per share attributable to Class A common stockholders — diluted	$	0.09										$	(0.37	)
Weighted-average Class A common shares — basic		25,538						3,345		(19	)		28,883
Weighted-average Class A common shares — diluted		28,994						(111	)	(19	)		28,883

TALEO CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(in thousands, except per share data)
	Historical
	Taleo			Vurv			Pro forma Adjustments			Notes			Pro forma Combined
Revenue:
Application	$	105,092		$	34,419		$	-					$	139,511
License					1,328			-						1,328
Consulting		22,849			13,282			-						36,131
Total revenue		127,941			49,029			-						176,970
Cost of revenue:
Application		22,602			9,880			1,931			(15	)		34,413
License					106			-						106
Consulting		18,026			8,688			-						26,714
Total cost of revenue		40,628			18,674			1,931						61,233
Gross profit		87,313			30,355			(1,931	)					115,737
Operating expenses:
Sales and marketing		36,916			13,520			7,037			(15	)		57,473
Research and development		22,981			8,086			(10	)		(15	)		31,057
General and administrative		23,734			11,482			(25	)		(15	)		35,191
Restructuring		-			-			-						-
Total operating expenses		83,631			33,088			7,002						123,721
Operating income / (loss)		3,682			(2,733	)		(8,933	)					(7,984	)
Other income / (expense):
Decrease in fair value of redeemable preferred stock conversion feature					(4,986	)		4,986			(12	)		-
Interest income		3,045			84			(1,892	)		(16	)		1,237
Interest expense		(137	)		(811	)		463			(17	)		(485	)

Total other income / (loss), net		2,908		(5,713	)		3,557					752
Income / (loss)  before provision for income taxes		6,590		(8,446	)		(5,376	)				(7,232	)
Provision / (benefit) for income taxes		2,707		241			115		(18	)		3,063
Net income / (loss)	$	3,883	$	(8,687	)	$	(5,491	)			$	(10,295	)
Preferred stock dividend requirements				(4,017	)		4,017					-
Net income / (loss) attributable to common stockholders	$	3,883	$	(12,704	)	$	(1,474	)			$	(10,295	)
Net income / (loss) per share attributable to Class A common stockholders — basic	$	0.16									$	(0.37	)
Net income / (loss) per share attributable to Class A common stockholders — diluted	$	0.13									$	(0.37	)
Weighted-average Class A common shares — basic		24,116					3,345		(19	)		27,461
Weighted-average Class A common shares — diluted		28,777					(1,316	)	(19	)		27,461

Notes to the Unaudited Pro Forma Combined Condensed Financial Statements

NOTE. 1 BASIS OF PRESENTATION

     The unaudited pro forma combined condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

NOTE 2. DESCRIPTION OF THE VURV TECHNOLOGY, INC. ACQUISITION

On May 5, 2008, the Company entered into an Agreement and Plan of Reorganization (the “Reorganization Agreement”) to purchase Vurv Technology, Inc. (“Vurv”), a private company with headquarters in Florida. Vurv is a provider of on demand talent management software.  On July 1, 2008, the Company completed the acquisition of Vurv.  Accordingly, the assets, liabilities and operating results of Vurv will be reflected in the Company’s consolidated financial statements beginning in the third quarter of 2008.  The total consideration paid by the Company in connection with the acquisition was approximately $37.5 million in cash and approximately 3.8 million shares of Class A common stock, of which approximately $36.8 million in cash and approximately 3.3 million shares of Class A common stock were paid on the closing date.  Of the total consideration, Vurv preferred stockholders received a total of $76.4 million in consideration including the Company’s Class A common stock with a value

of $52.8 million and cash of $23.6 million.  Approximately 0.5 million shares were placed into escrow for one year following the closing to be held as security for losses incurred by the Company in the event of certain breaches of the representations and warranties contained in the Reorganization Agreement or certain other events.  Additionally, approximately $0.3 million was placed into escrow to pay for expenses incurred by the stockholder representative in connection with its duties under the Reorganization Agreement, and approximately $0.4 million was placed in escrow to compensate the Company in the event certain expenses are incurred in connection with payments to certain Vurv employees.  In addition, the Company assumed obligations for all outstanding options to purchase shares of Vurv common stock, which converted into options to purchase approximately 0.4 million shares of the Company’s common stock Taleo also repaid approximately $9.0 million of Vurv debt on the closing date.

(1) Under purchase accounting, the purchase price has been preliminarily allocated to the net identifiable assets based on their estimated fair value at the date of acquisition. As part of our process we performed a valuation analysis to determine the fair values of certain identifiable intangible assets of Vurv as of the valuation date. This analysis was used as the basis for the preliminary allocation of the purchase price among the acquired identifiable intangible assets of Vurv. The excess of the purchase price over the net identifiable assets has been recorded to goodwill.  The Company expects the allocation of the purchase price to be final in the second quarter of 2009.  The Company does not expect a material change in the preliminary allocation of the purchase price.

Preliminary allocation of purchase price
	Vurv			Elimination			Purchase		Amount
	Historical			Entry			Entry		(In thousands)
Cash and cash equivalents	$	223							$	223
Accounts receivable, net		8,868								8,868
Other current assets		2,260			(1,334	)				926
Property and equipment		4,731			177					4,908
Goodwill		9,966			(9,966	)		83,262		83,262
Intangible Assets		1,415			(1,415	)		49,300		49,300
Non-current assets		1,561			(1,034	)				527
Accounts payable and accrued liabilities		(8,857	)		(3,767	)				(12,624	)
Other current liabilities		(1,139	)		(132	)				(1,271	)
Deferred revenue		(15,809	)		8,552					(7,257	)
Non-current liabilities		(1,502	)		(54	)				(1,556	)
Non-current deferred revenue		(139	)							(139	)
Total estimated purchase price									$	125,167

Purchase Price	Amount
	(In thousands)
Cash	$	46,541
Estimated fair value of common stock issued		73,444
Estimated fair value of stock options assumed		1,745
Accrued transaction cost		3,438
Total estimated purchase price	$	125,167

The following adjustments have been reflected in the unaudited pro forma combined condensed financial statements and the preliminary allocation of purchase price table:

Balance Sheet

(2) Adjustment to record the payments of $46.5 million cash related to the acquisition of Vurv.

Consideration	Amount
	(In thousands)
Cash	$	33,815
Employee Severance - Escrow		375
Expense Escrow		250
Third party fees		2,952
Notes payable (Including fees of $149,000)		9,149
Total cash consideration	$	46,541

(3) Adjustment to to write-off Vurv deferred commission with no future value.

Other current assets	Amount
	(In thousands)
Other current assets - Vurv	$	2,260
Write-off deferred commission - Vurv		(1,334	)
Fair value Vurv current assets	$	926

(4) Adjustment to record step-up in value of certain Vurv fixed assets from their net book value to their estimated fair value.

Property and Equipment	Amount
	(In thousands)
Historical Vurv fixed assets	$	4,731
Write-up of fixed assets		177
Fair value Vurv fixed assets	$	4,908

(5) Adjustment to record the excess of purchase price over the estimated fair value of the identifiable net assets acquired (Goodwill):

Goodwill	Amount
	(In thousands)
Goodwill - Vurv	$	83,263
Write-off historical Vurv goodwill		(9,966	)
Adustment to  goodwill	$	73,297

(6) Adjustment to record the allocation of the acquisition cost to the estimated fair value of assets acquired based on an independent appraisal:

Indentifiable intangible assets	Average Estimated Useful Life (Years)		Amount
			(In thousands)
Developed Technology		5	$	9,390
Customer Relationships		6		39,240
Non-compete agreements		2		410
Tradename		2		260
Total Vurv intangible assets acquired			$	49,300
Vurv intangible assets prior to acquisition				(1,415	)

Intangible assets adjustment $ 47,885

(7) Adjustment to reclass deferred cost associated with the acquisition of Vurv to goodwill and to write-off Vurv deferred commission with no future value.

Other non current assets	Amount
	(In thousands)
Reclassification of tranaction cost to goodwill	$	(2,919	)
Adjustment to write-off Vurv deferred commission		(1,034	)
Adustment to non-current assets	$	(3,953	)

(8) Adjustment to estimated exit cost (severance, employee benefits facility closure cost) associated with the acquisition of Vurv.  Additionally, the Company paid consideration directly to vendors on Vurv’s behalf for direct transaction cost:

Accounts payable and accrued liabilities	Amount			Vurv Adjustment
	(In thousands)
Accrued exit cost associated with Vurv	$	5,307		$	5,307
Accrual transaction fees		519
Payment of transaction fees on Vurv's behalf		(149	)		(149	)
Payment of transaction fees on Vurv's behalf		(1,391	)		(1,391	)
Adustment to accounts payable and accrued liabilities	$	4,286		$	3,767

(9) Adjustment to write-down deferred revenue to the estimated fair value of the contractual obligation to customers:

Deferred revenue	Amount
	(In thousands)
Historical Vurv deferred revenue	$	(15,809	)
Fair Value Vurv deferred revenue		7,257
Adustment to reduce deferred revenue to fair value	$	(8,552	)

(10) Adjustment releated to payment of $9.0 million Vurv notes payable outstanding balance at closing.

(11) Adjustment to record step-up in capital lease value.

Other current  and non-current liabilities	Amount
	(In thousands)
Historical other current liabilities - Vurv	$	1,139
Write-up of capital leases		132
Fair value current liabilities	$	1,271
Historical other non-current liabilities - Vurv	$	1,502
Write-up of capital leases		54
Fair value non-current liabilities	$	1,556

(12) Adjustment to record the elimination of fair value of redeemable preferred stock conversion feature and preferred stock.  Vurv preferred stockholders received $76.4 million in total consideration including the Company’s Class A common stock with a value of $52.8 million and cash of $23.6 million.

(13) Adjustment to reflect the elimination of the historical Vurv common stock, accumulated deficit, treasury stock and other comprehensive income.

Stockholders' equity	Amount
	(In thousands)
Adjustment to write-off Vurv common stock	$	(30	)
Adjustment to write-off Vurv accumulated deficit	$	75,012
Adustment to write-off treasury stock and accumulated other comprehensive income	$	8,021

 (14).  Adjustment to record additional paid-in capital resulting from the Company issuing 3.8 million shares of its Class A common stock and assuming outstanding options to purchase shares of Vurv common stock, which converted into options to purchase approximately 0.4 million shares of Taleo common stock as consideration.  The value of the common stock issued was valued using a stock price of $19.21 is based on the Company’s average stock price a few days before and after the transaction signature date, May 5, 2008.  The fair value of the 281,214 vested and 127,222 unvested stock options assumed was determined in accordance FAS 123(R ) Share-Based Payment using the Black-Scholes-Merton option pricing model.

Additional paid-in capital	Amount
	(In thousands)
Issuance of Taleo common A stock - 3,823,192	$	73,444
Estimated fair value of Taleo stock options converted from Vurv stock options		1,745
Paid-in capital adjustment	$	75,189

Statement of Operations

15) Adjustment to reduce share-based compensation expense associated with the conversion of Vurv stock options to the Company’s stock options.  Had the transaction occurred on January 1, 2007, share-based compensation expense for both the year ended December 31, 2007 and the six months ended June 30, 2008, would have been reduced by approximately $0.1 million.

Adjustment to amortize identifiable intangible assets resulting from the allocation of the Vurv purchase price. The pro forma adjustment assumes that the identifiable intangibles will be amortized on a straight-line basis over their estimated lives (remaining intangibles including goodwill will be tested for impairment).  Had the transaction occurred on January 1, 2007, amortization expense for the year ended December 31, 2007 would have been approximately $8.9 million and amortization expense for the six months ended June 30, 2008 would have been approximately $4.7 million.

Adjustment for depreciation expense associated with the step-up in value of certain Vurv fixed assets from their net book value to their estimated fair value.  Had the transaction occurred on January 1, 2007, depreciation expense for the year ended December 31, 2007 would have been approximately $60,000 and depreciation expense for the six months ended June 30, 2008 would have been approximately $30,000.

Pro Forma Expense Adjustments
For the Six Months Ended June 30, 2008
	Share-based Compensation			Amortization Intangible Assets		Depreciation		Total
	(In thousands)
Cost of revenue	$	(15	)	$	608	$	30	$	623
Sales and marketing		(32	)		4,056				4,024
Research and development		(21	)						(21	)
General and administrative		(56	)						(56	)
Total	$	(124	)	$	4,664	$	30	$	4,569

Pro Forma Expense Adjustments
For the Year Ended December 31, 2007
	Share-based Compensation			Amortization Intangible Assets		Depreciation		Total
	(In thousands)
Cost of revenue	$	(7	)	$	1,878	$	59	$	1,931
Sales and marketing		(14	)		7,051				7,037
Research and development		(10	)						(10	)
General and administrative		(25	)						(25	)
Total	$	(55	)	$	8,929	$	59	$	8,933

(16) Adjustment to record reduction in estimated interest income earned at an assumed rate of approximately 1.34% for the six months ended June 30, 2008 and 4.06% for the year ended December 31, 2007on cash and cash equivalents as a result of paying cash proceeds of $46.5 million in connection with the acquisition of Vurv.  The reduction in interest for the six months ended June 30, 2008 and the year ended December 31, 2007 totaled $0.6 million and $1.9 million, respectively.

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(17) Adjustment to record reduction in estimated interest expense at an assumed rate of approximately 6.5% for the six months ended June 30, 2008 and the year ended December 31, 2007 resulting from the pay-off of $9.0 million in debt in connection with the acquisition of Vurv.  Interest expense reduction associated with pay-off debt was $0.3 million for the six months ended June 30, 3008 and $0.5 million for the year ended December 31, 2007

(18) Amount represents tax items related to the consummation of this transaction and have been adjusted in the Pro Forma Consolidated Statement of Operations.

(19)Basic pro forma loss per share was calculated based on the Company’s outstanding common stock at June 30, 2008 and December 31, 2007, which reflects 3,345,000 shares of the Company’s common stock issued in connection with the acquisition of Vurv.

	Six Months Ended June 30, 2008			Year Ended December 31, 2007
Share issued to Vurv shareholders (excluding 477,899 shares in escrow)		3,345			3,345
Antidilutive shares		(3,456	)		(4,661	)
Pro forma weighted-average Clas A common shares - dilutive		(111	)		(1,316	)