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EXHIBIT 99.4
CONCORD COMMUNICATIONS, INC.
FIRSTSENSE SOFTWARE, INC.
Unaudited Pro Forma Consolidated Financial Information
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CONCORD COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PRO FORMA
YEARS ENDED ADJUSTMENTS PRO FORMA
CONCORD FIRSTSENSE CONSOLIDATED
DECEMBER 31, 1999 DECEMBER 31, 1999 DEBIT CREDIT DECEMBER 31, 1999
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Revenues:
License revenues 52,707,905 1,297,615 81,249 53,924,271
Service revenues 14,635,150 126,932 14,762,082
Consulting services 137,693 3,600 134,093
---------- ---------- ----------
Total revenues 67,343,055 1,562,240 68,820,446
Cost of Revenues 8,085,987 459,096 42,792 8,502,291
---------- ---------- ----------
Gross profit 59,257,068 1,103,144 60,318,155
Operating Expenses:
Research and development 11,409,464 3,022,870 14,432,334
Sales and marketing 25,687,262 3,755,042 29,442,304
General and administrative 3,678,544 1,706,336 5,384,880
Stock-based compensation 2,549,000 441,828 2,990,828
Acquisition-related charges 550,601 0 550,601
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Total operating expenses 43,874,871 8,926,076 52,800,947
Operating income 15,382,197 (7,822,932) 7,517,208
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Other Income (Expense):
Interest income 3,136,026 0 3,136,026
Interest expense 0 (39,560) (39,560)
Other (19,268) (113,541) (132,809)
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Total other income, net 3,116,758 (153,101) 2,963,657
Income before income taxes 18,498,955 (7,976,033) 10,480,865
Provision for income taxes 5,592,703 0 1,307,194 4,285,509
Net income 12,906,252 (7,976,033) 84,849 1,349,986 6,195,356
Accretion of redeemable preferred stock 0 (125,285) (125,285)
Pro forma provision for income taxes on
Subchapter S-Corporation income
(unaudited) 146,325 0 146,325
Pro forma net income (unaudited) 12,759,927 (8,101,318) 84,849 1,349,986 5,923,746
Net income per common and potential common share:
Basic 0.91 (4.12) 0.37
Diluted 0.85 (4.12) 0.35
Pro forma diluted (unaudited) 0.85 (4.12) 0.35
Weighted average common and potential common shares outstanding:
Basic 14,160,755 1,966,745 16,127,500
Diluted 15,139,325 1,966,745 17,106,070
Pro forma diluted (unaudited) 15,139,325 1,966,745 17,106,070
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
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CONCORD COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PRO FORMA
YEARS ENDED ADJUSTMENTS PRO FORMA
CONCORD FIRSTSENSE CONSOLIDATED
DECEMBER 31, 1998 DECEMBER 31, 1998 DEBIT CREDIT DECEMBER 31, 1998
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Revenues:
License revenues 34,597,958 449,753 35,047,711
Service revenues 6,859,394 46,329 6,905,723
Consulting services 15,000 15,000
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Total revenues 41,457,352 511,082 41,968,434
Cost of Revenues 4,676,335 207,476 4,883,811
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Gross profit 36,781,017 303,606 37,084,623
Operating Expenses:
Research and development 7,386,706 2,493,106 9,879,812
Sales and marketing 17,522,653 2,362,099 19,884,752
General and administrative 2,802,023 840,997 3,643,020
Stock-based compensation 1,001,000 77,188 1,078,188
Acquisition-related charges 0 0 0
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Total operating expenses 28,712,382 5,773,390 34,485,772
Operating income 8,068,635 (5,469,784) 2,598,851
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Other Income (Expense):
Interest income 2,355,816 255,473 2,611,289
Interest expense (514) 0 (514)
Other (65,251) (29,960) (95,211)
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Total other income, net 2,290,051 225,513 2,515,564
Income before income taxes 10,358,686 (5,244,271) 5,114,415
Provision for income taxes 532,600 0 1,518,422 (985,822)
Net income 9,826,086 (5,244,271) 1,518,422 6,100,237
Accretion of redeemable preferred stock 0 (120,420) (120,420)
Pro forma provision for income taxes on
Subchapter S-Corporation income
(unaudited) 41,400 0 41,400
Pro forma net income (unaudited) 9,784,686 (5,364,691) 1,518,422 5,938,417
Net income per common and potential common share:
Basic 0.73 (3.56) 0.40
Diluted 0.66 (3.56) 0.36
Pro forma diluted (unaudited) 0.66 (3.56) 0.36
Weighted average common and potential common shares outstanding:
Basic 13,457,495 1,508,137 14,965,632
Diluted 14,892,238 1,508,137 16,400,375
Pro forma diluted (unaudited) 14,892,238 1,508,137 16,400,375
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
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CONCORD COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
PRO FORMA
CONCORD FIRSTSENSE ADJUSTMENTS
DECEMBER 31, 1999 DECEMBER 31, 1999 DEBIT CREDIT
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ASSETS
Current Assets:
Cash, cash equivalents and marketable securities 62,044,141 1,525,060
Accounts receivable, net of allowance of approximately
$930,000 and $450,000 in 1999 and 1998, respectively 13,465,999 510,930
Prepaid expenses and other current assets 1,286,070 65,885 160,808
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Total current assets 76,796,210 2,101,875
Equipment and Improvements, at cost:
Equipment 7,897,533 1,127,450
Leasehold improvements 3,005,915 104,454
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10,903,448 1,231,904
Less -- Accumulated depreciation and amortization 3,294,551 791,399
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7,608,897 440,505
Deferred Tax Asset -- -- 3,000,000
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84,405,107 2,542,380
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LIABILITIES
AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt (notes 4 and 9) -- 898,462
Accounts payable 4,542,644 397,776
Accrued expenses 6,885,827 538,080 4,300,000
Deferred revenue 9,925,297 454,788 118,751
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Total current liabilities 21,353,768 2,289,106
Long-term debt, less curreent portion (notes 4 and 9) -- 2,064,004
Commitments and Contingencies (Note 8)
Stockholders' Equity
Series A Redeemable Convertible Preferred Stock, $.01 par value;
Authorized -- 5,500,000 shares
Issued and outstanding -- 5,471,465 shares 54,715 54,715
Series B Redeemable Convertible Preferred Stock, $.01 par value;
Authorized -- 2,920,000 shares
Issued and outstanding -- 2,800,000 28,000 28,000
Preferred Stock, $.01 par value --
Authorized -- 1,000,000 shares
Issued and outstanding -- None -- --
Common stock, $.01 par value --
Authorized -- 20,000,000 shares
Issued and outstanding -- 3,206,108 and 2,683,834shares, in
1999 and 1998 respectively 26,838 26,838
Common stock, $.01 par value --
Authorized -- 50,000,000 shares
Issued and outstanding -- 14,406,192 and 13,040,374 shares,
in 1999 and 1998 respectively 144,062 16,740
Additional paid-in capital 77,799,827 15,739,910 92,813
Deferred compensation (53,221) (3,504,573)
Accumulated other comprehensive income (1,386,125) --
Accumulated deficit (13,453,204) (14,155,620) 42,057 7,300,000
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Total stockholders' equity 63,051,339 (1,810,730)
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84,405,107 2,542,380 7,570,361 7,570,361
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PRO FORMA
CONSOLIDATED
DECEMBER 31,
1999
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ASSETS
Current Assets:
Cash, cash equivalents and marketable securities 63,569,201
Accounts receivable, net of allowance of approximately
$930,000 and $450,000 in 1999 and 1998, respectively 13,976,929
Prepaid expenses and other current assets 1,191,147
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Total current assets 78,737,277
Equipment and Improvements, at cost: --
Equipment 9,024,983
Leasehold improvements 3,110,369
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12,135,352
Less -- Accumulated depreciation and amortization 4,085,950
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8,049,402
Deferred Tax Asset 3,000,000
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89,786,679
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LIABILITIES
AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt (notes 4 and 9) 898,462
Accounts payable 4,940,420
Accrued expenses 3,123,907
Deferred revenue 10,261,334
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Total current liabilities 19,224,123
Long-term debt, less curreent portion (notes 4 and 9) 2,064,004
Deferred revenue 29,434
Commitments and Contingencies (Note 8)
Stockholders' Equity
Series A Redeemable Convertible Preferred Stock, $.01 par value;
Authorized -- 5,500,000 shares
Issued and outstanding -- 5,471,465 shares --
Series B Redeemable Convertible Preferred Stock, $.01 par value;
Authorized -- 2,920,000 shares
Issued and outstanding -- 2,800,000 --
Preferred Stock, $.01 par value --
Authorized -- 1,000,000 shares
Issued and outstanding -- None --
Common stock, $.01 par value --
Authorized -- 20,000,000 shares
Issued and outstanding -- 3,206,108 and 2,683,834shares, in
1999 and 1998 respectively --
Common stock, $.01 par value
Authorized -- 50,000,000 shares
Issued and outstanding -- 14,406,192 and 13,040,374 shares,
in 1999 and 1998 respectively 160,802
Additional paid-in capital 93,632,550
Deferred compensation (3,557,794)
Accumulated other comprehensive income (1,386,125)
Accumulated deficit (20,350,881)
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Total stockholders' equity 68,498,552
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89,786,679
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The accompanying notes are an integral part of these
unaudited consolidated financial statements.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma consolidated balance sheet of Concord
Communications, Inc. (Concord) as of December 31, 1999 gives effect to the
February 4, 2000 merger of FirstSense Software, Inc. (FirstSense) with and into
a wholly owned subsidiary of Concord (the Merger) as if it occurred on December
31, 1999 and combines the balance sheets of Concord Communications, Inc. as of
December 31, 1999 and FirstSense as of December 31, 1999. The unaudited pro
forma consolidated statements of operations for all periods presented give
effect to the Merger as if it occurred on January 1, 1998. For purposes of the
unaudited pro forma statements of operations, Concord's consolidated statements
of income for each of the two years in the period ended December 31, 1999 have
been combined with FirstSense's consolidated statements of operations for each
of the two years in the period ended December 31, 1999. The unaudited pro forma
consolidated statements of operations do not reflect any cost savings and other
synergies anticipated by Concord management as a result of the merger or any
merger-related expenses. The unaudited pro forma consolidated financial
statements are not necessarily indicative of the actual results of operations or
the financial position of the combined entities had the merger been consummated
at the beginning of the earliest period presented, nor are they necessarily
indicative of future results of operations or financial position. Sales from
Concord to FirstSense of $84,849 in 1999 have been eliminated from the 1999
unaudited pro forma consolidated statement of operations. In addition,
adjustments have been made to decrease the tax provisions and increase the
deferred tax assets on both the 1999 and 1998 unaudited pro forma consolidated
statements due to the surety of Concord's assessment that it will be able to
utilize the deferred tax assets generated by FirstSense's net operating loss
carryforwards. Prior to its acquisition by Concord, FirstSense had fully
reserved for these assets.
2. MERGER COSTS AND RELATED EXPENSES
In connection with the Merger, Concord and FirstSense estimate that
they will incur approximately $4.3 million for direct merger costs, consisting
primarily of legal, investment banking, accounting and printing fees. Direct
merger costs will be charged to operations in the period in which the Merger is
consummated. This estimate is preliminary and is subject to change. The
unaudited pro forma consolidated balance sheet gives effect to the direct
merger costs as if they were incurred on December 31, 1999; the unaudited pro
forma consolidated statements of operations do not reflect such costs since
they are non-recurring.
3. UNAUDITED PRO FORMA NET INCOME (LOSS) PER SHARE
The unaudited pro forma earnings per share calculations are based on
the combined basic and diluted weighted average number of shares outstanding for
Concord and FirstSense based on the exchange ratio of approximately 6.654 shares
of FirstSense common stock surrendered for each share of Concord common stock
issued.
4. CONFORMING ADJUSTMENTS
No adjustments have been made to conform the accounting policies of
Concord and FirstSense. The nature and extent of such adjustments, if any, will
be based upon further study and analysis and are not expected to be significant.